FAQs (Frequently Asked Questions) On Supply Chain Systems
FAQs (Frequently Asked Questions) On Supply Chain Systems
Following are some of the frequently asked questions (FAQs) on supply chain systems that we have encountered in our speeches, workshops, seminars, and other forums. Feel free to ask more questions if your particular question is not answered below.
Why We Are Qualified To Write This List Of FAQs On Supply Chain Systems?
VERY FEW PEOPLE KNOW SUPPLY CHAINS LIKE WE DO – retail, beverages, food, milk, dairy, meat, livestock, explosives, chemicals, cotton, rice, graphite, solar power, natural gas, crude oil, fertilizers, electronics, packaging, glass manufacturing, machine parts, automobiles, industrial goods, mining, etc are just some of the industries where boards and executives have benefited from our proprietary knowledge of the supply chain analytics.
Click on our project methodology above to see how supply chain analytics is an integral step in each and every project that we have undertaken in the last three decades.
Since when no one had heard of supply chain, our co-founder Vivek Sood has been considered one of the most authoritative professionals in the field when it comes to the subject of supply chain analytics in Australia, Asia, North America, South America and Europe.
He has written four seminal books about restructuring supply chains to gain massive advantage in business. He also regularly delivers keynote speeches at business schools and conferences such as University of Technology Sydney, Supply Chain Asia, Asian Bankers Forum, APEC Business Advisory Council.
He has been quoted in the authoritative business press and over 100 academic papers written by supply chain researchers around the world. Vivek and his team have examined thousands of supply chains during their projects over the last three decades and helped hundreds of executives build safe, cost effective and sustainable supply chains and careers.
Supply Chain Systems - FAQs
A supply chain itself is a network of organisations and facilities that transforms raw materials and inputs into products and services delivered to customers.
Supply chain systems are a set of tools that enable companies to efficiently handle the five flows of supply chains. We have discussed these five flows in a lot more details in another FAQ.
Once you get your mind wrapped around the vastness of supply chains with thousands of nodes around the world, and millions of handoffs in each of the flow – you realise the importance of supply chain systems. No human, or a collection of humans can handle this job in their brain.
In fact, we know for a fact that the concept of supply chain management came to life itself only after computing power came into existence to enable to do this.
Current supply chain systems keep track of all the flows in all the pipelines or networks of supply chains, as well as all the stock in all the nodes or stocking locations for each of the five flows.
Supply chain systems are the combination of software, data centres, processing power and information access devices. Taken together they help the operators, analysts and managers ensure that these five flows happen efficiently and effectively.
It all started very humbly with the introduction of cash registers that could process basic cash transaction and keep track of the daily sales.
In the 1970s the introduction of functional transactional system enabled automation of the low-value repetitive works within individual functions such as purchasing, invoicing, inventory tracking etc.
In the 1980s the new enterprise transactional systems with best in the class tool were introduced. These systems were generally owned by the users and supported by MIS.
They provided an accurate, consistent view of data across the company even though these were generally closed systems.
By 1990s and early 2000’s the best in class tools, and software reduced the role of the transactional approach, it introduced new synchronisation tools and analytical software into the system.
During the 2000s and 2010’s the term Object-oriented “plug and play” was introduced into the field which emerged the use of fully open software and established the standards of “plug and play” by the way ability to combine the software components was achieved.
By the start of 2010, New internet-based supply chain tools were already in vogue. These contained service-oriented architecture (SaaS) which ensured better GUI also with interactive and integrated software.
Thus the supply chain visibility was improved by the real-time tracking of information and also the extreme transaction processing ability was enabled to scale up the supply chain.
The entire history and evolution is explained in a gerat deal of details in our report titled SINK OR SWIM REPORT: HOW INFORMATION TECHNOLOGY CAN SAVE OR RUIN SUPPLY CHAINS. A newer edition of the same report is also available at https://globalscgroup.com/product/sink-or-swim-report/.
In the 1980s the mainframe systems were deployed for the supply chain systems, in inventory management, Manufacturing Resource Planning (MRP) and scheduling.
The information flow had inherent issues because it was controlled by MIS, causing the funnelling of information into bottlenecks.
By the wake of 1990s Mini-computers were introduced to work along with the mainframe in departmental as well as personal level.
This leads to the beginning of the dynamic approach inside the system and response improved. But the low-quality maintenance and the lack of adequate training was a hindrance.
During the 1990s and 2000s, the client/server systems began to show up in the supply chain, and they provided an attractive alternative to mainframe. These systems offered data integrity and synchronisation throughout the company. Modern client/server systems improved the Graphical user interface (GUI), leading to a reduction in error.
Fully distributed computing models was the vogue in the 2010s, and it enabled the business need to reduce the wall thickness between the customer and vendor for the free flow of data.
All the Enterprise software was coded in object-oriented codes for rapid development and reusability.
Enterprise web portals are the emerging trend in the environment. This comprises centralised, as well as service-oriented architecture, uses the software solution to improve connectivity and also use powerful tools such as software as a service ( SaaS).
The business trends faced by the organisations was the driving force in the evolution of information architecture.
Talking in the supply chain language – materials flows changed drastically in the 70s and 80s as a result of globalisation and removal of the trade barriers. Global trades exploded, and every company started looking internationally for better suppliers and lower prices.
As the materials flow became complex and larger, information flow needs exploded even more dramatically. And this explosion in the information flow to plan, manage and control the materials flow, moentary flow, risk flow, value flow in the supply chain became paramount.
This was the big pulling factor in the evolution of the information architecture of supply chain systems.
As noted in the FAQs on supply chain management – there are four levels of activities in in every department or functional area inside every company. These are – starting from the bottom to the top (or the periphery to the centre in the following infographic) – execution, scheduling, tactical planning, and strategic thinking. We cover this concept in great detail in our book Unchain Your Corporation.
Supply chain systems help in breaking the silos between the functional areas – such as sales, marketing, operations, purchasing, logistics, production, finance etc. – by bridging the gaps between them. That is the entire purpose of existence of supply chain management.
In summary, at each level these supply chain systems do this job differently. That is the reason why each level tends to have its own set of systems.
At the other periphery – for execution we have transaction processing systems – mainly ERP software such as SAP, Oracle etc. which operate at the last two levels mainly to record every transaction and to help plan and control each transaction / event as it happens.
In the middle we have decision support tools or systems (DSS) for tactical planning of demand and supply and their corresponding dependencies.
At the top we have tools for strategic planning and scenario planning. All these level of planning, decision making, competencies and tools are shown in the figure below.
There is a very good saying which is repeated so often that it has now become a cliché – “those who do not learn from the history are condemned to repeat it”. This saying aptly summarises all the reasons why companies continue to make these mistakes.
The following graphic from the same report mentioned above ( SINK OR SWIM REPORT: HOW INFORMATION TECHNOLOGY CAN SAVE OR RUIN SUPPLY CHAINS. ) clearly illustrates these mistakes in sufficient detail and clarity:
This question will take a minimum of 20 pages to answer in full detail. In fact that is what our report SINK OR SWIM REPORT: HOW INFORMATION TECHNOLOGY CAN SAVE OR RUIN SUPPLY CHAINS. does. However, sometimes one picture is worth a hundred pages:
New information architecture is designed to support the demands of the modern realities of the five flows in supply chain management. Here are the two most salient points about it.
- It will provide real-time supply chain visibility by implementing advanced wireless technologies like Radio frequency identification (RFID) and Wireless communication. It also put the better forecasting methods by using Linear and Multi integer programming into action
- Scenario-based planning for better contingency is also established in new architecture providing Interactive solutions are introduced. The procurement and transactions are made reliable and online through web-based portals. Different representation of Objective functions is introduced for optimisation.
The strategic elements of supply chain systems is continually evolving every ten years, or so as the next generation supply chains emerge. The following infographic shows this transformation over the past four generations of supply chain management.
Today, these systems must be capable of supporting :
- Accurately map the organisation’s business and profitability drivers
- Accessing all data readily through the dashboard
- Capture, analyse and share business intelligence about customers and company operations to do better business decisions and continually refine business strategy
- Store, manage and distribute all process information through a central repository
- Producing customised flowcharts and process activity – Linking each process with process drivers and risks
- Running simulation models considering organisation goals and objectives (e.g. customer satisfaction)
- Identifying potential risk and impact of the change of critical resources or processes using simulation
- Investigating relational dynamics between processes, resources, costs and profits
- Graphically assign roles and resources used for each process
- Providing full visibility through complete process chart of functions of individual employee or system
- Bottleneck identification, report generation, resource allocation, workflow identification
- Performance measurement of specific processes
The most useful strategic supply chain systems architecture looks something similar to the following:
The most common supply chain systems strategy are summarised in the following infographic:
The tactical requirements are as follows :
- Implementation of new systems: The tactical requirement consist of the performances of new techniques such as RFID to reduce the redundancy in the existing system.
- Better information visibility: It will help the extended planing and enables the partners up and down in the supply chain to maintain availability levels without maintaining the excess stock.
- Better information timeliness: By the way, shorter planning cycles can be enabled, which will, in turn, reduces the working capital.
- Increased information accuracy: More information accuracy related to inventory and lead time will reduce the safety stocks and idle capacity, which will lead to effective planning.
The strategic activities will pull the data from the information warehouse then using the various planning tools the strategic planning activities are performed resulting in different output regarding S&O Planning, Cost optimisation, Value-at-Risk analysis and network optimisation.
Almost all activities in the operational and execution segments are performed over the internet. Here the requests and their fulfilment are placed across the enterprises and the downstream via the internet.
The request is categorised into Face-to-face/Voice-to-voice, Semi-structured request, Unstructured offer according to nature, and it is either pulled or shared with the vendors and the enterprise using the internet as the transfer media.
The web-based architecture has increased adaptability and distributivity with optimised reliability. The use of sophisticated information systems will, in turn, increase the scalability and extensibility. By enabling the new method to reduce the cyber by threats, the security also improved. The web-based architecture is reusable as it is agile. Most of the portals and Web architecture ha right user interface, making its use very easy. As the system can be opened and use in many devices, its portability is also increased.
The introduction of the new architectures will focus more om real-time connectivity, security and reliability. This system will be based on XML and web services with improved communication bandwidths providing the capability to support extreme transactional processing.
The main challenge in deploying the new technical architecture is as follows:
- End to End Security In the new systems, the transactions are done over the internet so both parties must have clarity over the database and networks during the entire life cycle.
- Auditing and tracking Auditing and tracking facility must be provided for all transaction between the business partners.
- High reliability By integrating this software, the companies and their applications need to be highly scalable, reliable and always available.
- Complex business process The integrated solution must be capable of handling highly autonomous, diverse and distributed application.
Internet standards The implementing software must support the internet standards such as HTTP, XML and Open buying on the internet (OBI)