Technology That Enhance Supply Chain Management

Introduction

Supply chain management refers to “the management of a network of interconnected businesses involved in the ultimate provision of goods and service packages required by end users” (Mentzer 2001, p. 5). It involves harmonizing the activities of all the businesses within the supply chain in order to enhance long-term benefits for all firms in the chain. The process of designing and executing supply chain activities is usually tedious and complex.

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This calls for an efficient system that simplifies the activities and reduces costs. This can be achieved through modern technology that improves communication and synchronization of activities within the supply chain. This paper analyzes the technologies used to enhance supply chain management. The impact of the technologies on operations management and the challenges associated with implementing them will be illuminated.

Types of Technologies

Global Data Synchronization (GDS)

This is a communication technology that facilitates sharing of information among partners within the supply chain. It forms the basis of collaboration among businesses and supports the application of other supply chain technologies such as RFID. The main aim of the GDS technology is to help “retailers and manufacturers to effectively manage the information about their products” (Charki & Boukef 2009, vol. 4, pp. 8-30). Thus it focuses on aligning the operations of the supply chain in order to avoid errors stemming from inaccurate information about products. It achieves this by ensuring that “basic product information such as description stored by one firm matches that stored by their trade partners” (Nakatani, Chuang & Zhou 2006, vol. 17, pp. 350-460).

The firms using the GDS technology usually submit the information about their products in a predetermined format to a common data pool. Such information is then verified against a universal data registry. Any inconsistencies or changes in regard to the product information are then communicated to all partners immediately. The main benefit of the technology is that it facilitates world-wide availability and access to product catalogues (Charki & Boukef 2009, vol. 4, pp. 8-30). It also helps in preventing the losses associated with inaccurate information such as invoice mismatching. The GDS technology reduces the time need to source and order for merchandise.

The GS1 Technology

This is a “global system of standards for accurate identification and communication of information regarding products, assets, services and locations” (Nelson 2010, vol. 23, pp. 410-431). The application of the GS1 system is illustrated in figure 2 in the appendix. It provides a conventional structure for sharing business information in a fast and accurate manner. It supports communication of messages that facilitate trade transactions such prices, transportation and payment methods. The business messages supported by the system can categorized as follows.

The first category is referred to as master data messages. These include information relating to the product’s attributes and the identification details of the trading partners. The second category is referred to as business transaction messages. These include the information about the ordering process such as quantity and terms of payment. The last category include “planning and report messages” (Nelson 2010, vol. 23, pp. 410-431). These include all the trade reports used in planning. The main aim of the GS1 technology is to improve efficiency and traceability in the ordering process by facilitating accurate and quick sharing of information within the supply chain.

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Yard Management System (YMS)

This is a “web-based mobile application designed to provide control, compliance, visibility and efficiency in the transportation system through real-time tracking and reporting on vehicle location and contents” (Hisatsasu 2002, vol. 39, pp. 701-711). It relies on the use of portable scanners and an online application to trace the location of tracks used to transport goods within the supply chain. It also helps in planning for yard capacity by linking the distribution centers and the receiving centers. Its advantages are as follows. First, it automates the process of content verification during transportation. Second, it facilitates effective and efficient communication between the firms. Finally, it helps in reducing the costs associated with delays during transportation. Besides, it optimizes the use of tracks and improves the productivity of drivers.

Radio Frequency Identification (RFID) Technology

This is a communication technology that relies on “radio frequency to enhance traceability of products” (Ngai 2010, vol. 48, pp. 2481-2483) within the supply chain. Its components include the following. The first component consists of a tag and an antenna fitted on goods or pallets. The other component consists of “a radio that communicates with the tag” (Ohrman 2004, vol. 6, pp. 44-82). The advantages of RFID technology include the following. First, it does not use lines of sight during scanning. Thus it facilitates automation of the scanning process. Second, the tags store a large volume of information about the products. Besides, the information can be edited when necessary.

Electronic Data Interchange (EDI)

This refers to “the structured transfer of data between firms through an electronic process” (Gary 1997, vol. 2, pp. 158-170). The application of the EDI system is illustrated in figure 1 in the appendix. Its application involves the transfer of business documents such as invoices or local purchase orders from one firm to the other. Apart from the electronic transfers, the messages representing the documents can also be transferred through telecommunication systems. The benefits associated with the technology include reduced transaction processing time (Hill & Scudder, vol. 20, pp. 375-387). It also leads to a reduction in transaction costs since the data transmission process is fully automated.

Automated Point-of-Sales System and Wireless Communication

This involves the use of portable point-of-sales systems that use electronic payment methods such as credit cards (Madaan 2009, p. 37). The advantage of this technology is that it allows the retailers to position the checkout systems at any point within the store. Consequently, they can easily increase the number of checkout systems in order to avoid long queues. The wireless communication technology involves the use of handheld “radios that support two-way communication” (Madaan 2009, p. 39). These are generally used to enhance rapid communication such as making enquiries within the store and reporting incidents such as accidents.

Operations Management Implications

Better Inventory Management

Inventory management refers to the process of “specifying the size and placement of stocked goods” (Blunchard 2007, p. 56). The main aim of inventory management is to help firms to maintain the optimal level of stock in order to avoid losses associated with over-stocking or under-stock of goods. This is achieved as follows. The automated point-of-sale system captures information about the expenditure or purchasing patterns of customers. Such information is used by retailers to identify the goods with high demand and those with low demand. Consequently, they are able to maintain the right quantity of stock at the right time.

The RFID system helps in reconciling the quantity of stock captured in the retail management system and the actual stock available in the store (Gary 1997, vol. 2, pp. 158-170). This is achieved through automatic scanning of goods and stock adjustment. Besides, it enhances accuracy in regard to inventory management since the process is done automatically. The GDS technology helps in verifying the descriptions and other attributes of the goods.

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Thus it helps in avoiding the errors associated with incorrect information during order processing (Charki & Boukef 2009, vol. 4, pp. 8-30). Besides, it helps retailers to have access to a wide variety of goods and services offered by various producers. Thus it reduces the cost of sourcing goods while enabling retailers to stock a variety of products. The EDI system enables retailers to maintain their optimal level of stock by reducing the time needed to execute the transactions associated with the ordering process. This is because it facilitates rapid transfer of transaction documents which translates into rapid order processing.

Supplier Integration

This relates to the process of involving the suppliers in the supply chain system in order to create competitive advantages. The integration enables the retailers and the suppliers to develop common objectives that promote efficiency and cost reduction within the supply chain (Lambet 2008, p. 47). This is achieved as follows by the above mentioned technologies. The GDS technology enables the suppliers to provide the correct information about their products. It gives them the opportunity to correct and maintain a standard information about their products within the supply chain since product information is stored in a common pool (Charki & Boukef 2009, vol. 4, pp. 8-30).

Through the EDI systems, the suppliers can easily access the local purchase orders and thus supply the goods in time. Besides, it enables the retailers to have real-time access to information about the goods stocked by various suppliers. The RFID system can also be used to facilitate supplier integration. This can be achieved by linking the suppliers’ distribution centers and the retailers’ receiving centers (Ngai 2010, vol. 48, pp. 2481-2483). Thus the suppliers will be able to monitor the sales of their goods. The retailers on the other hand will benefit from the advantage of reduced order processing time due to the link between the distribution centers and their stores.

Queuing Theory

This refers to “the mathematical analysis of the time spent in waiting lines or queues” (Greasley 2007, p. 78). Its role in the retail industry is to improve the efficiency of the checkout system and to reduce the time needed to order and receive goods. This has been achieved through the following technologies. The automated point-of-sales systems usually stores information about the time spent in serving customers and the number of customers served over a given period of time (Madaan 2009, p. 81). This information helps the retailers to adjust the number of their point-of-sales systems accordingly in order to reduce long queues.

Since the automated point-of-sales system use wireless communication technology, they can be easily installed at any point in the store in order to supplement the existing ones. The yard management system helps in planning for timely delivery of goods. This is achieved by linking the distribution and receiving centers. Thus the retailers are able to plan for the arrival of goods in time. Both RFID and EDI technologies facilitate automation of order processing. This is because they provide real-time sharing of transaction information and transfer of business documents. This leads to a reduction in the time needed to process orders.

Capacity Planning

Capacity planning refers to the process of “determining the production capacity needed by an organization to meet the changing demands of its products” (Stevenson 2008, p. 36). In the context of retailers, the capacity refers to the optimal level of stock needed to meet customers’ demand. Both RFID and automated point-of-sale systems store historic data that describes the sales or purchase patterns of various goods. This information helps the retailers and suppliers to identify the seasons of high demand and low demand associated with various goods (Ohrman 2004, vol. 6, pp. 44-82). Thus the suppliers will be able to plan for their production capacities accordingly.

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The retailers on the other hand will use the information to plan for their storage capacities in order to avoid stock shortages during the high demand periods. This also helps in reducing the losses associated with overstocking or over production of goods. The firms involved in the supply chain usually use the YMS system to plan for their transportation capacities. This is because the system generates transportation reports such as availability of tracks or shipment services and compliance requirements.

Besides, it enables the parties in the supply chain to track the location of their goods on transit in order to prepare storage space in time (Hisatsasu 2002, vol. 39, pp. 701-711). The GS1 systems also help in capacity planning. This is because they generate accurate reports about the delivery and sales of goods. Due to the accuracy and reliability of these reports, the capacity planning decisions made using them will be effective.

Customer Experience

Customer experience refers “to the sum of all experiences a customer has with a supplier of goods and services over the duration of their relationship” (Pycraft 2000, p. 57). The experiences relate to product awareness, product use and the interaction between the buyers and sellers. The automated point-of-sale systems facilitate positive customer experiences since they enhance efficiency at the checkout points. Thus customers do not spend their valuable time in long queues. The GDS system provides accurate product information especially on health related issues and prices. This helps the customers to make the right choices during their shopping sessions.

The RFID systems help the retailers to match their stock capacities and the level of demand (Ohrman 2004, vol. 6, pp. 44-82). Consequently, the customers are always able to find the goods they need under one roof. This not only leads to positive customer experiences but also facilitate customer loyalty. The EDI systems help the retailers and suppliers to maintain positive relationships through collaboration and sharing of information about the supply chain. Such collaborations promote economical use of resources within the supply chain.

Security Management

This refers to the process of identifying potential causes of product shrinkage and formulation of policies that help in preventing such shrinkages. The YMS system helps in ensuring security over goods on transit in the following ways. First, the tracks are sealed in order to prevent theft of goods (Hisatsasu 2002, vol. 39, pp. 701-711). Second, the tracks and their contents can be tracked between the distribution centers and the receiving centers. This helps in preventing robbery cases. Since the YMS and RFID systems facilitate automatic container verification, the process of confirming the details of goods being transported has been simplified.

This helps in preventing the transportation of illegal goods such as weapons that pose great danger to the supply chain. Security over transaction documents is enhanced by the EDI and GS1 technologies. Access to documents transferred through these technologies is restricted through identity verification requirements and passwords (Gary 1997, vol. 2, pp. 158-170). The automated point-of-sale systems help in preventing losses associated with credit card frauds. This is because the use of this technology is based on identity verification.

Challenges Associated with the Implementation of the Technologies

Security Concerns

Lack of proper security protocols has adversely affected the adoption and use of the technologies that enhance supply chain management (Pycraft 2000, p. 61). The rising cases of credit card frauds have discouraged the use of automated point-of-sales systems. The companies using such systems are not able to maximize the returns on their investments. This is because the customers avoid using the systems due to their reluctance to provide identification information. The use of both EDI and GS1 systems has been limited due to lack of security over transaction documents and sensitive information. The rise in criminal activities such as computer hacking has enabled unauthorized persons to gain access to transaction documents transmitted through EDI and GS1 systems. This increases the risk of losing goods or payments due to misrepresentations.

High Cost

The implementation of the above discussed technologies requires a lot of financial resources. A lot of cash is needed to purchase the technology and the equipment that facilitates its use (Pycraft 2000, p. 63). Initial implementation of the technologies requires a complete overhaul of the existing operation processes. For example, a shift from manual order processing to an automated order processing system supported by RFID technology necessitates a complete replacement of the existing system.

Thus a lot of cash is needed to study and restructure the existing operation processes. Besides, the firm adopting the new technology must spend in training its staff on how to use the new technology (Hill & Scudder, vol. 20, pp. 375-387). This further increases the cost of adopting and using the technologies. Thus most companies especially, the small and medium sized firms can not afford the new technologies. In some cases, the firms using the new technologies have failed to realize the expected returns on the investment in such technologies due to their internal inefficiencies. In such cases, the cost of using the technology exceeds the benefits associated with it and this discourages its use.

Organizational Capacity and Resistance

Some businesses in the supply chain system have failed to implement the new technologies due to their production capacities. This means that the level of their output can not guarantee maximization of the benefits associated with the technologies (Blunchard 2007, p. 74) For example, a small store with only one track will not need the YMS system to plan for its transportation needs. This has adversely affected the ability of firms to adopt the technologies that enhance supply chain management. Technologies such as RFID and YMS leads to automation of supply chain processes. This has led to loss of jobs as machines replace workers. Thus the implementation of such technologies has always been resisted by employees and trade unions in order to prevent job losses.

Lack of Collaboration

Since the supply chain system requires businesses to synchronize their activities, the technologies must be implemented by all parties (Blunchard 2007, p. 78). For example, a retailer will not be able to use the GDS system if its suppliers are not using the system. This is because the retailer can only access information about the supplier’s products if the supplier is using the GDS system. Thus lack of collaboration or failure by one party to implement the technology will discourage other firms within the supply chain from implementing the technology.

Research and Development

Lack of appropriate research and development in the industry has led to under utilization of the modern technologies (Hill & Scudder, vol. 20, pp. 375-387). A lot of research is needed in order to develop tailor made supply chain management solutions. However, most firms lack the capacity to carryout such research studies. Besides, companies that have been contracted to undertake the needed research fail to understand the needs of their clients. Consequently, they develop solutions that are not effective.

Talent

The use of the above discussed technologies requires talent. This is because as the needs of the business change over time, the staff must be able to identify how the technology should be modified in order to accommodate the emerging needs (Mentzer 2001, p. 77). However, talent in the information and communication industry is inadequate. This thus discourages the adoption and use of the modern technologies.

Challenges Associated with Customers’ Expectations

Purchasing Process

Changing lifestyles coupled with the invention of modern communication technologies such as the internet has changed the customers’ expectations in regard to the purchasing process. Currently, many customers prefer viewing the goods available in various stores through online systems. This means that retailers must adopt online marketing communication technologies such the internet in order to reach its customers. Besides, most customers prefer making instant purchases from the comfort of their homes or offices.

This presents the following challengers to the retailers. First, the retailer must adopt an online payment system that will enable the customers to purchase the goods without visiting the stores. Second, the retailer must develop a delivery system that will enable the customers to receive their goods in the desired condition and at the right time (Hisatsasu 2002, vol. 39, pp. 701-711). Third, the retailer must develop security protocols that will prevent fraud cases associated with cash transfer. Besides, the security of the goods purchased by the customers must be ensured.

Variety

Customers in the retail industry are highly concerned with the availability of a variety of goods. This is attributed to the rise in consumerism and lack of enough shopping time. This means that customers will prefer to find all the goods they need under one roof. This presents the following challenges to the retailer. First, the retailer must improve their product sourcing processes in order to offer a variety of goods.

This calls for adoption of technologies such as GDS that facilitate world-wide access to product catalogues (Charki & Boukef 2009, vol. 4, pp. 8-30). Second, the retailer is faced with the challenge of capacity planning in order to create enough room for all varieties of goods. Third, the retailer will require an “efficient inventory management system” (Blunchard 2007, p. 82). Such a system will enable the retailer to stock the right goods at the right time.

Product Information

Customers in the retail industry especially in the Western economies are more concerned with product information such as side effects, ingredients, ease of use and disposal requirements. This is attributed to rising cases of health risks associated with product consumption and the need to protect the environment. Customers will only buy a product if they are able to access correct and reliable information about it at the time of purchase (Hill & Scudder, vol. 20, pp. 375-387). This leads to the following challenges. First, the retailers must ensure that each product bares correct information about its ingredients and use.

This calls for adoption of technologies such as GDS which enables retailers to verify product information. Second, the retailers are faced with the challenge of labeling their products. Since most products are labeled by the manufacturers, the retailers must work together with manufacturers in order to ensure that the goods are properly labeled. Thus the retailers are also faced with the challenge of ensuring supplier integration in the supply chain. Such integrations enable the supplier to understand the needs of the customers.

Service Quality

Service quality is the driving force in the retail industry. Generally, customers prefer stores in which their enquiries can be answered within the shortest time possible. Besides, they prefer efficient checkout systems that reduce the time spent on queues. The challenges associated with this expectation are as follows. The retailer will have to invest in an efficient communication technology in order to answer customers’ enquiries within the shortest time possible. Second, the retailer will have to automate the checkout system in order to improve its efficiency (Madaan 2009, p. 82).

Store Ambiance

This relates to the atmosphere in the store. Customers generally prefer stores that are “welcoming from outside and attractive from inside” (Mentzer, 2001). This means that retailers must find enough space to install attractions in their stores. Therefore, the retailers are challenged to plan properly for the store space at their disposal.

Conclusion

Effective management of the supply chain system calls for adoption of modern technologies that enhance efficiency, security and inventory management. The main technologies used to enhance supply chain management include “RFID, GDS, YMS, EDI, wireless communication and automated point of sale systems and GS1” (Mentzer 2001, p. 87). The main challenges associated with the implementation of these technologies include high costs, lack of collaboration and inadequate research and development. Successful implementation and use of these technologies enables a company to create competitive advantages for itself and the entire supply chain. Thus firms involved in supply chain systems should focus on adopting new technologies.

Appendix

This figure illustrates the transfer of data using the EDI system. The arrows indicate the follow of information form one firm to the other.

EDI system.
Figure 1: EDI system.

This figure illustrates the applications of the GS1 system. The arrows indicate the flow of information between firms in the supply chain.

GS1 system.
Figure 2: GS1 system.

References

Blunchard, D 2007, Supply chain management, John Wiley and Sons, New York.

Charki, M & Boukef, N 2009, ‘Looking to adopt the global data synchronization standard’, Journal of Management Information System, vol. 4, no.1, pp. 8-30.

Gary, J 1997, ‘EDI network and logistics management at Unilever-Sogit’, International Journal of Supply Chain Management, vol. 2, no. 4, pp. 158-170.

Greasley, A 2007, Operations management, SAGE, New York.

Hill, C & Scudder, G 2002, ‘The use of electronic data interchange for supply chain coordination in food industry’, Journal of Operations Management, vol. 20, no. 4, pp. 375-387.

Hisatsasu, Y 2002, ‘Rolling stock yard management system using control equipment for industrial use’, Japan Science and technology, vol. 39, no. 2, pp. 701-711.

Lambet, D 2004, Supply chain management: process, partnership and performance, John Wiley and Sons, New York.

Madaan, P 2009, Fundamentals of retailing, McGraw-Hill, New York.

Mentzer, J 2001, Supply chain management, SAGE, New York.

Nakatani, K, Chuang, T & Zhou, D 2006, ‘Data synchronization technology: standards, business values and applications’, Communications of the Association of Information Systems, vol. 17, no. 1, pp. 350-460.

Nelson, J 2010, ‘Lawson enterprise applications help healthcare organizations move to GS1 standards’, Healthcare Purchasing, vol. 23, no. 2, pp. 410-431.

Ngai, E 2010, ‘RFID technology and application in production and supply chain management’, International Journal of Product Research, vol. 48, no. 9, pp. 2481-2483.

Ohrman, A 2004, ‘RFID technology being rolled here’, Northeast Pennsylvania Business Journal, vol. 6, no. 3, pp. 44-82.

Pycraft, M 2000, Operations management, Pearson, Boston.

Stevenson, W 2008, Operations management, McGraw-Hill, New York.

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