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European and Mediterranean Conference on Information Systems 2010 (EMCIS2010)
April 12-13 2009, Abu Dhabi, UAE
Peter Trkman, Ales Groznik
Current issues and challenges of supply chain management
1
CURRENT ISSUES AND CHALLENGES OF SUPPLY CHAIN
MANAGEMENT
Peter Trkman, University of Ljubljana, Faculty of Economics, [email protected]
Aleš Groznik, University of Ljubljana, Faculty of Economics, Slovenia, [email protected]
lj.si
Abstract
Efficient supply chain management is crucial for survival and success in a turbulent world. Current
economic crisis increases its importance even further. This conceptual paper reviews latest findings in
the most relevant areas, namely the importance of a proper supply chain strategy that is a pre-
condition for business process renovation and mitigation of supply chain connected risks.
Performance measurement is also a pre-condition for proper management. Supply chain frameworks
and standards that provide guidelines in facing those challenges are reviewed. Finally, the benefits of
supply chain informatization are shown.
Keywords: Supply chain management, business renovation, IT, supply chain risks, supply chain
frameworks
1 INTRODUCTION
It has often been claimed that in the modern world the competition is no longer between single
companies but between supply chains (Trkman et al., 2007), (Li et al., 2005). Anecdotic evidence also
supports this claim (e.g. the problems in automotive industry due to supplier failures or the infamous
Nokia-Eriksson-Phillips example (Chopra & Sodhi, 2004)). However, most of the papers are focused
on mathematical methods for supply chain optimization instead of an overview of business-related
challenges connected to supply chains
The challenge for firms today is namely not just to take up a supply chain management (SCM)
initiative but to implement it successfully. An informatics perspective is vital since information flow is
an integral part of SCM and material flow is closely dependent on information flow. But SCM
initiative can be a failure unless one is aware of the issues that may arise during its planning or
implementation (Varma et al., 2006).
However, SCM is, at best, still emergent in terms of both theory and practice (Storey et al., 2006),
therefore both further research and classification of previous research efforts is needed. This paper
mainly contributes to the second purpose; namely it presents several important issues in SCM.1
2 CURRENT ISSUES IN SCM
2.1 Strategic insights
Earlier purchasing was wedded to routine in many companies. For the last two decades though, no
company can allow purchasing to lag behind other departments in adjusting to worldwide changes
1 The paper is based on previous conference publication (Groznik & Trkman, 2009)
European and Mediterranean Conference on Information Systems 2010 (EMCIS2010)
April 12-13 2009, Abu Dhabi, UAE
Peter Trkman, Ales Groznik
Current issues and challenges of supply chain management
2
(Kraljic, 1983). The recognition of the SCM as a key and vital area, both in the private and public
sectors, has focused attention on its effectiveness. In a number of organizations, cost-effective supply
chain is a matter of survival as purchased goods and services account for up to 80 per cent of sales
revenue (Quayle, 2003), while in the public sector there is an ever-increasing demand for savings in
the procurement process (Groznik et al., 2008).
However, there is (in line with the contingency theory) no single best way of organizing/leading the
supply chain that is effective in all situations and there is no universal set of choices that is optimal for
all SCs (adapted from (Fiedler, 1964), (Gingsberg & Venkatraman, 1985)). In order to optimize the
SC the following five configuration components are critical: operations strategy, outsourcing strategy,
channel strategy, customer service strategy and asset network (Cohen & Roussel, 2005). The four
main approaches towards production are make to stock, make to order (see e.g. (Gunasekaran & Ngai,
2005) for a comprehensive review of make to order SC challenges), configure to order and engineer to
order (Cohen & Roussel, 2005) – they considerably affect the correct strategy.
One of the main consequences of the lack of information exchange/coordination in the chain is the so-
called bullwhip effect, which was first theoretically described in the 60s (Forrester, 1961) and
practically in the 80s with the case of Pampers diapers. The fluctuation of demand namely increases as
we move up the supply chain; small fluctuations at the end of the chain can be propagated to
considerably larger fluctuations for e.g. the original equipment manufacturer. The main reasons for
bullwhip are (Chopra & Meindl, 2007):
• Rewards system
local optimization
employees rewards
• Information processing
lack of information
planning on the base of the orders not final customer demand
• Barriers
lot sizing
long lead-times
• Pricing policy
price fluctuation
quantity discounts
Another important decision is whether push or pull system should be used. The push system schedules
the jobs in advance for a series of work centres, and each work centre pushes its completed jobs to the
succeeding work centres. In a pull system uses a „pull‟ approach, where a work centre finishes its
operations and then requests the next job from the preceding work centre (Özbayrak et al., 2004).
Obviously the correct response is contingent on the industry in question. The Figure 1 shows the
percentage of companies in various industries that use different strategies.
European and Mediterranean Conference on Information Systems 2010 (EMCIS2010)
April 12-13 2009, Abu Dhabi, UAE
Peter Trkman, Ales Groznik
Current issues and challenges of supply chain management
3
Fig. 1: Operations strategies by industry; Source: (Cohen & Roussel, 2005)
Business renovation in SCM
After successful strategy preparation, companies have to identify areas of possible improvement in
quality of product or service, lead times or operational costs. This step takes an integral view of all
organisations involved into the supply chain in order to renovate their operations towards supply chain
excellence. Business Renovation (BR) or business process renovation and informatisation efforts
integrate the radically strategic method of Business Process Re-engineering (BPR) and more
progressive methods of Continuous Process Improvement (CPI) with appropriate IT infrastructure
strategies. BPR is a thorough re-engineering strategy that critically examines current business policies,
practices and procedures, rethinks them and then redesigns the mission-critical products, processes and
services (Prasad, 1999). BPR seeks improvements by elevating efficiency and effectiveness of the
business process that exist within and across organizations. On the opposite, CPI refers to minor and
specific changes that one makes in an existing business process (Harmon, 2003). CPI relies on
building a fundamental understanding of customers‟ requirements, process capability, and the root
cause of any gaps between them by developing culture of continuous improvement in the areas of
reliability, process cycle times, costs in terms of less total resource consumption, quality, and
productivity. Six Sigma and Total Quality Management (TQM) are examples of approaches to CPI.
BR argues for a balanced approach between radical changes and continuous improvements. Table 1
summarizes comparison of BPR, TQM and Six Sigma on the basis of goal, level of change, scope,
focus and other characteristics.
According to Jacobson (Jacobson, 1995), we view business renovation as an umbrella concept for
strategic IS planning, and both BPR and CPI since thorough and effective renovation should combine
both, radical shifts (BPR) with those that permanently increase business efficiency and effectiveness
(CPI).
European and Mediterranean Conference on Information Systems 2010 (EMCIS2010)
April 12-13 2009, Abu Dhabi, UAE
Peter Trkman, Ales Groznik
Current issues and challenges of supply chain management
4
BPR TQM Six Sigma
Level of change Radical Incremental Incremental
Scope Organization Processes Single process
Focus Start from scratch
Redesign current
processes
Improve current
processes
Participation Top-down Bottom-up Bottom-up
Role of IT Essential enabler Key enabler Key enabler
Other Enablers Process owners Statistical tools Statistical tools
Risk High Moderate Moderate
Principle goal Cost reduction Quality improvement Quality improvement
Table 1: Comparison of BPR, TQM and Six Sigma; source: (Simpson et al., 1999; Valentine & Knights, 1998).
Since direct changes can have a detrimental result, companies develop business models (Kovacic et
al., 2001). A business model is an abstraction of a business that shows how business components are
related to each other and how they operate. Its ultimate purpose is to provide a clear picture of the
company‟s current state and to determine its vision for the future. There are several reasons producing
business models (Eriksson & Penker, 2000):
• A business model helps us understand the business: one of the primary goals of business
modelling is to increase understanding of the business and to facilitate communication about the
business.
• A business model is a basis for creating suitable information systems: descriptions of the
business are very useful in identifying the information systems necessary to support the business.
Business models also act as a basis for engineering requirements when a particular information system
is being designed.
• A business model is a basis for improving the current business structure and operation: as it
shows a clear picture of the business current state, a business model can be used to identify the
changes necessary to improve the business.
• A business model provides a polygon for experiments: a business model can be used to
experiment with new business concepts and to study the implications of changes for the business
structure or operation.
• A business model acts as a basis for identifying outsourcing opportunities: using a business
model the core parts of a business system can be identified. Other parts considered less important can
be delegated to external suppliers.
The main purpose of developing and analysing business models is to find revenue and value
generators inside a reversible value chain, or a business model's value network. An example of AS-IS
and TO-BE process models are shown in Figures 2 and 3 (developed on a case of a company in oil
industry).
European and Mediterranean Conference on Information Systems 2010 (EMCIS2010)
April 12-13 2009, Abu Dhabi, UAE
Peter Trkman, Ales Groznik
Current issues and challenges of supply chain management
5
gas station
purchasing
department
analytic
department
transport
company
Startmeasurement of
gas level
sending the
results to
purchasing
department
acceptance of
results from
different gas
stations
prediction of
future needs
supply
level high
enough?
End1Yes
aggregation and
optimization of
purchase orders
consultation with
gas station
No
order
confirmationorder OK?
final check of
created order
order correction
Yes
sending the
order to transport
company
acceptance of
order
transport of fuel
to gas station
creation of
purchase orders
acceptance of
delivery
No
consulati
on
needed?
No
Yes
waiting/preparati
tion of delivery
preparation of
orderunloading
End2
Figure 2: AS-IS business process model (Trkman et al., 2007)
transport
company
analytic
department
gas station
Start
identification of
the needs
(automatic)
aggregation of
purchasing
orders
(automatic)
informing the
analytic
departmment
optimization of
transportation
transport of fuel
to the gas station
acceptance of
deliveryEnd
order
confirmation
order
acceptance
waiting/preparati
tion of delivery
unloading
is
confirme
d?
order correction
order
needed?
End1
Yes
No
Yes
No
Figure 3: TO-BE business process model (Trkman et al., 2007)
2.2 Supply chain risks
The risk of disruptions caused by both factors within SC and outside environmental forces is a topic of
increased importance. Supply chain risk management is therefore a field of escalating importance and
is aimed at developing approaches to the identification, assessment, analysis and treatment of areas of
vulnerability and risk in SCs (Neiger et al.). Various trends that enhance exposure to risks, such as the
increased use of outsourcing, globalisation, reduction of the supplier base; reduced buffers, increased
demand for on-time deliveries or shorter product life cycles (Norrman & Jansson, 2004) are increasing
European and Mediterranean Conference on Information Systems 2010 (EMCIS2010)
April 12-13 2009, Abu Dhabi, UAE
Peter Trkman, Ales Groznik
Current issues and challenges of supply chain management
6
the importance of SCRM. The sources of risks can be from suppliers‟, customers‟ or internal
environment (also shown in Fig. 4)
Figure 4: Sources of risks (The Supply Chain Council Risk Research Team, 2008)
The recently developed model ((Trkman & McCormack, 2009a) shown in Figure 5) sheds more light
on the prediction of suppliers‟ connected risks. It is based on the premise that different suppliers (and
their second and third tier suppliers) operate in different markets and environments; therefore their
turbulence and the forces influencing a supplier also differ. While a certain supplier strategy (e.g.
ordering large batches to decrease procurement costs or single-source suppliers with long contractual
commitments) may be acceptable in a non-turbulent environment, it may be detrimental in a more
turbulent one (e.g. in the presence of quick technological advances such as microprocessors or large
commodity price swings). Considering all of this, the same supplier attributes, strategy and structure
may pose considerably different risks of disruption. Therefore, a comprehensive approach to SCRM
has to include supplier-associated turbulence as well as various sources of uncertainty due to supplier
attributes such as strategy, structure and performance.
In order to distinguish between the different kinds of risks, the sources of uncertainty were separated
into two different constructs (Trkman & McCormack, 2009a):
- endogenous uncertainty: the source of uncertainty/risk is inside the SC and can lead to
changing relationships between focal firm and suppliers, the most notable kinds are market
and technology turbulence. Market turbulence is likely to arise from the heterogeneity and
rapid changes in the composition of customers in the market and their preferences (Kandemir
et al., 2006). It means continuous changes in customers‟ preferences/demands, in price/cost
structures, and in the composition of competitors (Calantone et al., 2003). Technological
turbulence refers to the degree to which technology changes over time within an industry and
the effects of those changes on the industry (Chatterjee, 2004). Technological turbulence
arises from changes in the underlying technologies of products or services and their rates of
obsolescence (Kandemir et al., 2006). Technical dynamics includes how fast the related
technology is changing, as well as breakthroughs in the manufacturing process, and mass
production techniques (Hsu & Chen, 2004);
- exogenous uncertainty: the source of uncertainty/risk is from outside the SC. These risks are
further divided into the two most notable kinds; namely discrete events (e.g. terrorist attacks,
contagious diseases, workers‟ strikes) and continuous risks (e.g. inflation rate, consumer price
index changes).
European and Mediterranean Conference on Information Systems 2010 (EMCIS2010)
April 12-13 2009, Abu Dhabi, UAE
Peter Trkman, Ales Groznik
Current issues and challenges of supply chain management
7
Endogenous
uncertainty Risk of Supplier
Non Performance
or Disruption
in a SC
Supplier Attributes
SC Strategy
and Structure
Exogenous
uncertainty
Market Turbulence
New products
Price sensitivity
Level of competition
Demand swings
New customers v. repeat
Continuous
Interest rates
CPI
GDP
Commodity prices
Discrete
Terrorism
Disasters
Strikes
Technology Turbulence
Rapid changes
High tech influenceFinancial Performance
Human Resource Factors
Operational Factors
Culture
Relationship Factors
SC type
lean, agile, hybrid
Suppliers Types
Business Structure
Geographic Location
Endogenous
uncertainty Risk of Supplier
Non Performance
or Disruption
in a SC
Supplier Attributes
SC Strategy
and Structure
Exogenous
uncertainty
Market Turbulence
New products
Price sensitivity
Level of competition
Demand swings
New customers v. repeat
Continuous
Interest rates
CPI
GDP
Commodity prices
Discrete
Terrorism
Disasters
Strikes
Technology Turbulence
Rapid changes
High tech influence
Endogenous
uncertainty Risk of Supplier
Non Performance
or Disruption
in a SC
Supplier Attributes
SC Strategy
and Structure
Exogenous
uncertainty
Market Turbulence
New products
Price sensitivity
Level of competition
Demand swings
New customers v. repeat
Continuous
Interest rates
CPI
GDP
Commodity prices
Discrete
Terrorism
Disasters
Strikes
Technology Turbulence
Rapid changes
High tech influenceFinancial Performance
Human Resource Factors
Operational Factors
Culture
Relationship Factors
SC type
lean, agile, hybrid
Suppliers Types
Business Structure
Geographic Location
Figure 5: Conceptual model for suppliers’ connected risks (Trkman & McCormack, 2009a)
The current approaches only offer a limited estimation of the risk of supplier non-performance. The
proposed approach (see (Trkman & McCormack, 2009a) for more details) enables the estimation of
the risks and helps the company to make a more informed decision as to how much risk it is willing to
take and which risks will it mitigate (either with dual/multiple sourcing or with the change of
supplier).
Dual sourcing is namely an important topic – while it may increase the costs due to activities
connected with supplier search and qualification it can considerably decrease the costs of supplier non-
performance or even bankruptcy (see e.g. (Sheffi, 2001), (Wang & Zhao, 2007)).
2.3 Supply chain frameworks and standards
In order to streamline businesses and bridge the supply chain risks, different frameworks and
standards (SCOR, GS1, MMOG/LE, ISO 9001, ISO 14001, BS OHSAS 18001, BS 25999, ISO/IEC
27001, etc) have been developed. The organizations are facing the challenge which one to implement
and to what extent. The adoption of frameworks and standards causes standardization of business
operations that is in contradiction with agile supply chain strategies and lean business models. From
the business model point of view the most relevant is the Supply-Chain Operations Reference (SCOR)
model that was developed by the Supply-Chain Council (SCC) to assist organisations in increasing the
effectiveness of their supply chains, and to provide a process-based approach to SCM (Stewart). The
SCOR model (Figures 6 and 7) provides a common process oriented language for communicating
among supply-chain partners in the following decision areas: PLAN, SOURCE, MAKE, DELIVER
and RETURN.
European and Mediterranean Conference on Information Systems 2010 (EMCIS2010)
April 12-13 2009, Abu Dhabi, UAE
Peter Trkman, Ales Groznik
Current issues and challenges of supply chain management
8
Figure 6: SCOR framework (Supply Chain Council, www.supply-chain.org)
SCOR is a top-down analytical method that help organizations break out of the box and see where
they fit into the SC. SCOR provides three-levels of process detail. Each level of detail assists a
company in defining scope (Level 1), configuration or type of supply chain (Level 2), process element
details, including performance attributes (Level 3). Below level 3, companies decompose process
elements and start implementing specific supply chain management practices. It is at this stage that
companies define practices to achieve a competitive advantage, and adapt to changing business
conditions (Figure 7).
As a framework it also facilitates inter and intra supply chain collaboration, horizontal process
integration, by explaining the relationships between processes (i.e., Plan-Source, Plan-Make, etc.). It
also can be used as a data input to completing an analysis of configuration alternatives (e.g., Level 2)
such as: Make-to-Stock or Make-To-Order. SCOR is used to describe, measure, and evaluate supply
chains in support of strategic planning and continuous improvement.
European and Mediterranean Conference on Information Systems 2010 (EMCIS2010)
April 12-13 2009, Abu Dhabi, UAE
Peter Trkman, Ales Groznik
Current issues and challenges of supply chain management
9
Figure 7: Detailed SCOR framework; source: Supply Chain Council, www.supply-chain.org
Although SCOR framework is widely used it has limitations that have to be taken into account. Cases
in literature (Wang et al., 2005) show that limitations for applying SCOR in improving current
interfirm processes regarding graphical presentation, „gaps‟ identifying, and none-defined business
activities that are summarized below:
• SCOR can only present business flow in between legal or geographical entities but not any matrix
organisation structure or the concept of „virtual enterprise‟.
• SCOR is limited to the presentation of one single supply chain while most of the enterprises may be
associated with multiple channels of markets and products.
• The KPI of SCOR is not always available in the target firm, particular when it involves with cross-
sites information.
• Problems sometimes can not be identified by KPI gaps such as information systems readiness.
Some essential activities are not defined in SCOR standard, for example,
• Demand up-size and down-size from order changes, e.g., emergent orders or order cancelling.
• The activities of collaborative design and customer relationships management are not defined in
SCOR.
Researching the link between frameworks or standards and supply chain performance is scarce.
Lockamy & McCormack (Lockamy & McCormack, 2004) have studied the link between SCOR
planning practices and supply chain performance and shown that the supply chain planning practices
related to process integration, collaboration, teaming, process measurement, process documentation
and process ownership have been shown to be important to supply chain performance, but lack broad
implementation by supply chain partners. This suggests that integrated supply chain management may
be more difficult to operationalize in practice than the popular supply chain press or consultants would
have one to believe.
European and Mediterranean Conference on Information Systems 2010 (EMCIS2010)
April 12-13 2009, Abu Dhabi, UAE
Peter Trkman, Ales Groznik
Current issues and challenges of supply chain management
10
This study also suggests is that some of the best practices proposed as mechanisms for improving
overall supply chain management performance may not have the degree of impact often presented in
the literature. Some best practices help to improve supply chain performance only in specific decision
areas.
2.4 Performance measurement in SCM
A well known-saying is that: „You Can‟t Manage What You Can‟t Measure‟. Therefore all
frameworks and research efforts emphasize the importance of performance measurement. Before
investigating different performance measures it is important to note that performance measures have to
be closely connected with strategy, business model and also the objectives of a company/SC. This
connection is also shown in Figure 8.
Figure 8: Connection between strategy and measurement system(Santos & Gomes, 2006)
The starting point for performance measurement is that the metrics should:
• be directly related to the manufacturing strategy,
• primarily use non-financial measures,
• vary between locations,
• change over time, as needs change,
• be simple and easy to use,
• provide fast feedback to operators and managers,
• be intended to foster improvement rather than just monitor (Persson & Olhager, 2002).
Performance measurement focuses on two connected but still separable areas, namely the
measurement of performance of each supplier and the measurement of supply chain as a whole. The
classic metrics for supplier performance measurement are replenishment lead time, on-time
performance, supply flexibility, delivery frequency, quality, viability, information coordination
capability etc. (Chopra & Meindl, 2007). According to the recent survey the most important measures
are quality of delivered goods, on time delivery and flexibility of supply (Gunasekaran et al., 2004).
Since balanced scorecard (Kaplan & Norton, 1996) is in general one of the most widely used models
for performance measurement its application to supply chain area has also been proposed. Such an
example is presented in (Park et al., 2005) who derived the objectives for SCM from financial,
European and Mediterranean Conference on Information Systems 2010 (EMCIS2010)
April 12-13 2009, Abu Dhabi, UAE
Peter Trkman, Ales Groznik
Current issues and challenges of supply chain management
11
customer, business process (both internal and external) and learning and growth perspective. As
shown performance measurement is closely connected with process renovation outlined in the
previous section (see e.g. (Theeranuphattana & Tang, 2008) as an example of performance metrics for
each of the supply chain processes.
Different performance measures can also be used at various decision areas of the SCOR model; for
example supplier delivery performance and purchase order time are suitable metric for “SOURCE”
while utilization of resources or percentage of defects are more relevant for “MAKE” phase (see e.g.
(Gunasekaran et al., 2004) for more details). The review of customer and internal facing metrics is
also shown in Figure 9.
One of the increasingly popular approaches for both measurement of effectiveness and prediction of
changes due to renovation of supply processes is the use of simulations. They enable the preparation
of the models of current and desired state (Caridi et al., 2004) and can be used to estimate the risks of
different events (Cho & Eppinger, 2005). In connection with business process modeling (see chapter
2.2. of this paper) they can be used to compare different configurations of business processes (Roeder
& Tibken, 2006). Figure 10 shows the analysis of different scenarios (with the increasing use of e-
procurement) and the consequent changes in lead times.
Figure 9: Main metrics for supply chain performance measurement (Lai et al., 2002)
European and Mediterranean Conference on Information Systems 2010 (EMCIS2010)
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Peter Trkman, Ales Groznik
Current issues and challenges of supply chain management
12
0
200
400
600
800
1000
1200
1400
1600
1800
2000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
no. of days
no
. o
f tr
an
sa
cti
on
s
scen1
scen2
scen3
scen4
Figure 10: Distribution of lead times in various scenarios (Trkman & McCormack, 2009b)
2.5 Supply chain informatization
Final issue in SCM is supply chain informatization which is by far an easy task. Information
technology is an important enabler of effective supply chain management. Much of the current interest
in SCM is motivated by the possibilities that are introduced by the abundance of data and the savings
inherent in sophisticated analysis of these data (see e.g. (Davenport, 2006) for several successful case
studies). SC must move from mere cooperation and coordination to true collaboration which requires a
foundation of trust and commitment. According to Ruppel (Ruppel, 2004) core issues of SC
informatization are:
- ability to secure since trust is important from relationship point of view. From technological
point of view a company can attempt to protect itself from exploitation while maintaining an
open collaborative system by its ability to secure SCM systems.
- return on investment (ROI) which is a panacea oversold by vendors (Krizner, 2002).
According to Nickles (Nickles, 1999), ROI may not be the correct indicator when technology
whose purpose is to facilitate relationships is applied. ROI could be applied in case of
technology that reduce internal costs. The recent slowing down of the economy has led to a
renewed emphasis on the use of ROI assessment.
- cost/affordability relative to budget is related to but not the same as ROI. Even if a tool has the
potential for a high rate of return, if an organization cannot afford the costs involved in
purchasing and implementing the tool they cannot gain the potential benefits.
- fit with business user needs is key to successful technology introduction. It has often been
suggested that technology should not be implemented merely for technology‟s sake, but rather
to meet specific business need. SCM informatization should meet the needs of business users,
while still being compatible with existing systems. Matching or aligning of users‟ business
European and Mediterranean Conference on Information Systems 2010 (EMCIS2010)
April 12-13 2009, Abu Dhabi, UAE
Peter Trkman, Ales Groznik
Current issues and challenges of supply chain management
13
needs with technology should be a threshold criterion to ensure appropriate technology
choices.
The innovative opportunities coming to the fore with e-business have increased the interest in IT.
From technological perspective SCM spans over internal as well as external systems, which facilitates
information transfer between various organizations. In addition, SCM typically includes many
functional areas within an organization and is affected by the way the various groups communicate
and interact.
According to Simchi-Levi (Simchi-Levi et al., 2000) ultimate goals (Figure 11) of IT are to collect,
access and analyze information. In practice that SCM systems have to:
- collect information on each product from production to delivery or purchase point and provide
complete visibility for all parties involved,
- access any data in the system from single-point-of-contact,
- analyze, plan activities, and make trade-offs based on information from the entire supply
chain.
In order to achieve these goals, major issues (Figure 11) in informatization are standardization,
infrastructure e-business, supply chain components and integration. Standardization is vital for IT
since it allows systems to work together and is a key feasibility factor of SCM implementation.
Infrastructure is a basic component of system capabilities without which some of the goals cannot be
achieved. E-business is an emerging area of business conduct that provides cost-effective way of
SCM. Supply chain components are various systems that are involved directly in supply chain
planning. These are typically systems that combine short-term and long-term decision support system
elements.
Figure 11: Goals and means of SCM – an IT view(Simchi-Levi et al., 2000)
The goal of SCM software is to increase flows through collaboration. However, increasing
collaboration is not merely a matter of making a tool available. Participants must be encouraged to use
the tool share information to make its use effective. Ruppel (Ruppel, 2004) compared adoption of
three information technologies (i.e. group decision support systems, EDI and e-business) that can be
used to improve information flows and the factors that affect their adoption and use. Comparison
indicates that the decision to adopt one of these technologies does not guarantee its effective use.
Those who wish to champion the use of tools have a complex task to perform not just to foster
adoption, but also to encourage successful implementation.
European and Mediterranean Conference on Information Systems 2010 (EMCIS2010)
April 12-13 2009, Abu Dhabi, UAE
Peter Trkman, Ales Groznik
Current issues and challenges of supply chain management
14
The real challenge of implementation is bridging the gap between IT, process and performance view
(Figure 12). According to Gun Kim (Byoung et al., 2008) business processes are key integrator
providing performance-process-IT relation to elicit the actual impacts. To connect the performance
with IT, business processes are acted as mediators between them. Linkage could be explained via
reliance level of a business process that corresponds to the allied IT system.
Figure 12: Goals and means of SCM – an IT view (Byoung et al., 2008)
3 CONCLUSION
The paper has tackled a vital challenge to provide a comprehensive review of several inter-connected
challenges in supply chain management. Only continuous efforts in each of the mentioned areas assure
efficiency and success. Nevertheless, optimal decision making is not possible since the choice set is
too complex and generally unknown, due to the large number of possibilities and uncertainties.
Therefore SCM »optimization« involves a small number of choices at each step of exploration (Lee &
Ahn, 2008). We hope that our paper is a small but significant contribution in this quest
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