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INFORMATION TECHNOLOGY TOOLS AND THEIR PLACE WITHIN
THE SUPPLY CHAIN MANAGEMENT SYSTEM

 

 

 

Introduction.

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Information Technology Tools come in a variety of
formats and with an assortment of intended uses. However, one thing stands out
with all of them; they all provide the ability to capture an accurate picture
of the supply chain at each stage. Integration of supply chain partners is
hugely important and yet very easy to get wrong if IT tools are not being
utilized to their fullest capability. Accurate information forms the backbone
of well-run Logistic and Supply chain systems. This associative and multi-layered
information is central to the very definition of Supply Chain Management;

“The management of the interconnection of organizations which relate to
each other through upstream and downstream linkages between different processes
that produce value in the form of products and services to the end customer.” 1

 

At the outset, with the
receipt of raw materials and their goods inwards inspection, the information
flow has begun. The Information
Technology Tools available to the company will be required for recording of
the product type and location, through to stock picking based on customer
orders and ultimately packing, shipping and invoicing of finished goods for
delivery.

 

Warehousing and
Distribution centres need the assurance that what they are dispatching to
customers meets the basic Logistic Objectives or metrics. Accuracy, Availability, Orders shipped complete, Speed of delivery
and Returns and Error recovery are
greatly aided by the use of Information
Technology Tools which integrate all features of the supply chain.
Replenishing stock levels is another key feature which accomplishes the goal of
maintaining optimum stock levels.

 

Some IT tools will capture
individual aspects, and some will be used to correlate multiple inputs which
have been captured individually.  Here I
will discuss four examples of Information
Technology Tools commonly used in supply chain management systems,
distribution and warehousing.

 

 

1.
AIDC

Automatic identification and data capture (AIDC) refers to the methods of
automatically identifying objects or product types, collecting data about them
like quantity and location, and entering them directly into computer systems, ERP for example, with minimum human
involvement. Advantages of AIDC systems
are immediate and recognisable.

Two commonly used examples
of Automatic Identification and Data capture tools are Barcodes and Radio Frequency
Tags (RFID).

 

Using
Barcodes, or the most recent version, the Quick Response (QR) code, will save time when tracking
inventory through the supply chain system. They are both quick and easy to
scan, give accurate feedback and require very little training. However, there
are some major differences between Barcodes
and QR codes. Depending on your
requirement, either one is reliable. Where Barcodes
are cheaper, they also hold a limited amount of information. QR codes on the other hand are capable
of storing a lot more information like product descriptions, images and website
URLs. Originally
invented as a two-dimensional graphical code system by Denso Wave, a subsidiary
of Toyota, it was designed to allow high-speed component scanning during the manufacturing
process. This link to
inventory management has allowed the code to become very popular across all
functions of product identification. Primarily used to instantly identify any product
type held in storage, or in transit with a cross docking logistic system, they
have a major use in terms of indicating the progress of a product or a shipment
through the supply chain.  As a result of
these advantages, the opportunity for error is reduced significantly. Barcodes and QR codes are widely used as a means of tracking stock levels. They
play a significant role in providing information to the Enterprise resource planning tool.

Radio Frequency Tags differ from barcoding in a unique way. Where a
barcode will identify a single product type at a time held in inventory, RFID
can identify multiple items all at once. RFIDs can also be scanned at a
distance of up to 10 metres, unlike barcodes which require close proximity to
the item being scanned. They are more expensive than barcodes, with a much
higher, sometimes prohibitive start-up cost. They are, however, more robust,
can contain vast amounts of information compared to both Barcodes and QR codes
and are certainly more versatile. Recent developments with GPS and IoT
(Internet of Things) have given RFID transmitters a new lease of life as
they are a perfect tool for identifying items, indicating product type and
disclosing location. RFID transmitters are also utilized in delivery
tracking, which is a huge benefit in situations where Cross Docking is the processing system being used.

Advantages
of AIDC;

·        
Tracking of work in
progress. (WIP)

·        
Reduction in data
entry costs.

·        
Determines exact
location within inventory storage.

·        
Functions with any
operating system.

·        
Provides traceability
of stock.

·        
Not adversely
affected by challenging environments. (temperature, noise, laboratory)

·        
Multi-function
warehouse capability. (goods inwards, cross docking, replenish, stock taking,
storage, shipping)

·        
Provides real-time
information to ERP.

 

Disadvantages of
AIDC;

·        
Heavily reliant on
the organisations IT operating system.

·        
Potential for
technological malfunction.

·        
Damaged barcodes or
RFID units could lead to valuable stock being unaccounted for.

 

 

2. EDI and API

Electronic Data
Interchange (EDI)
is the computer-to-computer exchange of business documents in a standard
electronic format between business partners.

The link between
purchasing/procurement departments and suppliers is an ideal scenario for IT
tools to succeed. Purchase orders, invoices, quotations and shipping status
have in the past been slow and overly complicated when compared to the widely
used EDI format. Due to the
necessity to communicate in a common language, or standard format, this system
lends itself to internal communication within the supply chain as well as with outside
business partners. Typical examples of the standard format language would be ANSI or XML. However, it can be problematic if you as a customer are using
a different format to a potential new supplier.

Newer, innovative IT tools
like Application Program Interface (API) are gaining traction in situations
where EDI used to be the norm. API is easier to install, cheaper to
run, provides greater detail, is accessible globally and doesn’t have the same
format constraints that EDI has.
This system has been adopted by companies like amazon with great success.

 

Advantages
of EDI/API;

·        
Instant, real-time
interaction between suppliers and customers.

·        
Massive cost and time
reduction in processing orders, internal and external.

·        
Reduced inventory
costs, exact numbers are ordered and shipped.

·        
Transparency with
status of orders and deliveries.

·        
Increased
productivity for staff involved in processing purchase orders.

·        
Seamless flow of
information creates greater customer satisfaction.

·        
Appropriate for use
with Third party logistics (3PL) and Just In Time. (JIT)

·        
Can be used globally.

 

 Disadvantages of EDI/API;

·        
EDI doesn’t cover all
activities of Supply Chain partners.

·        
EDI can be expensive
to implement.

·        
EDI has format
constraints with how it sends and receives communication.

·        
Cyber Security can be an issue as APIs can be targeted by
malware.

·        
APIs require specialized programming knowledge to avoid being
overly complicated.

·        
Implementing and providing API capabilities can be costly in
terms of development times, ongoing maintenance requirements, and providing
support.

 

 

3. AS/RS
Automated Storage & Retrieval Systems

Automated
Storage & Retrieval Systems are a constantly developing technology driven
by warehousing and distribution cost reduction strategies. While they are
usually designed with large volumes of product in mind, they are also widely
used for smaller size batch quantities of high value. Modern versions of this
technology also feature Information
Technology Tools which allow for e-purchasing applications to function.
Stock levels can be set so when a minimum quantity is reached, an automated communication
is sent via e-mail to the supplier placing a recurring order. This information
is critical to maintain an efficient use of inventory space within the
warehousing environment. This application of Information Technology Tools reduces the need for manual counting
of stock levels. It can be applied to all aspects of the supply chain, from raw
materials right through to finished goods being picked for shipping. Consumable
product in the manufacturing environment and Work-In-Process storage are also
highly appropriate uses for this application. The information flow will also
indicate frequency of order picking and with ERP, will indicate efficiencies,
costs and lead time analysis.

Advantages of
AS/RS

·        
Optimized inventory
levels.

·        
Reduction in manual
interaction.

·        
Suitable for use with
Cross Docking.

·        
Reduction in labour
cost.

·        
Greater protection of
stock from damage or theft.

 

Disadvantages of
AS/RS

·        
Very expensive
initial cost.

·        
May require updating
based on product changes.

·        
Mechanical
malfunction could lock all stock in the system.

 

 

4. Enterprise
Resource Planning (ERP)

So,
we can accurately identify all the product in our inventory system and track
all product in the supply chain, regardless of whether they are raw materials,
work in progress, finished goods ready for shipping or returned product. Enterprise Resource Planning or ERP
is an effective and possibly beneficial Information
Technology Tool. It has the capacity to unify and centrally process all recorded
product information. ERP can be best described as a central database which
encompasses all aspects of the company’s activities which promotes an
integrated environment. Cleverly, it allows each department, whether
participating in the supply chain or not- this could be HR, finance, customer
services, manufacturing or purchasing, to see real-time results from elsewhere
within the supply chain and react accordingly. This
vital function facilitates the effective use of resources, including manpower, machines
and production capacities. The transparency created by the ERP system breaks down barriers between
departments and exposes inefficiencies and redundant processes.

Material Requirements
Planning (MRP)
and Manufacturing Resource Planning (MRPII)
predated ERP. Both were hugely successful in their initial stages but as
business needs changed and supply chain management became more efficiency
driven, it became a challenge to fully encompass all aspects of the supply
chain and record data effectively.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MRP
and MRPII are still in use today,
but have increasingly become an aspect or input within the ERP system. MRP and MRPII
are generally concerned with production and inventory. Both can be used
independently, however, they require manual input to produce production
schedules, something ERP can do automatically. Both MRP and MRPII are limited
to purchasing, production and shipping of finished goods, where again, ERP can
spread a lot further across the entire supply chain management system to
include HR management, finance departments, sales departments and customer
relations management.

 

 

ERP can be used by
companies of all size and type, with various program versions available to
match a company’s expectation. SAP SE
and Oracle are two examples of ERP
software systems in global use.

 

Advantages of Enterprise
Resource Planning (ERP)

·        
Full integration of all supply
chain partners.

·        
Companywide accessibility to a
central database. 

·        
Transparency of lead times.

·        
Highlights inefficiencies.

·        
ERP can be used to order stock, schedule deliveries, track
time spent from order to delivery.

·        
Manage and minimize costs associated with the supply chain by
maintaining optimum stock levels.

 

 

Disadvantages of Enterprise Resource Planning (ERP)

·        
Very expensive to implement.

·        
Programs tend to be tailored
to a company’s current needs resulting in inflexibility with future business
changes or growth.

·        
Requires skilled operators to
fully interpret outcomes and trends.

 

 

Conclusion.

Integration of all
partners within the supply chain is something all companies strive to achieve. Distribution
and warehousing are particularly appropriate areas to install the tools listed
above. Implementation of appropriate and cost-effective Information Technology Tools should help to improve all aspects the
main performance objectives, Quality, Speed,
Dependability, Flexibility and Cost. Major challenges will always exist no
matter what system is utilized; return on investment, training, reliable IT
support and market conditions. Each of these challenges will all determine how
the Information Technology Tools are
viewed. If we consider the main functions of warehousing; the receipt of raw
materials, storage of product, order picking and shipping, we can identify the
advantages to having transparent, coherent and accurate information shared to a
centralized database. Global markets dictate availability as a necessity, Information Technology Tools are an
effective way to make sure your business is always ready to react when orders
are placed.

 

 

 

 

 

 

 

 

 

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