Tag: Information technology in Business notes

Outsourcing is contracting with another company or person to do a particular function. It means some companies may enter into an agreement with other companies to perform their activities at an agreed cost. Here the contracting companies may be benefited from the experience of the outsourcing company.

Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity that is or could be done internally, and sometimes involves transferring employees and assets from one firm to another.

The term outsourcing, which came from the phrase outside resourcing, originated no later than 1981. The concept, which The Economist says has “made its presence felt since the time of the Second World War”,[6] often involves the contracting of a business process (e.g., payroll processing, claims processing), operational, and/or non-core functions, such as manufacturing, facility management, call center/call centre support).

The practice of handing over control of public services to private enterprises, even if on a short-term limited basis, may also be described as “outsourcing“.

Outsourcing includes both foreign and domestic contracting, and sometimes includes offshoring (relocating a business function to a distant country) or nearshoring (transferring a business process to a nearby country).

Offshoring and outsourcing are not mutually inclusive: there can be one without the other. They can be intertwined (offshore outsourcing), and can be individually or jointly, partially or completely reversed, involving terms such as reshoring, inshoring, and insourcing.

Needs for outsourcing

In this troubled economy every rupee is precious. The business needs to control costs wherever possible.  Outsourcing certain aspects of the business to third parties, can be a powerful cost cutting move that also frees up for more important tasks such as finding new clients and product development.

Cost and efficiency Savings

Back-office functions that are complicated in nature, but outsourcing enable the business to perform it at a consistent and reasonable cost.

Expansion and growth

Outsourcing helps to reduce the investment in backend activities. Hence the firm can use its resources for its further expansion and developmental activities.

Customer support

Having a live person to deal with customer questions and concerns is an important part of building the business’ credibility.  When it is outsourced the call professionals can represent the business with authority.

Benefits of latest development

The outsourcer generally maintains a world class information technology and techniques. Therefore, the client company is also benefitted from the technical expertise of the outsourcing company

Focus on Core Activities

In rapid growth periods, the back-office operations of a company will expand also. Outsourcing those activities will allow refocusing on those business activities that are important without sacrificing quality or service in the back-office.

Scope of Outsourcing

The term outsourcing has more popularly come to be associated with I T enabled services or Business Process Outsourcing (BPO). We can classify the scope of Outsourcing into 4 major areas.

Advertising

Business firms generally depend on advertising agencies for designing developing and disseminating their products and services. Under the agreement the advertising agencies agrees to provide all the services associated with advertisement.

Financial Services

The firm may outsource various financial services like payroll preparation, Underwriting, Merchant banking etc.

Customer support Services

Customer service is the major area were outsourcing applicable. Almost all the companies outsource its after sale services and customer services. Call centers are the best example for the customer service outsourcing.

Courier service

Big firms generally depend on the courier agencies to dispatch their large amount of parcels.

Knowledge Process Outsourcing (KPO) means information related business task or knowledge-based processes such as research, analysis, consultancy or any other high-level task are outsourced i.e. done by the workers of another company or allocated to the subsidiary of the same organization.

These subsidiaries can be in different countries or geographical location. This is done in order to save resources and costs. KPO firms can take decisions of businesses on the behalf of the parent companies. KPO is nothing but the subset of Business Process Outsourcing (BPO).

Cost-effectiveness, access to the best talent, focus, better utilization of the resources are the advantages of Knowledge Process Outsourcing (KPO).

List of KPO Companies in India

• Sutherland Global Services
• WNS
• Boston Analytics
• SG Analytic
• Eclerx
• Syntel
• CRISIL
• iGate
• McKc (Mckinsey Knowledge Centre)
• Deloitte

Types of KPO Services

Some common example of KPO outsourcing domains include:

• Financial consultants
• Research and development (R&D)
• Business operations (management consulting)
• Technical analysis
• Investments
• Legal
• Medical & Healthcare
• Data analysis and interpretation

Advantages of KPO

• Cost-effectiveness: One of the biggest advantages of a KPO is obviously the cost advantage. The company does not have to set up any infrastructure or bear any operational or running costs. And it gets effective, expertizes services at a fraction of the cost.
• Access to the best talent: KPO’s provide the company with the best, most knowledgeable and skilled professionals available in the global talent pool. And if the KPO is in a developing country like India or Philippines then the cost of such talent is also relatively low.
• Focus: Outsourcing some of the processes, allows the company to focus on its core functions. The KPO handles the peripheral functions, and the company can better focus on its core functions and improve their efficiency and results.
• Better Utilization of Resources: If the company outsources the process that is not at the core of their business strategy, it can use the resources it saves in better places. Say a company outsources its supply chain management. Then the resources it saves on this can be utilized to streamline the manufacturing process, R&D activities, better marketing etc.

Advantages and Disadvantages of KPO

KPO can help companies reduce operational or production costs by creating new processes or streamlining efficiency. KPO also fills the gap or need for skilled employees in a particular field. KPO also frees up existing staff, including management, to do other work boosting efficiency and productivity.

The flexibility that comes with KPO allows a company to increase or reduce staff easily. For example, if economic conditions worsen, a company can easily reduce its KPO staff to cut costs. Conversely, a company can quickly hire specialized staff to boost profits or revenue. KPO helps a company to be more nimble and adapt to the changes in its industry and competitive landscape.

However, disadvantages do exist with KPO. Privacy of intellectual property and business security can be compromised if classified or proprietary information is lost, copied, or brought to a competitor. Companies have less control over the hiring process of outsourced workers. As a result, a company might not be able to ensure the character of its outsourced employees or the quality of their work.

Implementing KPO can be time and resource intensive to establish a successful operation. Moreover, communication can be a concern and a challenge, due to legal, language, and cultural barriers. Another disadvantage might be that existing employees might feel threatened by the hiring of outsourced workers and feel their jobs are at risk.

ERP technical architecture basically defines layout of layers of application deployment between servers and desktops, interfaces and software objects. ERP architecture is no more meant to just provide technical functionality, user interface and platform support but should be able to absorb emerging technologies. It should be expandable and maintainable to meet future business needs such as business process changes, merger and acquisitions, compatibility with future regulations etc.

Design of an integrated enterprise model is a complicated task as it involves mapping of all the functions, information flow, decision process, material flow, and several other aspects, that govern the dynamic process of the enterprise. Several approaches exist to do this. A generic model may comprise two building blocks: hierarchical IDEF model and object oriental model. Some of other models adopt structural modelling or system approach with support from object-oriented approach to analyse and design the software (Ng. et al. 1999). A general understanding of ERP is as follows:

Enterprise Resource Planning (ERP) is a game plan for planning and monitoring all of the resources of a manufacturing company, involving the functions of manufacturing, finance marketing & engineering. ERP is recognized as being an effectual management system that contains an outstanding planning and scheduling capability offering significant achievement in productivity, dramatic enhance in customer service, much higher inventory turns, and larger reduction in material costs. These technology innovations involved the move to relational database management systems (RDBMS), the utilization of a graphical user interface (GUI), open systems and a client/server architecture.

The generic design of ERP involves development of a tree structure, depicting different functional nodes of enterprise. A simplified generic model of ERP system is depicted in Figure. All of the generic representations of this figure might further be exploded to develop the exploded generic representation.

The successful implementation of an ERP system will have many advantages, as indicated below:

Business integration and Improved Data Accuracy: ERP system is composed of various modules/ sub modules where a module represents a particular business component. If data is entered in one module such as receiving, it automatically updates other related modules such as accounts payable and inventory. This updating occurs at real time i.e. at the time a transaction occurs. Since, data needs to be entered only once at the origin of transaction, the need of multiple entries of the same data is eliminated. Likelihood of duplicate/ erroneous data is, therefore, minimized. The centralized structure of the data base also enable better administration and security provisions, which minimizes loss of sensitive data.

Real-time information with Decision Support Tools: The various decision support tools like planning engines and simulations functions, form integral part of an ERP system which helps in proper utilization of resources like materials, human resources and tools. Without an ERP system, your team is flying blind. They make decisions based on guesswork and rules of thumb because they don’t have the data they need. Sometimes they are the right decisions, but more often, they are sub-optimum decisions that can cost you money and customer goodwill. Constrained based planning help in drawing appropriate production schedules, thereby improving operation of plant and equipment. As a part of MIS, an ERP system, contains many inbuilt standard reports and also a report writer which produce ad hoc reports, as and when needed.

Improved visibility, Boost Efficiency and Productivity: In addition to provision of improved planning, ERP system provides a tremendous boost to the efficiency of day to day and routine transactions such as order fulfilment, on time shipment, vendor performance, quality management, invoice reconciliation, sales realization, and cash management. Cycle time is reduced for sales to cash and procurement to pay sequences. If customers want to know when their order will ship or if you need to know whether you have enough of a critical component to accept a rush order, an ERP system gives you instant visibility into your operations and your supply chain.

Establishment of Standardized Procedures: ERP system is based on processes of international best practices, which are adopted by the organizations during implementation. The uniformity of record data that an ERP system instance will help ensure that your records are more accurate, which will increase process accuracy across the board.

Flexibility and technology: Due to global environment, where production units, distribution centres and corporate offices reside in different countries, organizations need multi company, multi-currency, multi-language and multi accounting modes, in an integrated manner. These provisions are available in the Odoo ERP systems.

Faster periods end close and cost control: ERP systems automatically process transactions and generate audit trails and financial reports that can simplify period-end closings. They flag anomalies so you can investigate quickly, and they simplify repetitive journal entries and other activities that make closing so complex and time consuming. Faster closes mean you know the health of your business sooner. ERP systems calculate and collect costs so you always have an accurate picture of your product cost and margins.

Make Customer Happy with Balance of Supply and Demand: Customers like accurate delivery dates, and ERP can help you provide them with improved inventory and shop floor visibility. In addition, the increased visibility and accuracy will help you improve your delivery in full on time, MRP, a component of ERP systems, will help you balance supply and demand so you can reduce inventory while keeping customers happy.

Reduced lead times and increased operational efficiency: Better scheduling and accurate records ensure that your schedules focus on priorities, leading to shorter lead times. Since you won’t have as many orders waiting for tooling or parts, your throughput will increase. By helping you to plan production more effectively, your operational efficiency will improve as you reduce set-ups and tear downs or unnecessary downtime.

ERP Modules: Traditional Types 

An ERP system is a modular application that contains various tools for different business processes. Let’s see the most important ERP system modules:  

• Supply chain management (SCM). It helps employees to control all the processes related to chain supply. For example, there is always a need to plan the amount of material and calculate the commission; 
• Product lifecycle management (PLM). This module may be helpful for companies that have their own production. Starting with the control of the project’s design and its quality, ending with the costs and spends, it optimizes the consumption of the components and materials;  
• Supplier relationship management (SRM). The unfortunate reality is that suppliers can sometimes be unscrupulous or forgetful. The SRM allows scheduling business meetings, calculating the budget, and billing the suppliers;  
• Customer relationship management (CRM). This module is one of the most important functions, since it establishes the connection between your marketing specialists and the customers;  
• Human resources. If you have a medium-size company, a huge enterprise, or one that you plan to grow, this module will help your HR department. In such companies, it is difficult to keep every staff member in mind. The module contains a database with all the contact and salary information, employee’s attendance and engagement; 
• Finance module. A machine is much more accurate than a person, which makes it the best tool for assets management, including any types of arrears. It also gathers all the financial data from the other modules and departments, analyses the information, and creates reports.  

As you can see, the ERP system is a vital tool for your company’s growth. It processes many operations such as supply, delivery, finance, and much more. You may find the platform helpful at each step of the product’s lifecycle, from its production to its sale. 

Now let’s take a closer look at ERP architectures.  

Types of ERP Architecture  

The two main ERP software architecture categories are the monolithic system and the postmodern system. It is already clear from the name which of the types is the newer one. But newer does not necessarily mean better. What are the differences between the systems? 

Monolithic architecture of ERP system  

• The monolithic type of ERP systems has a single technology stack and supplier design; 
• To improve the system, you will have to update it;  
• It is not flexible and cannot be scaled with business growth. 

Postmodern architecture of ERP system 

• The system is oriented on customers since it is convenient to use; 
• The set of products also includes social media and a cloud; 
• The postmodern type is flexible and simplified. It does not have tables or other complex things that were used for scaling in previous ERP products. 

The postmodern option is easier to use and is much more customer-oriented.

The aim of the ERP software is to optimize processes, improve the communication between departments and their efficiency. But the main reason entrepreneurs choose these solutions is an opportunity to save their time and money while making a profit and growing. ERP applications can cost higher than you expected, but it is worth every single cent. Let’s see the benefits you can get by implementing ERP.

Operating costs reduction

ERP helps to unite all the business processes in a holistic system. It leads to the improvement of coordination and raises the company’s efficiency. After the implementation, you will be able to see the crucial difference. The employees will have more time to devote to other tasks, or you will even be able to cut the staff because some manual processes will be fully or partly automated. You will be able to reduce the cost of marketing and production as well as the cost of office maintaining.   

Facilitation of day-to-day management

The application provides better corporate planning and easier data access. It helps the employees to make decisions based on the available information. ERP can also control the actual operations’ costs and calculate the spendings.

Strategic planning support

Such processes determine the goals, tasks, needs, assets, and results that entrepreneurs use for analysis. It helps to plan the company’s opportunities and future actions.

An ERP system doesn’t always eliminate inefficiencies within the business. The company needs to rethink the way it’s organized, or else it will end up with incompatible technology.

ERP systems usually fail to achieve the objectives that influenced their installation because of a company’s reluctance to abandon old working processes that are incompatible with the software. Some companies are also reluctant to let go of old software that worked well in the past. The key is to prevent ERP projects from being split into many smaller projects, which can result in cost overruns.

ERP systems can be extended with third–party software, often via vendor-supplied interfaces.

Companies use enterprise resource planning (ERP) systems to assist management with decision making as well as to automate common business processes to save the company time and money. While core ERP focuses on internal business operations like finance and human resources, extended ERP focuses on external operations to make it easier to manage relationships with customers, suppliers, transporters and other parties.

Common extended ERP modules your business might use include those for supply chain management, business intelligence, e-commerce and customer relationship management.

Extensions offer features such as:

• Customer Relations Management

Customer Relationship Management (CRM) includes software related to business processes for sales teams and call centres to function more autonomously. ERP and CRM require minimal integration and can come packaged as part and parcel of an extended ERP.

Supply Chain Management

Supply Chain Management (SCM) may include software for planning and controlling any step in the manufacturing and distribution process, including tracking external companies’ handling of products. Many different processes are involved in this progression, which essentially deals with the co-ordination of supply chains within and among various businesses.

Many supply networks and channels are involved in the production and delivery of products and services. Before goods reach the customer, they go through a chain of processes that could include anything from operations management to logistics, procurement, IT and warehousing. SCM can be defined as the integrated and efficient management of supply chain activities.

E-Procurement/E-Commerce

More and more businesses require an online presence to leverage new markets. The seamless integration of ERP systems to e-commerce websites via an API (Application Programming Interface) is becoming an essential requirement.

Product Lifecycle Management

Product Lifecycle Management (PLM) software may include design, regulation, manufacturing, distribution and field service activities having to do with how a product changes over its life span. Depending on the industry, PLM software may cover more business processes or be restricted to design and engineering.

Data Mining

Data mining is a term from computer science. Sometimes it is also called Knowledge Discovery in Databases (KDD). Data mining is about finding new information in a lot of data. In many cases, data is stored so it can be used later.

For example, a store wants to save what has been bought. They want to do this to know how much they should buy themselves, to have enough to sell later. Saving this information makes a lot of data. The data is usually saved in a database. The reason why data is saved is called the first use.

Product Data Management

Product Data Management (PDM) systems capture and manage product information, ensuring that information is delivered to users throughout the product lifecycle. File ownership, version control (check-in and check-out of files), revision management, and information status (ie In Progress/Generated/Pending Approval/Released) are all managed by the PDM system. Security and administrative functionality protect intellectual property rights through role management, project-based security as well as the relevant access rights.

A CRM capability is an abstraction of the underlying functionality and process and captures what CRM does and can do.  A capability is a business architecture term, and a CRM capabilities model is an integral part of the business architecture deliverables.

A CRM capability is a foundational building block, and it establishes a common language between business and IT. Instead of focusing on systems or processes, which are volatile and transient, leveraging CRM business capabilities will help in understanding the current state and envisioning the future state and crafting a capability-centric CRM transformation roadmap.

1. Contact Management

Stores contact information such as names, addresses, and social media accounts in a searchable database.

2. Interaction Tracking

Add notes and track interaction history to document conversations with specific contacts.

3. Lead Management

Manage the process of converting prospects into potential customers (leads) by identifying, scoring, and moving leads through the sales pipeline.

4. Email integration

Integrate with email such as Gmail, Outlook, Yahoo, etc., allowing for management and segmentation of contact lists, as well as a centralized hub for internal cross-collaboration.

5. Document management

Collect, upload, store, and share documents in a centralized location, making it easier for everyone involved to access information.

6. Quotes/proposal management

Create and send quotes or proposals to customers.

7. Pipeline management

See an overview of your entire sales pipeline as well as the status/progress of each individual stage in the sales funnel.

8. Workflow automation

Automate repetitive tasks by creating workflows that trigger actions or send follow-up reminders for next actions.

9. Reporting/analytics

Get routine summary reports of sales figures or sales rep performance (e.g., on a daily, weekly, monthly, etc., basis).

10. Forecasting

Generate predictions for future sales figures or projected revenue based on past and present data/trends.

CRM software offers three major benefits for your business:

• Easy access to customer data. Customer relationship management systems include searchable databases that allow users to access client and prospect information during meetings. Some solutions let users sync information across multiple devices, providing the most up-to-date customer information from any access point.
• Streamlined processes through automation. CRM software lets users standardize workflows and processes associated with sales, marketing, and customer support to improve coordination between these teams.
• Actionable insights into business performance and customer behavior. Some CRM software vendors offer analytics functionality, where users can create customizable dashboards and reports based on customer data. These reports help in segmenting customers, tracking revenue, and managing personalized campaigns.

Needs a CRM Capabilities Model:

• Hyper-competition, rising customer expectations, and digital technologies are putting more demands on the CRM function. So, to succeed in this era of mega shifts, a CRM business capabilities map will help in getting your arms around what CRM does and have a structural basis to deal with change.
• A CRM capabilities model can help in translating the CRM strategy into action at the process, people, and technology level.
• CRM is the epicenter of the customer-centric revolution. Having a detailed understanding of all capabilities and an assessment and prioritization can help in securing funding for the projects.
• We are in the era of a real-time enterprise. Knowing what CRM capabilities and Value Streams need to be real time or near real time will allow adequate technology enablement and process improvements.
• If the business and technology teams do not speak a common language, a CRM business capability map can be the common lingua franca bridging the communication gap.
• CRM transformation projects without a capability model as a foundation tend to veer toward a bunch of projects with a disparate set of requirements. A capability-based transformation roadmap helps provide the guard rails and guideposts for the implementation.
• A CRM capability model helps in conducting a capability-based vendor evaluation for the CRM functions.

Modern customer relationship management (CRM) workflow automation has provided both small and enterprise-level businesses to operate at scale. Today the software as a service (SaaS) driven CRM market is a $35 billion industry.

CRM workflow automation options allow businesses to run manual tasks, activities, and processes through a centralized system with less human involvement. Companies are able to achieve more with fewer resources using workflow automation.

CRM workflow automation requires maturity of business processes. If the business processes are inefficient or wasteful, the automation might worsen the situation. So, businesses should first evaluate that their processes are optimized before trying to automate them. However, automating mature and optimized processes can help organizations gain speed and cost advantages over their competitors.

When businesses start investigating CRM workflow automation, they are often wondering about where to begin their journey. Here are some key areas:

Sales and Marketing Automation: Every day sales and marketing departments have to deal with large amounts of data. They need to analyze the information, find possible leads. and follow up on those leads with email or phone contacts. They have to align their media campaigns. The data analysis, lead generation, and follow-ups can become quite chaotic.

CRM workflow automation can help in multiple ways. Automated data monitoring can trigger reminders to sales and marketing teams to complete certain tasks. It can keep track of leads statuses. For example, if a lead status changes, it can automatically update the databases. The automations can lead to faster turnaround times.

Customer Service Automation: Customer support can take a lot of time from an organization. Companies have to answer the same questions again and again. They have to keep track of complaints submitted to the ticketing system to ensure high-quality customer service.

Companies can use CRM systems to automate manual support processes. They can send customers automatically to certain pages for known problems. The notification process can be automated to alert salespeople or the IT support staff. Such CRM workflow automation can lead to higher customer satisfaction.

Document and Process Automation: Account managers have to deal with a lot of mundane tasks like updating client addresses, rates, payment methods, expiration dates and other customer information. Some of these documentation processes don’t need human intervention.

CRM workflow automation allows account managers to set up reminders and processes to let clients know about payment due dates or service expirations. It can create automated renewal and address update processes and save time for both the account managers and the clients.

Benefits of CRM Workflow Automation

Organizations have to put in conscious effort to automate their workflows. It requires planning and time commitment. However, companies are investing their time and resources because CRM workflow automation is quite beneficial. Here are some workflow automation benefits:

Eliminates Human Errors: Human beings are not good at repetitive tasks. Tasks like data entry or migration, reminders, and keeping track of assets can fall prey to human errors. CRM workflow automation can decrease the errors in these tasks.

Improves Work Satisfaction: Cumbersome and monotonous tasks produce stress. When employees don’t have to perform these duties due to CRM software automation, they are more likely to have a more satisfactory work experience. They can be more productive and concentrate on creative work. It can reduce employee attrition.

Increases Productivity through Integration: As organizations grow larger, teams and departments get isolated from each other and start working in their own bubbles. CRM workflow automation can create bridges that keep the organizations running smoothly by keeping data and systems integrated between different teams and departments.

Reduces Costs: CRM sales workflow automation can save businesses in labor costs. Companies can reduce the time-to-market of products and run sales and marketing more efficiently. It can also automate product support tasks.

Improves Scalability: Hiring new employees was the proven method to scale a business. But companies are realizing that CRM workflow automation can provide them with a low-cost alternative.

E-Supply chain management is practiced in manufacturing industries. E-SCM involves using internet to carry out value added activities so that the products produced by the manufacturer meets customers’ and result in good return on investment.

E-SCM is the effective utilization of internet and business processes that help in delivering goods, services and information from the supplier to the consumer in an organized and efficient way.

Improved product and material flow

• Time-to-consumer is a crucial indicator of product flow efficiency. The less time it takes for goods to reach the end customer, the more efficient the product flow. However, there are many other factors to consider such as the quality of the materials or goods that reach customers, the supply and demand balance, shipment options and costs, and inventories.
• Effective supply chain management enables companies to improve product flow through accurate demand and sales forecasting and also improve inventory management to arrest the bullwhip effect and avoid underproduction. SCM also minimizes delays and allows full traceability and visibility into the movements of goods from the supplier to the customer. SCM enables working strategies that can accelerate time-to-market and optimize business speed, while ensuring high level of product quality.

Seamless information flow

• “The effective SCM requires not only the integration of material flows but also the integration of information flows in the supply chain (Frohlich & Westbrook, 2001; Trent & Monczka, 1998).” Today, with customers constantly demanding for real-time response and easy access to product and other supply chain content, information flow should be uninterrupted. Intermittent and insufficient information flow due to a fragmented supply chain can lead to poor supplier and customer relationships and huge costs to the tune of $1.2 billion per year, according to Oracle.
• Companies with effective supply chain management can remove the bottlenecks to supply chain information flow. It can help them evaluate the quality of information sharing, then implement solutions to best fill the gaps. SCM helps design effective best practices to facilitate different types of supply chain information that usually come in different formats and structures. SCM also enables accurate, timely, complete, and relevant information flow to avoid missed opportunities and possible risks.
• Effective and seamless information flow addresses information distortion and miscommunication and promotes enhanced collaboration and relationship value among supply chain stakeholders. It also helps improve visibility into all transactions and accelerate generation of supply chain insights through past reports creation.

Enhanced financial flow

• Another pain point for supply chain players is how to improve cash flow in the value chain, which involves “thousands of invoices and payments in a given year.” The unpredictability and variability of financial inflows and outflows can add more complexity to the inherently complex supply chain financial flow.
• According to Visa, generally, financial management challenges are:

(1) Slow processing due to manual and silo processes

(2) Unreliable, unpredictable cash flows because of lack of timely information

(3) Costly processes due to compliance and lack of employee empowerment

(4) High days sales outstanding (DSO) caused by invoice reconciliation delays; and

(5) Suboptimal credit decisions due to manual processes for setting optimal limits.

• Implementing supply chain management can help companies address all these cash flow challenges, allowing them to carefully evaluate their current processes, identify the weakest links that slow down and hamper financial flow, and determine the right solutions to address the problems.

Advantages of e-supply chain management

Companies implementing E-SCM can enjoy the following advantages:

1. It improves efficiency
2. It reduces inventory
3. It reduces cost
4. It helps to take competitive advantage over competitors.
5. It increases ability to implement just-in-time delivery, increases on-time deliveries, which enhances customer satisfaction.
6. It reduces cycle time, increases revenue, by providing improved customer service.
7. It improves order fulfillment, order management, decision making, forecasting, demand planning, and warehouse/distribution activities.
8. It reduces paperwork, administrative overheads, inventory build-up, and the number of hands that handle goods on their way to the end-user i.e., the customer.

Supply Chain Management flow

SCM flows can be divided into three main activities

• Product flow
• Information flow
• Financial flow

1. Product Flow: The product flow includes the movement of goods from a supplier to a customer, and also any goods returned by customers.
2. Information flow: The information flow involves transmitting orders and updating the status of delivery.
3. Financial flow: The financial flow consists of credit terms, payment schedules, consignment and title ownership arrangements.

The activities of E-SCM include the following:

• Supply Chain Replenishment. Supply chain replenishment encompasses the integrated production and distribution processes. Companies can use replenishment information to reduce inventories, eliminate stocking points, and increase the velocity of replenishment by synchronizing supply and demand information across the extended enterprise.
• E-Procurement. It is the use of web-based technology to support the key procurement processes, including requisitioning, sourcing, contracting, ordering, and payment. E-procurement supports the purchase of both direct and indirect materials and employs several web-based functions, such as online catalogs, contracts, purchase orders, and shipping notices.
• Supply Chain Monitoring and Control Using RFID. This is one of the most promising applications of RFID (Radio-Frequency Identification).
• Inventory Management Using Wireless Devices. Many organizations are now achieving improvements in inventory management by using combinations of bar-coding technologies (or RFID) and wireless devices.
• Collaborative Planning. It is a business practice that combines the business knowledge and forecasts of multiple players along a supply chain to improve the planning and fulfillment of customer demand. Collaborative planning requires buyers and sellers to develop shared demand forecasts and supply plans for how to support demand.
• Collaborative Design and Product Development. It involves the use of product design and development techniques across multiple companies to improve product launch success and reduce time to market. During product development, engineering and design drawings can be shared over a secure network among the contract firm, testing facility, marketing firm, and downstream manufacturing and service companies.
• E-Logistics. It is the use of web-based technologies to support the material acquisition, warehousing, and transportation processes. E-logistics enables distribution to couple routing optimization with inventory-tracking information. For example, Internet-based freight auctions enable spot buying of trucking capacity.

The key activities of e-SCM use a variety of infrastructure and tools. The following are the major infrastructure elements and tools of e-SCM:

• Electronic data interchange (EDI). It is the major tool used by large corporations to facilitate supply chain relationships. Many companies are shifting from traditional EDI to Internet-based EDI.
• Its major purpose is to support inter organizational communication and collaboration.
• These are the corporate internal networks for communication and collaboration.
• Corporate portals. These provide a gateway for external and internal collaboration, communication, and information search.
• Workflow systems and tools. These are systems that manage the flow of information in organizations.
• Groupware and other collaborative tools. Many tools facilitate collaboration and communication between two parties and among members of small as well as large groups. Various tools, some of which are collectively known as groupware, enable such collaboration. Blogs and wikis are beginning to play an important role. A major purpose of these tools is to provide visibility to all, namely, let people know where items are and when they arrive at certain locations.
• Identification and tracking tools. These tools are designed to identify items and their location along the supply chain.

Components:

1. Planning

This is one of the most important stages. Before the beginning of the entire supply chain, it is essential to finalise the strategies and put them into place. Checking the demand for the product or service, checking the viability, costing, profit, and manpower etc., are vital. Without a proper plan or strategy in place, it will be well-nigh impossible for the business to achieve effective and long term benefits. Therefore, enough time has to be devoted to this phase. Only after the finalisation of the plans and consideration of all pros and cons, can one proceed further. Every business needs a plan or blueprint or a roadmap based on which the strategies are made. Planning helps to identify the demand and supply trends in the market and this, in turn, helps to create a successful supply chain management system.

2. Information

The world today is dominated by a continuous flow of information. In order to be successful, it is essential that a business stays abreast with all the latest information about the various aspects of its production. The market trends of supply and demand for a particular product can be best understood if the information is properly and timely disseminated through the many levels of the business. Information is crucial in a knowledge-based world economy, and ignorance about any aspect of business may actually spell doom for the prospects of the business.

3. Source

Suppliers play a very crucial role in supply chain management systems. Products and services sold to the end user are created with the help of different sets of raw materials. It is therefore necessary that suitable quality raw materials are procured at cost effective rates. If a supplier is unable to supply on time, and within the stipulated budget, the business is bound to suffer losses and gain a negative reputation.

It is crucial that a company procures good quality resources so it can create good quality products and maintain its reputation in the market. This necessitates a strong role for suppliers in the supply chain management system.

4. Inventory

For a highly effective supply chain management system it is essential that an inventory is kept and thoroughly maintained. An inventory means the ready list of items, raw materials and other essentials required for the product or service. This list has to be regularly updated to demarcate available stock and required stock. Inventory management is critical to the function of supply chain management, because without proper inventory management the production, as well as sale of the product, is not possible. Businesses have now started to pay more attention to this component simply because of its impact on the supply chain.

5. Production

Production is one among the most important aspects of this system. It is only possible when all the other components of the supply chain are in tandem with each other. For the process of production to start it is essential that proper planning and supply of goods, as well as the inventory, are well maintained. The production of goods is followed by testing, packaging and the final preparation for delivery of the finished product.

6. Location

Any business, that wants to survive as well as flourish, needs a location which is profitable for the business. Take for example, a carbonated drink factory is set up in an area where water supply is scarce. Water is a basic necessity of such business. The lack of water could hamper the production as well as affect the goodwill of the company. A business cannot survive if it has to share an already scarce raw material with the community. Hence, a suitable location, which is well connected, and very close to the source of essential resources for production is vital to a business’ prosperity. The requirement and availability of manpower must also be considered while setting up a business unit.

7. Transportation

Transportation is vital in terms of carrying raw materials to the manufacturing unit and delivering the final product to the market. At each stage, timely transportation of goods is mandatory to sustain a smooth business process. Any business which pays attention to this component, and takes good care of it, will benefit from the production and transportation of its goods on time.

It is essential that a company works towards a safe and secure transportation process. Be it in-house or a third-party vendor, the transportation management system must ensure zero damage and minimal loss in transit. A well-managed logistics system along with flawless invoicing are the two pillars of secure transportation.

8. Return of goods

Among the various components that create a strong supply chain is the facility for the return of faulty/malfunctioning goods, along with a highly responsive consumer grievance redress unit.

No one is infallible. Even a machine may malfunction once in a million times if not more. As a part of a strong business process, one may expect the return of goods under various circumstances. Even the best quality control processes may have unavoidable momentary lapses. In the case of such lapses, inevitably followed by consumer complaints, a business must, instinctively, recall the product/s and issue an apology. This not only creates a good customer bonding, but also maintains goodwill in the long run.

Records

Records are composed of fields, each of which contains one item of information. A set of records constitutes a file. For example, a personnel file might contain records that have three fields: a name field, an address field, and a phone number field.

A single entry in a table is called a Tuple or Record or Row. A tuple in a table represents a set of related data. For example, the above Employee table has 4 tuples/records/rows.

Following is an example of single record or tuple.

Attributes

A table consists of several records(row), each record can be broken down into several smaller parts of data known as Attributes. The above Employee table consist of four attributes, ID, Name, Age and Salary.

Attribute Domain

When an attribute is defined in a relation(table), it is defined to hold only a certain type of values, which is known as Attribute Domain.

Hence, the attribute Name will hold the name of employee for every tuple. If we save employee’s address there, it will be violation of the Relational database model.

Keys

In database management systems (DBMS), keys are used to uniquely identify records within a database table. They ensure data integrity and support efficient data retrieval and manipulation. There are different types of keys in DBMS, including:

1. Primary Key: A primary key is a unique identifier for each record in a table. It ensures that there are no duplicate values and that each record can be uniquely identified. A primary key can consist of one or more columns in a table.
2. Candidate Key: A candidate key is a set of attributes (columns) that can uniquely identify a record in a table. It is similar to a primary key but may not have been designated as the primary key.
3. Foreign Key: A foreign key establishes a relationship between two tables in a relational database. It refers to the primary key of another table, creating a link between the two tables. The foreign key ensures referential integrity and maintains the relationships between tables.
4. Unique Key: A unique key ensures that the values in a column (or a set of columns) are unique and not duplicated within a table. Unlike the primary key, a unique key can allow NULL values.
5. Composite Key: A composite key is a key that consists of two or more columns in a table. Together, these columns uniquely identify a record. Individually, the columns may not be unique, but their combination makes them unique.

6. Super Key: A super key is a set of attributes that can uniquely identify a record in a table. It may contain more attributes than necessary to uniquely identify a record.

Example:

Integrity constraints

Every relation in a relational database model should abide by or follow a few constraints to be a valid relation, these constraints are called as Relational Integrity Constraints.

The three main Integrity Constraints are:

• Key Constraints
• Domain Constraints
• Referential integrity Constraints
• Entity integrity Constraints

Key Constraints

We store data in tables, to later access it whenever required. In every table one or more than one attributes together are used to fetch data from tables. The Key Constraint specifies that there should be such an attribute(column) in a relation(table), which can be used to fetch data for any tuple(row).

The Key attribute should never be NULL or same for two different row of data.

For example, in the Employee table we can use the attribute ID to fetch data for each of the employee. No value of ID is null and it is unique for every row, hence it can be our Key attribute.

Domain Constraint

Domain constraints refers to the rules defined for the values that can be stored for a certain attribute.

Like we explained above, we cannot store Address of employee in the column for Name.

Similarly, a mobile number cannot exceed 10 digits.

Referential Integrity Constraint

We will study about this in detail later. For now remember this example, if I say Supriya is my girlfriend, then a girl with name Supriya should also exist for that relationship to be present.

If a table reference to some data from another table, then that table and that data should be present for referential integrity constraint to hold true.

Entity integrity Constraints

Entity Integrity Constraint is used to ensure the uniqueness of each record or row in the data table. There are primarily two types of integrity constraints that help us in ensuring the uniqueness of each row, namely, UNIQUE constraint and PRIMARY KEY constraint.

The unique key helps in uniquely identifying a record in the data table. It can be considered somewhat similar to the Primary key as both of them guarantee the uniqueness of a record. But unlike the primary key, a unique key can accept NULL values and it can be used on more than one column of the data table.

Schema Architecture

The three-schema architecture divides the database into three-level to create a separation between the physical database and the user application. In simple words, this architecture hides the details of physical storage from the user. The database administrator (DBA) should be able to change the structure of database storage without affecting the user’s view.

This architecture contains three layers or levels of the database management system:

• External level
• Conceptual level
• Internal level

Three Schema Architecture of DBMS

1. External or View level: This is the highest level of database abstraction. External or view level describes the actual view of data that is relevant to the particular user. This level also provides different views of the same database for a specific user or a group of users. An external view provides a powerful and flexible security mechanism by hiding the parts of the database from a particular user.
2. Conceptual or Logical level: The conceptual level describes the structure of the whole database. This level acts as a middle layer between the physical storage and user view. It explains what data to be stored in the database, what relationship exists among those data, and what the datatypes are. There is only one conceptual schema per database.

Database administrator and the programmers work at this level. This level does not provide any access or storage details but concentrates on the relational model of the database. The conceptual schema also includes features that specify the checks to retain integrity and consistency.

3. Internal or Physical level: This is the lowest level of database abstraction. It describes how the data is actually stored in the database and provides methods to access data from the database. It allows viewing the physical representation of the database on the computer system. The interface between the conceptual schema and the internal schema identifies how an element in the conceptual schema is stored and how it may be accessed.

If there is any change in the internal or physical schema, it needs to be addressed to the interface between the conceptual and internal schema. But there is no need to change in the interface of a conceptual and external schema. It means that the changes in physical storage devices such as hard disks, and the files organized on storage devices, are transparent to application programs and users.

Data independence

A database system normally contains a lot of data in addition to users’ data. For example, it stores data about data, known as metadata, to locate and retrieve data easily. It is rather difficult to modify or update a set of metadata once it is stored in the database. But as a DBMS expands, it needs to change over time to satisfy the requirements of the users. If the entire data is dependent, it would become a tedious and highly complex job.

Logical Data Independence

Logical data is data about database, that is, it stores information about how data is managed inside. For example, a table (relation) stored in the database and all its constraints, applied on that relation.

Logical data independence is a kind of mechanism, which liberalizes itself from actual data stored on the disk. If we do some changes on table format, it should not change the data residing on the disk.

Physical Data Independence

All the schemas are logical, and the actual data is stored in bit format on the disk. Physical data independence is the power to change the physical data without impacting the schema or logical data.

For example, in case we want to change or upgrade the storage system itself − suppose we want to replace hard-disks with SSD − it should not have any impact on the logical data or schemas.