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Improving Global Supply Chains by Information Systems

Info: 5447 words (22 pages) Dissertation
Published: 11th Dec 2019

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Tagged: Information Systems

Investigation on the improvement of Global Supply Chains by using Information Systems.


The process of globalisation continues to increase the competitive pressures on all firms. Those who wish to lead the market have to continue to raise the bar in terms of operating in the most efficient possible manner. One key area for companies today is how they manage particular or own SC activities via the increasing utilisation of Information Systems (IS).

The scope of think over on to research a role of Information System within global supply chain management (SCM) and understand advantages and profits it fetches. Results showed that in order make SCM to be effective, suppliers and customers must work in close collaboration together to truly integrate their business processes.

From the results of the analysis undertaken, it has been concluded that using IS throughout the Supply Chain increases efficiency by reducing inventories, which in turn reduces costs to the entire Supply Chain, but also adds significant value from the end customer’s perspective. Furthermore, the use of IS throughout a Supply Chain enables better speed of response to unpredictable demand


List of Abbreviations

SC = Supply Chain

S-A = Sigma-Aldrich

SCM = Supply Chain Management

MNC = Multinational Company

SME = Small to Medium Enterprise

IS = Information System

E-commerce = Electronic Commerce

B2B = Business to Business

B2C = Business to Customer

EDI = Electronic Data Interchange

ERP = Enterprise Resource Planning

MRP = Material Requirement Planning

MRPII = Manufacturing Resource Planning

POS = Point of Sale

MPS = Master Production Schedule

CRP = Capacity Requirement Planning

RFID = Radio Frequency Identification

APS = Advanced Planning & Scheduling

APO = Advanced Planner and Optimiser

SCC = Supply Chain Cockpit

ATP = Available-to-promise

CPFR = Collaborative planning, forecasting & Replenishment

Chapter 1: Introduction

Over the past ten years, retailers and suppliers invested huge capital in reducing the occurrences, where customers cannot find right products in stores. This has created a serious problem in retail and other industries (Collins, 005). Gerry Jastremski (Gillette & Co) reported that this serious problem is causing a $69 billion loss for top retail companies. Recent studies revealed more than 70 percent companies face the same problem that their customers cannot find the products they want to buy in stores due to out of-stock mostly because of inappropriate supply and forecasting of products (Gruen, Corsten et al 2002). When more focused on markets during special offers and sales campaigns, the probability of finding desired product is always one in five times ratio when customers visit the store. As a result, customers change their mind and delay their purchase or look for alternative brand’s products. Thus retailers will not achieve their targeted ROI (return of investment) and customer loyalty goes down. Though organizations and big companies wish to solve the above problem but disruptions are unavoidable.

The most efficient way to manage and maintain the stock in stores is through Supply Chain Management (SCM). Supply chain with globalisation created fresh/modern era in the market environment in recent days. Businesses in today’s market are increasingly considering global atmosphere. Organizations need to be completely aware of external factors like economic trends, competitive and technological innovations at home and abroad markets, which affect their ability to grow and sustain. Globalisation means, a product can be developed in China, manufactured in UK and sold in USA. This process of globalisation shows the need and urgency for organizations to change the way in which their logistical and operational activities are managed, explainingthe the concept of Supply Chain Management (SCM).

Simple Supply chains were designed in the past using paper, pen and calculators. As business process and supply chain networks grew more complex in nature (Christopher, 2005) it became more difficult and impossible to manage SC activities without appropriate technological support. Its quite impossible to receive an effectuate and efficient SCM without IS/IT tools (Gunasekaran, Ngai. 2005).

1.1 Background/Supply Chain System

In 21st century for achieving the global organizational competitiveness, Supply Chain Management System has evolved. Organizations are trying to find ways of increasing their competitiveness, responsiveness and flexibility by changing their operational strategies, technologies and methods which include the implementation of SCM (Gunasekaran, Ngai, 2003). SCM is an approach for companies to integrate their activities in the changing market requirements which improve company’s agility level and dynamic nature.

Through the view of Simchi Levi (2000) “SCM is bunch of addresses to effectuate gather suppliers, store & warehouses, manufacturers so that trade is created and dilivered at the right quantities, to the right locations and at the right time in order to minimize system wide cost while satisfying service level requirements” (cited in Gunasekaran, Ngai, 2005). Supply chains created a viable way for satisfying customer’s needs around the world. What is a Supply Chain? SC is a strategy introduced in organizations to enhance the ways of distributing the products from the firms to end consumers. It is all about purchasing raw materials, developing them into products and distributing those finished goods to customers with the help of intermediate sources. Janyashanker, Stephen (1996) defined supply chain as ‘’a network of autonomous or semi autonomous business entities collectively responsible for procurement, manufacturing and distribution activities associated with one or more families of products”. Due to greater demand of products and high global competition of firms resulted in implementing Supply Chain.

In another words supply chain is the movement of substances or products as they drive through their origin point to the end customer. SC includes manufacturing, purchasing , warehousing, customer service, transportation, supply planning, demand planning and supply chain management. It is the involvement of the people, information, activities involved in moving products from its supplier to customer. Affective management of the supply chain can be a real challenge though definition sounds very simple.

Example of a Supply Chain:

A very well SC flow of goods is shown above. In some cases, the product is shipped from the Manufacturer to the distribution centre as soon as it is manufactured. In other cases, such as spoke model and Hub the product is held at the manufacturer once produced and on only on the requirement it is sent to the distribution centre.

In reality, every step in Supply Chain activity has complex calculations during the globalisation process; however this increases business efficiency and brings benefits to the organization on greater scales. So the Supply Chain activities must be well planned, organized meticulously as efficiency plays major role and advantageous in competitive markets (Bartlett et al. 2007). Activities in Supply Chain entail purchasing raw materials, converting into bulk or finished products and sending those products to various warehouses / distribution centres. They are then directly or indirectly delivered to 1st tier customers who add further more value to the end customers. The activities like planning and delivery should be managed and coordinated well in terms of both time and place. IS or software tools which have been developed all these years to manage these activities – have evolved and became increasingly specialized. Hence organizations need to understand and carefully select the IS tools that are best suited to their needs.


  1. Integrated Behaviour
  2. Mutually Sharing Information
  3. Mutually Sharing Risk And Rewards
  4. Cooperation
  5. The Same Goal and The Same Focus on Serving Customers
  6. Integration of Processes
  7. Partners to Build and Maintain Long-Term Relationship

1.2 Identified Problem

SCM allows the organizations to manage numerous relations in SC for ongoing business process, for which IS plays a major role. Sanders (2005) says that ‘’IS/IT which permits for the transmission and processing of information useful for synchronous decision making between organisations can be viewed as backbone of SC business structure.” As a result organizations started using IS especially SCM systems in order to have closer contacts with suppliers and vendors and to reduce problems in SC activities.

Though technology is growing and investigating new methods to solve SC problems, Maguire (2000) states: The IS community faces a paradox: despite impressive advances in technology, problems are more abundant than solutions; organizations experience rising cost instead of cost reduction. IS misuse and rejection are more frequent than acceptance and use”. Major factor that leads IS to a failure is alignment between IS and the organization that is applied in. However there is a paucity of research in IS when efficiency is considered.

Even though there is a SCM system for reducing problems in SC, but still it is not efficient. And due to lack of collaboration between different departments in the organizations, information is not shared exactly for targeted tasks. Though sophisticated technologies have been introduced to reduce problems, due to employee’s misuse and resistance, efficiency is being reduced. In this project we will discuss how technology (SAP) is being used in an organization and what problems have been identified. More over in this report enhancement has been investigated on SC. The reason for choosing SCM with SAP is due to the complexity of system that operates as a chain between suppliers and vendors. And also nature of the case is too complex as the organization has businesses with numerous suppliers and vendors internationally. One more reason for selecting this case and topic is the researches founded an opportunity to investigate how the SC activities are managed in the organization and problems existing in the usage of the SAP. The reason SAP is selected: It is a powerful tool for integration purposes and also researcher’s personal interest in acquiring more knowledge about SAP technology.

1.3 Aims and Objectives

This examination sets out to carry the investigation and the factual goal of the dissertation is- To understand the ways in which the information technology or Information systems (IT/IS) are able to find the management of global Supply Chains (SC). In order to achieve these aims the following objectives have been set:

  1. To broaden knowledge by researching in two main areas i.e., Supply Chain Management (SCM) and Information Systems or Technologies that are specifically designed to be used in SC.
  2. To do research and understand how Supply Chains have been created with globalisation.
  3. To conduct a thorough research on the literature of SCM
  4. Identifying advantages and challenges faced while implementing the IS/IT tools in SCM by doing the comprehensive review on the literature gathered on SCM.
  5. Identifying the factors that are driving and affecting the technologies / information systems used in SCM.
  6. A real case study will be carried out using a research methodology. Information will be collected through semi-structured interviews from employees of the case study organisation: Sigma Aldrich.
  7. An evaluation of the outcome, based on literature and data collected during interviews is used to find the gaps between literatures (theoretical) and practise (practically) in real world.
  8. Recommendations (if any) about SC in company.

1.4 Research Approach

The Interpretive Method is applied to understand the complex nature of IT in Supply Chain system. This will identify the sociological features like behaviour of employees, benefits of technologies employed and issues arising in business with the use of IS/IT in SCM. The interpretive method involve gathering literature on SCM, IS/IT tools used, and semi structured interviews. The research aim will be fulfilled by studying the current literature, analysing what are the factors which indicate SCM and identifying existing gaps with reference to the literature studied. Further, the research continues on existing technologies used in supporting the SCM system in the present business market. Benefits associated with implementation of IT in SCM, adoption factors and any kind of implementation issues will be determined.

For gathering the literature review core textbooks, journals, online papers, conference proceedings and information from internet have been used. After the literature study, we find out the gaps which exist in the literature read and provided. After identifying the gaps, an empirical study will be applied to give an alternative to the gaps which already been discovered in literature gathered. A qualitative research methodology has been applied. Both primary and secondary research methods are adopted. Primary method of research deals with conducting semi structured interviews and collecting data, where as secondary method of research is in the form of literature review.

1.5 Dissertation Outline

This dissertation include of seven chapters, spanning the development of research from aims and objectives to the conclusions. Dissertation has been structured in the following way:

  • Chapter one deals with the introduction of the topic with adequate theoretical background on Supply Chain and provides overall aims and objectives of the topic. Furthermore it provides types of research methodologies employed in this dissertation to achieve the aims and objectives.
  • Chapter two provides literature review with the topics covering Globalisation, Supply Chain system, IS/IT tools used in SCM and it goes on with functionalities and issues arising in SCM system and also the use of IT in SCM.
  • Chapter three deals with the research methodologies adopted and their advantages and limitations
  • In chapter four, case study about a Life Science and Bio-chemical manufacturing company and its heavy utilisation of IT in SCM have been discussed. Technical characteristics of Supply Chain in that company have also been discussed.
  • In chapter five, case study interview findings are analysed.
  • Future recommendations are discussed in chapter six.
  • In chapter seven conclusions of the whole research are provided.

1.6 Summary

This chapter gives an introduction of the research area, highlights aims, objectives and outlines of examination. Next chapter is going to present crucial points through literature.

Chapter 2: Literature Review/Background study

2.1 Introduction

In this chapter adequate background is developed to demonstrate that this study will adjust the current knowledge in SC. Part one provides information about globalisation and how it has been achieved in recent years, Which is followed by implications in global SC. Part two emphasis on definitions, concepts of SC and IS in SC, which is followed by defining various technologies in SC. part three explains integration and IS applications in SC. Part four identifies issues and challenges in SC today’s market and next part talks about identifying a technology which address those challenges. Part six summarizes the chapter.

2.2 Overview/Globalisation

Over the last two centuries globalisation process underwent remarkable changes and established closer contacts between human societies over the globe. In modern days, rapid and significant Changes in terms of technologies, communications, and transportation led to new impetus for global processes and more interdependent world than before. Business started moving rapidly than ever to new perspectives in many perceptions like coordinating closely, cooperating more in networks, competing with other networks (Schary, Skjott-Larsen, 2001). According to Mehmet (1996, P31) chartered companies in the past and multinational companies in the present are the driving factors behind the remarkable process of globalisation, Further saying, the main goal and motivation of these companies is for global profits and honestly, the inner logic of globalisation is ‘capitalisation on a world scale’. Globalisation created new markets, wealth, and the march led to have major impact on manufacturing companies.

National and international economies merged under trade, technology and capitalization. Multinational companies started manufacturing goods and sell to customers in different countries, this process initiated the movement of products, raw materials, money and technology swiftly circulate all around the world freely. Schary, Skjott-Larsen (2003, p. 450) states that ‘Globalisation involves markets, production and global infrastructure’. Companies started racing toward global competitive efficiency which caused organizations to produce and sell their products all over the world. This process made supply chain, its management and activities became more complex in nature.

Hill (2007, P.5) states that ‘’globalisation refers to the shift towards a more integrated and interdependent world economy. Globalisation has several facets, including and globalisation of markets and globalisation of production”.

2.1.1 Implications of Globalisation

The motivations were completely different from those of todays, which drove firms into foreign markets. For example tire industries extended their growth to abroad for rubber plantations whilst oil companies grew to Middle East countries to open new oil fields. According to Bartlett et al. (2008, P. 8) ‘’though they moved initially often opportunistic many organisations eventually realized that extra sales enabled them to exploit sales economies of scope & scale, thereby providing a source of competitive advantage over their domestic rivals”. It can be easily seen that over a period of time, those firms realized that benefits could be gained not only by suppliers sourcing but also by selling in those new markets.

Companies like Reebok manufacture their goods in lesser developed nations like Vietnam where manufacturing cost are comparatively low. By using modern transportation facilities like airways and containerization, these products can be easily moved to destinations quickly, reliable and efficiently at low cost.

2.2 Supply Chains

In todays globalise market; SC has become a centre of focus to all business organizations especially larger firms with multiple branches globally. Supply Chain Management (SCM) has become basic competitive requirement in order to satisfy and compete for the attentions of modern customers who is more empowered and have greater demand on total value package (Harrison, 2001). Significant supply chain decisions and supply chain performance is the key for success of any firm. Any supply chain combination of all parties which have involvement either indirectly or directly, in satisfying a consumer’s request.

In another words supply chain is the movement of substances or products as they drive through their origin point to the end customer. SC includes manufacturing, purchasing, warehousing, customer service, transportation, supply planning, demand planning and supply chain management. It is the involvement of the people, information, activities involved in moving products from its supplier to customer. Affective management of the supply chain can be a real challenge though definition sounds very simple.

Supply chain flow encompasses whole bunch of activities including organization and flow of materials, other resources to produce finished product to final customer Mannheim (1994), Treacy & Wiersma (1993) cited in (Schary & Skjott 2001). A sequel of process that add value to firm is product development, customer relationship and SCM (Schary & Skjott , 2001).

No process is considered as individually important, all three work together to make supply chains successful and profitable. It is a difficult task to manage SC and failures in SC can be devastating to firms, example Nike and Cisco found in 2001 loosing $100 million and $2.2 billion respectively due to improper management and problems in their SC. But on the other end organizations like Wall-Mart demonstrated huge success on daily basis on its SCM which provided a great deal of successful competitive advantage (Taylor, 2004).

A Supply chain is a network of distributors, retailers, transporters, storage facilities and mostly active member in this process is suppliers that take part in production, selling of the product to the customer and delivery. A supply chain is specially those who co-ordinate activities to set themselves apart from the competition by the multiple companies. It has three main key parts:

Supply: targets on the raw materials supplied to manufacturing, including when how and from what location.

Manufacturing: mainly active in converting raw materials into finished goods.

Distribution: targeting on ensuring these products reach the customers through an organized network of distributors, warehouses and retailers.

While implemented to customer products and manufacturing a supply chain can determine to show how different processes supply to one another.

SC can be also considered as network of suppliers, manufacturing, assembling and distributing facilities responsible for materials procuring, and converting into final products and distributed to end customers (Barbuceaunu, Teigen 1998, Fox, Barbuceaunu et al 2001, Agnetisa, Hallb et al 2005, Stadtler, 2005). SC consists of numerous networked organizations aiming to produce goods and services to customers.

A Supply chain is a network of distributors, retailers, transporters, storage facilities and mostly active member in this process is suppliers that take part in production, selling of the product to the customer and delivery. A supply chain is specially those who co-ordinate activities to set themselves apart from the competition by the multiple companies. It has three main key parts:

Supply: targets on the raw materials supplied to manufacturing, including when how and from what location.

Manufacturing: mainly active in converting raw materials into finished goods.

Distribution: targeting on ensuring these products reach the customers through an organized network of distributors, warehouses and retailers.

While implemented to customer products and manufacturing a supply chain can determine to show how different processes supply to one another. In this sense the definition of S C can apply to finance Internet technology and many other industries. A SC strategy restricts how SC supposed to behave in order to compete in their business relatively. And this strategy describes the cost relating to the operation and the benefits. SC strategy mainly targets the actual operation of the company and SC which will be used to meet a specific goal.

Another term SCM (supply chain management), which is focusing on oversight of materials, information and finances as they are distributed from supplier to consumer. The SC also contains all the required stops between the supplier and the consumer.

Above figure clearly indicates SC always needs the collaboration between various organizations. Functions ranging from ordering materials to delivery of finished products to customers need to operate in integrated manner (Angerhofer & Angelides, 2005). Supply Chain Management (SCM) was introduced for ‘’Gathering organizational units along a SC coordinating information, material and financial flows in order to provide customer demands with the aim of improving competitiveness of the SC as a whole” (Verwijmeren, 2004). SCM plays a major role for a good planning, organizing and coordinating of SC activities.

SCM (supply chain management) can be divided into three important flows:

  • The product flow contains moving materials or goods from supplier to consumer, as well as fulfilling the customer requests.
  • The information flow contains delivery status and order information.
  • The Financial flow contains credit terms, payment schedules and additional arrangements.

2.3 Information systems in SC

Due to increasing customer demand value and global competition supply chain concept has become a bigger concern thus to run a smooth operation the important information must be accessible in real time across the supply chain and this cannot be achieved without an integrated software system for SCM( supply chain management) . To improve customer’s satisfaction SCM members have to share information and collaborate with each other. In real time to trade with suppliers and customers over the internet, web technologies have played a major role to become effective. For this, company have to integrate their applications and IS with their customers and suppliers. The implementation of this will result in as an increase in company’s profits and competitiveness.

IS in SC making business to grow rapidly and is bringing both opportunities and challenges at the same time and pace. SC design and management has been intensified with IS tools which span organizations to integrate, manage and automate SC functions. Various IS tools like Electronic Data Interchange (EDI), World Wide Web (WWW), E-commerce, Radio Frequency Identification (RFID), Enterprise Resource Planning (ERP), Systems Application & products in Data (SAP). These tools help to overcome the complexities of systems which initiates vendor-customer-supplier relationships. Aim of SC activities with the use of IS is: reducing paper work, controlling cost, lowering inventories and shorten product cycles Chou et al., (2004). Below table shows different stages how IS has been used from recent years.

Stages Year Milestone Firms IS Developments

Introduction 1960-1970’s MRP Firms are closely linked with MRP

Only Internal integration was practised for customer services.

Growing 1970-1980’s EDI In-time delivery was practised for efficient communication between


Pre-Mature 1990-2000’s E-Commerce Organizations and vendors in SC

B2B & B2C started using internet for effectiveway to communicate.

Mature 2000- present C-commerce Business organizations started

ERP Collaborating for improving the Efficiency of SC System.

Table 2.1 Stages of IS Evolution in SC. Chou et al., (2004)

The above mentioned IS have advantages and disadvantages as well. EDI and E-commerce can be used for external operations in SCM.

2.3.1 Electronic Data Interchange (EDI)

EDI is defined as being ‘’specifically the electronic exchange of structured business documents between different computer applications across enterprise boundaries” (The Edi zone, 2008). Ruppel defined EDI as electronic data communication of invoices, purchase orders and other applications which use standard EDI format between supplier and customer. For purchasing orders and sending requisitions EDI has been used by trading partners for information exchange. EDI has been adopted for many reasons- faster and easier communication of data in trading, improved accuracy in information, reduced clerical errors, and reduced inventory cost, labour, and automation of tasks. These all together improves firm relationship with customers and suppliers (Ruppel, 2004 & Leonard, et al., 2006). Disadvantages associated with EDI is its adoption and implementation cost (Williams et al., 2002, & Chou et al., 2004) and it does not operate in real time. EDI’s standard format of structure makes it more difficult to follow (Chou et al., 2004).

The swap of business data from one company or organisations system application to the computer application of a trading partner.

Why EDI?

For accuracy, push up the no of accuracy by eliminating r-keying of data. The standard quality of data is found by agreeing product cost.

By reducing supply chain cost co related with manual processing EDI helps to build up the partnership between supplier or customer.

Those suppliers who are enabled with EDI are very simpler and having very low cost to deal with.

Because of EDI electronic documents can be transferred from system to another computer system means one trading company to another trading company. EDI conveys a row of messages between two organisation or companies or parties in which one can be a recipient or originator. The sequel of the data shows the documents might be passed from originator to recipient via telecomm or delivered physically on electronic storage media. To carry out smoothly supply chain operation EDI plays a very important role. EDI is able to explain a very strict standardized format of electronic document. Companies that send and receive papers between both of them are known as “trading partners” in EEDI methodology.

2.3.2 Internet, World Wide Web

When compared to EDI which requires technological expenditure, internet and World Wide Web have been widely accepted as the scope of connectivity between individuals and businesses is broadened (Chou et al., 2004 & William et al., 2002).

‘’This is the vision of the digital future: If there is an increased demand for woollen pullovers in Benton shops, a farmer in New Zealand receives an order via the web to shear his sheep” (Rohrict, Teufel et al 2002).

Internet became a ubiquitous and cheaper means to communicate between firms and partners and which initiated global SC’s. Cost involved in exchanging information has been greatly reduced with the usage of internet in e-SCM. It has been observed that web based networks provides professional services which are quick, accurate and synchronized in global SC (Folinas et al., 2004). A new trend evolved in supporting SC applications is use of ‘third party software’s. Firms recognized the value of developing partnerships with vendors and consultants. That software’s must be compatible, capable of integrating with SC allowing partners to include any other modules which helps to include programming interfaces to current systems for future use (Green, 2001). Now-a-days SC business processes are scattered over multiple members, so SC system should be actively flexible to handle and respond effectively to the dynamic changes in the global market (Chandrashekar, 1999).

2.3.3 Evolution of ERP

From business perspective ERP has broaden from co- ordination of manufacturing processes to the integration of enterprise – wide backend processes.

Recent studies show that organizations all around the world are investing billions of money on ERP (Enterprise Resource Planning), when consulting expenditure is calculated then the figure may be doubled (Themistocleous, Irani et al., 2001). Before integrating business process of a firm with customers and suppliers, initially their internal processes have to be operated more efficiently. For this purpose, software/technology ‘ERP’ is used commonly. According to Hamilton (2003, p. 12) “An ERP system provides transaction processing and a common database to model operations within a manufacturing firm, and supports several levels of decision making”.

MRP (Material Requirement Planning) is earliest form of ERP, which was used in ordering materials and components (Wallace & kremzar, 2001). Master production schedule (MPS) is considered as heart of MRP. MPS calculates production requirements according to meet distr

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