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390 SUPPLYCHAINMANAGEMENTTECHNOLOGIESis used to analyze and plan the structure of the supply
chain based on real-world variability and dynamics over
time. The object is to be able to predict the performance
of a given supply chain before investments are made in
the physical assets needed to operate the supply chain. A
well-thought-out simulation model can provide informa-
tion not attainable any other way than actually building
the supply chain itself.Optimization
This group of technology products attempts to improve
the performance of the supply chain by applying various
optimization techniques to the activities associated with
SCM. These techniques are applied in two major areas:
in design and analysis activities to optimize the structure
of the supply chain and in advanced planning & schedul-
ing (APS) technologies to optimize the flow of product
along the supply chain. These techniques include logic to
recognize and deal with constraints that affect the execu-
tion of the supply chain and mathematical algorithms that
search for optimized solutions based on the variables and
constraints of the problem. More detailed information on
optimization techniques is provided later in this chapter.Active Collaboration
Technologies in this area focus on the communication and
interaction of the various members of the supply chain.
These tools go beyond traditional EDI software by al-
lowing real-time communication and visibility of product
levels and production schedules throughout the supply
chain. Software products that provide groupware capa-
bilities are included in this category. The need for active
collaboration, sharing information, and planning data to
improve the performance of the supply chain (and its in-
dividual members) has triggered a reconsideration of the
supply chain model.
The traditional communication structure for members
of a supply chain has been linear and synchronous:Supplies⇔Manufacturing⇔Distributor
⇔Retailer⇔CustomerThe Internet has opened the door for a more col-
laborative communication structure for all members of
the supply chain, a structure that is nonlinear and asyn-
chronous (Figure 2). This change in the communication
structure has affected not only the flow of information,Figure 2: Collaborative supply chain structure.but in some cases the basic structure of the supply chain
itself. When this happens, some members of the supply
chain may be squeezed out of the chain, such as when
the Internet replaces part of the traditional distribution
channel.
Active collaboration assists the transition of supply
chain members to a more customer-driven focus through
the sharing of information and visibility of customer
wants and needs. It also facilitates synchronized planning
activities (along with APS) to help reduce overall costs
through reductions in inventories between the members
of the supply chain.Integration
Supply chain integration technologies are of major con-
cern as most companies opt for a modular approach to
supply chain technologies. Various technologies are se-
lected based on what a company wants to achieve in man-
aging the chain. These technologies also need to be in-
tegrated with legacy applications that already exist in a
business. Supply chain integration deals with linking and
interfacing new technologies with legacy technologies to
implement a complete SCM solution. Software products
that specialize in this integration include middleware and
database applications. Middleware operates by providing
an infrastructure that allows all applications to commu-
nicate in a standard way. Database integration is done
through the exchange of information in the database.SCM PLANNING PROCESS
SCM planning activities fall into two categories: strate-
gic planning and tactical planning. Strategic planning in-
volves the top level of the planning process. At this level,
decisions regarding the number of manufacturing plants
and distribution centers are determined. The location of
these facilities and the proximity of customers and raw
materials and other components are also analyzed. To
accomplish this level of planning, design and analysis
and optimization tools are used. Supply chain optimiza-
tion tools help determine the optimal supply chain net-
work configuration. Supply chain simulation is used with
these optimized networks to determine how various con-
figurations will perform in different economic environ-
ments.
Tactical supply chain planning involves determining
what, when, and how much each plant will produce. Op-
timization tools are used to generate optimal production,
supply, and distribution schedules for product demand
over a given time period. This planning includes details
regarding the procurement and delivery of raw materi-
als, production schedules for manufacturing facilities and
assets, and the movement of finished goods through the
distribution system. Some specific planning activities per-
formed in managing the supply chain are reviewed next.Demand Planning
Demand planning has taken on new importance in SCM
as emphasis has shifted from manufacturing-centric man-
agement to customer-centric management. This paradigm
shift has caused a basic change in the criteria for what