Managing Supply Chains A Logistics Approach International Edition 9th Edition Coyle Solutions Manual Download

Supply Chain Technology—Managing Information Flows Chapter 6
Solution Manual for Managing Supply Chains A

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CHAPTER 6 SUPPLY CHAIN TECHNOLOGY—MANAGING INFORMATION

FLOWS
LEARNING OBJECTIVES
After reading this chapter, you should be able to do the following:
• Appreciate the overall importance of information to supply chain management.
• Understand the role of information technology in the supply chain.
• Explain the key components of an integrated supply chain information system.
• Describe and differentiate between the primary types of supply chain solutions and their
capabilities.
• Discuss the critical issues in technology selection and implementation processes.
• Recognize the role of emerging technologies for improving supply chain information
management.
CHAPTER OVERVIEW
Introduction
6-1
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different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Supply Chain
Knowledge is Technology—Managing
essential for supply chainInformation Flows
success. Information, Chapter
along with materials and 6
money, must readily flow across the supply chain to enable the planning, execution, and
evaluation of key functions. Each participant in the supply chain needs relevant
information to make effective forecasts and operational decisions as highlighted by the
Supply Chain Profile.
Existing supply chain information technologies support timely, cost efficient sharing of
information between suppliers, manufacturers, intermediaries, logistics services
providers, and customers. The changing nature of supply chains underlies the need for
information and the investment in technology.
The Role of Information in the Supply Chain
It has been said that information is the lifeline of business, driving effective decisions and
actions. It is especially critical to supply chain managers because their direct line of sight
to supply chain processes is very limited. Information provides them with insights and
visibility into the supply chain activities taking place at distant supplier and customer
locations. A wide variety of information is needed for a supply chain to perform as
anticipated.
6-2
Information Requirements
Information quality is a critical characteristic of the knowledge flowing across the supply
chain. The seven R’s definition of logistics applies to information as much as products
with some slight alterations—getting the right information to the right partners, in the
right quantity, in the right format, at the right place, at the right time, and at the right cost.
Change any “right” to “wrong” and the capabilities of the decision maker will decline.
Accessible: Information must be available to supply chain managers who have a

legitimate need for it, regardless of their location or employer.
Relevant: Supply chain managers must have pertinent information to make decisions.
They must know what information is needed and be able to quickly acquire only that
which is applicable to their current situation.
Accurate: The information must be correct and depict reality; otherwise, it will be
difficult to make appropriate decisions. Information inaccuracies can lead to inventory
shortages, transportation delays, governmental penalties, and dissatisfied customers.
Timely: The information must be up to date and available in a reasonable timeframe.
Transferable: The final characteristic of information has multiple meanings. Supply chain
managers need the ability to transfer supply chain data from one format to another to
make it understandable and useful.
Information Technology Capabilities
The value and importance of supply chain information technology is not lost on supply
chain leaders. Recent research found that information technology has a direct and
positive impact on organizational performance, internal collaboration, and external
collaboration.
Connectivity Information. Technology is the primary focus of this driver; geographically

dispersed supply chain partners and facilities are linked electronically.
Visibility. The critical ability to monitor what is happening across the supply chain is
achieved via technology.
Collaboration. By virtue of providing connectivity and visibility, technology facilitates

real-time data sharing between supply chain participants.
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Optimization. A variety of software is available to help organizations maximize the
performance of supply chain activities. Optimization tools analyze all possible options to
find the best solution to a supply chain problem
Execution. Supply chain technology promotes efficient execution and integration of key
activities on an hourly and a daily basis to achieve operational excellence.
Speed. Properly implemented technologies help organizations rapidly respond to

customer requirements for faster, more consistent flows of materials and information.
Information Technology Challenges
Information technology holds great promise for enhancing supply chain performance and
organizational competitiveness. However, the implementation of new technologies and
software does not guarantee success. Technology is only an enabler.
Technology cannot make ill conceived supply chains productive, prompt adversarial
organizations to collaborate, or make use of poor quality data. A recent study reveals that
people are a major barrier to the effective use of information technology. A study points
to another technology use challenge that has been widely reported. As often organizations
do not change their supply chain processes concurrent with the adoption of new
information technology tools.
Another challenge facing supply chain professionals is the wide variety of software
solutions that are promoted as being “supply chain” tools. Supply chain technology may
be implemented in piecemeal fashion, leading to a “patchwork quilt” of technologies.
Poor planning and preparation for technology implementation is also problematic.
Follow these 10 golden rules for success:
1. Secure the commitment of senior management.
2. Remember that it is not just an information technology project.
3. Align the project with business goals.
4. Understand the software capabilities.
5. Select partners carefully.
6. Follow a proven implementation methodology.
7. Take a step-by-step approach for incremental value gains.
8. Be prepared to change business processes.

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9. Keep end users informed and involved.
10. Measure success with key performance indicators (KPIs).
A Framework for Managing Supply Chain Information
The term supply chain information system (SCIS) is widely used, although few formal
definitions exist. One such attempt describes SCIS as “information systems that automate
the flow of information between a firm and its suppliers to optimize the planning,
sourcing, manufacturing, and delivery of products and services.”
Foundation Elements
The ability to capture and manage supply chain information depends upon a strong, well-
integrated foundation of people, processes, and technology.
People ultimately determine the success or failure of a SCIS as the problem more
commonly lies with the competence of the people involved with the technology.
Process management also plays a role in SCIS performance. Organizations should review
existing methods in light of the new technology adoption. The risk of not doing this is
that inefficient, outdated, or unnecessary processes will be automated, providing little
benefit to the organization. Technologies used in SCIS have the greatest impact when
they are based on the open systems concept and take advantage of the Internet as it
provides the platform for supply chain activities to be carried out in a synchronized,
instantaneous manner to maximum performance.
Key Requirements
By themselves, software and other SCIS components cannot provide actionable

knowledge for supply chain managers. Data must be collected and synchronized so that it
can be used by skilled individuals in the planning and execution of supply chain
processes. Data collection of relevant information is needed at every point in the supply
chain. Data synchronization focuses on the timely and accurate updating of item
information within and across enterprises to ensure dependable, consistent product
information within a company’s systems and between business partners.
Functional expertise in each organization will be enhanced by access to the synchronized

data. Metrics help organizations articulate their impact on the supply chain.
Differentiating Capabilities
While leveraging technology for more adaptive capabilities is a widely desired goal, the
process of transforming the organization and its SCIS is a complex, multilayered effort.
The planning and execution infrastructure consists of the software tools that are utilized
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to provide supply chain speed, optimization, and connectivity. Visibility tools focus on
providing a seamless flow of timely, important information across the supply chain.
Exception management capabilities take the next logical step beyond visibility.
Automated decision making is the pinnacle of differentiating capabilities but remains a
future prospect for many SCIS. Software tools are rapidly being developed to recognize
exception alerts, assess the problem, evaluate alternatives, and recommend solutions. It is
important to remember that the foundation, requirements, and capabilities must be
developed in a logical, sequential fashion.
SCM Software
One of the key components of a strong SCIS is the supply chain software market space
includes technologies that address virtually every function and task that occurs in the
supply chain. These tools attempt to harness the computational power and
communication abilities of today’s technology to help organizations plan, execute, and
control supply chain activities in real time. Organizations are looking beyond efficiency-
focused applications to systems that provide the ability to react quickly to marketing and
demand changes, communicate decisions clearly and quickly to everyone affected, and
flexibly manage multiple types of supply chains.
Planning
Supply chain planning applications and suites help organizations evaluate demand for
materials, capacity, and services so that effective fulfillment plans and schedules can be
developed. These planning tools assist with decisions regarding the number and location
of facilities (network design), where to purchase materials (strategic sourcing), when to
build goods (production planning and scheduling), and how to deliver the goods (routing
and scheduling). Shorter-range planning tools that support sales and operations,
production, and distribution planning can leverage accurate forecasts.
Execution
Supply chain execution tools and suites carry out key tasks from the time an order is
placed until it is fulfilled. This order-driven category of software focuses on the day-
today activities required to buy, make, and deliver the materials that flow through the
supply chain. Supply chain execution doesn’t rely upon a single software program but
consist of a group of tightly integrated tools that link well with supply chain partners’
systems to share relevant data and provide visibility. Successful implementation can
provide users with improved inventory visibility, improved data accuracy, faster
throughput and higher inventory turns, better control of transportation costs, and
improved customer service.
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Event Management
Supply chain event management tools collect data in real time from multiple sources
across the supply chain and track the inventory as it flows through the supply chain,
providing graphical displays of expected and actual inventory levels and other key data at
each location. As the geographic scope and number of companies involved in a supply
chain grow, the ability to monitor activities exceeds manual capabilities.
Business Intelligence
Newer business intelligence tools have capabilities that are more dynamic, frequently
delivering data from transactional systems across the supply chain to a data warehouse.
In addition to the data collection and analysis capabilities, business intelligence software
supports self-service reporting, performance scorecarding versus goals, development of
dashboards and other graphical report displays, and activity monitoring in support of
event management. Interest in business intelligence applications is rising, due primarily
to a software vendor focus on increasing user-friendliness of the tools.
Enterprise Resource Planning (ERP)
It is becoming more difficult to completely segment SCIS from enterprise resource

planning (ERP) systems. Many of the supply chain software applications discussed above
are growing increasingly reliant upon the type of information that is stored inside ERP
systems which are multi-module application software platforms that help organizations
manage the important parts of their businesses. The ERP system provides a mechanism
for supply chain members to efficiently share information so that visibility is improved,
transactions are completed with more speed and accuracy, and decision making is
enhanced.
Related Tools
Other valuable tools include, but are not limited to, the following:
• Supply chain collaboration tools. The software helps users integrate their information
technology systems with those of trading partners to streamline and automate supply
chain processes.
• Data synchronization applications. These tools provide a platform for manufacturers,

distributors, and retailers to aggregate and organize item-related data (item number, price,
description, weight, etc.).
• Spreadsheets and database software. Spreadsheet software provides managers with

handy, portable tools for gathering, consolidating, and analyzing supply chain data.
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Supply Chain Technology Implementation
As the preceding section indicates, a wide array of software tools support supply chain
planning, execution, and control. Companies spend billions of dollars on these
technologies with the goal of making their supply chains more productive and effective.
The key to overcoming these issues and harnessing the capabilities of supply chain
technology within a reasonable timeframe is informed decision making.
Needs Assessment
The most important step in software selection and implementation is to understand the
supply chains that the technology is intended to support. Too often, supply chain
managers undertake the software selection process in isolation and without knowledge of
the processes to be automated. Organizations must start with a diagnosis of their
situation. This needs assessment sequence highlights the link between effective business
processes, appropriate technology, and supply chain performance.
Software Options
Supply chain managers face a multifaceted decision when selecting supply chain
software, the manager must determine which type of software—planning, execution,
event management, or business intelligence—is appropriate for the given process or
situation.
Development Alternatives. The first issue involved in software selection focuses on who
will develop the solution as the choices are to develop the tools in house or to purchase
software from an external vendor.
Solutions Packages. Should an organization choose to purchase software rather than

develop it in house, it has to determine what types of applications are needed and how
they should be purchased. Due to mergers and acquisitions in the software industry and
ERP vendors moving into the supply chain applications market space, it is possible to
purchase supply chain software suites that combine planning, execution, event
management, and related capabilities. The polar options are to work with a single
vendor’s software or to purchase individual applications from leading providers in each
software category, commonly called “best-of-breed” solutions.
Purchase Options. Historically, supply chain software buyers had one option—purchase
solutions from software vendors for their own information systems. The downside of this
purchase option is the high capital investment and complex deployment associated with
conventional licensed applications. The Internet brought another option—application
service providers (ASP)—that offered a new way to buy software. The ASP owns and
operates the software application and the servers that run the application. They also
employ the staff needed to maintain the application and the information system.
6-8
Some of the software-as-a-service issues that hampered ASP efforts are being addressed
by on-demand solutions providers. These companies provide software that is accessible
by multiple parties via the Internet.
Technical Issues
Supply chain managers tend to focus on functionality when considering software, but
they also must consider the technical issues related to its operation and upfront effort
must be expended to assess implementation challenges before selecting a supply chain
software suite or best-of-breed application.
Data Standardization. Given the variety of software vendors, proprietary tools, and legacy
systems, coordinating and sharing information across the supply chain can be a
significant challenge. Rather than manually or electronically translating data, a better
solution is to use a standardized format to enhance communication between partners. EDI
provides interorganizational, computer-to-computer exchange of structured information
in a standard, machine-processable format. Implementation can be complex and value-
added network services that provide the company-to-company linkages charge
transaction fees.
XML is a robust, logically verifiable text format based on international standards that
provides a flexible way to create structured, common information formats and share both
the format and the data via the Internet, intranets, and other networks.
Application Integration. Standardized and common format are important and it is also
imperative that different tools seamlessly share the data and supply chain partners often
rely on different vendors, applications, or software versions. A problem with this is that
these applications tend to present data differently, making communication between them
difficult. Extensive efforts have been made over the last 10 years to improve application
integration and foster supply chain information synchronization with initial work focused
on the development of application programming interfaces (API) link SCIS with supplier
and customer applications.
The focus has shifted toward adapter sets and a newer technology model called service-
oriented architecture (SOA). A service is defined as a unit of work to be performed on
behalf of some computing entity, such as a human user or another program. SOA defines
how two computing entities interact in such a way as to enable one entity to perform a
unit of work on behalf of another entity.
Supply chain technology buyers must assess and compare integration methods, and then
choose those that best fit current needs while providing the flexibility to meet future
functionality requirements, monitoring the development of SOA and its impact on the
software applications landscape.
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Asking the Right Questions
Senior management plays a key role in facilitating the implementation of supply chain
Technology providing vision, the required resources, and an unshakable commitment to
SCIS initiatives.
Some of these key questions include the following:
• Who will lead our implementation effort? Senior management has neither the time nor
direct knowledge of SCIS to supervise the selection and installation of new applications.
• How will technology support our business needs and processes? There is a propensity
to adopt software without considering the processes that it will support, leading to
automation of inefficiencies.
• What is the status of our existing data? It is critical to assess data quality, relevance, and
completeness to ensure that the needed information is available to use with the
technology being considered.
• How well does our existing system integrate with suppliers and customers? SCIS fall
woefully short on vital capabilities if they are unable to communicate with supply chain
partners in an efficient manner.
• What external issues must our systems address? Given the financial and product flow
data contained within most SCIS, they have a major impact on an organization’s ability
to address government mandates.
Supply Chain Technology Innovations
The supply chain industry transformation of the last 20 years has been enabled by
technology. Innovations in supply chain and ERP software, automatic identification
technologies, communications systems, and Internet functionality have forever changed
the way the supply chain works. Ultimately, these innovative technologies enable fast
execution of supply chain strategies, helping organizations to leverage time as a source of
competitive advantage. Innovative technology models like SOA support the integration
of supply chain applications and may change the software landscape from the current
focus on monolithic applications and suites to streamlined functionalities.
Radio-Frequency Identification (RFID)
No other technology has garnered the attention of the supply chain industry over the last
three years than has RFID but supply chain applications were largely conceptual until
major organizations began to develop RFID mandates.
6-10
RFID is an automatic identification method with tags consisting of a microchip and a
printed antenna that can be packaged into many forms. Unique product identification
information, in the form of a universal electronic product code (EPC) identifying the
manufacturer, product category, and individual item, is stored on these 96-bit tags. The
collected information is relayed back to the SCIS, updating the location status of the
associated product.
RFID technology costs must continue to decline to make product tagging economically
feasible; equipment issues such as reader range, sensitivity, and durability must improve;
the case for supplier return on investment of RFID mandates must be made; and
consumer privacy issues must be resolved.
Adaptive Supply Chain Networks
If supply chains are to become more flexible and responsive, must be effectively
connected. Integration of all supply chain and other support systems and processes both
within a company and across trading partners is needed to allow true, full supply chain
visibility and flexibility. This can be accomplished via the creation of an adaptive supply
chain network (ASCN).
Connectivity provides visibility. Collaboration enables a joint response with channel

partners to avoid a possible problem identified via the visibility. “Adaptive” in ASCN is
the ability to respond to and thrive on unexpected changes as they emerge, not after the
fact. The “network” is a dynamic compendium of business partners and their supply
chain technology tools working together to provide increased benefit across the supply
chain.
Pervasive Automation
As technology advances and becomes more affordable, business will come closer to the
realization of product connectivity where Internet-enabled microprocessors provide
digital intelligence and connectivity for almost every commercial and industrial product.
Pervasive automation is viewed as the next big thing in supply chain management as the
convergence of valuable technologies—RFID, ASCNs, wireless communication, and
others—that do not require human interaction will support supply chain innovation.
SUMMARY
Information is critical to the success of a supply chain and must flow freely between
supply chain partners. Without accurate, timely information, it is extremely difficult for
supply chain managers to make effective decisions regarding the purchase, production,
and distribution of materials. To facilitate the knowledge links and foster supply chain
visibility, many organizations are investing heavily in computer hardware, SCIS, and
supportive technologies like RFID. They realize that real-time information and the ability
to dynamically respond to changing conditions in the supply chain are critical to the
6-11
success of the organization. Industry leaders are using supply chain information
technology to create adaptive supply chain capabilities and substantial competitive
advantages in their respective markets. Harnessing information technology in support of
supply chain excellence is an ongoing challenge, given the continuing evolution of SCIS
capabilities. Supply chain managers must work diligently to appreciate the growing role
of information, understand each type of supply chain software, choose solutions wisely,
and overcome key implementation challenges to gain maximum benefit from information
technology.
• In order for supply chain managers to utilize information, it must be readily accessible,
relevant to their decision making needs, accurate, timely, and in a format that can be
shared.
• When properly implemented, information technology supports critical supply chain

capabilities and strategies, including supply chain connectivity, product visibility, partner
collaboration, and process optimization.
• A well-designed SCIS framework links people, processes, and technology in a manner

that provides actionable information and enhances decision making.
• Timely data collection and synchronization support supply chain visibility, exception
management, and effective response to changing customer requirements.
• Supply chain software falls into four general categories: planning tools for forecasting
and related activities, execution systems for management of day-to-day processes, event
management tools to monitor supply chain flows, and business intelligence applications
that help organizations analyze performance.
• Given the potential stumbling blocks, software selection and implementation are not a
minor undertaking. Needs must be assessed, software options studied, technical issues
addressed, and important questions asked before major SCIS investments are made.
• Change is the norm when it comes to supply chain technologies. It is critical that
developments related to RFID and other innovations are understood so that organizations
can take full advantage of worthwhile technologies.
ANSWERS TO STUDY QUESTIONS
1. Discuss the role of information in the supply chain and how it supports supply chain
planning and execution.
Answer: It has been said that information is the lifeline of business, driving effective
decisions and actions. It is especially critical to supply chain managers because their
direct line of sight to supply chain processes is very limited. Information provides them
with insights and visibility into the supply chain activities taking place at distant supplier
6-12
and customer locations. This visibility of demand, customer orders, delivery status,
inventory stock levels, and production schedules provides managers with the knowledge
needed to make effective situational assessments and develop appropriate responses. In
contrast, limited awareness of external activity would leave the supply chain manager
blind to the true situation and unable to make knowledge-driven decisions. Actions would
be based on educated guesses with no guarantee of effective outcomes.
A wide variety of information is needed for a supply chain to perform as anticipated. As

you read through this book, it will become evident just how important information is for
both long-range and day-to-day decision making. Supply chain professionals require
information from across the channel for strategic planning issues such as network design,
tactical planning and collaboration with supply chain partners, and execution of key
processes. This information must effectively flow within the organization and between
key participants to ensure the timely flow and control of materials and money in the
supply chain.
2. Describe the components of information quality, and how they impact supply chain
decision making.
Answer: Information quality is a critical characteristic of the knowledge flowing across

the supply chain. Information must be available to supply chain managers who have a
legitimate need for it, regardless of their location or employer. Supply chain managers
must know what information is needed, and be able to quickly acquire only that which is
applicable to their current situation. The information must be correct and depict reality;
otherwise, it will be difficult to make appropriate decisions. Information inaccuracies can
lead to inventory shortages, transportation delays, governmental penalties, and
dissatisfied customers. The information must also be up to date, available in a reasonable
timeframe, and transferable from one format to another to make it understandable and
useful.
Recent research found that information technology has a direct and positive impact on
organizational performance, internal collaboration, and external collaboration.
Information technology links geographically dispersed supply chain partners and
facilities electronically, giving them the critical ability to monitor what is happening
across the supply chain.By virtue of providing connectivity and visibility, technology
facilitates real-time data sharing between supply chain participants. Supply chain
technology promotes efficient execution and integration of key activities on an hourly
and a daily basis to achieve operational excellence.
3. What are the primary capabilities created by supply chain technology? How can they
drive supply chain excellence?
Answer: One of the key components of a strong SCIS is the supply chain software market
space includes technologies that address virtually every function and task that occurs in
the supply chain. These tools attempt to harness the computational power and
6-13
communication abilities of today’s technology to help organizations plan, execute, and
control supply chain activities in real time. Organizations are looking beyond efficiency-
focused applications to systems that provide the ability to react quickly to marketing and
demand changes, communicate decisions clearly and quickly to everyone affected, and
flexibly manage multiple types of supply chains.
Newer business intelligence tools have capabilities which are more dynamic, frequently
It is becoming more difficult to completely segment SCIS from enterprise resource

planning (ERP) systems. Many of the supply chain software applications discussed above
are growing increasingly reliant upon the type of information that is stored inside ERP
systems which are multi-module application software platforms that help organizations
manage the important parts of their businesses. The ERP system provides a mechanism
for supply chain members to efficiently share information so that visibility is improved,
6-14
transactions are completed with more speed and accuracy, and decision making is
enhanced.
4. Describe a supply chain information system in terms of its key elements, requirements,
and capabilities.
Answer: It has been said that information is the lifeline of business, driving effective
decisions and actions. It is especially critical to supply chain managers because their
direct line of sight to supply chain processes is very limited. Information provides them
with insights and visibility into the supply chain activities taking place at distant supplier
and customer locations. A wide variety of information is needed for a supply chain to
perform as anticipated.
Information quality is a critical characteristic of the knowledge flowing across the supply
chain. A system must be accessible, relevant, accurate, timely, and transferable.
Supply chain leaders will look for systems that offer connectivity, visibility,
collaboration, optimization, execution, and speed. However, the implementation of new
technologies and software does not guarantee success. Technology is only an enabler.
5. Identify the four primary categories of supply chain management software and discuss
their primary functions.
Answer: Organizations are looking beyond efficiency-focused applications to systems

that provide the ability to react quickly to marketing and demand changes, communicate
decisions clearly and quickly to everyone affected, and flexibly manage multiple types of
supply chains.
6-15
Newer business intelligence tools have capabilities which are more dynamic, frequently
Note that it is becoming more difficult to completely segment SCIS from enterprise
resource planning (ERP) systems. Many of the supply chain software applications
discussed above are growing increasingly reliant upon the type of information that is
stored inside ERP systems which are multi-module application software platforms that
help organizations manage the important parts of their businesses. The ERP system
provides a mechanism for supply chain members to efficiently share information so that
visibility is improved, transactions are completed with more speed and accuracy, and
decision making is enhanced.
6. Using the BCRC Web site (http://www.swlearning.com/bcrc/bcrc.html) and company

Web sites, develop a profile (types of supply chain software offered, annual sales, and
recent news) of the following organizations: a. SAP (http://www.sap.com) b. Manhattan
Associates (http://www.manh.com) c. i2 Technologies(http://www.i2.com)
Answer: Students’ answers will vary but should demonstrate and document sufficient
research.
7. What is the role of enterprise resource planning systems in supply chain management?
Answer: Just as the boundaries between supply chain planning and execution tools are
blurring, it is becoming more difficult to completely segment SCIS from enterprise
resource planning (ERP) systems.
ERP systems are multimodule application software platforms that help organizations
manage the important parts of their businesses. Initially concentrated on manufacturing
issues, ERP systems now focus on integrating information and activities across the
organization (i.e., the enterprise) via a common software platform and centralized
database system. Key business processes linked via ERP include accounting and finance,
planning, engineering, human resources, purchasing, production, inventory/ materials
management, order processing, and more. The centralized and shared database system
ties the entire organization together, allowing information to be entered once and made
6-16
available to all users. Business processes can also be automated for rapid, accurate
execution.
As the ERP systems branch out to include supplier relationship management, customer
relationship management, and other supply chain components, the connections between
SCIS and ERP grow stronger. Supply chain members can access the organization through
the ERP system to assess inventory availability, production schedules, and delivery
information. In short, the ERP system provides a mechanism for supply chain members
to efficiently share information so that visibility is improved, transactions are completed
with more speed and accuracy, and decision making is enhanced.
8. Discuss the relative advantages of best-of-breed software versus supply chain suites.
Answer: Should an organization choose to purchase software rather than develop it in

house, it has to determine what types of applications are needed and how they should be
purchased. Historically, software packages were purchased independently from different
vendors and the organization’s information technology staff was tasked with making the
various tools work together if possible. Today, buyers have another option. Due to
mergers and acquisitions in the software industry and ERP vendors moving into the
supply chain applications market space, it is possible to purchase supply chain software
suites that combine planning, execution, event management, and related capabilities.
The polar options are to work with a single vendor’s software or to purchase individual
applications from leading providers in each software category, commonly called “best-of-
breed” solutions. Each strategy has its merits. Single vendor supply chain suites should
take less time to implement than a variety of tools from different vendors since there are
fewer compatibility and connectivity issues to overcome. Also, there is only one vendor
to work with rather than multiple companies which reduces administrative and
coordination effort. Single vendor suites also require less training time and have lower
implementation costs as there is only one set of integration requirements to master.
Although the best-of-breed tools are more complex and typically take longer to integrate
into the SCIS, they are working to streamline the process. Also, they offer more powerful
applications for specific functions that provide greater flexibility and can be better
tailored to an individual company’s supply chain issues. Some suites, especially those
from ERP vendors, do not yet contain the advanced functionality or industry-specific
capabilities found in specific best-of-breed applications, though they are working to close
the gap. The challenge for the supply chain executives choosing between these options is
to understand the implementation issues; their organization’s need for tailored, advanced
capabilities; and the changing vendor landscape.
9. Why would companies choose to use on-demand software versus licensed software?
Answer: Historically, supply chain software buyers had one option—purchase solutions
from software vendors for their own information systems. The licensed software is
installed on the buyer’s powerful client-server systems, which is a valuable method,
6-17
given the intense computational activity required by most supply chain processes. The
downside of this purchase option is the high capital investment and complex deployment
associated with conventional licensed applications. Buyers have to pay for the software
upfront; manage the implementation issues; and deal with ongoing issues of software
upgrades, fixes, and maintenance costs.
The Internet brought another option—application service providers (ASP)—that offered a

new way to buy software. The ASP owns and operates the software application and the
servers that run the application. They also employ the staff needed to maintain the
application and the information system. Users access the software via the Internet using a
Web browser or small software tool. They are billed for the application on a per-use basis
or on a monthly/annual fee basis. The benefit of the ASP purchase model is low-cost
access to solutions because there are no major upfront license or installation costs. The
downside of ASPs is the inefficiency of hosting one copy of the software application for
each client. Also, because these solutions were traditional client-server applications with
HTML front ends added as an afterthought, performance was poor and application
updates difficult. Hence, the ASP model did not prosper in supply chain management,
though some software vendors now provide similar services for their own tools.
Some of the software-as-a-service issues that hampered ASP efforts are being addressed
by on-demand solutions providers. These companies provide software that is accessible
by multiple parties via the Internet. Because the application is shared, carriers, suppliers,
shippers, and customers can all work together using a standard business process and have
a common view of supply chain activity. This purchase option is gaining in popularity as
more supply chain tools are offered via this method. Faster implementation and return on
investment, lower hardware costs, and an ability to manage growth more economically
are cited as key reasons for interest in this method. Of course, certain issues must be
addressed. On-demand solution providers must prove that they can protect client data,
maintain system availability and reliability, and streamline the integration of their tools
with licensed software.
10. What are XML and service-oriented architecture? Discuss how they are used to
support supply chain technology improvement.
Answer: Just as English is the standard language of global business, EDI and extensible
markup language (XML) are key elements of data standardization. These tools improve
the data flows between applications and organizations.
XML can be used to define complex documents and data structures such as invoices,
inventory descriptions, shipment records, and other supply chain information. The
benefits of XML are numerous—it is a simultaneously human- and machine-readable
format, it supports multiple languages, its plain text file displays are unencumbered by
licenses or restrictions, and it is platform-independent and thus relatively immune to
changes in technology. XML is gaining traction in the supply chain because it supports
6-18
the integration of various information systems, is less complex than EDI, and eliminates
the need for value-added networks, which reduces cost while speeding data transmission.
More recently, the focus has shifted toward adapter sets and a newer technology model
called service-oriented architecture (SOA). SOA is the underlying structure supporting
communications between services with “plug and play” functionality as a key goal. A
service is defined as a unit of work to be performed on behalf of some computing entity,
such as a human user or another program. SOA defines how two computing entities
interact in such a way as to enable one entity to perform a unit of work on behalf of
another entity.
11. When preparing to purchase and implement SCIS components, what issues and
questions must managers address?
Answer: Senior management plays a key role in facilitating the implementation of supply
chain technology by providing vision, the required resources, and an unshakable
commitment to SCIS initiatives.
Some of these key questions include the following:
• Who will lead our implementation effort? Senior management has neither the time nor
direct knowledge of SCIS to supervise the selection and installation of new applications.
• How will technology support our business needs and processes? There is a propensity
to adopt software without considering the processes that it will support, leading to
automation of inefficiencies.
• What is the status of our existing data? It is critical to assess data quality, relevance, and
completeness to ensure that the needed information is available to use with the
technology being considered.
• How well does our existing system integrate with suppliers and customers? SCIS fall
woefully short on vital capabilities if they are unable to communicate with supply chain
partners in an efficient manner.
• What external issues must our systems address? Given the financial and product flow
data contained within most SCIS, they have a major impact on an organization’s ability
to address government mandates.
6-19
12. Why is there so much interest in radio-frequency identification? What supply chain
benefits does RFID facilitate?
Answer: No other technology has garnered the attention of the supply chain industry
over the last three years than has RFID but supply chain applications were largely
conceptual until major organizations began to develop RFID mandates.
RFID is an automatic identification method with tags consisting of a microchip and a

printed antenna that can be packaged into many forms. Unique product identification
information, in the form of a universal electronic product code (EPC) identifying the
manufacturer, product category, and individual item, is stored on these 96-bit tags. The
collected information is relayed back to the SCIS, updating the location status of the
associated product.
RFID technology costs must continue to decline to make product tagging economically
feasible; equipment issues such as reader range, sensitivity, and durability must improve;
the case for supplier return on investment of RFID mandates must be made; and
consumer privacy issues must be resolved.
6-20

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Supply Chain Technology—Managing Information Flows Chapter 6

Solution Manual for Managing Supply Chains A

Download full test bank at:

CHAPTER 6 SUPPLY CHAIN TECHNOLOGY—MANAGING INFORMATION

After reading this chapter, you should be able to do the following:

• Appreciate the overall importance of information to supply chain management.

• Understand the role of information technology in the supply chain.

• Explain the key components of an integrated supply chain information system.

• Discuss the critical issues in technology selection and implementation processes.

The Role of Information in the Supply Chain

Accessible: Information must be available to supply chain managers who have a

Timely: The information must be up to date and available in a reasonable timeframe.

Information Technology Capabilities

Connectivity Information. Technology is the primary focus of this driver; geographically

Collaboration. By virtue of providing connectivity and visibility, technology facilitates

Speed. Properly implemented technologies help organizations rapidly respond to

Information Technology Challenges

Follow these 10 golden rules for success:

1. Secure the commitment of senior management.

2. Remember that it is not just an information technology project.

3. Align the project with business goals.

4. Understand the software capabilities.

5. Select partners carefully.

6. Follow a proven implementation methodology.

7. Take a step-by-step approach for incremental value gains.

8. Be prepared to change business processes.

10. Measure success with key performance indicators (KPIs).

A Framework for Managing Supply Chain Information

By themselves, software and other SCIS components cannot provide actionable

Functional expertise in each organization will be enhanced by access to the synchronized

Enterprise Resource Planning (ERP)

It is becoming more difficult to completely segment SCIS from enterprise resource

• Data synchronization applications. These tools provide a platform for manufacturers,

• Spreadsheets and database software. Spreadsheet software provides managers with

Solutions Packages. Should an organization choose to purchase software rather than

Some of these key questions include the following:

Supply Chain Technology Innovations

Radio-Frequency Identification (RFID)

Adaptive Supply Chain Networks

Connectivity provides visibility. Collaboration enables a joint response with channel

• When properly implemented, information technology supports critical supply chain

• A well-designed SCIS framework links people, processes, and technology in a manner

ANSWERS TO STUDY QUESTIONS

A wide variety of information is needed for a supply chain to perform as anticipated. As

Answer: Information quality is a critical characteristic of the knowledge flowing across

It is becoming more difficult to completely segment SCIS from enterprise resource

Answer: Organizations are looking beyond efficiency-focused applications to systems

6. Using the BCRC Web site (http://www.swlearning.com/bcrc/bcrc.html) and company

Answer: Should an organization choose to purchase software rather than develop it in

The Internet brought another option—application service providers (ASP)—that offered a

Some of these key questions include the following:

RFID is an automatic identification method with tags consisting of a microchip and a

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