Role of RFID in Supply Chain Management

 | June 10,2010 05:00 pm IST

Overview of Supply Chain Management

Supply chain management (SCM) refers to the management of activities that procure raw materials, transform those materials into intermediate goods and final products, and deliver the products through a distribution system to the end-user.


There are numerous key factors that play an important role in the successful management of supply chains in today's dynamic environment.

Among those are: paying utmost attention to the needs and desires of the end customer, designing flexibility into the supply chain for rapid response to changing conditions, utilizing the latest communication and logistics technologies, employing a sound measurement system for making the right decisions, and always communicating through the total supply chain.


Several key issues should be addressed in the design and management of supply chains. The most critical among those are distribution network configurations, inventory control system, product design, information technology, supply chain integration and strategic partnering.


Recent advances in SCM

As we move on in the 21st century, like all other functions supply chain management is in a state of metamorphic flux. Several new technologies are creeping into SCM which are reshaping this crucial business function. Some of these forces and technologies have been described in brief.


1. Information Technology

The Internet as well as the intranet (connecting the workstations within an organization) and extranet (electronic network among business partners, e.g., EDI) have revolutionized the management of supply chains. The power and flexibility of these networks offer businesses more control over the flow of products, services and funds than ever before. Dramatic results have been obtained from using information to improve supply chain performance.


The Web has created a rare opportunity for organizations to access global markets. It allows for mass customization, stronger business relationships, a greater degree of channel coordination, and enhanced communications with customers and business partners.

Electronic commerce has revolutionized how business is conducted in today's world. It is now a reality in both business-to-customer and business-to-business transactions and is rapidly accelerating in both areas.


Internet based procurement
Business-to-business sales on the Web are starting to gain popularity. Companies around the world are getting serious about Internet-based procurement (IBP) because the return on a relatively modest investment is high and the risk is very low, at least for many items, companies buy routinely. There are two distinct parts of the IBP market:


Direct-Material Procurement, which involves the acquisition of products directly required for production. These include the components and materials from key upstream supply chain partners.

Indirect-Material Procurement, which is the purchase of products that are indirectly used in the production process. They include office supplies; maintenance, repair and operating supplies (MRO).


2. Outsourcing Logistics to third party logistics providers

'Outsourcing' refers to the purchase of goods or services that were previously provided internally. 'Logistics' is defined by the Council of Logistics Management as "that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers' requirements.

Traditionally, logistics activities were handled internally, particularly in medium to large size corporations. In the United States, third party logistics services have gained momentum over the past decade.


3. Business Process Reengineering

Business process reengineering (BPR) efforts call for 'radical' restructuring of processes to eliminate waste, improve quality, increase service level and enhance customer satisfaction. Most BPR efforts are confined to one company; however, BPR across multiple members of the supply chain should become increasingly common. By thinking in terms of supply chains instead of individual operations or functions, companies can improve their competitive strategies. Advances in information and communication technologies have made it possible to have real-time connectivity among supply chain partners.