Information Technology For Scm Operations

Published Date: 02 Nov 2017

1) Dr. S. Raja Mohan

Professor, Alagappa Institute of management, Alagappa University, Karaikudi, Tamilnadu, India.e-mail: [email protected], Cell:099945-90559

2) E.V.Rigin

Associate Professor, Department of Management Studies, VHNSN College, Virudhunagar, Tamilnadu, e.mail: [email protected], Cell: 094434-14413

Abstract

Supply Chain Management (SCM) encompasses all activities associated with a firm moving its composite flow of information, materials and services from the raw materials stage through production and on to the end customer. This includes sourcing

and procurement, production scheduling, order processing, inventory management, transportation, manufacturing, warehousing, customer service and the information systems used to monitor these activities. The sudden increase in Information technology, electronic commerce and the Internet has resulted in new opportunities to improve the performance of the supply chain. This paper highlights the role and importance of SCM in HLL Life care Ltd, Trivandrum.

Key words : Supply Chain Management, Information Technology, Production Management, HLL

1. INTRODUCTION

Large companies today mainly focus on becoming efficient and flexible in their manufacturing methods in order to handle uncertainty in the business environment, they need different strategies to manage the flow of goods from the point of production to the end user. However, they have not been able to formulate the right strategies required to achieve this noble task in SCM. Corporations have increasingly turned to global markets for their supplies. The globalization of supply chains has forced the companies to look for better and more interlinked systems for SCM competencies. SCM strategies, implementation processes and SCM capabilities used to coordinate the flow of materials. Companies and distribution channels today compete more, on the basis of time, quality, and defected-free products to customers faster and more reliably than the competitor. Customers consistently demand the products for fast delivery on time and with no damage. This can only be achieved with proper coordination of efforts by linking systems and processes to create synergy on SCM.

The global orientation and increased performance-based competition, combined with rapidly changing technology and economic conditions, all contribute to marketplace uncertainty. This uncertainty requires greater flexibility on the part of the individual companies and distribution channels, which in turn, demands for more flexibility in channel relationships. For this to be achieved, a firm must have a fit between SCM competencies, implementation of strategy and SCM capability with its suppliers and distributors. This will enhance the competitive advantage of the business and improve corporate performance. Improvement of industrial performance such as cost, lead-time, adaptability, variety and traceability is the major finality of companies. Thus, they need to collaborate and to strengthen their coordination mechanisms, face the strong pressures of the world competition. The companies are constantly in search of new ways to improve the performance of their supply chain in order to reduce costs, to improve quality and to increase productivity.

2. Statement of the problem

Health care industry is one of the worlds’ largest and fastest growing industries. It comprises various sectors such as medical equipment, pharmaceutical, healthcare services and so on. The health care supply chain involves the flow of many different product types and the participation of various stakeholders. The main purpose of the health care supply chain is to deliver products at the right time in order to fulfill the needs of customers.

The concept of SCM was introduced in the year 1980. It expresses the need to integrate the key business processes, from end user through original suppliers. SCM focuses on planning, forecasting, purchasing, storing, moving, product assembly and keeping track of a product. SCM is an essential element of operational efficiency. It plays a role in cultural evolution and helps to improve the quality of life. It creates jobs, decreases pollution and increases the standard of living. In health care industry, SCM practices increases the efficiency in all the functional activites of production and operations management, which use to produce quality product at right time

SCM supports to maintain good relationship with vendors and suppliers. Seamless flow of material and information is the key to supply chain. This helps in reducing the inventory , leads to low cost and increases the flexibility, improving price value offerings and so on. Information technology plays a vital role connected with SCM of HLL Life care Ltd. Hence the present study has been under taken to identify the need of IT in SCM of HLL.

3. Review of Literature

Jaideep Motwani et al. (2000) noted in their research article entitled " Information technology in managing global supply chains" pointed that supply chain managers increasingly want to automate all of the supply chain, from forecasting to distribution, and to link every element of the chain. More and more companies want an integrated solution to enable them to see the entire supply chain at once. IT impact on decision making, departmental performance, and organization-wide performance. This information can be of tremendous value for organizations planning to implement global SCM. More comprehensive and comparative case studies of successful implementation and the role played by IT in these implementations would be helpful to those who are still struggling.

Richard A. Lancioni et al. (2000) in their article entitled " The role of Internet in SCM" says that the use of the Internet in SCM is rapidly increasing. The key ingredient for success in managing a supply chain is fast, accurate information from a wide range of operating areas including transportation, inventory, purchasing, customer service, production scheduling, order processing, and vendor operations. The ability to react quickly to market changes and to adjust inventory, production, and transportation systems accordingly is necessary for cost efficiency and for the improved utilization of assets. The internet has and will continue to provide logistics managers with this information and enable them to improve the profitability of their supply chains. On a continuing basis, the internet will enable logistics managers to monitor their supply chain operations and reduce costs when inefficiencies arise.

Zillur Rahman (2004) in his research article entitled " Use of Internet in SCM : a study of Indian" his research findings indicates that the advent of the internet has transformed industries and redefined the rules of competition. Information technology changed the nature of relationships between businesses and their customers. Given current trends the internet influence will continue to grow into the foreseeable future as businesses collaborate with suppliers and partners, source, produce and distribute products and services globally. The internet has continue to provide managers with fast and accurate information from a wide range of operating areas including transportation, inventory, purchasing, customer service, production scheduling, order processing and vendor operations to enable them to improve profitability of their supply chain. On a continuing basis, the internet enable logistics managers to monitor their supply chain operations and reduce costs when inefficiencies arise. The effects of this are and will continue to affect the profitability of firms dramatically.

David C. Chou et al. (2004) have said in their research article entitled "Web technology and supply chain management" that the business environment changes rapidly. The change in corporate strategy increases their dependency on suppliers. A wide range of products and services provided by the suppliers makes SCM increasingly complex. Under this situation, the collaborative relationship between trading partners in the supply chain becomes critical. Effective SCM must be responded to this challenge. Fortunately, the internet is able to facilitate this challenge. The internet offers the supply chain enormous potential and entirely new methods for streamlining coordination between business partners and customers. The internet enhances SCM’s performance and it is an essential part of e-commerce. As the SCM evolves in the information age, the network supports coordination between business partners to make all the information, transactions, and decisions flow through the network. As a successful SCM model, dell computers has established competitive advantages with the advancement of the networked economy. The competition is increasingly based on supply chain efficiency, firms need to put SCM at the heart of their business model to be successful. They must take advantage of the internet and web technology to achieve higher quality and lower cost collaboration with trading partners.

4. OBJECTIVES OF THE STUDY

1) To study the demographic profile of the executives of HLL Life care Ltd.

2) To analyze the important elements of SCM and useful software packages for the effective operations of SCM.

5. METHODOLOGY

This study is based on both the primary and secondary data. The primary data have been collected from the executives of HLL Life care Ltd. It is an empirical study, based on survey method. Structured questionnaire is used for finding out respondents perception towards SCM practices on health care products of HLL Life care. The researcher met the respondents in person to collect primary data. The questionnaire has four sections such as personal information, elements of SCM, benefits, problems and impact of SCM and performance of SCM. The primary data collection was done from 2010 to August 2011. The secondary data have been collected from various journals, books, magazines and reports, internet and records of HLL Life care

6. SAMPLE SIZE

The population is finite. Therefore the researcher has collected data from 93 executives of HLL Life care Limited with the SCM operational experience. The simple random sampling method has been used. It becomes probabilistic sampling and paves the way to use both univariate and multivariate statistical technique in both parametric and non parametric approach.

7. SAMPLE DESIGN

The sample of 93 executives were selected by using simple random sampling technique. The selected sample represents at various designation such as top level executive, middle level executives and operational level executives working in various department of HLL life care Limited.

8. DEMOGRAPHIC PROFILE OF THE RESPONDENTS

8.1 Designation of the respondents

The respondents are classified into their designation to identify their perception towards benefits, problems, impact, aggregate planning, operational, performance and social performance measurement metrics. They are categorized into top level, middle level and operational level. Table 1 shows the designation of the respondents

Table: 1

Designation of the respondents

Designation

No. of respondents

Percentage to total

Top level

Middle level

Operational level

20

39

34

21.51

41.94

36.55

Total

93

100.00

Source: Primary data

Table 1 shows that 21.51 percent of the respondents belong to top level category, while 41.94 percent of them from middle level and 36.55 percent of them are from operational level. Thus it is concluded that middle level respondents occupy more than the other two for the smooth functioning of the SCM activities.

8.2 Monthly income of the respondents

Salary is an important factor to motivate the employees to do their work more enthusiastically. The salary is fixed based on the respondents’ educational background, years of experience and their designation. A person with regular income leads to increase their work efficiency and performance. The salary wise classification is given in Table 2

Table: 2

Income of the respondents

Monthly Income

No. of respondents

Percentage to total

Below Rs. 15,000

Rs.15,000-20,000

Rs.20,000-25000

Rs.25,000-30,000

Rs.30,000 and above

4

13

18

26

32

4.30

13.98

19.35

27.96

34.41

Total

93

100.00

Source: Primary data

Table 2 shows that 4.30 percent of the respondents’ monthly income is below 15,000, 13.98 percent of them are drawing Rs. 15,000 to 20,000, 19.35 percent of the respondents are getting salary of Rs.20, 000 to 25,000, while 27.96 percent of them getting Rs.25, 000 to Rs.30, 000 and 34.41 percent of the respondents drawing Rs.30, 000 and above. It is inferred that majority of the respondents are getting the salary of above Rs.25,000.

9. elements of SCM- parametric value

The supply chain process is an important aspect in any manufacturing sector to increase organizational productivity. SCM is a conglomeration of several elements. These elements and their importance are recognized by the executies in different department of HLL Life care.

There are 13 elements of SCM and five point scale used in the questionnaire. This scaling technique has been used and equal importance is given to all components . For each components, there are five responses such as strongly disagree, disagree, neutral, agree and strongly agree and the weightage is given a one, two, three, four and five respectively.

The 13 elements of SCM and their importance is analyzed through a parametric’ test. The parametric values shows the respondents perception towards useful elements of SCM in HLL. If mean value is above the average value 3, all the elements are agreed by the executives of HLL to measure the effective SCM practices. The standard deviation and standard mean error are in the positive direction and its value is above .5 and .05 it is more consistent to analyse t- test. Table 6.1 shows the elements of SCM- parametric values.

Table :3

Elements of SCM – Parametric value

Elements of SCM

No. of respondents

Mean

Std. Deviation

Std. Error Mean

Close relationship with suppliers

93

4.4839

.68545

.07108

Close relationship with customers

93

4.3871

.67618

.07012

Just in time supply

93

4.3978

.73927

.07666

Electronic-procurement

93

4.4731

.60057

.06228

Outsourcing

93

4.4086

.67946

.07046

Subcontracting

93

4.5269

.66906

.06938

Third party logistic(3PL)

93

4.3978

.67791

.07030

Plan strategically

93

4.4731

.71614

.07426

Supply Chain Benchmarking

93

4.3333

.74211

.07695

Few Suppliers

93

4.5161

.77478

.08034

Holding safety stock

93

4.4194

.75646

.07844

Use of external consultants

93

4.3656

.86959

.09017

Others

93

4.2151

.89503

.09281

Source: Primary data

The mean value of the 13 variables ranges from 4.21 to 4.52 and standard deviation ranges from .60 to .89. The standard error mean is consistent and varies from .062 to .092. This shows that the perception of the respondents towards the elements of SCM are very useful to operate SCM activities in HLL Life care. This leads to the computation of parametric ‘t’ value which is shown in the Table 6.2..

9.2 Elements of SCM- One sample t- test

The opinion of the executives about the elements of SCM normally differ significantly. In order to analyse the significance difference among their opinion, normalized t-test has been applied. Morever, the mean value, standard deviation and standard error mean is consistent. This leads to apply t – test which helps to verify the significance level towards elements of SCM in HLL.

One sample t-test is a statistical procedure used to examine the mean difference between the sample and the known value of the population mean. The ‘t’ test is used to ascertain the exact opinion of respondents towards elements of SCM. The ‘t’ value indicate whether the computed mean value is greater than the test value or not. Degrees of freedom are useful in computing the probability distribution value along with lower and upper limit of the distribution. Since the test value is three and scaling technique is five point. The lower and upper limits of the significant difference between mean values have to be computed. It determines the two tail possibilities either mean greater than 3 or less than 3. Here the respondents perception of useful elements to implement of SCM in a better way in HLL Life care. It is estimated by using normalized t -test.

Table :4

Elements of SCM using one sample t- test

Elements of SCM

Test Value=3

t-value

d.f

p-value

Mean Difference

95% Confidence Interval of the Difference

Lower

Upper

Close relationship with suppliers

20.877

92

.000

1.48387

1.3427

1.6250

Close relationship with customers

19.783

92

.000

1.38710

1.2478

1.5264

Just in time supply

18.235

92

.000

1.39785

1.2456

1.5501

electronic-procurement

23.655

92

.000

1.47312

1.3494

1.5968

Outsourcing

19.992

92

.000

1.40860

1.2687

1.5485

Subcontracting

22.008

92

.000

1.52688

1.3891

1.6647

Third party Logistic(3PL)

19.885

92

.000

1.39785

1.2582

1.5375

Plan strategically

19.837

92

.000

1.47312

1.3256

1.6206

Supply Chain Bench marking

17.327

92

.000

1.33333

1.1805

1.4862

Few Suppliers

18.871

92

.000

1.51613

1.3566

1.6757

Holding safety stock

18.095

92

.000

1.41935

1.2636

1.5751

Use of external consultants

15.144

92

.000

1.36559

1.1865

1.5447

Others

13.092

92

.000

1.21505

1.0307

1.3994

Source: Primary data

Table 4 shows that the ‘t’ values of 20.877, 19.783, 18.235, 23.655, 19.992, 22.008,19.885,19.837, 17.327, 18.871, 18.095, 15.144, 13.092 are statistically significant at 1 percent level and all the ‘t’ values are positive with consistent standard deviation. Therefore it can be concluded that the executives in HLL Life care strongly agree the e-procurement, sub contracting and close relationship with suppliers. They strongly believe these elements of supply chain are very important in organization for smooth flow of supply chain through the entire department. Secondly for the best practices of SCM the executives agree to consider the factors like close partnership with customers, outsourcing, third party logistics (3PL), plan strategically, few suppliers, holding safety stock. Finally the executives of HLL Life care Limited is neutral to consider the given elements namely supply chain benchmarking, use of external consultants and other factors for the perfect practices of SCM.

10. INFORMATION TECHNOLOGY for effective SCM

The use of Information Technology (IT) is considered a prerequisite for the effective control of today’s complex supply chains. The use of IT for SCM purposes can be divided into three namely transaction processing, supply chain planning and control and order tracking and delivery co-ordination. The strategic and technological innovations in supply chain will impact on how organizations buy and sell in the future. SCM is concerned with flow of products and IT between supply chain members organisations. Recent development in technologies enables the organization to avail information easily in their premises. The SCM is a mixed form of augmented electronic technical as well as standard SCM practices. These electronic domains are in the form of the customized standard package or in some cases the organizations do not have it. In HLL Life care two types of software packages are supported for the interconnected activities of SCM namely custom made and standard package. The respondents are given their opinion regarding the preferences towards software packages.

10.1 Preferences for Material requirement planning (MRP-I)

Material requirements planning is a production planning and inventory control system used to manage manufacturing processes. Most of the MRP systems are software-based. An MRP system is intended to simultaneously meet the objectives such as ensure materials are available for production, products are available for delivery to customers, maintain the lowest possible material and product levels in store, plan manufacturing activities, delivery schedules and purchasing activities.

In HLL Life care the raw materials and other corollary supportive materials are properly planned through the MRP system.

Table: 5

Preferences for Material Requirement Planning

Option

No. of respondents

Percentage to total

Custom made

Standard package

Either custom made or standard package

40

34

19

43

36.6

20.4

Total

93

100.0

Source : Primary data

Table 5 portrays that 43 percent of the respondents prefer custom made package for MRP, 36.6 percent of them preferred standard package and 20.4 percent of them willing to use custom made or standard package. It is inferred that custom made package is more preferred for MRP.

10.2 Preferences for Manufacturing Resources planning (MRP -II)

Manufacturing resource planning is a computer-based system, that can create detail production schedules using real time data to coordinate the arrival of component materials with machine and labour availability. MRP II is used widely by itself, but also as a module of more extensive enterprise resource planning (ERP) systems. MRP software is used to increase human resource productivity.

In HLL Life care master production schedule, bill of materials, inventories and orders and material requirement planning are properly planned through Primary production and planning department. The respondents opinion about MRP II is given in the Table 6

Table: 6

Preference for Manufacturing Resources planning (MRP-II)

Option

No. of respondents

Percentage to total

Custom made

Standard package

Either custom made or standard package

34

36

23

36.6

38.7

24.7

Total

93

100.0

Source: Primary data

Table 6 describes that 36.6 percent of the respondents prefer custom made package, standard packages is preferred by 38.7 percent and 24.7 percent of them use either custom made or standard package. It is inferred that a large majority of them preferred custom made and standard package for MRP-II operations.

10.3 Preference for Enterprise Resource planning (ERP)

Enterprise resource planning (ERP) systems integrate internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management and so on. ERP systems automate this activity with an integrated software application. The purpose of ERP is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders. The HLL executives realize the importance of ERP to the smooth flow of SCM. The respondents opinion is given in the Table 7

Table: 7

Preference for Enterprise Resource planning (ERP)

Option

No. of respondents

Percentage to total

Custom made

Standard package

Either custom made or standard package

36

34

23

38.7

36.6

24.7

Total

93

100.0

Source: Primary data

Table 7 explicates that 38.7 percent of the respondents have suggested for custom made package, 36.6 percent of them preferred standard package and 24.7 percent of them prefer either custom made or standard packages. It is inferred that both the custom made and standard package more flexible for the operational activities of ERP.

11. Findings

About 43 percent of the respondents prefer custom made software, 36.6 percent of them use standard form and 20.4 percent of them prefer either custom made or standard package for material requirement planning.

Regarding manufacturing resource planning 38.7 percent of the respondents use standard form package, 36.6 percent of them prefer custom made and 24.7 of them use either custom made or standard package.

Nearly 38.7 percent of the respondents prefer custom made form and the standard form software package is used by 36.6 percent of the employees and 24.7 percent of them prefer either custom made or standard package for enterprise resource planning operations.

Nearly 51.6 percent of the respondents use custom made, 30.1 percent of them prefer standard form and remaining of them prefer either custom made or standard packages for warehouse management system.

Regarding customer relationship management, 49.5 percent of the respondents prefer custom made, 33.3 percent of them prefer standard package and meager percent of 17.2 of them prefer either custom made or standard package.

Nearly 43 percent of the respondents prefer custom made form, 36.6 percent of them use standard form and 20.4 percent of them prefer either custom made or standard package for supplier relationship management.

Advanced planning system is a software used for production, about 48.4 percent of the respondents use custom made software, 34.4 percent of the respondents prefer either standard package and rest of them prefer custom made or standard package software .

JIT software is used in manufacturing industry. Nearly 43.0 percent of the respondents prefer custom made software, 35.5 percent of them prefer standard form and the remaining 21.5 of them prefer either custom made or standard package software .

About 39.8 percent of the respondents prefer custom made software, 35.5 percent of them choose standard form software and rest of them prefer either custom made or standard package for monitoring E-commerce activities.

Closely 48.4 percent of the respondents prefer custom made package, 33.3 percent of them prefer standard package and 18.3 percent of them prefer either custom made or standard package for the best practice of decision support system.

About 41.9 percent of the executives prefer custom made software for radio frequency identification activities, 34.4 percent of them prefer standard package and the rest of them prefer either custom made or standard package.

44.1 percent of the respondents prefer custom made packages, 41.9 percent of them use standard package and 14 percent of them prefer either custom made or standard package for the Electronic data interchange activities.

As per the survey made regarding transport management system, 44.1 and 41.9 percent of the respondents prefer the standard form and custom made software respectively and the rest of them prefer either custom made or standard package.

12. Conclusion

The SCM practices can be implemented to obtain in any organization. The HLL Life care is not an exemption too. In HLL Life care, the employees are classified into three levels namely top level, middle level and operation level. The salary is fixed, based on their experience and the designation of the employees as per the central government norms. This industry has experienced employees. The employees of this company are willing to use software packages to the effective operations of SCM practices. The logistics department has sufficient transportation facility to distribute the finished product to various places. Internet technology, world wide web, e-commerce and so on change the way of company business. As per the characteristics of business environments the HLL use IT for effective SCM operations.