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Supply Chain Management
COURSE : MIS 645
MANAGING IT FOR COMPETETIVE
ADVANTAGE
Professor. Katia Passerini
By
Adrian Carrion
Sudheer Holenarasipura
Sanjeev Nair
Mahesh Sahasranaman
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Supply Chain Management
ARTICLE SUMMARIES 3
Article 1. Meet Your New Host – Mid Market Supply Chain 3
Contribution of the article 4
Article 2. Uncertainty and the seamless supply chain by Steve
Geary, Paul Childerhouse and Dennis Towill. 4
Article 3. Admitting RFID into the hospital by Sussanah Patton. 6
Article 3. Cracks in the Pharmaceutical Supply Chain, by
Susannah Patton 7
Article 4. How Levi’s Got Its Jeans into Wal-Mart, by Kim Girard
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INTEGRATION OF ARTICLES: 9
Course Concepts Integration 9
Virtual Collaboration 9
Supply chain problems and solutions 10
Evaluating IT investment 10
Lessons Learned: 11
Well thought investment 11
Integration strategy 11
Need for solid SCM systems is key 11
RFID in future 11
WORKS CITED 12
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Supply Chain Management
Article Summaries
Article 1. Meet Your New Host – Mid Market Supply Chain
by Meridith Levinson
The article ―Meet Your New Host‖ brings out some of the issues which are faced with Supply
Chain Management Systems and discuses, how several of these issues can be resolved through
a hosted supply chain application. The article explains this issue with the example of
Kawasaki’s failure in getting the right products to its dealers at the right time, which caused
huge losses to the company. According to the author the reason was since Kawasaki like many
small and midsize companies, lacked the technology for precise collaboration and exchange of
demand forecasts with its parent company. Since the cost of maintaining a sophisticated supply
chain application in house is extremely high, Kawasaki looked at hosted supply chain
collaboration applications that ran on the vendor's computers and that his company could
access over the Internet, through a Web browser.
Kawasaki CIO Paterson needed a supply chain management with features such as
forecasting, collaborative planning, inventory visibility and transportation management.
He identified 4 major issues to be considered while choosing a vendor.
1. Security
Paterson used another ASP which they are working with currently to benchmark
Kawasaki’s security need and made sure that the security policies such as SSL, public-key
infrastructure and two-factor authentication is adequate
2. Reliability
Paterson figured that the since the vendor is invested who's invested heavily in being
available 24 by 7 by 365, would be a reliable choice and would have similar risks if the
software was to be build in house
3. Integration
Paterson had created a metadata repository that identifies all of the relationships between
Kawasaki's data structures, programs, and jobs for online and batch programs. This meta
data would give them a clear picture of the data and would make the integration easier.
4. Customization
Paterson figured that customizing a hosted supply chain application would be difficult
since it was designed to ―one size fit all‖ paradigm.
5. Compliance and Data access
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Paterson figured that since he is planning to use a hosted supply chain system he needs
to do his due diligence in making sure that the vendor can vouch for the integrity of the
systems in terms of compliance, especially in post Sarbanes-Oxley world
Through this article, author explains the issues which companies needs to consider when
implementing supply chain software, and also if they need to choose a vendor.
Contribution of the article
The author Meredith Levinson emphasizes on the importance of a good supply chain system,
and shows an example of how companies can lose millions if they do not implement a solid
SCM system. In this era of extreme competition, to meet the quick needs of customer demand,
companies with solid SCM systems will definitely outperform. One reason for the lag in SCM
may be the difficulty of integrating SCM processes across numerous functional areas. Though
companies are breaking down organizational barriers among functions by increasing the
integration of their internal processes, SCM processes still cross numerous such boundaries,
making progress more difficult. He suggests that for midsize companies it may be beneficial to
go for a hosted system rather than developing SCM systems in house, since the external vendor
mentioned in the article solves several issues which companies face now in SCM.
Article 2. Uncertainty and the seamless supply chain by Steve
Geary, Paul Childerhouse and Dennis Towill.
This article profoundly discusses about the realization of seamless supply chain by
reducing the uncertainties in the supply chain. It also brings in interesting statistics about how
many of the companies are not managing their supply chain and hence not able to meet the
time-to-market target. The paper categorizes uncertainties in the supply chain and suggests
remedies to reduce/eliminate them. It also boils down to indicate where exactly in the process
is an uncertainty. Finally it ends up revealing how managing the supply chain effectively can
show up as a cost saving and help in meeting time-to-market targets.
Uncertainty is always an element in any process and so is it in supply chain of a
company. Some of them may be attributed to events like damage of materials during the
transport, shipments held up in the customs to varying customer demands. This being the
scenario many of the supply chain professionals spend significant amount of time in building
buffer inventory. The paper points out that all of these events are a clear result of lack of
visibility throughout the value stream and lack of communication among all the participants in
the supply chain. The paper also reveals the findings of LSDG (Logistics System Design
Group) at Cardiff Business School in Wales. LSDG made an extensive effort in studying the
existing supply chain practices with the companies and relating them to the supply chain
uncertainties. Seamless supply chain is an idealized concept of perfect information and
material flow. Although this an ideal scenario this paper makes it sound that seamless supply
chain is reachable in reality. Supply chain is a concept that has evolved with times; the paper
quotes examples from 1574 where war ships were delivered within 24 hours. Application of
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Supply Chain Management
JIT techniques for the construction of Crystal palace in London; where pre-fabricated
components were used at the construction site.
The paper also brings a finding from Performance Measurement Group about the
uncertainty in the supply chain. PMG found out that in a group of 10 events in supply chain
there is only 35% of chances that all 10 events will happen successfully. Now, for an
organization it is difficult to predict which of the 10 events is going to fail. So it has to be
prepared for a scenario where any of the 10 events may fail. Hence uncertainty is an integral
part of supply chain. But the paper suggests some tools which will help reduce uncertainty by
increasing visibility. Some of them are Internet, XML communication and raw computing
power. The article brings out the best practices in supply chain that is built around reducing
uncertainties:
Simplicity: the companies should always try to adopt already proven solutions. Some of them
are inventory reduction, simplified processes and products and commitment to continuous and
incremental improvement.
Smooth material flow: this is the process design with no stoppage or no backflow as product
proceeds from design to delivery.
Value stream management: this is the effective management of all the activities involved in
design, order and delivery of a product. This helps the product to move smoothly from concept
to design to market.
Lean thinking: this is an approach where all the non-value added activities are eliminated that
causes waste and delay. This approach helps in adapting to change and continuous
improvement.
LSDG classifies supply chain uncertainties into four types:
Process uncertainty: this is the uncertainty in the process within the organization itself. This
uncertainty can be established by understanding the work process’s yield ratio leadtimes in the
operations. Also it is important to identify if the final delivery of the product is tied to some
process in the value stream. This interaction should be quantified for further improvement in
the process.
Supply uncertainty: this mainly results from supplier not meeting the requirements on time.
This uncertainty can be understood by studying suppliers’ past history, supplier quality reports
and actual lead times.
Control uncertainty: this is associated with the way an organization transforms it customer’s
order into suppler material request. This can be evaluated by comparing the customer order,
supplier request to deliver and production targets over the same period of time.
With globalization on the rise the level uncertainty is ever increasing and hence it
becomes very important for companies to study and understand the relationship between
supply chain and uncertainty. The article also reveals Steve Graham’s classification of
companies depending on their supply chain performance. This classification can be used as a
framework for companies to identify themselves in the categorization and work for betterment.
The following table shows the classification:
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In the above table higher the score on uncertainty section poorer is the supply chain
management of the organization. The article finally concludes by bringing out the fact that
managing supply chain effectively the organization can realize financial benefits in terms of
market share, inventory and profitability. In summary seamless supply chain is an achievable
milestone by any organization. This can be done by reducing the uncertainties in the supply
chain by focusing on increased visibility of all participants in the supply chain. In order to
achieve these companies should look out for the technologies that will help them in this effort.
Article 3. Admitting RFID into the hospital by Sussanah Patton.
This article discusses about the implementation of RFID at hospitals in Brigham and Boston.
These hospitals found it difficult to locate vital instruments like defibrillators and other crucial
cardiac equipment. The absence of these shows up as an expense to the hospital in investing to
buy new ones. Some of the equipments costs in the range of $1600 to $4500. In addition to the
cost the unavailability of these equipments could be a matter of life and death. All these factors
will matter in building the hospital’s name to the people. To solve this problem Michael Fraai
implemented RFID in all the instruments at the hospital. These RFID tags sends signal to the
receivers that link to the hospital’s IS network. With this arrangement and a web application
any hospital personnel can locate the equipment within the hospital. This has helped the
hospital by saving money in terms of equipment inventory.
Implementation of RFID is also being considered by many other hospitals too. Some of
the hospitals are considering implementing RFID to locate doctors and patients to schedule
operation procedure and rooms. These practices results in defect processes and help
organizations move towards the TQM goal of zero defects.
Comparing this article to the earlier one we can clearly see that uncertainty was within
the internal supply chain of the hospital. This uncertainty attributed to the unavailability of the
equipments. This could be classified as the process uncertainty as discussed in the earlier
article. Also looking at Steve Graham’s classification we can conclude that the hospital is at
level 3. Hospital has its internal processes tied up with the RFID tags and there is a seamless
internal supply chain within the hospital. With RFID there is more that it can do in the external
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world too. Hence the hospital still has room to expand its service through RFID technology in
place.
In summary supply chain could be thought of as a bundle of value streams in an
organization. Uncertainty could exist at any point; internal or external supply chain. For
organizations to realize seamless supply chain it is important to eliminate uncertainty. This
could be done by implementing the latest technologies like RFID to exchange information and
hence increasing visibility. It is important that every participant in the supply chain sees the
bigger picture and understands the supply chain from the supplier side till the end market. This
is the way to supply chain nirvana – seamless supply chain.
Article 3. Cracks in the Pharmaceutical Supply Chain, by Susannah
Patton
In Cracks in the Pharmaceutical Supply Chain, by Susannah Patton, we learn about the
complicated supply chain of pharmaceutical drugs in the US, and how thousands die every
year due to counterfeit drugs filtering into the chain - costing the industry billions of dollars
annually.
The problem lies partly in US legislation and partly in the mismanagement of the
industry giants like Cardinal Health, McKesson, and AmerisourceBergen which make up 90%
of drug sales in the US. US legislation allows for multi-tiered pricing; this grants nursing
homes and certain countries the privilege to buy drugs at a discount. This is where the
corruption comes into play, because there are hundreds of grey market wholesalers who look
for these deals, and exploit them by purchasing these drugs at a discount only to resell them
back to major wholesalers for a profit. Some of these drugs are meant to be exported, and
others are meant for nursing homes, however, the manufacturers and wholesalers have no
effective way of making sure the drugs fall into the right hands. In fact many times they fall
into the wrong hands, and many popular drugs are even counterfeited. Patton mentioned how
massive recalls are conducted in the US and overseas because of the discovery of fake drugs
like Cialis and Lipitor, that are sold to pharmacies – many times by seemingly legitimate
wholesalers. Many of the thousands of deaths can be attributed to the way these counterfeit
drugs are being produced, in putrid conditions.
There are many ways to track these drugs including using documents with holograms,
color shifting inks, watermarks, and even tamper resistant tape, and bar codes are already in
place in most of these supply chains. RFID is a better way to track these drugs, but companies
are facing a few challenges at present like: the need for expensive infrastructures to manage an
RFID enabled supply chain, the challenge and cost of tracking shipments of little bottles of
drugs, lack of standardization, and the overall research and development still needed to perfect
the tool. Another problem with RFID is the concern over privacy, although RFID is only
tracking large bottles of drugs now, groups like the ACLU and CASPIAN are opposing RFID
in fears that it will eventually find its way into consumers’ homes. However, the move
towards RFID is definitely inevitable as companies like Wal-Mart are now requiring
manufacturers to track their class 2 narcotics with RFID. Such a move will only force
competitors to follow suit, and eventually RFID will become the new standard in supply chain
management.
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Article 4. How Levi’s Got Its Jeans into Wal-Mart, by Kim Girard
Levis was struggling with declining sales from the peak it achieved in the mid 1990s. Sales had
dropped from a peak $7.1 billion in 1996 to $4.1 billion in 2002. Levis wanted to revitalize it
sales and was pursuing opportunities with retailers. Levis was in tentative discussions with
Walmart and wanted to market a specific brand of Levis jeans within Walmart stores. Levis
was already marketing its Levis jeans to Macys and JC Penny which combined had about 1300
stores.
Levis wanted to sell their Signature Line of jeans at about $23 in Walmart. This jeans
line has subtle differences from the original Levis jeans sold at Macy’s and JC Penny. Trying
to sell Levis jeans in Walmart’s 3500+ stores presented a unique challenge to Levis. To begin
with Levis had a poor IT infrastructure. They could not identify with accuracy the supply and
demand of their products across various retailers. Within their supply chain they had poor
visibility. They did not have enough distribution centers to cater to Walmart’s stores. Having
all these drawbacks they could never successfully market their jeans within Walmart. They
would have trouble keeping track of the demand at these stores. Walmart requires very quick
replenishment times and are very sensitive to the changes such as back to school season or
festive season etc. With all these drawbacks Levis cannot meet Walmart’s requirements to be a
supplier.
Levis was determined to get their jeans into the Walmart. Levis made changes at the
top and appointed accomplished executives to take up the challenge of not only selling their
products within Walmart but also improve sales and revenue of the company. Levis invested in
state of the art technology to gain more visibility into their supply chain. The new tools
provided them with a ―dashboard‖. This dashboard showed them the exact state of the sales of
each product line. Levis implement AS2 technology to exchange information with Walmart
EDI transactions to provide them with better forecasting. Along with technology changes they
also added to the existing warehouses infrastructure. They added three additional warehouses
to improve their time in transit to cater to Walmart’s warehouses. Levis would never have
invested so much in technology or warehouses had it not been for Walmart.
The changes they made to enter Walmart paid off for Levis. So far the results have
been encouraging with increasing sales and improved visibility of the Levis products in the
various fashion magazines. Levis was due to start shipping to Walmart beginning with 40
stores. With a couple of months of that launch Levis will be ferrying clothes in time for the
back to school season.
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Supply Chain Management
Integration of articles:
Pharma Hospital Levis Kawasaki
Uncertainty
Problem
Operation Time to
Product origin schedules Bad systems market
Product Resource Demand Demand
Authenticity unavailability forecasting forecasting
Solutions
RFID RFID IT Hosted SCM
Doctors, Distribution Outsourcing
Basic & Pedigree Equipments infrastructure the solution
Challeges
Privacy Privacy Cost Security
Cost Cost Infrastructure Reliability
Standards Standards Communication Integration
Infrastructure Infrastructure Complaints
As summarized in the table above the articles relate to each other through a common
thread of ―Lack of Visibility‖. This lack of visibility is in terms of information, material and
the processes involved in the supply chain. Of course the solution implemented leveraged
RFID and IT technologies to enhance the visibility through the supply chain. But all of these
call for a stable IT infrastructure and well documented working standards, as depicted in the
table above.
Course Concepts Integration
These are some more of the course concepts discussed in the article.
Virtual Collaboration
The book refers to the importance of e-collaboration (Virtual Collaboration 3.4). In the SCM
world powerful e-collaboration and integration is the key to success. The article – ―Admitting
RFID into the hospital‖ - could be linked to the concepts of e-commerce talked in the book.
Chapter (4) emphasizes on the extent to which e-commerce brings in the collaboration. The
same concept is reflected in the article. The data from the RFID was made available on a web
application which could e accessed by anyone hospital personnel. The chapter also brings out
the possibilities of expansion and collaboration with e-commerce. This could be extrapolated
to the doors that would be opened for the hospital in the future. If this hospital decides to use
the equipments on a shared basis between other hospitals.
A study done by the University of Michigan’s Office for the Study of Automotive
Transportation (OSAT),(competitive realities of the Automotive value chain) found that that
progress in both integration and collaboration for SCM lagged progress in most companies.
One of the primary reasons they found was that, SCM processes communicate across several
barriers. The following diagram depicts how SCM touches nearly all parts of the organization
and outside of it.
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Supply chain problems and solutions
The book refers to several problems in Supply chain (Refer Supply chain problems and
solutions 7.2 in book ) and the challenges companies are facing which has been emphasized in
this article. According to the book the problems in supply chain systems stems from two main
sources.
1. From uncertainties
2. From the need to co-ordinate several activities, internal units and business partners
All the articles clearly relates to these primary issues in supply chain world.
Evaluating IT investment
The complexities of managing IT and the inherent risks may require more management skills
that than some organizations process. In this case the organization may want to outsource some
of its activities (Refer Evaluating IT investment 13.2 in book) . In kawasaki’s case since the
company is midsize, it was the right decision to take for them to outsource their SCM
functionalities, in terms of maximizing their ROI.
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Lessons Learned:
Well thought investment
The companies mentioned in the article chose various solutions to the problem. Pharma and
hospital industries chose RFID, Kawasaki adopted a hosted supply chain solution and Levis
leveraged IT facility to find a solution. But companies need to do their due diligence to
compare the cost versus returns. For instance Kawasaki chose a hosted supply chain
application as against developing it in house since SCM wasn’t their core competency.
Integration strategy
Since companies need to make disparate systems work together, while implementing an SCM
system. A strategy of holistic integration is the key to success. Piloting that strategy are the
business drivers in a company—things such as speed, getting closer to your customers and
collaborating with partners. Companies need to plan and create metadata repositories of data,
with clear definition, so that it will be easy to integrate.
Need for solid SCM systems is key
Need for SCM is the key for success for companies. RFID and IT infrastructure helped Pharma
industries to solve counterfeit drugs problems and track inventory. Kawasaki was able to
deliver products on time. Levis got better visibility for the products sold. They could plan the
distribution. Hospitals were able to track equipments and make them available on time. All
these instances make it clear that there should be high visibility in the supply chain. Every
participant in the supply chain should be kept in a close loop in terms of information flow.
RFID in future
The concept of RFID will revolutionize SCM systems; Extending to the future, RFID could be
used to track patients in ambulances and take them to the right doctor, which will save time
and could save several lives in future. But implementation of RFID will demand a good IT
infrastructure and well defined standards. As there are other issues to be addressed like privacy
and ethical issues.
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Works Cited
http://www.cio.com/archive/090106/fea_midhosting.html
http://www.cio.com/archive/011506/pharma_sidebar.html
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