Role Of Logistics In Supply Chain Management Information Technology Essay

Logistic is defined as a business planning framework for the management of material, service, information and capital flows. It involves the management of complex information flow, communication, distribution, and control systems that are required in today’s business environment. It is “a channel of the supply chain that adds value of time and place utility” [2] .

The role of logistics is to manage the balance that is between the little details and the key components that are involved in a product. Looking at my chosen organizations, here are some of the suitable information collected:

HMV Group operates distribution centers that play a vital role in the supply chain and the delivery of stock to stores and customers from their suppliers. The role of logistics at HMV is especially important in its goal to transform from a one-dimensional retailer to a broader entertainment brand. HMV’s management has embarked in a three-year transformational strategy to restructure their supply chain to achieve efficiencies that would bring about improvement in their operating profit. One of their key initiatives in the fiscal year of 2009 is the implementation of new centralized distribution center for its Waterstone’s business which served as a facility to facilitate the delivery and distribution of their goods. This resulted in substantial reduction in suppliers’ transportation requirements, and added efficiency to their supply chain operation.

GlaxoSmithKline manages their supply chain with a global logistics team. Their core mandate is to enable supply and demand across the nodes in the chain, while simplifying this process through the implementation of standardization to facilitate the global IT systems. The role of logistics at GSK also involved the provision of warehousing and transportation as well as the management of pack and component portfolios [3] . One major initiative of GSK in 2010 is its partnership with Couzens Storage Solution for the installation of computer-controlled vertical life storage systems in its new facility in Harlow, Essex. This system helps maximize floor and cube space by providing fast access to storage with the help of technology. The technology implemented here instructs the picker to check and automatically update stock records with the internal system and add tracking capabilities. These will essentially help GSK to monitor their inventory and track shipments to ensure timely delivery to the customers.

BT Group

The role of logistics in BT’s supply chain management is aimed to drive the business of BT, in particularly in customer service delivery and cost transformation. BT certainty understands the role of logistics, and the importance to control costs with maximum efficiency in any supply chain operation. BT actually offers the BT Field Force Automation which is essentially a tailored BT product to improve customer service, cut overheads and increase productively. They also offer another product called the BT Auto-ID which allows their customers to track assets with RFID (radio frequency ID) technology to gain more visibility throughout the supply chain.

Extend research to Procurement practices in chosen organizations

Procurement plays an essential part in the delivery of goods and services for organizations. This is the process of obtaining goods and services from the preparation stage through to the approval of the invoice for payment.

HMV Group

Initiated the integration of IT and back office functions, and centralized procurement of non-sale goods that could bring about potential cost savings of over £40m annually [4] . This is known as sharing services to attain greater economies of scale by combining several small procurement agents into one centralized system.

Joint partnership with Unipart to create a new ‘book hub’ to serve stores and its website as a centralize location for its distribution functions.

Product department in HMV’s head office is responsible in facilitating product negotiations to obtain the best offers for their customers, and the maintenance of the latest range of products both instore and online.

Employ the use of bar coding and tags to identify items and facilitate the just-in-time system of timing the purchases from their suppliers to keep inventory costs low.

Engage in green public procurement practice such as its Automated Meter Reading (AMR) and electricity procurement to improve billing, monitoring and reporting capabilities [5] .

GlaxoSmithKline

Operates a shared service through its centralized Global manufacturing and supply (GMS) network that runs its procurement operation on behalf of GSK to purchase supplies for their business needs.

Has an in-house procurement/purchasing department that manages GSK purchases on particular categories, its facilitation of e-bid events/auctions, project management, supplier condition and negotiations and stakeholder engagement.

Leverage technology with the use of computer-controlled vertical life storage systems that checks, automatically updates stock record with internal system and tracking capabilities to help them manage their just-in-time system for timing purchases.

BT Group

Invested in automation with electronic interfaces to liaise to supplier directly from CRM.

Integrated core Supplier with its customer order system through a centralized B2B gateway system, where its suppliers can interface.

Implemented ORACLE Financials as BT’s core Enterprise Resource Planning (ERP) software that offers tools such as ORACLE eBusiness suite and iProcurement to manage their outgoing orders to suppliers.

Employs the SEBEL software, a customer relationship management system, to keep track of customer information and details while also measuring consumer satisfaction and preferences.

Discuss the factors considered to improve logistics/procurement practices

Procurement, which is the process of obtaining goods and services from the preparation stage through to the approval of the invoice for payment, is also known as sourcing, and some of the common procurement practices involve:

Purchasing Planning

Standards Determination

Specifications Development

Research and Supplier Selection

Value Analysis

Financing and Price Negotiations

Inventory Control and Stores

Using these known theoretical factors, one can apply these to improve the logistics and procurement practice at NewG.

Application of practices to NewG

From the aforementioned research in section 5.1 and 5.2, NewG Furniture can certainly draw from the expertise of these established organizations and use these practices to apply to their own business operations. NewG can implement these practices:

Operation of a NewG centralized distribution center: A centralized distribution centre such as a single B2B gateway will bring about significant cost savings in transportation and also allow NewG to reduce their carbon footprint in facilitating the delivery process to their stores and customers.

Share services by appointing a specialized NewG purchasing/procurement unit that manages NewG’s purchases on particular categories, its facilitation of e-bid events/auctions, project management, supplier condition and negotiations and stakeholder engagement.

Leverage technology in warehousing to maximum the real estate of NewG’s facilities and optimize the space in their warehouses.

Employ ERP software such as ORACLE Financials to utilize the tools like iProcurement to manage NewG’s just-in-time supply chain management. These would also be the infrastructure to support buyer-supplier communication, and include the real time messages (i.e status, delivery, etc) such that anyone in the supply chain can be provided with accurate information.

Engage in BT Field Force Automation to improve NewG’s customer service, cut overhead and increases productively. Similarly, use BT Auto-ID offer to enable NewG to track assets with RFID technology to gain more visibility throughout the supply chain

Task6

NewG Furniture – Supply Chain Strategy, 2011 and beyond

NewG Furniture’s strategy is to ensure full integration to be achieved with their suppliers in order to provide the best experience for both your internal and external customers. With the use of technology, there will be a marked improvement in the flexibility to collaborate with a wide breath of NewG suppliers to meet NewG’s needs for its annual expenditure on goods. The 2011 and beyond strategy is to incorporate the latest form of technology available to optimize the supply chain management process and NewG’s market competitiveness.

“The four phases to implement this Supply Chain Strategy are:

Phase 1 Improvement Assessment and Analysis

Define opportunities based on operations strategy and performance shortfalls

Define targets, quantify benefit and prioritise

Phase 2 Analyze supply chain and processes

Modeling the current supply chain flows

Measuring service and financial performance.

Phase 3 Design Improvement

Run simulations on model supply chain

Generate ideas through improvement teams

Align supply chain, process and information

Define process change and technology deployment

Phase 4 Detailed Planning and Implementation

Develop detailed designs and plans

Define business case

Manage change” [6] 

The strategy proposes to offer a range of electronic trading options, from which suppliers can select from, to meet their different requirements. These will be relayed back to the suppliers where they perform their assessment of which would best suit their requirements and maximize their return on investment (ROI). Next, NewG Furniture should enforce a standard protocol of having single trade arrangement and single invoicing arrangement for suppliers, to standardize transactions during the ordering processes, by providing:

A single portal interface used for “on-line” ordering

Comprehensive supply chain network (automatic order acknowledgement, invoice, status checks, receipts, etc)

Most cost effective supply chain by using centralized distribution centers

Accurate allocation of expenditure

NewG Furniture should work towards automation with electronic interfaces to suppliers with the introduction of EDI. From 2011 onwards, management should seek to automate as many processes as possible within the supply chain. One way to do this is to implement Customer Relationship Management (CRM), Planning and Bid Support applications to allow a direct interface to suppliers. These systems will help capture data and orders from NewG’s customers and give them additional insight in the procurement process.

Single B2B Gateway

NewG Furniture could facilitate its customer order systems by launching a single B2B gateway through which suppliers can interface. This will include the latest technology available and enable suppliers to send and receive messages through a consistent and stable platform. The system will automatically send real-time updates to inform on the status, time dispatched, delivery, etc, such that NewG Furniture will always be aware of the progress should their customers inquire. Additionally, NewG Furniture should also encourage their suppliers to embrace new technologies and further collaborate by “sharing information and integrating inter-company processes to improve resource utilization” [7] .

On-line Ordering

The next proposed step is for NewG Furniture to invest in ERM software that provides tools such as iProcurement/iBuy to pave the way for on-line ordering. Orders through these online channels should automatically churn out approve purchase requisition, which in turn should generate a purchase order (PO) to the supplier. NewG should also follow the “NO PO NO PAY” policy, whereby supplier are advise to only proceed until a formal purchase order is received.

Multiple Ordering and Invoicing Options

Such functionally should be available to manage the relationship with suppliers by provision of different options for ordering and invoicing.

Centralized Distribution and “SMART” facilities

NewG Furniture should launch a centralized distribution facility to bring about significant cost savings in transportation and also allow NewG to reduce their carbon footprint in facilitating the delivery process to their stores and customers. They could also introduce high-tech systems in their facilities to provide fast access to storage and maximize the real estate of their facilities.

Embedded chips

NewG Furniture can employ the proprietary offering from BT called the BT Auto-ID which will allow NewG to track their assets with the RFID (radio frequency ID) technology to gain more visibility throughout the supply chain.

Supply Chain Improvement Strategy and Benefits

Analyzing the inputs of the supply chain improvement strategy, one can assess the beneficial impact by the following:

Single portal / Single B2B Gateway

Suppliers can interface, allow NewG to benefit from better manage their supplier relations.

Allow companies in collaboration to share information and integrate the inter-company processes and improve resource utilization.

Online Ordering

Facilitate the automation process of ordering, where orders will automatically churn out the necessary follow ups and documents to send to counterparties.

Provide an additional platform for NewG Furniture to generate sales and thus improving their sales figures.

Opens their target market to an international audience which would bring a marked improvement in overall sales.

Centralized Distribution and “SMART” facilities

Reduce their overall carbon footprint and transportation costs to have a centralized unit facilitate the delivery process.

Cost savings generated can be re-directed to invest in product development or acquiring strategic assets.

Embedded Chips

Allow NewG to micro-manage their assets in the delivery process and provide customers with more visibility to achieve higher customer satisfaction.

Barriers to overcome in an organization in this implementation

No doubt, the implementation of a supply chain improvement strategy will come together with quite a few barriers to overcome. In order to design a comprehensive strategy, these issues will have to be identified by the management and addressed without delay. Firstly, the primary barrier in the implementation process is obtaining the sufficient capital and resources. The implementation of the aforementioned “2011 and beyond, Supply China Strategy” requires substantial investment in the necessary technologies. Without sufficient capital, NewG Furniture will find it difficult to fully exploit the new technological innovations that are used in the marketplace today and would not be able to successful put their implementation in action.

The next barrier would be to address the resistance to change in the organization. According to behavioral research studies, it is common wisdom that “it is a basic tenet of human behavior to resist change” [8] . This encompasses the more dramatic changes like major restructuring to the minor changes like implementing a new procedure. Thus, it is paramount for management to anticipate and plan strategies to tackle this resistance. This implementation should be initiated with an introduction of the change with periodic follow-through and consistent monitoring over the long-term.

The last barrier to be overcome to ensure the successful implementation of this Supply Chain improvement strategy would be to address the technical competencies of the employees at NewG Furniture. It would be ideal for employees to undergo training and equip them with the necessary skills to effectively operate the new systems and application that are installed.

Conclusion

Following this strategy, NewG will be able to achieve overall business performance in particularly in four key areas in process, measurement, information management and technology. This would directly lead to benefits of increased competitiveness and profitability, and position NewG Furniture to fully capitalize on investment opportunities and expand its market share. The new technologies would result in improvements in the supply chain process and enable rapid feedback as well as the ability to manage supplier relationship.

NewG Furniture could also realize benefits of improved customer service, greater efficiency and lower inventory costs with shorter cycle and lead times, and a much more simple supply chain.