Current ICT for supply chain processes

In this session, we will talk about the current ICT systems that you will see in supply chains that enable the supply chains today and that allow you to not only monitor current supply chain processes, but also to analyse them and to improve them, to innovate them. In the earlier lessons, we saw that supply chains have tremendously benefited from all kinds of IT innovations. Different IT breakthroughs cause the supply chain today to look completely different from, let’s say, 30, 40, 50 years ago. Today, you see a rich variety of ICT systems in the supply chain.

And we will do a brief overview so that you will recognise the different types of systems and software that you see today, and also the challenges that these systems bring, and also the opportunities they bring. So remember that supply chain is really about integrating processes– not only within your company, but also across the whole value network of companies to meet customer demands. And the customer demands, as we discussed, are changing rapidly, and they’re much more dynamic than in the past. Also, sustainability has become a really important issue. So we really need to integrate the supply chain to get what we often call end-to-end visibility of what’s going on so that we can really analyse it and improve it.

To get an overview of the type of supply chain processes and also the systems that can help them improve these processes, we use the supply chain score model, supply chain operations model, that has been developed and is still being developed by the Supply Chain Council. The Supply Chain Council was also established in the mid 1990s, and is an industry-wide association that really helps advance supply chain management as a profession. In the planning area, you see some really interesting systems today that help you to plan your supply chain, to optimise the network, and to simulate your supply chain.

In the sourcing area, you see systems that, for example, help you to manage your portfolio of suppliers– to see how they perform, to select suppliers, to communicate with them, to get bits and quotes, and so on. We see marketplaces that help you to procure from the market. In the make process area, we see systems that help you with your production– your production planning, the production execution– for example, process automation systems. In the delivery area, we see systems that help you to manage your transports, your warehouses, your terminals, and all these different processes that are needed to get goods from the shippers to the end consumers. Very connected to the topic of sustainability is the area of returns.

In the past, supply chains were just about pushing products to the market. But for sustainability reasons, it has become much more important to look at the entire product life cycle. So today, we are interested in also handling returns, which means products that come back from the market need to be recycled, need to be refurbished, need to be manufactured, reused. This requires the systems to also keep track of the products that have been sold, that are in use, and that will be returned. We have systems to monitor the entire product life cycle, and we have special systems that automate the return processes. In this area, you will see these kinds of examples. And then there are many enabling systems.

These systems basically facilitate all the supplies chain processes. Think of human resource planning, think of systems that analyse risks, that manage contracts, that measure the performance of the supply chain, and as for an example, enable the financial flows. So there’s a wealth of systems. And it’s very interesting in the history of these developments of systems who support supply chain that you see, on the one hand, the big enterprise resource system products that you have in many areas, and you have hundreds of vendors that sell these kind of systems. Here you see some really famous and large examples, but there’s also a lot of companies that focus on the mid-market or focus on specific industries.

These enterprise resource planning systems really try to automate every aspect of these processes that we just covered. Think of the planning, think of the manufacturing, the production, delivery, procurement– all of these processes have a specific module in that software. And you can imagine that the software is huge and very complex. The software contains this process support, and you can also tailor it to specific industries. You can include certain best practises in these software systems. But you can also imagine, these are large, and these are also complex, and not very cheap to buy and implement. Still, they are very powerful, and they are, in many businesses, the core functionality of the company.

However, you will always see that in any business process that you try to automate with your big enterprise resource planning software solution that there will be niche players, certain small software companies, that really focus on this specific area that can deliver similar, or maybe even better, solutions that are even better tailored to your needs. So over the last decades, it’s been a big debate whether you should buy a big enterprise resource planning solution for all your needs, or whether you should also have these niche solutions that are very specifically tailored to your needs, or whether you should have both. These strategies are called single vendor– trying to do everything in one solution.

And the other strategy is called best of breed, where you take a certain enterprise resource planning solution for your backbone functionality, but you tailor specific solutions where you need them. I tend to say that today, the best of breed is becoming more feasible. And more and more companies adopt it, because they have an ERP solution for the really core functionality of the company, and they use other solutions where needed, and they choose to integrate them. As you will see later in this course, it’s getting a more feasible solution. With today’s technology, it’s possible– not without risk. It’s not easy, but it’s possible.

So I’ll give you some examples of the different areas of the square model, the supply chain processes, and typically, what kind of solutions you see there. In the planning area, you see network optimisation systems– for example, a that analyses the current demand or the current deliveries in your network and analyses if this can be done more efficiency– for example, by setting up new delivery centres, or by setting up new production plants, or changing the delivery networks, and so on. You see simulation tools at the planning level, which means you use simulation to plan for certain events.

In this example, you see a simulation that can be run to see the effect of certain disruptions in your supply chain and see what kind of response would work best so that you can analyse many different kinds of disruptions, and you will be ready when they actually happen. In the planning, I also see, for example, solutions that are specialised in analysing stock levels and making good forecasts. So they really take a lot of daytime use algorithms to analyse the stock levels throughout the supply chain and see if the current demand patterns really justify these stock levels.

This can really help you a lot, because maybe you have a lot of stock and safety stock sitting all over in your supply chain that is really costing you a lot of money and may not be needed. So it’s really something you can do at the planning level. The sourcing level is really about how you deal with your suppliers, and it can be also improved if you look at certain software solutions in this space– for example, to analyse how much of your different components you get from different suppliers if they meet the quality criteria and if you can maybe design a different portfolio of suppliers that gives you a better return.

In the make area, you see all kinds of production automation solutions– for example, scheduling the machines and the resources to make the smart production schedule. Also, you see process automation systems that really are monitoring the shop floor and analysing if smarter production techniques can be used. Today, you also see customised production software that really can be linked directly to the customer’s demands so that the customer can configure certain products, and it will be directly communicated to the shop floor, where these will be automated and produced.

In the delivery area, which is really about getting the products from one company to the next and ultimately to the end customer, you see all kinds of solutions that help you to manage to the transport and the cargo and the warehouse– for example, solutions that manage transport and really keep track of the goods, plan the trucks, plan the real capacity, plan ships, plan terminals, and make sure that the cargo is monitored and stacked and stored and delivered in a very efficient way. There’s a whole area of managing warehouses– the facilities where cargo is temporarily stocked.

And here, you see that the software is becoming much, much more smart in really laying out the products in a warehouse in such a way that you minimise the movement and you use the capacity of the warehouse in a really effective way. Think of terminals. Terminals are really important hubs in supply chains where you often bring together multiple modes of transport. Think of multimodal terminals that handle ships, that handle train, that can handle air cargo, that can handle trucks, that also very often have warehousing, and that really are nodes in the transport network.

There’s specific software to manage terminals in a way that they run efficiently, that multimodal plans can be created that really make use of the best modality– so real ship rather than truck, if that’s possible. Make sure that containers and goods are stacked efficiently– a very specific area, again, where you have very dedicated software solutions. As I said, the returns and the product life cycle is becoming much more important because of sustainability reasons. We really try to minimise waste and reuse and recycle as much as we can, and also handle returns in an efficient way.

That’s one of the downsides of e-commerce, is that people– and also companies– tend to order many more products and to return them when they don’t like them. This process requires a completely new way of thinking and handling. And to do this as efficiently and effectively as possible, specific solutions have been designed– software that predicts returns and also manages returns in a way that they can be handled in a way that is not really causing too much waste and inefficient handling. Think of all the enabling processes are needed to make the supply chain work– personnel planning, finance, compliance, reporting, performance management. All of this used to be really, really a lot of manual work.

And now you see many, many software solutions that help you to do this. For example, if you have contracts with suppliers and these supplies deliver goods, then you need to see if you suppliers actually met the contact conditions. And if they did, then you can pay their invoice. If they don’t, then you may have to give them penalties. And maybe you give them incentives or bonuses if they exceed your expectations. All these agreements are written down in contracts, and all these agreements need to be effectuated and executed. And if all of this would be manual, then it would be a lot of work.

So software solutions appear that actually automatically interpret your contract, look at your transactions, and manage your contacts and fees and bonuses you want to give. So this was, in a nutshell, the overview of a lot of software solutions that have appeared to support all the areas, all the process areas of the supply chain reference model. So it’s really interesting to look at the supply chain, take a reference model like the score model, look at all the processes in place, and then see what kind of software solutions the companies have put in place to manage all this.

You’ll see– and this is what I find really fascinating about supply chain management– that every company and every group of companies is different in what they automate, what they still manual in place, where they choose certain really new solutions, where they have more traditional solutions, where they still do things manual. And there is always room for improvement and innovation. So this score framework helps you to analyse the supply chain, the software systems that are being used, and also, the ways to improve it. You have seen now many examples of these different types of software systems.

Of course, there are thousands of these kinds of systems available on the market today, and you have to be careful in selecting and implementing them. To find the right one that’s really good for your needs, has the right level of detail, complexity, of course, also the right price level– this is one of the jobs that the supply chain manager needs to be engaged in. He needs to be responsible for using ICT to improve the supply chain performance.