The Internet Encyclopedia (Volume 3)

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AREAS OFTECHNOLOGY 389

the common purpose of which is to develop the best possi-

ble means of delivering products to customers (Poirier &

Reiter, 1996), work together to reduce costs and increase

profits for everyone in the chain.

The supply chain models how a firm operates within

its industry segment. Its focus is on the interactions of

the various entities that make up the chain. Corporations

are obtaining competitive advantage through the man-

agement of these linkage strategies (Gordon & Gordon,

1996) with their suppliers and customers, and sometimes

even their competitors. The linkages across the supply

chain have provided opportunities to use new informa-

tion technologies to manage these activities. These new

technologies go far beyond concepts like electronic data

interchange (EDI) and production scheduling provided by

most enterprise resource planning (ERP) software pack-

ages. Businesses must invest time to explore these strate-

gies and the information systems required to support

them. The stakes are high and the goals fairly well defined,

but these strategies are not easily implemented due to the

complexity of this environment. In fact, implementing the

technology to support SCM has been defined as the pro-

cess of combining “art and science” to improve the way a

supply chain delivers products to customers (Koch, 2002).

SUPPLY CHAIN MODELS

The approach to SCM can be highly variable depending on

the driving function of the overall supply chain. These are

generally divided into three focus areas for manufactur-

ers: sourcing-, manufacturing-, and distribution-intensive

industries (Banker, 1998), and service supply chains.

Sourcing-Intensive Supply Chains

These companies have complex products and purchase

many components from their suppliers. Companies in this

group include automotive and durable goods manufactur-

ers and electronics firms. Often they are in industries with

rapid life cycles, such as computer manufacturing. The

SCM technologies they use need the capability of handling

short life cycles and the ability to build final assemblies to

specific customer orders.

Manufacturing-Intensive Supply Chains

Companies in this category have heavy investments in the

assets required to manufacture their products, and for this

reason, high asset utilization is a primary goal of these

companies. Manufacturing execution systems integrated

with the scheduling process are important SCM strategies

in these cases. The goal is to optimize the use of the equip-

ment while meeting customer demand. The demand man-

agement system must be able to produce optimized plans

that follow the highs and lows of customer buying pat-

terns. Companies in this segment include textile and bulk

chemical firms.

Distribution-Intensive Supply Chains

These organizations need strong functionality in demand

management and distribution planning. Advanced fore-

casting methods made possible by technologies such as

data warehousing are useful for the analysis of the mas-

sive quantities of data generated by point-of-sale systems.

Manufacturers in these industries need dynamic schedul-

ing capabilities to meet the needs of actual customer

demand. This segment includes companies that provide

pharmaceuticals, food and beverages, and personal care

products.

Service Supply Chains

Service SCM has become more important as the

economies of most industrialized nations have become

more service oriented. For example, in the United States

about 80% of all workers are currently employed in the

service sector (Fitzsimmons & Fitzsimmons, 2001). In ser-

vice industries, the process of “delivering the service” is

the product. Service supply chains focus on managing the

people, projects, clients, and other resources involved in

delivering these services. Supply chain management in the

service sector uses technology to streamline the delivery

of services and optimize the use of the resources involved

in the process.

AREAS OF TECHNOLOGY

The technologies used in SCM are somewhat fragmented.

Although some companies have tried to be all-inclusive

in handling the various technologies required, none have

been especially successful. The trend has been to take a

modularized implementation approach to these solution

areas, often using software products from multiple ven-

dors. Even when an all-inclusive integrated system is se-

lected, it is most often implemented in a modular fashion.

These multiple technologies are then assembled together,

to form a complete SCM solution.

Technology products tend to focus in one of four pri-

mary areas: supply chain design and simulation, supply

chain optimization, supply chain collaboration, and sup-

ply chain integration. Keys to successfully implementing

these technologies include (Cassis, 1997): (a) Developing

and refining the supply chain model until the system opti-

mizes the behavior of the actual production environment

and (b) Integrating supply chain technologies with exist-

ing legacy systems.

Design and Analysis

These technology packages include software to model and

simulate the supply chain. Their purpose is to allow de-

signers to build models of the supply chain and then simu-

late various activities and volume levels to determine how

the modeled supply chain will perform. They are invalu-

able tools for predicting the performance of new supply

chains and for assessing changes proposed for existing

supply chains.

Simulation

Simulation of the supply chain is done using a computer

model that is designed based on the characteristics of the

real (or proposed) supply chain. It has the ability to gener-

ate random variations in the supply chain, just as events

have a probability of occurring to a real supply chain. It