Research Korner: Supply Chain Management and Logistics

ICT Integration to Supply Chain Management

ICT Integration to Supply Chain Management   Introduction Change is the only thing in this world remained constant. Everything in this world evolves, even strategic performance measures. An organization must be open to the idea that some measures changes over time. Organizations must research on different approaches to be at par with the changes on the systems. Business organizations today particularly the manufacturing and retail organizations operate in a turbulent and dynamic business environment. The contemporary business environment is undergoing a metamorphosis as rapid technological innovations, competitive markets, diverse customer preferences, and extensive global operations prevail in it because of the value of time. For them time is equal to money. To ensure continuous operation and survival in today’s rigid business environment, a business firm has to be open to change and improvement. Business processes, services, products and operations should be consistently subject to evaluation and refinement. The norm is to deliver quality products and services while maintaining flexible and effective operations. One of the most vital aspects of a business operation is the management of the supply chain. The supply chain comprises of the coordinated arrangement of manpower, technology, and production processes that transforms raw materials into tangible products or services. The supply chain is the overall process that determines how business firms secure materials, exploit people, utilize machines, and follow business processes to develop specific products and services for the satisfaction of consumers. This business operation is crucial as any defect in one area can render adverse impacts to the others. Thus, management of the supply chain entails strategies and constant monitoring to ensure its consistency to deliver outputs to customer at the most convenient time.             Time is valuable to any business organizations since it corresponds to satisfaction of clients and business progress.  Satisfaction and progress reflects to the money earned by the organization. In manufacturing and retail organizations, time is very vital.  The needs of the supply chain demand the efficient and speedy movement of goods to the end user with enhanced levels of service. Increasingly, this entails the customization of goods and services according to the requirements of individual clients. In order to maintain their competitiveness, all parties involved in the process, including manufacturers, vendors and logistics providers, must be able to offer and provide a swift and individually customized service to value time and money. In retail or even in electronic business, time is also important because of continues changes in the demand of the consumers.  Businesses should learn how to cope up to the current trend and time in business to have more profit. Retail businesses should consider the changes in business arena. They should know the competition, position in the market value of money and time.   A certain business has to improve the flexibility of its supply chain network and coordination among the various entities involved in the process. Coordination and flexibility go hand in hand because a company that has well-aligned supply chain operations is guaranteed total flexibility. A business has to plan its supply chain operation in advance to minimize wasted transactions.  Garber and Sarkar (2007) reports that the pursuit of supply chain flexibility is by designing a supply chain model. A supply chain model requires the company to determine the kinds of strategies and amount of time to suffice current customer needs. In this approach the business has to analyze and understand customer and stakeholder expectations in order to conceptualize the supply chain requirements and costs involved in each. Today, with these reasons, the integration of ICT to businesses’ supply chain management has increasing prominent to the success of any company.   The Integration Information technology (IT), also commonly referred to as information and communication technology (ICT) has been applied in various forms not only in electronic businesses but also within different business industries. In the electronic business sector, IT has played a significant role in enhancing supply chain management (SCM) systems. A number of information technologies had been made available to owners of business organizations for this purpose, from less-sophisticated to more advanced systems. The supply chain operations of most businesses have been enhanced through information technology mainly when the concepts of business and consumers (B2C) and business partners (B2B) were introduced. Internet technology also led to the development of SCM systems among electronic companies. Through this innovation, product customization, information searches and online deliveries are some common services that are now available to the customers. Manufacturers, suppliers and distributors on the other hand, benefit from internet utilization through well-coordinated information sharing. Online auctions are even made possible with this technological development (Emiliani 2000). In addition to internet technology, specific programs and systems such as Enterprise Resource Planning (ERP) also became one of the most well-known strategies for applying IT within manufacturing enterprises, which helps in facilitating information exchange (Evans et al 1995). In addition to this, ERP also helps the business sector by improving various activities such as the monitoring of orders, materials, schedules and inventories as well as business process engineering. The Electronic Data Interchange (EDI) is yet another IT strategy that is applied by business organizations, particularly in improving their SCM operations. Private wide-area networks or value-added networks (VAN) were conventionally used to implement EDI. This however made EDI too costly for small and medium sized companies. With the introduction of the internet-based EDI, these enterprises are now able to acquire the benefits of EDI application (Johnston & Mark 2000). The electronic retailing industry is also one of the business sectors that utilize various information technology strategies so as to enhance its operations. One of these strategies was the application of Electronic Point of Sale (EPOS), which was first introduced during the late 1980s. With this strategy, retail companies are able to acquire virtual online information about their respective customers, particularly their demands. These data are derived from the scanned purchases at the checkout counters of retail stores (McCall & Stone 2004). As retailers operate for several years, especially the electronic retailers, they were able to acquire a large customer database that can more or less give a good representation of their total demand. Customer data basically include information such as consumer sales in terms of brand, product, outlet and region. Information about the customers such as names, frequency of their visit to a particular outlet and payment method can also be obtained and stored in the database. With these data, McCall & Stone (2004) pointed out that retail companies are able to develop and make successful television campaigns based on the product sales obtained from a specific region. The introduction of information technology to business application even made the development of a customer database even easier and more effective. The incorporation of IT to customer data then led to the construction of the EPOS strategy. With this added feature, businesses now can make the most of the data derived from their customers. In addition, the development of results from analyzing these data is now easier and faster than before. Data storage and classification are no longer a problem either. In organizations that observe regular office settings, IT application strategies had also been used. One of which is the use of information technologies in developing virtual teams.  Business organizations have long been searching for mechanisms or systems that will make their operations work more efficiently. In the past, industries had recognized the efficacy of creating teams from their workforce in achieving this objective. Based on corporate experience, organizations have witnessed that team-based working environment is capable of drawing productivity and creativity out of their employees. Moreover, a dynamic business environment exemplified by work teams enables the member to overcome challenges better.             However, as teams are integrated into an organization's work operation, management had started to encounter several problems and dilemmas. For instance, some work assignments require frequent relocations. This then would call for expensive travel expenses to transfer a particular work team. Due to this, organizations are not able to maximize the use of team-based workforce as work teams tend to be constricted on small projects only. Furthermore, traveling causes much delay on work actions and decisions. Without the full and complete presence of the teams’ members in a common work site or location, no work progress is achieved. This has been the case until information technology was introduced.             With new software programs, faster communication systems and more efficient processors, business sectors now have access to a useful technology known as virtual connectivity. The access to these new technologies and innovations has allowed people all over the world to communicate even at great distances. This transition has given organizations the idea of creating virtual teams. Virtual teams are made up of organizational members whose main form of interaction is made via electronic communication means. Through the use of the telephone, fax machines, the internet or other computer-based media (Townsend, DeMarie & Hendrickson 1996), team members are able to communicate without actually seeing one another and even without being in one work location. By means of these virtual communication systems, team members can easily decide or select information system is appropriate for particular work tasks. For instance, in a work assignment that needs the exchange of information, lean technologies, such as electronic mailing or instant messaging, are used. Complicated work duties on the other hand, like conflict resolution or brainstorming, require more advance technologies such as video conferencing. Leonard (1998) noted that as the members of the virtual team are aware of the resources available to them for specific tasks, they are able to develop a refined sense of efficiency in communicating and conducting business operations as a team. The application of information technology has also been used as a strategy for improving the businesses’ marketing efforts. For instance, internet technology may be integrated to other marketing tools in order to develop a strategy known as Integrated Marketing Communications (IMC). IMC is the strategic coordination of multiple communication voices. Its aim is to optimize the impact of persuasive communication on both consumer and non-consumer such as trade and professional audiences by coordinating such elements of the marketing mix as advertising, public relations, promotions, direct marketing, and package design (Moore & Thorson 1996). From these examples, it is clear that various strategies in applying information technology have been developed to address the different needs of business companies.   Benefits and Limitations             Through the application of these IT strategies, organizations within the business industry were able to achieve a number of advantages and some drawbacks. For instance, the application of EDI in the company operations allowed the facilitation of electronic data exchanges in the absence of human intervention. As daily transactions are accomplished faster through this technology, transaction costs are considerably reduced as well. Expenses incurred in transactions are also considerably reduced. In addition to these advantages, business practices such as vendor managed inventory as well as just-in-time delivery were made possible through the EDI. Vendors were also able to develop recent ICT-based systems for SCM. With these systems, businesses are able to apply analytical applications that are useful for planning, scheduling and revenue management. This in turn is useful for the optimization of the manufacturing, supply, transportation and distribution processes (Chopra & Meindl 2001).             On the other hand, the use of the EPOS strategy also proved to be beneficial to the business industry. For example, as business companies gather and record individual customer transactions through virtual means, EPOS enables them to calculate stock levels as well as eliminate the need for regular stock computations. As EPOS operates through electronic means, business organizations have eliminated the requirement for data-gathering through physical means. This in turn according to Czerniawska & Potter (1998) helps in reducing costs incurred out of data collection, analysis and dissemination. Higher work efficiency is yet another important benefit of EPOS systems as fewer errors are incurred with the application of this strategy. Timely delivery of output can also be standardized through this type of technology. A good example for this effect is the operations of a manufacturing company. Through EPOS, supply chain efficiency can be achieved. This is acquired through the provision of real-time information regarding product planning, product availability, purchase order generation, management of inventory and the delivery status. According to Walton & Gupta (1999), information systems based on this technology can automate both the internal or external procurements functions of the company. These functions could involve the issuance of request for pricing information, management tools, supplier interface, purchase orders and supply chain control. Another important internal benefit of implementing EPOS systems is its ability to provide valuable sales information. Acquiring these sales data is beneficial to the company as it allows it to concentrate on its more profitable product or service lines, improve demand forecasting as well as reduce inventory. EPOS systems are highly flexible and easy to upgrade as readily available features and capabilities may be added to the system. Incorporating other functions can also increase the efficiency of the company. For instance, by adding the EFT or Electronic Funds Transfer capability to the EPOS system, credit or debit card transactions are automatically processed whenever a sales transaction is made. This in turn helps in lessening time allocated for every transaction.   Conclusion The implementation of ICT to company’s supply chain has been beneficial as it helps in identifying the most useful and appropriate methods in communicating and establishing good customer relations, including good relationships with stakeholders like the employees, investors, suppliers interest groups and the public in general. The introduction of the ICT to company’s supply chain has been one of the most important developments in business process, which continued on up to the present. In accordance to this, the ICT integration to supply chain is being applied by large and small companies alike, and has been well-known among companies’ business procedures.   References: Chopra, S & Meindl, P 2001, Supply Chain Management: Strategy, Planning, and Operations, Prentice Hall College.   Czerniawska, F & Potter, G 1998, Business in a Virtual World: Exploiting Information for Competitive Advantage, Macmillan, Houndmills, England.   Emiliani, ML 2000, ‘Business-To-Business Online Auctions: Key Issues For Purchasing Process Improvement’, Supply Chain Management, vol. 5, no. 4, pp. 176-186.   Evans, GN, Towill, DR, & Naim, MM 1995, Business Process Re-Engineering the Supply Chain, International Journal of Production Planning and Control, vol. 6, no. 3, pp. 227-237.   Garber, R & Sarkar, S 2009, “Want a More Flexible Supply Chain?” Supply           Chain Management Review, Viewed 13 April 2009 Available from: <http://www.scmr.com/article/CA6406208.html>.   Johnston, RB & Mark, HC 2000, ‘An Emerging Vision of Internet-Enabled Supply-Chain Electronic Commerce’, International Journal of Electronic Commerce, vol. 4, no. 4, pp. 43-59.   Leonard, D et al 1998, ‘Virtual Teams: Using Communications Technology to Manage Geographically Dispersed Development Groups’, in S. Bradley & R. Nolan (Eds), Sense & Respond: Capturing Value in the Network Era (p. 292), Harvard Business School Press, Boston.   McCall, J & Stone, A 2004, International Strategic Marketing: A European Perspective, Routledge, New York.   Moore, J & Thorson, E 1996, Integrated Communication: Synergy of Persuasive, Lawrence Erlbaum Associates, Mahwah, NJ.   Townsend, AM, DeMarie, SM  & Hendrickson, AR 1996, ‘Are you ready for virtual teams?’, HR Magazine, 1 September viewed 13 April 2009 Available from: <www.highbeam.com>   Walton, S & Gupta, J 1999, ‘Electronic data interchange for process change in an integrated supply chain’ International Journal of Operations & Production Management, vol. 19, pp. 4-21.

ICT Integration to Supply Chain Management

ICT Integration to Supply Chain Management Introduction Change is the only thing in this world remained constant. Everything...

International Logistics Management of United Colors of Benetton

International Logistics Management of United Colors of Benetton Company Background             Benetton is an international apparel manufacturer and retailer present in 120 countries around the world. United Colors of Benetton is a fashion brand with a strong Italian character whose style, quality and passion. United Colors of Benetton has an international style that combines color, energy and practicality to offer a complete everyday look. All these key elements find their expression in the brand’s core value: Passion for Quality.             Benetton is popular for its excellent logistics and supply chain strategies. Benetton’s logistics and supply chain remain as a top competitive advantage for the company over its competitors. The company according to Fernie and Sparks (2004) has always been at the forefront of technological efficiency, from garment design, production and automated warehouses to the invoicing and transmissions of orders by EDI. Benetton’s long-term investment in logistics efficiency has been repaid with the fastest cycle times in the industry, no excess work in progress, little residual stock to be liquidated at the end of each season, and near perfect customer service. Logistics Management             Logistics management is defined as the process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services and related information from point of origin to point of consumption for the purpose of conforming to customer requirements (Simchi-Levi, et al 2005). According to Swamidass (2000) logistics management can be defined as the management of the movement and storage activities performed by the firm. A logistics system is made up of different components that add to the competitive advantage of the company such as facility location, forecasting and order management, transportation, inventory, warehousing and packaging.             Benetton’s manufacturing network was famed for its flexibility. It produced 20 percent of orders by quick response, with the remaining 80 percent scheduled to maximize capacity utilization. Those operations (such as design, cutting, dyeing and packing) that brought cost efficiencies through economic of scale, or were deemed essential to product quality, were performed in-house. All other manufacturing was completed by a local network of several hundred suppliers and subcontractors, most of which were small family businesses (Martin & Peck, 2003).             The company’s operations business model is composed of European and Mediterranean plants, Asian plants and independent suppliers. These plants and suppliers supply products to the European (Castrette, Italy) and Asian (Hong Kong) logistics hub which transport the products to Benetton’s global store network (Benneton, Organization and Know How, 2009).             In terms of logistics, the company holds a tight control of the logistic phase. The company invested heavily on modeling, organization and automatization of logistics in order to completely integrate the entire production cycle, from customer orders, to packing and delivery. The foundation of the company’s excellent logistics management system is its state-of-the-art logistics operations at Castrette, Italy. The automated hubs capable of handling individual orders for Benetton’s over 6,200 shops worldwide. From the automated hubs in Castrette, garments are sent through a one-kilometer tunnel to the Automated Distribution Center. This is where the inventory and distribution of products take place. The distribution center has a total capacity of 800,000 boxes and can handle 80,000 incoming/outgoing boxes a day with a workforce of only 26. In order to support the European platform, Benetton developed production hubs in Asia. The automated hub in Hong Kong supply Benetton’s worldwide network while hubs in Taiwan and Shanghai supply domestic market (Benetton, Logistics, 2009).             Different Benetton hubs all over the world handle different logistics components. Apparel Sites in Castrette, Italy handle wool dyeing and packaging. Textile business sites in other parts of Italy handle dyeing, spinning, and weaving. The site in Tunisia is responsible for cotton apparel, laundry and dying. Production locations in Croatia handle wool apparel, dyeing and weaving. Production location in Romania deals with quality control while cotton apparel is the responsibility of the Indian production site. The operational organization relies on the outsourcing of the labor-intensive phases of production, such as tailoring, finishing, and ironing, to small and midsize enterprises directly controlled by the Italian and foreign production sites (Benetton, Industrial Flexibility, 2009). Logistics Management Strategies of Benetton 1. Integrated Supply Chain – integrated global supply chain is very important for global organizations today. Benetton, sources raw materials from thousands of locations around the world and distribute finished products to thousands of other locations. This critical coordination and value center can enable the enterprise to synchronize many simultaneous unfolding material and informational flows on a worldwide basis – and help the whole enterprise to contain costs through more efficient utilization of assets and greater overall productivity (Boyson, et al 1999). Integrated supply chain enhances Benetton’s retail offer. Benetton draws heavily on lean production techniques. The company’s manufacturing operation is flexible, involving a network of subcontractors and, suppliers are in close proximity to the factory (Waters, 2007). 2. Quick Response – the aim of quick response (QR) is to link the manufacturers closely to the actual demand at the retail level. The emphasis is on time compression and the opportunity for the manufacturer to redesign production operations to allow for a little and often approach to resupply. Short production changeovers and small batch sizes enable the manufacturer to respond to changes in demand in a very short timescale. Quick response has allows Benetton to offer an extremely responsive supply to its retail outlets to reflect fast-changing nature of the fashion industry (Rushton, et al, 2006).   3. Networked Manufacturing – the networked manufacturing system Benetton developed in an interesting configuration. Manufacturing garments in Benetton starts when orders are placed from retail stores. Once the order was placed, Benetton would purchase the raw materials and ship directly to the Networked Manufacturing groups. As time went on, this system became highly centralized and allowed for better quality control of materials and logistics management in the networked manufacturing system. The system is a strong pillar in the success of Benetton. As the company actively seeks manufacturers for specific product segments, they look for and require highly integrated groups of manufacturers that combine their efforts and work together closely. What this means is each part of the manufacturing process, cutting each piece of the clothing, stitching, assembly, adding accessories, and packaging is all coordinated among the members of the manufacturing network so that each has a defined role and responsibility (www.kongandallen.com).  4. Postponement - Benetton was one of the first retail companies to apply the principle of postponement to its operations, whereby semi-finished garments were dyed at the last possible moment when color trends for a season became apparent from EPOS data at the stores. So rather than manufacture stock to sell, Benetton could manufacture stock to demand (Waters, 2007). Benetton was one of the first fashion retailers to revolutionized the supply chain and logistics of garments. It was typical for apparel retailer and manufacturers before to order pre-dyed raw materials which will be manufactured, assembled and distributed. What Benetton realized was postponing dyeing to the last step of the production process will give the company more flexibility and will lessen inventory. Through postponement, Benetton achieved logistics excellence which resulted to different advantages. Instead of preparing an entire seasons product line, and holding a large safety stock, the company could produce smaller batch sizes to initially stock stores and adjust to customer preferences as the season went on. Postponement also enables Benetton to re-stock high demand high demand products and stop distribution of low-demand products instead of marking down their price. The application of postponement results in greater customer satisfaction as products that they find in stores are what most of them want. Postponement also decreases the risk that new product will fail and the inventory costs of these failures will hurt profitability across all products (www.kongandallan.com). 5. Investments in Logistics Technology – the logistics management strategy of Benetton will never be a success if the company does not invest in technology. The company is known to be among the biggest investor in logistics technology. Investments in logistics technology support the core business strategy of Benetton. The key investment of the company is information systems technology. Information technology links the market place with the manufacturing process. Electronic Data Interchange (EDI) allows Benetton’s agents in each country to regularly transmit orders to Benetton’s head office. This knowledge of the market updated every 24 hours allows Benetton to carefully track and react to demand by manufacturing only those garment styles, colors and sizes required. Communications technology has allowed Benetton to eliminate the filters between the customer and production and to link the customer directly to the factory. Benetton has been forced to innovate in the manufacturing process to take advantage of the market knowledge made available through EDI. Communications technology has been integrated to CAD/CAM systems to give Benetton the speed and flexibility which it needs to compete effectively in the fashion market. Computer-aided design (CAD) of garments along with computerized garment cutting and assembly is the secret to a fast and flexible manufacturing operation. The process starts with in-house garment design using sophisticated CAD technology. Video disc storage of all past clothing ranges allows designers to call up previous styles and colors. State-of-the-art-on-line software allows designers to create designs using 250-color palette screens. Data representing these designs can be transferred directly to computer-controlled garment cutters and knitting machines. The garment assembly is carried out by subcontractors. Any fabric and garment dyeing is carried out by Benetton while subcontractors are again used for finishing operations. Clothing manufacture is a mix of high technology and high labor. By retaining ownership of the high technology production elements, Benetton can take advantage of the economies of scale inherent in volume manufacture (Dapiran, 1992).             Benetton also invested on a “robotic” distribution center worth $50 million (Dapiran, 1992). The storage area alone of the DC measures 170 metres long b 80 metres wide by 20 metres high; a third of this height is below ground level to minimize the impact on the surrounding landscape, in keeping with the Benetton concern for the environment. Twenty loading and unloading bays service the building. Inbound garments from the production areas arrive below ground level. The garments are already packed in one of two standard boxes which are bar-coded and pre-addressed to customers. The bar-coded cartons are delivered by high speed conveyors from the receipt bays to rail-guided transporters in the storage area. Each transporter can transfer up to 24 cartons at a time to and from the racking. Simultaneous put-away and retrieval occurs to maximize efficiency. The storage zone has a capacity of 250,000 boxes sorted randomly. The DC handles 12,000 boxes a day. equivalent to 6,000 consignments a day, representing some 60 million garments a year. The high level of automation allows the DC to operate on three shifts with six operators to a shift. Shipment is directly to one of 6,000 retail stores in 83 countries. Distributors, wholesalers and regional centers are not used. To achieve high levels of response all exports are air freighted (Dapiran, 1992).             In 2008, the company invested 50 million euro in the automated hub Castrette (Benetton Annual Report, 2008). This investment resulted in increased in capacity, functionality, effectiveness, efficiency of the company’s operations and logistics. This new investment allowed the distribution capacity of Benetton to almost double. Castrette is considered as one of the most advanced industrial logistic complexes in the world (Benetton, Business, 2009). The said investment is instrumental to the future and success of Benetton as it serves as a coordinator of the company’s whole production system. Assessment of Logistics Management Strategies             In general, the logistics management strategies employed by Benetton has been successful. The company earned a competitive advantage over its competitors in terms of the speed at which its products are manufactured and delivered. The vast network of suppliers, contractors, manufacturing sites, distribution hubs, and stores that Benetton possess aid in the efficient logistics of products. Comparing the distribution strategy of Benetton with the distribution of Zara, another fashion retailer with excellent logistics, Benetton has a more effective distribution strategy. Zara (a Spanish brand) has a Spain-centric production and distribution while Benetton has production and distribution centers in Italy and Hong Kong. This makes logistics more efficient in Benetton as the Hong Kong distribution center supplements the Italian distribution center.             Benetton, invests heavily on technology, one proof to this is the 50 million euro distribution hub in Italy. The company can also make use of the internet as a complimentary sales channel. Catalogues can also be used as a complimentary sales channel. Benetton can choose to grow in thee sales channels – stores, internet and catalogue. Although the stores are Benetton’s primary sales channel, internet and catalogue sales can strengthen Benetton’s profile and increase the level of service to customers, thereby making Zara even more accessible.             The quick response strategy of Benetton is also very useful and advantageous for the company. Quick response helps the company to gather information about consumer preferences which will help in the company’s production, logistics and distribution strategies. The quick response strategy of Benetton relies on information, which is gathered through the company’s state-of-the-art information and communications systems, making transmission and transformation of sales data efficient. The QR strategy of Benetton links all activity to real time demand. References Boyson, S et al 1999, Logistics and the extended enterprise: benchmarking best practices for the manufacturing professional, John Wiley and Sons, New York. Christopher, M & Peck, H 2003, Marketing logistics, Butterworth-Heinemann. Dapiran, P 1992, “Benetton – global logistics in action”, International Journal of Physical Distribution and Logistics Management, vol. 22, no. 6, pp. 7-11. Fernie, J & Sparks, L 2004, Logistics and retail management: insights into current practice and trends from leading experts, Kogan Page. Rushton, A et al 2006, The handbook of logistics and distribution management, Kogan Page Publishers. Simchi-Levi, D, Bramel, J & Chen, X 2005, The logic of logistics: theory, algorithms, and applications for logistics and supply chain management, Springer. Swamidass, PM 2000, Encyclopedia of production and manufacturing management, Springer.

International Logistics Management of United Colors of Benetton

International Logistics Management of United Colors of Benetton Company Background Benetton is an international apparel ...

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