Supply chain information
flows
& technologies
Professor Cecil Bozarth
College of Management
North Carolina State University
Premise

All supply chains consist of:






Physical flows
Information flows
Monetary flows
There is a difference between the supply chain’s
logical information flows and the information
technologies (IT) used to support them
The technologies are constantly changing; the logical
flows are not …
… with one major exception that we will discuss.
Sources –
Supply chain information flows

Manufacturing Planning & Control for Supply Chain
Management, by Vollmann, Berry, Whybark and
Jacobs. McGraw-Hill / Irwin, 5th Edition, 2005.


Rigorous and comprehensive treatment of S&OP, master
scheduling, MRP, etc.
Sales & Operations Planning: The How-To
Handbook, by Thomas Wallace, T.F. Wallace &
Company, 1999.

High-level workbook for understanding and implementing
S&OP
Sources –
Supply chain information technologies
A rea
C om p an y / W eb site
H igh ligh ts
A ll
A M R R esearch
 Independent research firm
P rim arily subscription, but
som e nice overview s avail.
http://w w w .am rresearch.com
S C M (A P S )
i2
http://w w w .i2.com /H om e/
S R M – S o u rcin g A rib a
h ttp ://arib a.co m /reso u rces.cfm #
S R M – D esig n
CRM
 Industry leader
 P lanning sy stem s
 A berdeen G roup
w hite papers;
 E nterprise S pend M gm t
(E S M )
h ttp ://w w w .m atrix o n e.co m /
 C ollaborative product life
cy cle m anagem ent (P L M )
 Industry exam ples
S ieb el S y stem s
 C onsidered industry leader
M atrix O n e
http://w w w .siebel.com /
Learning Objectives
After completing this module you will be able to:

Discuss at a high level the different levels and
types of supply chain information flows

Contrast the traditional top-down approach to
supply chain planning and control with the
emerging horizontal supply chain perspective.
Outline
1.
Supply chain information flows
2.
Supply chain information technologies
3.
Managing individual information flows
1. Supply Chain Information Flows
A map of supply chain information flows
Supplier
Linkages
Strategic
decision-making
Planning systems
Execution systems
Internal
Production
Logistics
Customer
Linkages
A map of supply chain information flows
Supplier
Linkages
Internal
Production
Logistics
Strategic
decision-making
Planning systems
Execution systems
Capture and control transactions
Customer
Linkages
A map of supply chain information flows
Supplier
Linkages
Internal
Production
Logistics
Strategic
decision-making
Set boundaries on what can be done
Planning systems
Plan lower-level activities
Execution systems
Capture and control transactions
Customer
Linkages
A map of supply chain information flows
Supplier
Linkages
Internal
Production
Logistics
Strategic
decision-making
Set boundaries on what can be done
Planning systems
Plan lower-level activities
Execution systems
Capture and control transactions
Customer
Linkages
Perspective 1
Classic top-down model
Tactical
Sales & Operations Planning
Suppliers?
Short-term
Master Scheduling
Material Planning
Detailed Scheduling
Customers?
Execution
Push & pull systems
Shop Floor Control
Perspective 2
Horizontal supply chain flows
Network Planning
Sales & Operations Planning
Supplier
Relationship
Management
Master Scheduling
Material Planning
Detailed Scheduling
Push & Pull systems
Shop Floor Control
Customer
Relationship
Management
Key Points

Firms still need solid internal systems in
place before they can interface well with
supply chain partners

Perspective 2 emphasizes supply chain vs.
firm-level performance (more on this later)

Impossible to evaluate specific IT solutions if
you don’t have a solid understanding of
Perspectives 1 and 2
Internal production planning flows:
The traditional view
Sales & Operations Planning


“Provides the key communication links for top
management to coordinate the various planning
activities in the business”
Fundamentals:



Balancing supply & demand
Volume vs. precise mix
Operations plan <> forecast
Business-level plan
Market plan
Resource planning
Financial plan
Sales & operations planning
(volume)
Sales plan
Operations plan
Master scheduling &
detailed material planning
Demand management
Pay-offs

“Top-management’s handle on the business”




Clarifies interaction points between functions
Formalizes negotiations
Established clear functional-level goals
Planning vs. “organizational slack”
The monthly S&OP planning process
Run sales
&
Forecast
reports
Starts with
Marketing &
Sales …
Demand
planning
phase
Supply
planning
phase
…picked up
By operations…
Pre-SOP
meeting
… come to
Agreement…
Executive
SOP
meeting
… present plan
and bring forward
any issues
requiring top
management
resolution
This meeting should be
short and very focused
Other managerial issues

Top management



Commit to the process
Force resolution of trade-offs before approving plans
Functional managers


“Hit the plan”
Communicate when plan may be missed
Other managerial issues


Keep analysis level high -- no more than a dozen
“families.”
Structure analysis around “how you go to market”,
not how you make things:



Yes: product lines, cases of Product X, etc.
No: Manufacturing units, work cells, raw material costs, etc.
The operations and supply chain areas can later
translate to production plans
Total
company
Business Unit
Sweet spot:
Enough detail to make
planning relevant,
but not overwhelming
Product family
Product subfamily
Model / brand
Package size
Stock keeping unit (SKU)
SKU by customer
SKU by customer location
Creating the “habit” of S&OP
3-step process
1. Developing the foundation

Education

Developing appropriate planning families &
information support

Establishing the S&OP process
2. Integrating / streamlining the process

Integrate financials into the analysis

Revamp organization / info. gathering as
needed

Emerging SOP database

“What if” analyses
3. Gaining a competitive advantage

You know you are here when:





Well-integrated demand planning process
Proactive vs. reactive approach to capital
equipment planning
CI tied to S&OP process
Simulation commonplace
S&OP database easily accessible
Master scheduling

Controls the timing and quantity of production-related activities

Coordinates forecasted demand or actual orders with actual
production-related activity

Serves as tool for agreement between production and other
functional areas (most notably, sales)

Feeds more detailed planning
Link between the Master Schedule
and Sales & Operations Planning
Month
January
February
March
Output
200
300
400
January (weeks)
1
2
3
4
Push Mowers
Self-propelled
Riding
25
25
35
25
25
40
12
13
Typical master schedule record
60
O n -h a n d in v e n to ry a t e n d o f D e ce m b e r =
M o n th
W eek
******** Ja n u a ry **********
******** F e b rua ry **********
1
2
3
4
5
6
7
8
F o re ca st D e m a n d
220
220
220
180
180
180
165
165
O rd e rs B o o ke d
175
160
140
120
85
45
20
0
in ve n to ry
440
220
0
420
240
60
395
230
M a ste r sch e d u le
600
0
0
600
0
0
500
0
A va ila b le -to -p ro m ise
185
P ro je cte d o n -h a n d
350
480
Key points:

Master scheduling serves as a coordinating
mechanism for sales, production, and other functional
areas

There are a variety of ways to carry out master
scheduling, depending on the nature of the product
and the level of customization


Vollmann, Berry, Whybark, and Jacobs, 2005
As we will see, changes driven by the supply chain
perspective are changing how master scheduling
works
“Engine” & “Back end” activities …
Vary greatly
from one
environment to
the next, but
there are some
general truths …
General truths about “engine” and “backend” processes
1. These processes are constrained by resource
decisions made at higher levels (S&OP, master
scheduling, etc.)
2. The longer our lead times are in comparison to
customers’ requirements, the more we will need to
execute from a plan (“push” systems)
General truths (cont’d)
3. The further downstream customization occurs, the easier
“engine” and “back-end” processes become:
Before:
After:
General truths (cont’d)
4.
The “lumpier” and more unstable downstream
requirements are, the more we will need to depend
on downstream signals – NOT plans – to control
activities
What kind of signals do I mean?
5. As information systems improve, firms will depend
more on these systems – rather than excess
production resources or inventory – to respond to
market dynamics
Horizontal information flows
vs.
“Up-over-and-down”
The major change to supply chain
information flows I mentioned earlier
Two supply chain partners, both with
*traditional* production planning systems
*Traditional* information flows
between the partners …
… What is the problem here? Can you think
of an example? What is the solution?
2. Supply Chain
Information Technologies
A map of supply chain
information technologies – current view
• Where do such technologies as RFID go? Executive dashboard applications?
Up to the 1990s
Islands and loose links
Demand
Management
Financial
Reporting
Sales & Ops Planning
Batch
transfer
Master Scheduling
Material Planning
Purchasing
Periodic
reconciliation
Periodic
reconciliation
Scheduling
Distribution
Tighter Links & Feedback
Demand
Management
Financial
Reporting
Sales & Ops Planning
Batch
transfer
Purchasing
Periodic
reconciliation
Master Scheduling
(+ rough-cut capacity)
MRP (+ CRP)
(Finite) Scheduling
Distribution
MRP II
Manufacturing Resource Planning
Financial
Reporting
Purchasing
A/R, A/P
Demand
Management
Production
Planning &
Control
HRM
Distribution
“Piecemeal” Enterprise Planning
Typical Problems

“Add-on,” customized approach

Multiple hardware / platform considerations

Maintenance nightmares

Awkward data movement

Functional vs. business process perspective
The State of the Art, c. 2005
ERP systems
A p plic ation s w ith a c o m m o n te c h no lo g ic a l p la tfo rm
a nd b uilt- in inte gra tio n ...
Fin a nc e
A c c ou n tin g
M a rk e tin g
Sa le s
C e n tr a liz e d
D a ta b a se
O pe r a tio n s
Pu r c ha sin g
… tha t sh are a c om m o n
se t o f da ta
… a nd o the r s
Linking ERP with other applications
ERP
ERP
B e st in
cla ss
ERP
L e g a cy
ERP
B e st in
cla ss
L e g a cy
ERP
ERP
ERP
ERP
ERP
ERP
ERP
Customer relationship management (CRM)
Example:
S eib el S ystem s C u sto m er R elation sh ip M an agem en t A p p lication s (2004)
S a les
M a rketin g
C a ll C en ter a n d
S erv ice
S ieb el M arketing
S ieb el C all C e nter
S ieb el E m ail
M arketin g
S ieb el W eb S ervice
C u sto m er O rd er
M a n a g em e n t
PRM
S ieb el S ales
S ieb el S ales
A nalytics
S ieb el S ales
F o recastin g
S ieb el M o b ile
S ales
S ieb el Incentive
C o m p en satio n
S ieb el F ield S ervice
S ieb el eM arketing
S ieb el eE ven ts
S ieb el S ervice
A nalytics
S ieb el M arketing
A nalytics
S ieb el P ro fessio nal
S ervices A uto m atio n
S o u rce: h ttp://w w w .sieb el.co m /p ro d u cts/in d ex.sh tm
S ieb el Q uo te and
O rd er L ifec ycle
M anage m e nt
S ieb el P ro d uct
and C atalo g
M anage m e nt
S ieb el P ricing
M anage m e nt
P artner R elatio nship
M anage m e nt
Supplier relationship management (SRM)
SRM Applications
Design
Collaboration
Sourcing Decisions
Examples:
www.matrixone.com
Negotiations
Buy Process
Supply
Collaboration
www.ariba.com
How has IT evolved over the past few
years?
Consider the view in 1999...
Strategic Management
Trans.
Content
Component
Supplier
Management
Execution
Planning / Tactical
Strategic
From Bozarth’s 1999 lecture notes …
Prod.
Data
Mgmt.
SUPPLY
Transp.
Planning
APS
Demand
Content
Demand
Planning
Invent.
Planning
MES
ERP
OPERATIONS
Trans.
Execution
Wareh.
Mgmt.
LOGISTICS
Order
Mgmt.
DEMAND
Managerial perspectives on the relationship
between IT investments and supply chain
management
“Is Supply Chain Management the Same as ERP?”



Why was this article was written?
What is the article’s one-sentence definition
of the purpose of ERP systems?
From the article, what appears to be the
direction of ERP software (c. 2001, when the
article was written?) Is your sense that this
direction has played out?
“Do You Have Too Much IT?”



Why does this “example of wise IT investment
[come] from an unlikely source...[?]” How is
Inditex Group reshaping its industry?
What was the author’s expectation for IT
implementation at Inditex Group? What was
the reality?
What principles of IT usage does the author
infer from his study of Inditex Group?
“Do You Have Too Much IT?”
McAfee’s Principles of IT Usage
1) IT is an aid to judgment, not a substitute for it
2) Computerization is standardized and targeted

“Occam’s Law of IT”
3) Technology initiatives begin from within
•
Note the antecedent—Understand, then propose
4) The process is the focus
•
Role of IT is to support the process
5) Alignment is pervasive
Leveraging Technology for
Speed and Reliability
A case study linking supply chain IT
investments with the business strategy
3. Managing individual information
flows
“Perfect” information
Information flow mapping & profiling
What is “perfect” information?

Perfect information is…






Accurate
Timely
Correct in detail & form
Shared
Complete
Other—as defined by the process user
Costs of “imperfect” information

What are some of the costs associated with
information that is:





Inaccurate? (e.g.—inventory, lead time)
Late?
(e.g.—customer orders)
Incorrect in detail and/ or form?
(e.g.—quarterly sales forecast)
Not shared? (e.g.—exception conditions)
Incomplete? (e.g.—customer orders)
Mapping information flows
Basic concepts & case study
Basic Steps
1. Start from a process point & select boundaries
2. Each physical activity will have inflows and outflows
of information
3. Build the analysis around:
Major categories of flows
Who / what / how / when?
Symbols
Who / What / How / When?

WHO generates it? Uses it? Needs it?

WHAT is the info? Is it accurate? Timely? Correct
in detail & form? Complete?

HOW is the information sent? Shared?

WHEN is the information sent? Received?
Needed?
Mapping Symbols*
Step or activity in the process
Decision point
Input or output (typically data or materials)
Document created
Delay
Inspection
Information records
Physical flow
Information flow
Example
Process mapping at a San Diego DC
Facts of the case

Process







Dealer faxes order to DC. 1 out of 25 lost to paper jams.
Fax sits in “in box” around 2 hours (up to 4) until internal mail picks
it up
Internal mail takes about 1 hour (up to 2) to deliver to the picking
area. 1 out of 100 delivered to the wrong place.
Order sits in clerk’s in-box until processes (0 - 2 hours). Processing
time takes 5 minutes
If item is in stock, worker picks & packs order (ave = 20 minutes,
but up to 45 minutes)
Inspector takes 2 minutes to check order. Still, 1out of 200 are
wrong
Transport firm delivers order (1 - 3 hours)
One possible solution
D ealer
fax es
o rd er
P ap er
o rd er
created
• 4% of
o rd ers lo st
O rd er
sits in
fax in -b o x
• 0 - 4 h o u rs
• 2 h o u rs, o n a ve .
O rd er
In tern al m ail
d eliv ers fax
sits in clerk ’s
in -b o x
• 0 .5 - 1 .5 h o u rs
• 1 h o u r, o n a ve .
• 1 % o f o rd ers lo st
• 0 - 2 h o u rs
• 1 h o u r, o n a ve .
C lerk
p ro cesses
o rd er
• 5 m in u tes
• 1 0 - 4 5 m in u tes
• 2 0 m in u tes, o n a ve .
D ealer
receiv es
o rd er
T ran sp o rt firm
d eliv ers o rd er
In sp ecto r
ch eck s
W o rk er
p ick s o rd er
YES
Is item
in sto ck ?
o rd er
• 1 - 3 h o u rs
• 2 h o u rs, o n a ve .
• N o h isto ry o f lo st,
d a m a g ed , o r
in co rrect d eliveries
• 2 m in u tes
• 0 .5 % o f o rd ers in co rrect
NO
C lerk n o tifies
d ealer an d p asses
o rd er o n to p lan t
Guidelines for diagnosing information flows

Attack delays


Examine decision points


What causes it? How long is it? How could we reduce its
impact?
Is this a real decision or just a checking activity? If the latter,
can we automate or eliminate it?
Look for loops


Why is this loop here?
Would we need to loop if we didn’t have any failures in
quality, planning, etc?
Advanced concepts

Levels of value provided by information:




Provide visibility
Replace physical flows
Provide new products / services
“How can we exploit these information flows?”
Advanced concepts (cont’d)

Gap Analysis



To what extent is the information flow less than
perfect?
What are the benefits / costs associated with
closing this gap?
Look for “low-hanging fruit”, not necessarily hightech solutions
Information Flow Profile
Poor
Accurate
Timely
Correct in
detail & form
Shared
Complete
Other
Excellent
(Example from a recent company project)

Consensus Forecasting Process

Only major difference was the quality of the information
coming from the retailers
Retailer information flows
Poor
Timeliness
Completeness
Form & Detail
Wal-Mart
Accuracy
Excellent
Conclusions



Supply chain information flows are quite broad, and
are distinct from the IT solutions used to carry them
out
Companies are experiencing a shift from “top-down”
planning and control, to horizontal flows of
information
In general, these horizontal information flows require
companies to respond to downstream demand, rather
than to higher level plans
Conclusions (cont’d)

Information flows, just like physical flows, can
be mapped, diagnosed, and improved.

Specific IT investments must be justified
based on their ultimate impact on the
business’ performance