L3.4 Explain the common IT systems that can be used by a proc. or supply chain function Flashcards
P2P systems
+ what is the P2P cycle?
+ 6 benefits
Case study: Cegedim/CloudTrade EDI and P2P technology
- CloudTrade’s e-invoice and e-document solutions allow suppliers to send PDF invoices directly into Cegedim’s (an e-biz) processing application
-> timely, eliminating manual entries and risk of human errors, cost effective and easy to use on a global scale
-> also protects environment through paperless doc submission methods
Electronic Data Interchange (EDI) systems: the exchange of data between companies in COMPUTERISED FORMAT
- P2P cycle includes all stages from the initial IDENTIFICATION of requirements, to the PROCUREMENT/PURCHASING of the item, through the RECEIPT of the goods, to the PAYMENT of the supplier once the goods are received.
- Reduced errors
-
Reduced waste
- within proc, WASTE = anything that does not add value; anything that is not necessary or which can be improved to reduce costs
- ‘Lean’ approach: a philosophy of improving EFFICIENCY and REDUCING waste (Womack and Jones) -
Reduced costs & Faster payments
- P2P system allows faster payments from customers and to suppliers & increases likelihood of them being ON TIME…
- …this would help suppliers with their CASH FLOW, hence creating an opportunity for buyers to NEGOTIATE COST REDUCTIONS / suppliers could offer DISCOUNTS to buyers
-
Reduced costs & Faster payments
-
Enhanced relationships
- if buyer uses e-procurement tools and provide suppliers with an EASIER WAY OF WORKING, supplier may be more inclined to work with the buyer
eg. receiving an email rather than having to wait for a paper document to be delivered in the mail -
Continuous improvement
- important and demonstrates that an org. is EMBRACING CHANGE and {following the tech. advancements} & seeking to always add value
- use of electronic systems in proc is constantly developing as systems are UPGRADED and new tech is introduced into businesses
From P2P systems’ benefits 2. Reduced waste,
what are the 8 areas where there can be WASTE w.r.t. ‘Lean’ thinking?
- Motion
- e-requisitioning would avoid unnecessary MOVEMENT of ppl around an org -> save time and money - Inventory
- installing an MRP system could reduce the amount of inventory held and ensure that the P2P system only ordered genuine requirements - Over-production
- P2P aids proc function in sourcing only what is NEEDED - Waiting
- P2P ensures requisitions and orders arrive at required destination in a timely manner; manual req.s can take time to be actioned especially where staff are ON LEAVE - Defects
- P2P system reduces HUMAN ERROR - Over-processing
- P2P systems avoid unnecessary handling of documentation (by many individuals which could distort the docs along the way) -> reduce risk of errors - Transportation
- no need for individuals to go to the bank to pay money in/WITHDRAW CASH to PAY SUPPLIERS - Skills
- using P2P systems FREE UP employee TIME to focus on other value-add activities
3 Systems for inventory management
1. Material requirements planning (MRP)
+ 3 objectives
+ how is ERP related to MRP?
*holding more inventory than is needed at any time may incur additional costs
*running out of core products may cause production to stop
= A system designed to manage the FLOW of RAW MATERIALS and components through an organisational process
Objectives
1. Ensure that the parts/materials needed for mfg and end products are AVAILABLE
2. Establish WHEN to place orders and schedule deliveries
3. Keep INVENTORY value as LOW as possible
- to meet the demand of the products that need mfg, the MRP system calculates - based on the bill of materials (BOM) - how much of each component is needed…
- …= inventory amount - order requirement
^^MRP system relies on CORRECT INFO input into the computer system, similarly for JIT - the MRP system will work out ORDER QUANTITIES based on minimum order quantities (MOQ), batch quantities, buffer stock and lead times <- worked out with each supplier
- MRP system saves TIME within materials management, as no need to manually calculate order quantity and the lead time
Enterprise resource planning (ERP)
- MRP (since 1970s) has now been superseded by MRP II (since 1980s) and org.s are moving towards ERP systems…
- …which have EVOLVED from MRP (since 1990s)
3 Systems for inventory management
1. Material requirements planning (MRP) - definitions
ii) Minimum order quantity (MOQ)
The smallest amount of a product a buyer can order from the supplier
3 Systems for inventory management
1. Material requirements planning (MRP) - definitions
i) Bill of materials (BOM)
A comprehensive list of components items, materials and parts to create a product, essentially a recipe for the PRODUCTION of an item
3 Systems for inventory management
1. Material requirements planning (MRP) - definitions
iii) Batch quantity
Number of products produced AT A TIME
3 Systems for inventory management
1. Material requirements planning (MRP) - definitions
iv) Buffer stock
Amount of stock held as INVENTORY at any time in addition to immediate requirements
3 Systems for inventory management
1. Material requirements planning (MRP) - definitions
v) Lead times
vi) Cycle time
Lead times
= The amount of time from placing the ORDER to the goods/services being DELIVERED
Cycle time
= The amount of time it takes rom RECEIVING RAW MATERIALS to creating a FINISHED PRODUCT
3 Systems for inventory management
2. Just-in-time (JIT)
*holding more inventory than is needed at any time may incur additional costs
*running out of core products may cause production to stop
= A philosophy used in manufacturing that is based on suppliers DELIVERING goods at the point that they are NEEDED. It aims to reduce inventory COSTS and reduce WASTE in the supply chain
- purpose: MINIMISE UNNECESSARY inventory
- suppliers work to specific lead times and delivery times to ensure production line never stops & no excessive amounts of inventory
^as with MRP, accuracy of JIT system relies on CORRECT INFO input into the computer system
3 Systems for inventory management
3. Kanban
*holding more inventory than is needed at any time may incur additional costs
*running out of core products may cause production to stop
= A SCHEDULING system that supports ‘Lean’ and JIT manufacturing processes, used to SIGNAL inventory is LOW, and TRIGGER REORDERING of materials
- linked to CONTINUOUS CHANGE
- purpose: to maintain acceptable levels of inventory such that an org. never runs out of production components, yet does not hold surplus amounts that tie up the biz’s cash unnecessarily and require valuable storage space
How a basic Kanban system works {in my own words}
1. Maximum stock level = Bin 1 + Bin 2
2. Reorder stock when Bin 2 reaches REORDER POINT, ie. enough stock left to meet the demand until delivery arrives, based on the supplier’s agreed lead time
3. Stock arrives to fill Bin 1 and Bin 2
Systems for inventory management
4. The importance of IT systems in proc. and the supply chain
+ 4 advances in technology that have aided the development of these inventory control systems
Case study: DEFRA (Dept. for Environment, Food and Rural Affairs) to implement AI in import monitoring
- using AI can minimise costs and frequency of fishery inspections; improve detection rates of any non-compliant consignments
Advances in technology
1. the Internet
2. Bespoke software
eg. for planning warehouse designs for maximum efficiency
3. Barcodes, scanners, tag readers
- provides traceability of items as they arrive/leave an org; identification of specific location in the warehouse
- RFIDs don’t require scanning unlike barcodes
4. Artificial intelligence (AI) = machines that display human-like intelligence
- AI systems are linked across the org. and can make automated decisions as to when products need to be re-ordered, in what quantity, and which areas of the org. to be delivered to
Systems for inventory management
4. The importance of IT systems in proc. and the supply chain
+ 9 advantages
+ 6 disadvantages
Advantages
1. accurate data provided
2. saves resources
3. improves efficiency
4. speeds up communication
5. promotes consistent working methods
6. traceability
7. supplier visibility
- can monitor suppliers’ KPIs, an org’s SLAs, & provide feedback on which individuals within an org. are manufacturing the most products w/ the lowest defects
8. customer visibility
- can track incoming sales orders
9. allows remote working
- authorised individuals are able to access such IT systems remotely from laptops/mobile devices
Disadvantages
1. reliant on ACCURATE SET UP INFORMATION
2. time-consuming to install
3. large FINANCIAL OUTLAY to implement
4. staff may resist change and be concerned for their job
5. incorrect data input could cause major problems {linked to point #1}
6. less direct contact with suppliers - relationships could suffer
Enterprise Resource Planning (ERP) technologies
+ 6 functions of an ERP system & the 8 elements within SUPPLY CHAIN MANAGEMENT
+ 3 recent developments
!! ERP involves the whole organisation.
- stores all information centrally for EASE of access, uniformity & LESS TIME-CONSUMING
- ERP can reduce labour by eliminating repetition of tasks across dept.s
Functions - each of these are referred to as ERP modules; all modules are interlinked
1. Supply chain management
i) Requisitions
- enables internal customers to raise req.s and gain authority prior to the need reaching the proc function
ii) Purchase order creation and sending
iii) Delivery of purchase order
- so proc can see when goods have been delivered
iv) Invoice payment
- so buyer can see up-to-date info and take action to avoid exceeding credit limits
v) Contract management
- logging KPIs, price increases, defects/quality issues
vi) Supplier relationship management
- business review notes can be uploaded to the module for others in the org/proc dept. to view if they’re looking for suitable suppliers
vii) Supplier database
- eg. contact details, product ranges, CSR policies, codes of ethics
viii) Supplier evaluation
- allows storage of questionnaire templates and logging of analysed feedback
- Manufacturing
- Human resources
- Project management
- Finance/accounting
- Customer relationship management
Recent developments
1. Remote access
- via laptops/portable devices -> easy access
2. Cloud-based systems
- cloud computing frees up physical space within the org & reduces risks (no manual backups needed; less likely to be affected by power failure/tech issues)
3. Social media modules
- for managing and monitoring the org’s social media
- also provides reports on interactions based on SM posts
Communications systems for internal and external use
1. communication within procurement contributes towards what 7 elements?
2. email within procurement and supply chain mgmt is used for what 11 activities?
Communication within proc
1. agreeing specifications
2. supplier relationship mgmt
3. customer service
4. conflict resolution
5. expediting
6. supplier performance mgmt
7. contract mgmt
Email - most commonly recognised form of electronic communication
1. sending specifications
2. sending RFQs or ITTs
3. negotiation
4. requesting samples
5. supplier evaluation
6. awarding contracts
7. expediting
8. arranging meetings
9. evaluating KPIs
10. dispute resolution
11. general correspondence
Communications systems for internal and external use
3. communication has evolved so it can be which 3 types?
+ define Internet of Things (IoT)
Types of communication
1. Machine to human
2. Human to machine
3. Machine to machine communication (M2M)
eg. vending machines send msgs to MRP systems to generate orders
eg. warehouse locations send msgs to IT systems when inventory is getting low
eg. logistics can be tracked through msgs sent from vehicles to machines
M2M communication is based on Internet of Things (IoT) technology
= a SYSTEM of LINKED TECHNOLOGY including machines, animals, people or objects that can TRANSFER DATA over the internet, mobile phone network or computer network with NO HUMAN INTERVENTION
