The Internet Encyclopedia (Volume 3)

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Supply Chain Management TechnologiesSupply Chain Management Technologies

Mark Smith,Purdue University

Introduction 387

What is the Supply Chain? 388

Supply Chain Management and the Value Chain 388

Supply Chain Models 389

Sourcing-Intensive Supply Chains 389

Manufacturing-Intensive Supply Chains 389

Distribution-Intensive Supply Chains 389

Service Supply Chains 389

Areas of Technology 389

Design and Analysis 389

Simulation 389

Optimization 390

Active Collaboration 390

Integration 390

SCM Planning Process 390

Demand Planning 390

Advanced Planning and Scheduling 391

SCM Execution 391

Demand Management 391

Manufacturing Execution Systems 391

Supplier Systems 392

Logistics 392

Optimization Approaches 392

Optimal Techniques 392

Linear Programming 392

Integer and Mixed Integer Programming 393

Heuristic Solutions 393

Simulated Annealing 394

Exhaustive Enumeration 394

IT Infrastructure 394

Middleware 394

Database Interface 394

Networks 395

Databases 395

Applications 395

Supply Chain Management Trends 395

Glossary 396

Cross References 396

References 396

Further Reading 397

INTRODUCTION

Supply chain management (SCM) attempts to identify the

most cost-effective or profitable way of “getting the right

product to the right place at the right time” (Bendiner,

1998). It is concerned with the goal of delivering the right

amount of products or services from the point of origin

to the point of consumption in the least amount of time

and at the least cost. This becomes complex in supply

chains that involve multiple levels of suppliers, manu-

facturers, distributors, retailers, and customers. A well-

managed supply chain benefits all the members of the

chain, maximizing throughput and profit, by effectively

coordinating all of the resources in the chain.

Traditionally, manufacturers focused on the produc-

tion operations of a business. The object was to get prod-

ucts through the manufacturing plant as efficiently as

possible. Today this has changed. Large companies no

longer control the entire supply chain. Businesses that

used to do all their manufacturing operations internally

have become finished goods assemblers, purchasing as

much as 70% or more of their components from suppli-

ers. Many components come from other countries, requir-

ing the supply chain to accommodate an international

scope. Trends toward globalization have introduced is-

sues of exchange rates and tax considerations. The supply

chain paradigm has shifted from manufacturing-centric

management to customer-centric management and has

been extended to cover many more participants in the

chain. The information flow along the chain has become

the dominant factor in implementing supply chain im-

provements. These changes and the extraordinary growth

of the Internet have made the field of SCM ripe with op-

portunities for competitive advantage using information

technology tools and packages.

By analyzing the principles of supply chain manage-

ment, one quickly sees that information technology (IT)

plays a strategic role both directly and indirectly in a suc-

cessfully managed supply chain. Looking at the items in

Table 1, one can make the following observations:

To segment customers based on their needs, data de-

scribing their buying preferences, quality and cost con-

cerns, geographic locations, and other demographic in-

formation must be analyzed. This requires data mining

technologies from both internal and external database

systems.


Customizing the logistics network is done most effec-

tively using supply chain simulation and optimization

software tools.


Signals from market demand are best captured and an-

alyzed using demand management technologies.


To differentiate the product closer to the point of actual

consumption, the demand planning system must know

in real-time what the customer wants, and advanced

planning and scheduling technologies must extend the

visibility of production schedules to the company’s sup-

pliers, so that components are there when needed.


To source strategically, supply planning and execution

systems that track and rank vendor performance in

terms of cost, quality, and on-time delivery must be in

place. Supply chain simulation software may also be

used to make decisions regarding geographic locations

of suppliers and raw materials.

387