CS507 - Information Systems - Lecture Handout 42

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Supply Chain Management


The business in the globalization age is more about enhanced efficiencies, increased productivity resulting in lower costs of production, quick and effective decision making increased outreach and customer/client satisfaction and sharing knowledge across institutions. This enables a business to become a more effective player in the free and extremely competitive global market. Globalization encompasses the concept of moving beyond the geographical boundaries of a country and using technological advances to maximum advantage for the business. The internet and Web technologies have brought new dimensions to doing and managing business. ECommerce we have talked about. Obviously every business has some inherent risks. So does ECommerce.
For example, privacy, legality, taxation are issues that pose a challenge for a good Ebusiness environment although measures both legislative and operational have been taken and continue to be devised. As far as Management Information Systems for businesses are concerned these too have undergone a major change particularly with the availability of Internet. Gone are the days of the stand alone systems which looked at each aspect of the business separately. Today we are talking of end to end solutions for businesses. In other words business imperatives have driven us to re-define the scope of the coverage/ extant of management information systems. The Buzzword for some time now is “ ENTERPRISE RESOURCE PLANNING.” (ERP).

The stand alone systems scope required a singular approach to each aspect of the business.
Why? Perhaps at that time the security issues could not be handled in any other way. Perhaps it was much cheaper to employ people to consolidate and produce MIS for all aspects, time taken being of little or no consequence. Perhaps this is what technology allowed us. Packaged or customized software was now available. We move on and find ourselves with an enhanced scope which requires all aspects of the business to be integrated. This meant that issues/transactions of each department which had always impacted other departments had to be integrated in such fashion that the resulting MIS was complete in all respects. Thus was laid the foundation of the Customized Integrated software development and packages. The use of the web and internet expanded the scope further requiring on line transfer of data and real time functionalities.

This lead to a further increase in the scope where we started demanding an analysis of the data as an integral part of the software used by a business regardless of its size. It also created a new demand for bringing the entire supply chain into the perspective as well as the Consumer. The result of the enhancement of scope lead to the Customized integrated software approach becoming an Enterprise Resource Management Software of which MIS was an integral part. Since then we have re-defined the scope to include Planning, Supply Chain and Customers resulting in what is today referred to as the ERP. Certain software developers around the world then decided to produce generic versions of ERP for various industries which could be installed straight off without having to spend time on the development process of a customized integrated software. Obviously the generic versions required that your business systems and processes must be aligned exactly in accordance with its design. This gave rise to the concept of BPR. The versions were too expensive to be modified and it was deemed that it would be cheaper to re-align the business processes.

BPR was not simply of redesigning certain input forms but involved changed practices of working. It involved change in human thought and approaches to their routine, mundane tasks.
This raised issues of Change Management. Since the ERP generic models need to be implemented this work is also required to be undertaken and involves training of the staff and transfer/conversion of data in the legacy system. Thus it is not a simple straight forward proposition but involves detailed and phased approach towards successful implementation at considerable cost. The ERP approach, essentially meant for a highly computerized Society, assumes that for it to be used from one end of the business to the other everyone is connected and uses computers. Therein lies a major challenge to make such a system a success in a developing country, like Pakistan, and raises questions in terms of financial viability and suitability. Perhaps it is time to go back and look at the integrated approach.

Integrating systems

Let’s take a look what an integrated information system looks like.

Integrating systems

As seen in the above picture all systems are interfaced with one another, the input in one system automatically updating the data in the other relevant system. We thus observe simultaneous Data sharing between various systems and simultaneous execution of different business processes. For Example, a confirmed sales order received by the sales department from the customer will once entered into the sales system automatically provide data input to stores/packing/ shipping and possibly the production systems. Thus ensuring that all relevant departments are notified of ready for necessary action simultaneously.

Methods of integration

Information systems can be integrated in the following ways.

  • Connect Existing modules/system
  • Use Supply Chain Management (SCM) Software
  • Use ERP Software

Connect Existing Modules/system

The basic concept is to maximize the use of existing systems and minimize the changes in them.
Good integration allows the addition of new applications to existing ones and the connection of systems to intranets and the internet. This approach extends the life of applications and saves tremendous amounts of money. However, connecting existing system may be difficult and expensive in many cases. Old systems were built and developed over a number of years encompassing technologies and platforms of various specifications.

Using SCM Software

Supply chain management (SCM) is the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. Supply chain management spans all movement and storage of raw materials, workin- process inventory, and finished goods from point-of-origin to point-of-consumption. In literal terms, supply chain refers to the flow of materials from their sources (suppliers) to the company and then inside the company for processing. Today the concept is much broader, including flow of materials, information, payments, and services from suppliers to factories and warehouses to end customers. This reduces uncertainty and risks in the supply chain thereby positively affecting inventory levels, cycle time, business processes.

Components of Supply Chain

The concept of supply chain can be divided into three major parts.

  • Upstream supply chain segment – includes the organization’s first-tier suppliers (manufacturers and assemblers). The major activities are purchasing and shipping.
  • Internal supply chain segment – includes all the processes to transform inputs to outputs.
  • Downstream supply chain segment – includes distributing, delivering to customer and final consumption of the product.


For a car manufacturer industry the above three segments can be shown as follows.

Vendors to the manufacturers.
Sub- Vendors or Suppliers to the
Vendors or Suppliers to the
Manufacturing plants, Assembly
plants, Packaging, warehouses,
Banks, transportation companies,
distributors, wholesalers, retailers.

Types of Supply Chains

Supply chain may exist in various forms depending on the need of the business:

  1. Made to Store – Focuses on tracking customer demand in real time, so that the production process can restock the finished goods inventory.
  2. Continuous Replenishment – focuses on constant replacement of inventory by working closely with suppliers. Applicable to environments with stable demand patterns.
  3. Built to order – Focuses on careful management of component inventories and delivery of needed supplies along the supply chain. A solution to this potential inventory problem is to utilize many common components across several production lines and in several locations.

Challenges to supply chains

There are usually two major sources of challenges to supply chains.

  1. The uncertainties faced
    • Demand forecast
    • Competition
    • Weather conditions
    • Technological development
  2. The need to coordinate several activities
    • Business partners are misunderstood
    • Departments are not well connected