TABLE OF CONTENTS INTRODUCTION…………………………………………………………………………….. 3


Three flows of supply chain management………………… ……………………………4



Three sources of data integration……………………………………………………….. 7



RFID TECHNOLGY………………………………………………………………………….. 9

Components of RFID……………………………………………………………………




SUPPLY CHAIN ALLIGNMENT……………………………………………………………12



Matched Strategies…………………………………………………………………….. 14

THE TRIPLE-A SUPPLY CHAIN……………………………………………………………14

Building the Triple-A Supply Chain…………………………………………………… 15



REFERENCES………………………………………………………………………………… 18

Introduction Supply chain management is a topic that has been widely studied; more so since the 1980’s when companies realized that they needed to create competitive advantage, create value and stay ahead of the competition. In using and utilizing supply chain management not only were companies able to sustain competitive advantage by being responsive to customers’ needs, they also streamlined their processes, and were able to drastically cut cost and increase efficiency in areas such as collaboration using just-in–time ystems to deliver products when they are needed instead of holding inventory on hand, and paying the cost of doing so.

Although the just-in-time system of inventory management is not new, it has been fine-tuned over the years with the help of information technology. With information technology being more widespread and easily accessible, it is almost impossible for businesses to stay ahead of the game if their technological system has not been created in such a way that creates value for the company.

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An article written by Hau L. Lee states that, “the best supply chains aren’t just fast and cost-effective.

They are also agile and adaptable, and ensure that all their companies’ interests stay aligned” (October 2004). When the supply chain of a company is agile, it will be able to respond to sudden changes in supply and demand. Being adaptable is the ability of the supply chain to evolve overtime with economic increase or decline, political changes, demographic trends and technological trends. As with the information systems strategy triangle, the supply chain needs to be aligned with the interests of all the participants in the supply chain so that maximum efficiency can be realized.

When all parts of the supply chain are working in harmony then the supply chain is functioning efficiently and will as a result optimize the chain’s performance. In this paper, I will highlight supply chain integration and take an in-depth look at how Wal-Mart and Proctor & Gamble have effectively utilized this process to their advantage and have created value for customers in the process. This research will also look at some trade-offs that this practice presents, practices in supply chain management and supply chain management software that is used in the supply chain integration process.

What is supply chain management? Supply chain management can be defined as a sequence of processes that goes into improving the way that a company coordinates its activities to obtain the raw materials needed to meet the needs of its customers. This process involves coordinating and integrating processes between and among manufacturers, suppliers, transporters, warehouses, retailers and customers. With so many variables involved in the supply chain, no wonder the ultimate goal of a supply chain management system is to reduce inventory.

Supply chain management includes, but is not limited to, new product development, marketing, operations, distribution, finance, and customer service” (Chopra and Meindl, 2001). The flow of supply chain management can be divided into three main flows; I have outlined it in the diagram below to show how each flow is interconnected to the other. Figure 1. The three flows of supply chain management. As outlined by the diagram above, the supply chain management process contains different flows that work in accordance with each other so that effectiveness can be optimized and maintained.

The product flow includes the movement of goods from suppliers and ends up in the hands of the customer. The information flow involves transmitting orders and updating delivery status. The financial flow involves credit terms, payment schedules, consignment and title ownership arrangements. Although the just-in-time system had been around for a while; it was not until the early 1980’s when most companies in the United States started to adopt the concept (Mawhinney & Presutti Jr. , 2007). Business executives started to recognize the overwhelming potential that effective supply chain management had to offer.

Business executives have come to realize that supply chain management can help achieve the businesses objectives on four dimensions – costs, quality, response time and flexibility. Five Components of Supply Chain Management Before the supply chain management can be implemented on any level, there needs to be a series of steps that are taken to ensure that the process is seamless and the end result is not only effective but is a form of value creation for the firm. As with any business process, there are basic components that first need to be addressed.

In an article written by Ben Worthen in 2006, entitled ABC: An Introduction to Supply Chain Management: The basics of supply chain management (SCM), he stated that “there are five basic components of supply chain management”. The components are listed below: 1. Plan – This is the strategic portion of SCM. You need a strategy for managing all the resources that go toward meeting customer demand for your product or service. A set of metrics needs to be developed needs to be developed to monitor the supply chain to make sure it is functioning as it should. 2.

Source – Choose the suppliers that will deliver the goods and services you need to create your product. This is the part of the component where prices are set and delivery schedules and payment processes are created. Processes for managing inventory are also created at this stage. 3. Make – This is the manufacturing step. Schedule the activities necessary for production, testing, packaging and preparation for delivery.

This stage of the process is the most metric-intensive portion of the supply chain, quality levels are to be measured at this level, production output and worker productivity. . Deliver – This is the stage most times referred to as logistics. The receipt of orders from customers is coordinated, a network of warehouses is developed, carriers are chosen to deliver the product to customers and the invoicing system is set up to receive payments. 5. Return – Usually referred to as the problem part of the supply chain. A network for receiving defective and excess products back from customers and supporting customers who have problems with delivered products.

Planning, sourcing, manufacturing, delivery and product return are all the business processes within the supply chain that helps to deliver superior customer value to the supply chain as whole whilst meeting the needs of all stakeholders within the supply chain. The term ‘value-added activity’ originates from Porter’ value chain framework and characterizes the value created by an activity in relation to the cost of executing it (George & Jones, pg. 311). Value Creation through Supply Chain Management Supply chain collaboration has created tremendous amount of value for supply chain participants.

Some of the immediate values that the chain experiences are: better delivery performance, increased information availability and a reduction of the time it takes to get the products to the consumer. With better deliver performance the reliability of deliveries are ensured; a participant of the supply chain will not have to worry that a particular item will not arrive in time to meet a customers’ need because that has already been taken into consideration and provisions have been made to make sure that fewer stock outs occur.

Since information is readily available and is shared by members of the supply chain, they are better able to predict customers demand; this could be made possible by using statistical data of sales patterns to predict order cycles accurately and in real time. Other than non-profit organization, the majority of companies go into business to make a profit. Supply chain integration reduces costs and accelerates sales. A cost reduction strategy is one that has been adopted by most companies and implementing supply chain integration into a company’s business strategy can help them achieve this goal.

With the world being a global economy, companies have to be proactive in the way they do business. They need to create strategies that help them obtain competitive advantage over their rivals but that will also show an increase in their bottom line. In the global economy, managing a supply chain can be a complex task. For the process to function smoothly there needs to be business-to business connectivity were supply chain integration enables manufacturers and suppliers to engage in collaborative planning, electronic transactions, and online reporting.

The values created by this type of integration are reductions in the cost of processing orders and more speedy transaction times. Having an effective supply chain where partners within the chain are able to collaborate and share data makes it much easier to increase sales. One prime example of how this process has been effective has been evident with the collaboration of two well respected companies, both of which can be considered as giants in their industry. They have been the subject of many case studies and have shown other companies how this type of integration is done.

Procter and Gamble is a major player in the manufacturing industry and Wal-Mart the world’s largest retailer, have found a way to leverage their competencies and share data with the use of information technology. Michael Green and Michael J. Shaw in their case study on the Chanel Partnership of Wal-Mart and Procter and Gamble, have outlined three sources that allows companies to answer key questions when implementing a supply chain (Green & Shaw). I have combined these three sources into the following flow chart. Figure 2.

The three sources of data integration. The result of this type of collaboration has resulted in the acceleration of sales for both companies. When supplies run low at Wal-Mart they do not need to reorder it is all done automatically and this helps to not only speed up the sales process but creates customer satisfaction as well because, Wal-mart is better able to focus on selling what customers really want. With this type of collaboration, all steps have been taken into consideration, even invoicing and payments.

With such a dynamic integration in sharing data between the two companies, Procter and Gamble is able to pass on lower prices to Wal-Mart which creates value for the customer while helping Wal-mart maintain its low cost strategy. For companies to collaborate in the manner that Wal-Mart and Procter and Gamble have done, they need to make sure they acquire the right type of supply chain management software and the technology necessary to get the job done. Supply Chain Management Software Categories Supply chain management software is a computer based application that enables companies to automate their processes.

These software packages facilitate business in planning and executing their supply chain steps to ensure efficiency. Software can be placed into two categories. 1. Supply Chain Planning (SCP) – The goal of supply chain planning software is to help businesses improve flow and efficiency of the supply chain and reduce inventory stocks. The accuracy of the planning application is heavily dependent upon the information that is imputed; whether the data is up-to-date will have a critical impact on the effectiveness of the program. 2.

Supply Chain Execution (SCE) – The goal of this software is to automate business processes with little or no human intervention. This is typically used by business-to-business (B2B), business-to-customers (B2C) and internally within the company to avoid human error and improve business efficiency. Types of Supply Chain Management Software 1. Application Service Provider (ASP) – Houses business applications for an organization. The applications are then distributed through network for participants of Supply Chain Management Systems to complete the necessary transaction and interactions within the supply chain. 2.

Enterprise Resource Planning (ERP) – A software package which integrates all departments and functions across an organization into a single computer system that can serve all those department’s particular needs. Enterprise resource planning combines different department systems into one single database, so different departments can easily share information and communicate with each other. Since all departments are able to communicate with each other in real-time, this ensures the accuracy of the information being feed into the supply chain management system and as a result guarantees accurate supply chain planning.

Extranet – Used to facilitate information sharing and web communication for participants in a supply chain management system. It is a password authenticated website which resides outside the internal network of users (companies). The security and contact detail are managed by a member administration system and allows administrators to assign full or partial access to different members according to their business requirements. 4. Extensible Markup Language (XML) – A content-based markup language created for structured documents, which can be described, exposed, shared and modified on the web.

XML data content is independent of any document style and format; it can facilitate data exchange data exchange between businesses or among different departments with different systems. The supply chain management software listed above provides significant value to businesses within a supply chain. As I mentioned earlier, one of the most obvious values that a supply chain management system provides is cost reduction. The aim of supply chain execution is business automation by minimizing the amount of manual work used in business processes.

Author Helen Johnson wrote in an article, “Wal-mart Stores, Inc. built an inventory and supply chain management system that changed the face of business. By investing early and heavily in cutting edge technology to identify and track sales on the individual item level … its IT infrastructure is a key competitive advantage that has been studied and copied by many companies around the world”. In order to achieve superior competitive advantage it is critical to thoroughly research and invest in the appropriate technology that will be able to achieve that kind of streamlining that is needed for the supply chain.

One such technology that Wal-Mart has implemented into its business process is RFID. RFID Technology RFID technology imbeds a chip inside the packaging of an item and is able to be read by a reader when the product is within an appropriate range. A basic RFID system consists of three components. These components are illustrated in the diagram below. Figure 3. Components of RFID The chips that are placed inside the packaging are passive and take energy from the reader and use it to transmit their signal (McGeoch, 2005).

The frequency levels of these chips vary some of them can be read through metal, water and practically any surface. Much more data can be store in each chip compared to the data stored in a bar code. The technology allows for multiple RFID tags to be read at once by a single reader; this makes it easier for measuring inventories at all levels within the supply chain. The fact that RFID tags are able to transmit information throughout the supply chain in almost real-time is a definite advantage that RFID technology brings to the supply chain.

Having the RFID technology in place will also decrease inventory build-up throughout the supply chain and will in turn increase sales because store would be able to forecast inventory needs. Since the RFID technology has the capability of scanning multiple items at the same time, then companies would not need to hire additional staff to check the accuracy of a load coming in but would rather utilize the technology to take care of it. Wal-mart is known worldwide for its bargaining power.

Being the largest retailer in the United States, the company is able to use this status to influence its suppliers and have them implement this technology. Wal-mart has currently mandated the use of RFID technology into their system and as a result suppliers who do not comply with this mandate may not only lose one of their biggest customer but may also run the risk of having their business suffer or even being eliminated from the supply chain. An important question to ask before installing a supply chain management system

Supply chain management systems are not by themselves stand-alone systems; after all they are highly dependent on the type of information technology system that is used by the company or companies that are a part of the supply chain. As I mentioned earlier, Enterprise Resource Planning (ERP) is a type of supply chain management software that has the ability to integrate all departments and functions across an organization into a centralized database to serve all those department’s particular needs.

A small to medium size company who may not yet have this type of software installed would need to seriously consider whether or not they are able to withstand the investment cost of having the system installed. In the event that the cost prohibits the installation of the ERP, then for the purposes of supply chain management that company may want to consider feeding information from software such as excel. There are trade-offs that will no doubt occur by going this route, one such trade-off is the loss of fast flowing information on a reliable basis which could result in inadequate resource planning and inventory levels.

Supply chain execution software and supply chain planning software are the two types of software used in the supply chain management process. While ERP is falls into the category of supply chain planning software, other software that are used are for execution purposes; meaning they automate business process with little or no human input. Supply chain execution applications are less dependent upon information gathering from different departments within the company and especially if the company size is already small, data may not need to be integrated for all departments.

With this in mind, a financial evaluation between the supply chain execution software and the cost of implementing and maintaining the enterprise resource planning software must be done. Potential Problems Associated with Implementing Supply Chain Management System As with the implementation of any new process, roadblocks may be experienced. The goals of supply chain management are business process automation, return on investment, efficient inventory management processes and customer satisfaction.

Although these are the intended goals of supply chain management, the software packages cannot change problems with management nor is it able to negotiate collaboration between members of the supply chain. With the implementation of a supply chain management system come hindrances to its use. The three key issues that are prevalent are: 1. Resistant to change – “Organizational change is the movement of an organization away from its present state and toward some desired future state to increase its efficiency and effectiveness (George & Jones, p. 456).

Whenever an organization is accustomed to doing business a certain way then members of the organization may not readily accept the changes even though the benefits will far out weight the cost overtime. From a suppliers standpoint, the supplier may not be willing to assume more responsibility for inventory management In order to avoid unnecessary resistant to change it is important to maintain open communication, participants of the chain must be willing to compromise and training and assistance must be provided in order for all participants to understand the full benefits and potential of the supply chain management system. .

Gaining trust partners within the chain – Our text defines trust as “the willingness of one person or group to have faith or confidence in the goodwill of another person, even though this puts them at risk” (George & Jones, p. 144). Gaining the trust of all participants of the chain is paramount if the chain is to function efficiently and effectively. The difficulty of supply chain management occurs because no one stakeholder has total control over the process unless that stakeholder is as big as Wal-mart.

The power of Wal-mart is evident in its collaboration with manufacturing giant Procter and Gamble. “Wal-mart’s collaboration with P&G meant that P&G would assume more responsibility for inventory management, something retailers have traditionally done on their own. Wal-mart had the clout to demand this from P&G, but it also gave P&G something in return – better information about Wal-mart’s product demand, which helped P&G manufacture its products more efficiently” (Worthen, 2006).

Although it is difficult to trust beyond the walls of your own company, we see how Wal-mart and Procter & Gamble have compromised and leveraged information between them and this has resulted in one of the best supply chain management collaboration from which other companies have copied and numerous case studies have been done. 3. Mistakes – For the first few months after the implementation of the supply chain management system it should be expected that there will be errors in the process and flaws that need to be worked out before the system will be functioning as it should.

The fact that flaws are found in the beginning of using the new system does not in itself suggest that future data generated by the system will be useless or inaccurate. Users of the system need to be aware of these initial problems, be patient and accept the fact that although they have a new system there will be times when they the users will have to still work manually, until they are able to fully merge their expertise with that of the system and the accuracy can be completely trusted then and only then will users begin to have faith in the potential of the technology.

Solutions offered by supply chain management There are a number of companies who are in the business of helping companies reach their goal and achieve effectiveness in their implementation and use of a supply chain management system. The following solutions to problems faced by supply chain participants are as follows: 1. Increased supply chain visibility and control 2. Increased supply chain accountability 3. Accelerated time-to-market through better supply chain project management. Supply Chain Alignment To align means to support or bring in line with.

When supply chain strategy is aligned with business strategy then the company is setting itself up to achieving its up to reap overall success. Before a company decides to become part of a supply chain they need to be clear as to what they are trying to achieve in such venture. Not having a clear vision or goals could lead to undesirable results such as loss of customers, too much inventory and lack of participation by other members of the supply chain. Throughout this paper I have been examining how Wal-mart uses supply chain management to its advantage.

The company prides itself of being the low cost leader and building customer loyalty by attracting them with some of the lowest prices in the retail industry. Wal-mart became proactive and creating a supply chain management system that is at the center of this competitive strategy. “Wal-mart’s business strategy demonstrates that effective business strategy requires the achievement of a dynamic balance between the functional details and a broader competitive position (Gattorna, p. 22). Supply chain management plays an integral part in the creation of this balance as it links together stakeholders of the supply chain.

Aligning Supply Chain Strategies with Product Uncertainties Life in itself is uncertain; so there is no surprise that characteristics within a supply chain may give rise to uncertainty which in turn causes some degree of risk or even anxiety. Participants of the supply chain will need to have strategies in place to mitigate these risks and respond to uncertainties in a way that provides each chain participant with a competitive edge. The strategies can be classified in four types: 1. Efficient Supply Chain – supply chains that utilize strategies aimed at providing the highest cost efficiencies for the supply chain.

In this type of supply chain, anything that does not add value to the chain should be eliminated and replaced with value-added activities. Some value added activities that would need to be pursued includes, economies of scale, optimization techniques and information linkage. 2. Risk-Hedging Supply Chain – In this type of supply chain, risk is pooled and shared among the chain’s participants so that risk associated with supply chain disruptions can be shared. This type of risk hedging strategy reduces the vulnerability of any one party to the chain. 3.

Responsive supply chains – Being flexible is the ultimate goal of this type of supply chain strategy. By being responsive companies need to be aware that their customer base is diverse and as a result tailor their products to meet the changing needs of their customers. 4. Agile supply chains- This supply chain strategy is a combination of the risk-hedging and responsive supply chains. Within this chain, customer’s needs are being satisfied as they change while simultaneously, the risks of supply chain disruption are being minimized. The following diagram was adopted from an article written by Hau L.

Lee and shows how each strategy matches up to mitigate uncertainties. Figure 4. Matched Strategies The supply chain strategy chosen by a company may be largely determined by their supply and demand. Supply chain adaptability is critical as the life cycle of products become shorter; companies must have the ability to meet the changing demands of customers’ needs. While agility within a supply chain is an important factor the alignment of the supply chain with the interest of all participants within the chain is a definite must. The Triple-A Supply Chain

Hau L. Lee wrote an article which he cleverly titled, “The Triple-A Supply Chain”. In this article he outlined how a supply chain that fosters agility, adaptability and alignment, has the ability to achieve and sustain competitive advantage (Lee, 2004). He went on to say, “the best supply chains identify structural shifts, sometimes before they occur, by capturing the latest data, filtering out noise, and tracking key patterns”. In his article Mr. Lee demonstrated how companies can achieve and sustain competitive advantage using the ‘Triple-A’ approach.

Mr. Lee’s article was brilliantly written and I give him full credit for the following: Figure 5. Building the Triple-A Supply Chain (Hau L. Lee, 2004) Strategic Alliance that Delivers Supply Chain Agility Supply chain management is about collaboration and data integration that creates a platform of trust among supply chain participants whose collective efforts are directed towards the goal of achieving superior competitive advantage that must be sustained in order for the chain to function efficiently and effectively.

Companies that are part of a supply chain are indeed allies; they leverage their competencies for the good of the chain and create competitive advantage over rivals within the marketplace. There are numerous companies that are in the business of providing other companies with solutions to their supply chain management challenges, questions and software. Two such companies are i2 Technologies, Inc. and Microsoft Corp. One could argue that both companies are competitors, after all they both assist companies with software issues that are used to maximize efficiency.

Just like Wal-mart and Procter and Gamble, Microsoft Corp. and i2 Technologies Inc. are well respected companies. Microsoft Corp. was founded in 1975 and is the world’s leader in software; services and solutions that help people and businesses realize their full potential. I2 Technologies Inc. is a leading provider of demand-driven supply chain solutions designed to enable business agility. On may 11, 2005 both companies announced their strategic alliance aimed at providing companies with more flexibility, greater ease of use and a lower total cost of ownership of supply chain management solutions for customers.

The alliance allows i2 to deliver its own solutions using the Microsoft platform, allowing businesses to customize and use Microsoft Office products as interface for i2 applications. This type of collaboration has brought about a tremendous amount of flexibility by developing i2 solutions using Microsoft. Most people in the business world are already familiar with Microsoft’s software environment which helps to streamline efficiencies.

Summary Alliances such as that of i2 Technologies Inc and Microsoft Corp. re helping to shape the mountains of possibilities that can be achieved when companies collaborate to create value for themselves and their counterparts who are a part of the supply chain. The very first thing that companies need to be aware of is what exactly supply chain management is. Being able to define the term will bring about a better understanding of what is expected. The way information flows through the chain to create value for the chain’s participants is a critical component in determining the sources from which the data will be integrated whether it be from the manufacturer, retailer or a third party.

As collaboration takes place all participants will need to be knowledgeable of the different types of supply chain software that are available and make a decision as to which one creates more value for what the chain is trying to achieve. Emergent technology has the potential to create value for the supply chain; one such technology is the RFID technology which Wal-mart has utilized in its business process. When a company decides to implement a supply chain management system, the company’s management will need to ask certain questions to help them decide what the exact needs of the company are.

Once the decision has been made to use a system things just does not automatically work the way they are supposed to but will instead take some time before it functions efficient and effectively. Three major problems are usually experienced when a supply chain management system is new, they are: resistant to change, gaining trust from partners within the change and mistakes. The chain’s participants will need to exercise patience and slowly take advantage of the different solutions that are offered from having a supply chain management system.

For maximum effectiveness then, the supply chain’s strategies must be aligned with the overall business strategy. When strategies are aligned then the chain’s participants will have a better opportunity of mitigating the risks that are associated with uncertainties. By employing these four strategies this can be accomplished; the four strategies are: 1. having an efficient supply chain, 2. engaging in a supply chain that has risk-hedging capabilities, 3. creating a supply chain that is responsive, and 4. making sure that the supply chain is agile. As author Hau L. Lee puts it, “the best supply chains aren’t just fast and cost-effective.

They are also agile and adaptable, and they ensure that all their companies’ interests stay aligned”. By keeping all these strategies in mind when designing a supply chain management system, companies are well on their way to achieving and sustaining the kind of competitive advantage that Wal-mart has so long experienced and enjoyed and who knows we may even see a company in the future who is able to out-smart Wal-mart at its own game and take over the lead as it relates to supply chain management. Anything is possible! References (Anonymous, 2008). Strategy: Framing supply chain complexity.

Supply Chain Standard. Retrieved June 10, 2008, from PROQUEST Complete database. (Document ID: 1491708931). Gattorna, John L. (1998). Strategic Supply Chain Alignment: Best Practice in Supply Chain Management. Burlington: Gower. George, Jennifer M. & Jones, Gareth R. (2008). Contemporary Management (5th ed. ). New York: McGraw-Hill. Green, Michael & Shaw, Michael, J. Supply Chain Integration through Information Sharing: Channel Partnership between Wal-mart and Procter & Gamble. Unpublished Master’s Thesis, University of Illinois, Champaign, IL. Johnson, Amy Helen. (2002). A new Supply Chain Forged.

Computerworld 36 No40 38-9. Retrieved May 29, 2008, from Wilson Web. Lee L. Hau. (2002). Aligning Supply chain Strategies with product Uncertainties. California Management Review, Vol. 44, No3. Lee L. Hau. (2004). The Triple-A Supply Chain. Harvard Business Review. Retrieved May 29, 2008, from http://images. ed4. net/images/htdocs/hbsp/050117/ AAA_SupplyChain. pdf McGeoch, Jonathan. (2005). The Impact of RFID Technology on the Supply Chain Management. Unpublished Thesis proposal Sabyasachi Mitra, Vinod Singhal. (2008). Supply chain integration and shareholder value: Evidence from consortium based industry exchanges.

Journal of Operations Management, 26(1), 96. Retrieved June 10, 2008, from ABI/INFORM Complete database. (Document ID: 1405148991). Vost, van der Jack G. A. J. (2004) Supply Chain Management: theory and practices. Retrieved May 29, 2008, from http://www. orl. wur. nl/NR/rdonlyres/FD1FCC16-C84B-4C93-9211-BE419B6563B0/26752/SupplyChainManagementbijdrageJackvanderVorstv10. pdf Worthen, Ben. (2007). ABC: An Introduction to Supply Chain Management. The basics of Supply Chain Management (SCM). Retrieved May 29, 2008, from http://www. cio. com/article/40940/ABC_An_Introduction_to_Supply_Chain_Management/5

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