Information System

&
Supply Chain Management

(RENATA LIMITED)

Information System
&
Supply Chain Management

i
 (RENATA LIMITED)

Submitted To

Muhammad Bakhtear Uddin Talukdar

Course Teacher
Financial Information System
& IT in Business (F-406)
Department of Finance
University of Dhaka

Submitted By

Mohammed Areful Islam 10-052

Ferjana Yesmin 10-095
Nusrat Jahan Azad 10-096
Shayala Sharmen Shathi 10-097
Reza Ahmed 10-110
Md. Asraf Ali 10-111
Sayma Siddiqui 10-119
Hasan Mahmud Jeetu 10-124
Md. Abu Sufian 10-127
Noor Hossan Sohag 10-129

Date of Submission: February 07, 2009

ii
February 07, 2009

Muhammad Bakhtear Uddin Talukdar

Course Teacher
Financial Information System (F-406)
Department of Finance
University of Dhaka

Sub: Presenting the paper you assigned for the course Financial
Information System.

Dear Sir

With due respect, we want to inform you that, we were given the opportunity
to prepare a report on Information Systems & its Supply Chain Management,
as a partial fulfillment of the requirement of the course Management
Information Systems(F – 406). This was really a very interesting & important
opportunity for us to work on. During the course of this assignment we
experienced every nook and corner of an organization (Renata Ltd.), which
gives us a lot of insights and understanding about the overall condition of the
organization’s information systems & how it is maintaining its supply chain
system.

We want to express our hearty gratitude to you for giving us such an

excellent opportunity to analyze the current scenarios. We are ready to
provide any additional information should you require & look forward to
perform such interesting job again & again.

Sincerely Yours

Sayma Siddiqui
(On behalf of the Group)

Enclosure
1. The Paper

ACKNOWLEDGEMENT

iii
The course teacher, Muhammad Bakhtear Uddin Talukdar, deserves the
thanks for assigning the topic and for necessary instruction.

We also would like to give thanks all the officers of Renata Ltd. specially Mr.
Shibbir Ahmed, IT Manager, Renata Ltd. & Mr. Shofiqul Islam, Marketing
Manager, Renata Ltd. who helped us a lot providing all the necessary
information.

We also thank others who helped us complete this report.

iv
 Table of Contents

v
 No. Topic Page No.
Executive Summary vi
Part: one About the company 03
Company Background 04
Company description 05
Product and services 05
Part: Two Information system 07
Introduction 08
Dimensions of Information System in Renata 09

Organizations 09
Management: 09
Information Technology 10
Part: IS and SCM 11
Three
Supply chain management 12
Developments in supply chain management 13
Practice by Renata Limited 15
Supply Chain Models 16
Setbacks in supply chain management 17
Options for restructuring supply chain 18
E-supply chain management 22
IS infrastructure for supply chain 24
management
Supply chain process: 26
Information and supply chain 29
management
Supply Chain Management Application 30
Supply chain performance 30
measurement
Demand driven supply chain: 31
Systems as planned organizational change 32
Strategic analysis or critical success factors 34
Practice by Renata Limited 35
Software used by Renata 36
Goods Distribution Process 37
Part: Four Demand planning & Supply 38
Planning
The concept 39
THE demand planning 40
The supply planning 41
Recommendation & Conclusion 43

vi
 EXECUTIVE SUMMARY
Supply chain concept is extended to the activities started from the raw
materials suppliers through the organization to the end consumer. Once
thought only as the Physical Distribution Management (PDM), that is the
logistics management, has now been the part of Enterprise Resources
Planning (ERP). From a set of activities is now considered a part, module, of
an integrated system.

vii
There has been a change in supply chain management thinking from a push
oriented supply chain that emphasizes distribution of a product to passive
customers to a pull-oriented supply chain that utilizes the supply chain to
deliver value to customers who are actively involved in product and service
specifications.

Electronic communications have played a major role in facilitating new

models of supply chain management. Technology applications that have
facilitated supply chain management are the E-mail, Intranets, Extranets,
Electronic Data Interchange (EDI) and lately interfacing of ERP system with
B2B intermediary sites or Exchanges.

Our studied company, Renata Limited, also has got a Distribution Channel
Management (DCM) that works in the downstream supply chain arena while
upstream one is still managed conventionally with the help of mail or e-
commerce solution.

Over competition in the industry and the cost leadership approach have been
making the pace of change a bit slower and they are still being led by the
existing system, we can say legacy system. They still maintain a good
amount of safety level that cost time and hazards. But we see some
improvement in database management that works in downstream arena is
helping them a lot.

Since the market driving force is the marketing to doctors and chemist, any
sophisticated system, in their words, is only contributing to curtailed profit.
But some part of the industry is doing better in quality and excellence in
export while others whose market share are inside the boundary are
adjusting themselves to the situation.

Renata Limited is envisaging to introduce ERP to strengthen their foothold in

and outside of the country as they are also a recognized one to enter the EU
market. It is now the time and the will to shift themselves from the legacy to
a contemporary system, we understand.
Origin of the report
The report is a requirement of the course of Financial Information System
(406). The topic of our report has been duly approved by my course teacher,
Muhammad Bakhtear Uddin Talukder. The reason behind choosing this topic
is to evaluate the information system practiced in our country. This report
therefore shows how much the companies of our country use information
system to operate their functions.

viii
Objective of the report
General objective is to see that how an organization cope with the
information system to effectively make decisions and operate functional
activities. Assess the level of importance of supply chain management of the
company and also to determine how well the company meet up the
compliance of information system. More specific objective is to provide
information on Renata Ltd. & their supply chain management.

Scope
The scope of this report is limited to the overall description of the company,
their information system-hardware, software & Information technology
configuration, information system planning, supply chain management, their
demand planning and supply planning.

Methodologies
In this study, exploratory research was undertaken to gain insights and
understanding of their system and for preparing the assignment. To prepare
this term paper, we have collected information from different sources:
company personnel, things provided by the organization, internet searching
and our peer group. Some information, which was not available from any of
the sources, was assumed. After that a more comprehensive conclusive
research was undertaken to fulfill the main purpose of the study.

Limitations of the study

⇒ Delays in getting the necessary materials to collect information from
different sources
⇒ Large-scale analysis was not possible due to constraints of data
⇒ Large-scale analysis was not possible due to constraints of time
⇒ Some parts on the report were written from individual’s perception and
may vary from person to person, thus made hypothetically.
⇒ Information provided by the concerned organization was not satisfactory
⇒ Some of the internal information is difficult to get

ix
 About the Company

x
COMPANY BACKGROUND
Renata Limited is a public limited company incorporated in Bangladesh, with
more than Tk. 2.3 billion in assets. The company manufactures and sells
various pharmaceutical products, animal health, animal nutritional, oral
saline, hormone products and other medical products in the local and foreign
markets. The company has two subsidiary companies; Renata Agro
Industries Limited and Purnava Limited.

They have manufacturing contract with Eskayef for Cephalosporins, with

UNICEF and SMC for Sprinkles. The trademark of Renata is assigned from
Pfizer and Hoechst with manufacturing technology. In 2007 Renata has
received a Certificate of GMP Compliance for its Potent Products Facility from
MHRA2, UK and it is the only Bangladeshi company to receive it.

The company’s largest subsidiary, Renata Agro Industries Limited, is a

private company limited by shares incorporated in 1997. The principal
activities of the company are to carry on business for producing and sale of
various agro based products, and poultry breeding and hatching and sale of
poultry products. The company commenced its commercial operation from
October 1998. Since then it has been operating as successful company.
Renata Agro is now financially strong and declared a dividend of 30% on
paid-up capital in the last year.

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Another subsidiary, Purnava Limited, was incorporated as a private limited
company in 2004 to explore the prospects of entering into Fast Moving
Consumer Goods (FMCG). The principal activities of the company are to carry
on the business of manufacturing, marketing and distribution of all kinds of
consumer goods, consumer durables, food items, sugar confectioneries,
edible oils, beverages etc, raw materials, semi-finished items, producers,
goods and various other products of local or foreign origin and to engage in
the business as traders, importers, exporters, commission agents of all kinds
of goods and services including pharmaceutical drugs and medicines. But the
company has not started production yet.

Renata has a relatively flat management structure. S. H. Kabir is the

Chairman of the board and Syed S. Kaiser Kabir is the Managing Director of
the company. Renata Limited is well known for its corporate social
responsibility. Institutional shareholders own as much as 15% of total share
of the company.

COMPANY DESCRIPTION
Renata Limited is the holding company for Renata Agro Industries Limited
and Purnava Limited. Starting in 1972 as Pfizer Laboratories (Bangladesh)
Limited, subsidiary of Pfizer Corporation, USA this company was renamed as
‘’Renata Limited’’ in 1993 after divestment of shareholdings by Pfizer
corporation, USA. The company operates by manufacturing pharmaceutical
products, animal health medicines, nutritional and vaccines. It was listed in
Dhaka Stock Exchange in 1979.

Products and Services

Renata Ltd. is the market leader of Animal Health in Bangladesh. Together
with, Renata Ltd. is famous for its pharmaceuticals product. Some of those
are listed below:

Anto-bacterial preparation:
Cephalosporins is one of the most sold
anti-bacterial product of Renata ltd.

Anti-ulcerant Preparation:

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 Omeprazole is one of the most reknowned
anti-ulcerant product of Renata Ltd.

Anti-spasmodic Preparation:

Tiemonium is the best anti-spasmodic

product of Renata Ltd.

Anti-hemorrhoidal Preparations
Diasmin & Hesperidin is also
an effective anti-hemorrhoidal Preparation.

NSAID Preparations

Piroxicam is also an effective medicine

of NSAID Preparation.

Anti-allergic Preparations

Fexofenadin HCL is a famous

medicine for allergic patients.

Anti-Diabetic Preparations
Gliclazide is used for diabetic patient.

Cardiovascular Preparations

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Amlodipine is an effective medicine for cardiovascular patients.

Information Systems

xiv
Introduction

An entirely new internet business culture is emerging with profound

implication for the conduct of business. We can see this everyday by
observing how businesspeople work using high-speed internet connections
for e-mail & information gathering, portable computers connected to wireless
networks, cellular telephones are connected to the internet, and hybrid
handheld devices delivering phone, Internet, & computing power to an
increasingly mobile and global workforce.

Information system (IS) can be defined technically as a set of interrelated

components that collect (or retrieve), process, store, and distribute
information to support decision making and control, information systems
may also help managers and workers analyze problems, visualize complex
subjects and create new products.

By information we mean data that have been shaped into a form that is
meaningful and useful to human beings. Data in contrast, are streams of
raw facts representing events occurring in organization or the physical
environment before they have been organized and arranged into a form that
people can understand and use.

Three activities in an information system produce the information that

organizations need to make decisions, control operation, analyze problems
and create new products or services. These activities are input, processing
and output.
Input captures or collects raw data from within the organization or from its
external environment.
Processing converts this raw input into a more meaningful form.
Output transfers the processed information to the people who will use it or
to the activities for which it will be used.
Information system can be both formal and informal. Informal information
systems such as office gossip networks rely on unstated rules of behavior.
There is no agreement on what is information or on how it will be stored and
processed. Formal information systems are structured, they operate in
conformity with predefined rules that are relatively fixed and are not easily
changed. Formal information system can be either computer based or
manual based. Manual systems are paper based, in contrast Computer-based
information systems (CBIS) rely on computer hardware and software
technology to process and disseminate information.

A manager & potential entrepreneur can use information technology &

systems to create differentiation from the competitors and strategic
advantage in the marketplace.

xv
Dimensions of Information System in Renata

Renata uses both the manual and computer based information system.
Manual systems serve important needs in Renata but they are not the
main focal point of our analysis. In the computer based information system
Renata uses an array of infoamation technologies including bar-code
scanning systems, handheld computers, intranet network, the internet, and
many different pieces of software for tracking packages, calculating fees,
maintaining customer accounts and managing logistics.

There are three dimensions of information Systems in Renata -

Organizations, Management, & Information Technology.

Organizations

The organizational structure of Renata is composed of different levels and

specialties. Their structure reveals clear-cut division of labor. Experts are
employed and trained for different functions consisting of sales and
marketing, manufacturing and production, finance and accounting, and
human resources. They coordinate work through a structured hierarchy and
through its business process. The hierarchy of Renata arranges people in a
pyramid structure of rising authority and responsibility. The upper level
consists of managerial, professional, and technical employees whereas the
lower levels consist of operational personnel. Business process includes
formal rules that have been developed over a long time for accomplishing
tasks. This rules guides employees in a variety of procedures, from writing
an invoice to responding to customer complaints.

Management:

Managers perceive business challenges in the environment; they set the

organizational strategy for responding to those challenges; and they allocate
the human and financial resources to coordinate the work and achieve
success. Managerial roles and decisions vary at different levels of Renata.
Senior managers make long-range strategic decisions about what products
and services to produce. Middle managers carry out the programs and plans
of senior management. Operational managers are responsible for monitoring
the firm’s daily activities.

xvi
Information Technology

Information technology is one of many tools managers use to cope with

change. Renata uses Computer hardware, software, and storage and
communication technology for IT purpose. Computer hardware is the
physical equipment used for input, processing and output activities in an
information system. Computer software consists of the detailed,
preprogrammed instructions that control and coordinate the computer
hardware components in an information system. Storage technology includes
both the physical media for storing data, such as magnetic disk, optical disc,
or tape and the software governing the organization of data on these
physical media. Communication technology, consists of both physical devices
and software, links the various piece of hardware and transfers data from
one physical location to another. Network links two or more computers to
share data or resources such as printer.

xvii
 Information System
&
Supply Chain Management

Supply Chain Management (SCM) involves the coordination of all supply

activities of an organization from its supplier and delivery of products to its
customers. It’s essentially the optimization of material flows and the
associated information flows involved with an organization’s operations.

Supply Chain Management (SCM) includes not only supplier and buyer, but
also the intermediaries such as the supplier’s suppliers and the customers’
customers. It is the coordination of supply activities of an organization from
its suppliers and partners to its customers. For most commercial and not for
profit organization we can distinguish between upstream supply chain and
down stream supply chain.

xviii
An organization’s supply chain can be viewed from a systems perspective as
the acquisition of resources (inputs) and their transformation (processes)
into products and services (outputs) which are then delivered to customers.
Such a perspective indicates that as part of moving to e-business,
organizations can review the transformation process and optimize it in order
to deliver products to customers with greater efficiency and lower cost.

The position of the system boundary for the SCM extends beyond the
organization- in involves not only improving the internal processes, but also
processed performed in conjunction with suppliers, distributors and
customers. The process perspective has also a strategic importance that
provides great opportunities to improve product performance and deliver
superior value to the customers. As a result, Supply Chain Management can
dramatically have an impact on the profitability of a company through
reducing operating costs and increasing customer satisfaction and so loyalty
and revenue.

Upstream supply chain is the transactions between an organization and its

suppliers and intermediaries, equivalent to buy side e-commerce.

On the other hand downstream supply chain is the transactions between an

organization and its customers and intermediaries, equivalent to sell side e-
commerce.

For the companies that have first-tier suppliers, second-tier and even third-
tier suppliers or first-, second- and higher-tier customers maintain a supply
chain network. A supply chain network is the link between an organization
and all partners involved in multiple supply chain.

Developments in supply chain management

Over the time modern technology and improved concepts like e-commerce
and logistics have contributed to the development of supply chain. We can
shoe it in chronology as following

Physical Distribution Management

THE Physical Distribution Management (PDM) focuses upon the

physical movement of goods by treating stock management, warehousing,
order processing and delivery as related rather than separate activities.

xix
Although information systems were developed to manage these processes
they were often paper-based and not integrated across different functions.
However, some leading companies started using EDI at this time. PDM was
essentially about the management of finished goods but not about the
management of materials and processes that impacted upon the distribution
process. PDM was superseded by logistics management which viewed
manufacturing storage and transport from raw material to final consumer as
integral parts of a total distribution process.

Material Requirement Planning (MRP) and

Just-In –Time (JIT) Logistics Management

The Just-in –time (JIT) philosophy is still a relatively recent development of

logistics management, its aim being to make the process of raw materials
acquisition, production and distribution as efficient and flexible as possible in
terms of material supply and customer service. Minimum order quantities
and stock levels were sought by the customer and therefore manufacturers
had to introduce flexible manufacturing processes and systems interfaced
directly with the customer who could call an order directly against a
prearranged schedule with a guarantee that it would be delivered on time.

Materials Requirement Planning systems were important in maintaining

resources at an optimal level. The design for manufacture technique was
used to simplify the number of components required for manufacture.
However, none of the above methods looked at the management of total
supply chain. An associated phenomenon is lean production and lean supply
where supply chain efficiency is aimed at eliminating waste and minimizing
inventory and work in progress.

Supply chain management and

Efficient Customer Response

Effective management of supply chain involved much closer integration

between the supplier, customer and intermediaries and in some instances
involved one organization in the channel taking over functions that were
traditionally the domain of the intermediary. Bottlenecks or

xx
undersupply/oversupply can have a significant impact on the organization’s
profitability. The two primary goals of supply chain management are to
maximize the efficiency and effectiveness of the total supply chain for the
benefit of all the players, not bust one section of the channel, and to
maximize the opportunity for the customer purchase by ensuring adequate
stock levels at all stages of the process.

These two goals impact upon the sourcing of raw materials and stockholding.
A recent phenomenon has been the rapid in global sourcing of supplies from
preferred suppliers, particularly amongst multinational or global
organizations. The internet will provide increased capability for the smaller
players to globally source raw materials and therefore improve their
competitiveness. The internet will revolutionize the dynamics of international
commerce and in particular lead to the more rapid internalization of small
and medium sized enterprise. The web will reduce the competitive
advantage of economies of scale in many industries, making it smaller
companies to compete on a worldwide basis.

New integrated information systems such as the SAP Enterprise Resource

Planning (ERP) system have helped manage the entire supply chain. ERP
systems include modules which are deployed throughout the business and
interface with suppliers. Technology ha enabled the introduction of faster,
more responsive and flexible ordering, manufacturing and distribution
systems, which has diminished even further the need for warehouses to be
located near to markets that they serve.

Technological Interface Management

The challenges facing suppliers, intermediaries and customers in the supply

chain will shift from a focus on physically distributing goods to a process of
collection, collation, interpretation and dissemination of vast amounts of
information. Enterprise resource planning systems are continuously being
updated to support direct data interfaces with suppliers and customers, for
example to support EDI.

A more recent development is interfacing of ERP systems with B2B

intermediary sites or exchanges such as commerce One. SAP has also
created mySAP facility to help customers manage and personalize their
interactions with these exchanges. XML is increasingly used as the technical
means by which technological interface management is achieved.(The
critical resources possessed by these new intermediaries will be information
rather than inventory. This stage has been taken a bit further by suggesting
that customer information capture will sere customers rather than vendors in
future. Currently customers leave a trail of information behind them as they
visit sires and make transactions. This data can be captured and then used

xxi
by suppliers and agents to improve targeting offers. However, as customers
become more aware of the value of information and as technology n the
internet enables them to protect private information relating to site visits
and transactions, then the opportunity grows for intermediaries to act as
customer agents not supplier agents.

Practice by Renata Limited

Renata Limited has got a Distribution Channel Management (DCM) that

primarily works for the downstream supply chain that we can relate to
Physical Distribution Management (PDM), the earliest phase of supply
chain management. This is responding to the need of the market from the
front end, the distribution channel, and back end, the procurement of raw
materials.

The Block list, total procurement needed for a year, is usually made at the
beginning of a year with minor adjustment afterwards. This is determined by
a forecasting based on previous years sale with adjustment for the micro
factors, every single response from the field force who visit doctors and
chemists.

The technology used here are simple mail communication for the overall
supply chain while keeping track of every movement of inbound and
outbound logistics are kept in custom database. Since the procurement is
designed for once in a year there are tenders to bid by the suppliers, the
management is simple and largely done by the suppliers. For the local
supplier the complication is less and supply can happen as per order at any
time.

On downstream supply chain the communication is web. Every performance

on delivery of goods is communicated through web to update database. So
present stock level, the delivered lot and present demand from the customer
can be traced at every moment.

Supply Chain Models

Two prominent models are very widely used. They are illustrated below

xxii
Push supply chain

The push model is illustrated by a manufacturer who perhaps develops an

innovative product and then identifies a suitable target market. A distribution
channel is then created to push the product to the market.

Push to Customer

Supplier

Manufacturer Distributor Retailer Customer

Pull supply chain

This model emphasizes on using the supply chain to deliver the value to
customers who are actively involved in product and service specifications.
Here the supply chain is constructed to deliver value to the customer by
reducing costs and increasing service quality.

Manufactur Distributor Retailer Customer

Supplier

Renata Limited is following the pull model of supply chain as they are
demand oriented and this model has been the strategy for many
organizations.

Setbacks in supply chain management

xxiii
The practice by Renata Limited for its supply chain, the Goods Distribution
Process (GDP), has been suffering from many problems that a future
participant in pharmaceuticals arena should have been eliminated. We can
list the shortcomings as following.

• The system is comparable to the earliest model of supply chain

management like Physical Distribution Management (PDM). Here the
information management and coordination is least and it is
integrated within the organization.

• They need to maintain a safety level of inventory in front end for a

period of 8 weeks and in the back end for a period of 8 weeks. This
signals more investment done for the working capital.

• Once a safety level of inventory is maintained, it cost more for

storage and management. Just In Time (JIT) eliminated this problem
that they are yet to introduce.

• Their supply chain is dependent one some intermediaries in back end

and their own multistage distribution channel in front end. So they
aren’t able to order directly for inputs and supply directly to
customers.

• They haven’t yet employed any high performing supply chain

management software like ERP system. They only rely on the
database for the performance judgment and forecasting the future
needs based on it.

• The time lag in back is high as it needs several steps for ordering the
new materials and coordination with different agencies.

Options for restructuring supply chain

As part of strategy definition for e-business, managers will consider how the
structure of the supply chain can be modified. These choices aren’t primarily
based on internet technology choices, rather they are mainly choices that
have existed for many years. What internet technology provides is a mire
efficient and enabler and lower cost communications within the new
structure.

Supply chain management options can be viewed as a continuum between

internal control of the supply chain elements and the external control of

xxiv
supply chain elements through outsourcing. The two end elements of the
continuum are usually referred to as ‘vertical integration’ and ‘virtual
integration’.

Vertical integration refers the extent to which supply chain activities are
undertaken and controlled within the organization.

Virtual integration refers the majority of supply chain activities ate

undertaken and controlled outside the organization by third parties.

Vertical
Integration Vertical Virtual
integration
Disintegration

Characteristics: Characteristics: Characteristics:

• Majority of manufacture in-
house.
• Distant relationship with
suppliers.
• Move to outsourcing. • Total reliance on
linked third parties.
• Network of suppliers. • Close relationships
with
Suppliers.

Applications: Applications: Applications:

• Specialized or proprietary • Cost reduction and focus • Rapid market

production on core capabilities. penetration

xxv
There was a general trend in during the second half of twentieth century
from vertical integration through vertical disintegration to virtual integration.

A good example is provided by the car manufacturing industry where

traditionally car plants would be located near to a steelworks so that the
input to the car plant would be raw materials, with finished cars produced as
the output. Other components of the car such as engine and passenger
equipment would also be manufactured by the company. In addition other
value chain activities such as marketing would also largely performed in
house. There has been a gradual move to sourcing more and more
components such as lights, upholstery ad trim and even engines to third
parties. Marketing activities such as web site development, brochure
fulfillment and advertising campaigns are now largely outsourced to
marketing agencies.

Another example is the purchase by pharmaceuticals companies of

pharmacy benefit managers (companies that manage drug distribution with
private and company health schemes). By acquiring these companies which
are part of pharmaceuticals company’s downstream supply chain the aim is
to ‘get closer to the customer’ while at the same time favorably controlling
the distribution of the company’s own drugs.

Hayes and Wheelwright provide a useful framework that summarizes choices

for an organization’s vertical integration strategy. The three main decisions
are:

1. The direction of any expansion: Should the company aim to

direct ownership at the upstream or downstream supply chain? The
pharmaceuticals companies referred to above have decided to buy
into the downstream part of the supply network (downstream
vertical integration). This is sometimes refereed to as an offensive
strategic move since it enables the company to increase its power
with respect to customers. Alternatively, if the pharmaceuticals
company purchased other research labs this would be upstream-
directed vertical integration which is strategically defensive.

2. The extent of vertical integration: How far should the company

take downstream or upstream vertical integration? Originally car
manufacturer had a high degree of vertical integration, but more
recently they have moved from a wide process span to a narrow

xxvi
 process span. This change is the main way in which e-business can
impact vertical integration by assisting the change from wide to
narrow process span.

3. The balance among the vertically integrated stages: To

what extent does each stage of the supply chain focus on
supporting the immediate supply chain? For example, if a supplier
to a motor manufacturer also produced components for other
industries this would be an unbalances situation.
Combining these concepts, we can refer to the B2B Company. If it owned the
majority of the upstream and downstream elements of the supply chain and
each element was focused on supporting the activities of the B2B Company,
its strategy would be to follow upstream and downstream directions of
vertical integration with a wide process span and a high degree of balance.
Alternatively, if the strategy were to focus on core competencies it could be
said to have a narrow process span.
How, then, often can electronic communication support these strategies?
Through increasing the flow of information between members of the supply
chain, a strategy of narrower process span can be supported by e-
commerce. However this relies on all members of the supply chain being e-
enabled. If only immediately upstream suppliers have adopted e-commerce
then the efficiency of the supply chain as a whole will not be greatly
increased. It may be difficult for a manufacturer to encourage companies
further up the supply chain to adopt e-commerce. So companies undertaking
offensive strategies will be in a better position to stipulate adoption of e-
commerce, and so increase the overall efficiency of the supply chain.

Following are two examples of the manufacture of personal computers also

illustrate the concept of the two different supply chain products well.

Approach 1 (IBM Practice)

Manufacture of many components by IBM plants in different locations

including IBM processor, IBM hard disks, IBM cases a IBM monitors and even
IBM mice. Distribution to companies by IBM logistics.

Approach 2 (DELL Practice)

Manufacture of all components by third parties in different locations

including Intel processors, Seagate hard disks, Sony monitors and Microsoft

xxvii
mice. Assembly of some components in final product by third parties, e.g.
adding appropriate monitor to system unit for each order.

E-supply chain management

E-business can be used to improve supply chain management in a number of
ways. in that cases challenges were

• Reduce order-to –delivery time.

• Reduce costs of manufacturing.
• Manage inventory more efficiently.
• Improve demand forecasting.
• Reduce time to introduce new products.
• Improve aftermarket/ post-sales operations.

The typical benefits that B2B companies have from e-SCM are as following

1. Increased efficiency of individual processes: Here the cycles time to

complete a process and the resources needed to execute it are
reduced. If the B2B Company adopts e-procurement this will result
in a faster cycle time and lower cost per order.

Benefits: Reduced cycle time and cost per order.

2. Reduced complexity of supply chain: This is the process of

disintegration. Here B2B Company will offer the facility to sell direct
from its e-commerce site rather than through distributors or
retailers.

Benefits: Reduced cost of channel distribution and sale.

3. Improved data integration between elements of the supply chain:

The B2B Company can share information with its suppliers on the
demand for its products to optimize the supply process.

Benefits: Reduced cost of paper processing.

4. Reduced cost through outsourcing: The company can outsource or

use virtual integration to transfer assets and costs such as inventory
holding costs to third companies. Technology is also enabler in
forming value networks, and in making it faster to change suppliers
on the basis of cost and quality.

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 Benefits: Lower costs through price competition and reduced spend
on manufacturing capacity and holding capacity. Better service
quality through contractual arrangement.

5. Innovation: E-SCM should make it possible to be more flexible in

delivering a more diverse range of products and to reduce time to
market. For example, the B2B company may use e-commerce to
enable its customers to specify the mixture of chemical compounds
and additives used to formulate their plastics and refer to a history
of previous formulations.

Benefits: Better customer responsiveness.

Flexibility in adapting to a new business requirements is a key capability of

e-SCM systems. For example, in 2006, e-business system supplier and
integrator SAP explained the three key capabilities of its SCM solution as

• Synchronize supply to demand: Balance push and pull network

planning processes. Replenish inventory and execute production
based on actual demand.

• Sense and respond with an adaptive supply chain network: Drive

distribution, transportation, and logistics processes that are
integrated with real-time planning processes.

• Provide network wide visibility, collaboration, and analytics- Monitor

and analyze your extended supply chain.

An alternative perspective on the benefits is to look at the benefits that

technology can deliver to customers at the end of the supply chain. For
the B2B company these could include:

• Increased convenience through 24 hours a day, 7 days a week, 365

days a year ordering.
• Increased choice of supplier leading to lower costs.
• Faster lead times and lower costs through reduced inventory holding.
• The facility to tailor product more readily.
• Increased information about products and transactions such as
technical data sheets and order histories.

IS infrastructure for supply chain management

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Information systems need to deliver supply chain visibility to different parties
who need to access the supply chain information of an organization, whether
they be employees within the organization, suppliers, logistics service
providers or customers. Information systems have a key role in providing this
visibility. Since a huge volume of information defines supply chain processes
for each organization, users of this information need to be able to
personalize their view of information according to their need- customers
want to see the status of their order, suppliers want to access the
organization’s database to know when their customer is next likely to place
major order. Security is also important – of a company has differential
pricing, it will not want customers to see price differences.

FIG

These requirements for delivering supply chain information imply the need
for an integrated supply chain database with different personalized views for
different parties. A typical integrated information systems infrastructure for
delivering supply chain management is illustrated in above figure. It can be

xxx
seen that applications can be divided into those for planning the chain and
those to execute the supply chain process.

A key feature of modern supply chain infrastructure is the use of a central

operational database that enables information to be shared between supply
chain process and applications. This operational database is usually part of
an enterprise resources planning system such as SAP, Baan or Prism and is
usually purchased with the applications for supply chain planning and
execution. Some of the planning applications such as network simulation and
optimization are more likely to be supplied by separate software suppliers.
The use of internet technologies to deliver information over a TCP/IP protocol
is becoming standard to reduce the costs of proprietary leased line networks.
Information needed by managers to intervene in supply chain process when
problems occur is delivered as alerts or through continuous monitoring
across secure private intranets of extranets used to link to partners.

Practice around the world

Today’s competitive business environment calls for companies to pay much
more attention to how they manage their supply chains. Customers are
insisting on greater value, faster order fulfillment and more responsive
services when they make purchase. Shorter product life cycles, global
sourcing and greater product variety have increased supply chain costs and
complexity. The value of so many businesses are linked together that

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competitive advantage may be based on entire supply chains rather than
individual firms.

Supply chain process:

Many process and sub processes are involved in managing the supply chain
to expedite flow of information and materials. The Supply Chain Council
developed a Supply Chain Operations Reference Model which identifies five
major supply chain processes: Plan, Sources, Make, Deliver and Return

Plan: consist of processes that balance aggregate demand and supply to

develop a course of action to meet sourcing, production, and delivery
requirements.

Source: consist of processes that procure goods and services needed to

create a specific product or service.

Make: consists of processes that transform a product into a finished state to

meet planned or actual demand.

Deliver: consists of processes that provide finished goods and services to

meet actual or planned demand, including order management,
transportation management and distribution management.

Return: consists of processes associated with returning products or

receiving returned products, including post delivery customers support.

Logistics plays an important role in these processes, dealing with the

planning and control of all factors that will have an impact on transporting
the correct product or service to where it is needed on time and at the least
cost.

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 Plan:
Balance resources with requirement
Align supply chain plan with business and financial plan

Deliver:
Sources: Make:
Select carrier
Identify suppliers Schedule production
Route shipment
Schedule deliveries Evaluate quality & performance
Manage warehouse
Manage inventory Manage work in process
Invoice customers

Issue return credit

Receive return
Schedule return
Automatic return
Return:

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Manager A Manager B Manager C Manager C

Aggregate + analyze
Individual CSFs

Develop agreement on
company CFSs

Define company
CFSs

Use CFSs to develop

Define DSS and database
information systems
priorities

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Information and supply chain management
Inefficiencies in supply chain such as parts shortages, underutilization of
plant capacity, excessive finished goods inventory are caused by inaccurate
or untimely information. These supply chain inefficiencies can waste as much
as 25% of company’s operating costs.

If a manufacturing had perfect information about exactly how many units of

product customers wanted, when they could be produced, it would be
possible to implement a highly efficient just-in-time strategy.

In supply chain uncertainties arise because many events cannot be foreseen-

uncertain product demand, late shipments from suppliers, defective parts of
raw material, or product process breakdowns. One recurring problem in
supply chain management is the bullwhip effect, in which information
about demand for a product gets distorted as it passes from one entity to the
next across the supply chain. These changes ripple throughout the supply
chain, magnifying what started out as a small change from planned orders,
creating excess inventory, production, warehousing, and shipping costs.

The bullwhip can be tamed by reducing uncertainties about demand and

supply when all members of the supply chain have accurate and up-to-date
information members of the supply chain could share dynamic information
about inventory levels, schedules, forecasts and shipments, they would have
a more precise idea of how to adjust their sourcing, manufacturing and
distribution plans. Supply chain management system provides the kind of
information that can help members of the supply chain make better
purchasing and scheduling decisions.

Supply Chain Management Application

The central objective of supply chain management systems is information
visibility- open and rapid communication and information sharing between
members of the supply chain. Supply chain management systems automate

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the flow of information between a company and its supply chain partners so
they can make better decisions to optimize their performance.

The supply chain software can be classified as either software to help

businesses plan their supply chains (supply chain planning) or software to
help them execute the supply chain steps (supply chain execution). Supply
chain planning system enables the firm to generate demand forecasts for
a product and develop sourcing and manufacturing plans for that product.
Such system help companies make better operating decisions such as
determining how much of a specific product to manufacture in a given time
period. Supply chain execution system manage the flow of products
through distributing centers and warehouses to ensure that products are
delivered to the right location in the most efficient manner.

Supply chain performance measurement

Companies need to be able to measure the performance of their supply
chain management efforts using objective performance information. A
metric is a standard measurement of performance. Important metric for
measuring supply chain performance include the fill rate, the average time
from order to delivery, the number of days of supply in inventory, forecast
accuracy, and the cycle time for sourcing and making a product.

Supply chain management and the internet:

In the pre-internet environment, supply chain coordination was hampered by
difficulties of making information flow smoothly among disparate internal
supply chain systems as well as external supply chain partners because the
systems of suppliers, distributors or logistics providers were based on
incompatible technology platforms and standards.

Some supply chain integration can be supplied inexpensively using internet

technology. Firms can use intranets to improve coordination among their
internal supply chain processes, and they can use extranets to coordinate
supply chain processes shared with their business partners.
Demand driven supply chain: from push to pull
manufacturing and efficient customer response
Earlier supply chain management systems were driven by a push based
model (also known as build-to-stock). In push based model, production
master schedules are based on forecasts or best guesses of demand for
products, and products are “pushed” to customers. With new flows of
information made possible by web- based tools, supply chain management
can more easily follow a pull based model. In a pull based model which is
also known as demand-driven model or build- to- order, actual customer
orders or purchases trigger events in the supply chain. Transactions to

xxxvi
produce and deliver only what customers have ordered move up the supply
chain from retailers to distributors to manufacturers and eventually to
suppliers. Only products to fulfill these orders move back down the supply
chain to the retailer. Manufacturers would use only actual order demand
information to drive their production schedules and the procurement of
components or raw materials.

Business value to supply chain management system

Supply chain management systems enable firms to streamline both their
internal and external supply chain processes and provide management with
more accurate information about what to produce, store, and move. By
implementing a networked and integrated supply chain management
system, companies can match supply to demand, reduce inventory levels,
improve delivery service, speed product time to market and use assets more
effectively. Effective supply chain management system enhances
organizational performance in the following areas:

1. Improved customer service and responsiveness: make the

products easily available to the customers. Having the right product at
the right place at the right time will increase sales.

2. Cost reduction: supply chain management helps companies contain,

and often reduce some or all of the costs associated with moving a
product through the supply chain.

3. Cash utilization: the sooner a company delivers a product, the

sooner that company will get paid.

Systems as planned organizational change

Building a new information system is one kind of planned organizational
introduction of a new information system involves much more than new
hardware and software. It also includes changes in jobs, skills, management
and organization. When we design an information system we are redesigning
the organization. System builders must understand how a system will affect
the organization as a whole.

Information system plan

1. Purpose of the plan

Overview of the plan contents
Current business organization and future organization

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 Key business processes
Management strategy

2. Strategic business plan rationale

Current situation
Current business organization
Changing environment
Major goals of the business plan
Firm’s strategic plan

3. Current system
Major systems supporting business functions and process
Current infrastructure capabilities
Hardware
Software
Database
Telecommunication and internet
Difficulties meeting business requirement
Anticipated future demands

4. New developments
New system projects
Project description
Business rationale
Application’ role in strategy
New infrastructure capabilities required
Hardware
Software
Database
Telecommunication and internet

5. Management strategy
Acquisition plans
Milestones and timing
Organizational realignment
Internal reorganization
Management controls
Major training initiatives
Personnel strategy

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 6. Implementation plan
Anticipated difficulties in implementation
Progress report3

7. Budget requirements
Requirements
Potential savings
Financing
Acquisition cycle
This table is a summarize output of enterprise analysis which shows what
information is required to support a particular process, which processes
create the data, and which use them.

Strategic analysis or critical success factors

The strategic analysis, or critical success factors, approaches argue that an
organization’s information’s requirements are determined by a small number
of critical success factors (CFSs) of managers. If these goals can be attained,
success of the firm or organization is assured. CFSs are shaped by the
industry, the firm, the manager, and the broader environment. New
information system should focus on providing information that helps the firm
meet these goals.

Examples Goals CFSs

Profit concern Earnings / share Automotive industry
Return on investment Styling
Market share Quality dealer system
New products Cost control
Energy standards

Non-profit Excellent health care Regional integration

concern Meeting government with other hospitals
regulation Improved monitoring of
Future health needs regulations
Efficient use of
resources
An example of critical success factors and organizational goals

The principal method use in CFS analysis is personal interviews- three or four
with a number of top managers identifying their goals and the resulting

xxxix
CFSs. These personal CFSs are aggregated to develop a picture of the firm’s
CFSs. Then the systems are built to deliver information on these CFSs.

Practice by Renata Limited

Distribution Channel Management

Renata Limited has got a Distribution Channel Management (DCM) that
primarily works for the downstream supply chain that we can relate to
Physical Distribution Management (PDM), the earliest phase of supply
chain management. This is responding to the need of the market from the
front end, the distribution channel, and back end, the procurement of raw
materials.

Distribution Planning

The Block list, total procurement needed for a year, is usually made at the
beginning of a year with minor adjustment afterwards. This is determined by
a forecasting based on previous years sale with adjustment for the micro
factors, every single response from the field force who visit doctors and
chemists. After analyzing all the required micro and macro factors, and
reviewing all those, generally a plan is given to the Distribution Chain
Channel.

Based on the condition of 15 sales outlet of Renata, and inventory kept in the
central warehouse, the total planning is determined. After initiating the plan,
goods are moved to the outlets for sale, from the central inventory
warehouse.

Organization Service Department

xl
The Organization Service Department of Renata Ltd. includes Purchase
Department and Distribution Department.

Purchase Management System

The raw materials procurement system of Renata Ltd. is called Purchase
Management System. From the beginning of coming raw materials, and to
the reach of end customers, every thing is computerized.

Mail Communication
The technology used here are simple mail communication for the overall
supply chain while keeping track of every movement of inbound and
outbound logistics are kept in custom database. Since the procurement is
designed for once in a year there are tenders to bid by the suppliers, the
management is simple and largely done by the suppliers. For the local
supplier the complication is less and supply can happen as per order at any
time.

On downstream supply chain the communication is web. Every

performance on delivery of goods is communicated through web to update
database. So present stock level, the delivered lot and present demand from
the customer can be traced at every moment.

Software used by Renata

The software currently used in the organization is called “Bridging

Technology”. That means, they are connected to the each of the
department through their home made connecting technology. At this
moment, they are not fully automated, but in near future, hopefully, they will
be fully automated.

In Renata, their Front End Distribution System is 100% computerized, and

Back End Distribution System is 20% computerized.

Renata Ltd. has Intranet facilities for the inter connection of total
organization. For this, they use “World Client” software.

xli
For accounts purposes, Renata uses renowned software, which is called
“Troyee”. Troyee is effective for accounts purpose because, it records all
the entries in a structured format.

Renata Ltd: Goods Distribution Process

Here will be a Diagram

xlii
 Demand Planning
&
Supply Planning

xliii
The concept

Demand planners are kind of like weather forecasters -- they rarely get credit
for doing their job correctly, and they're only noticed when they get it wrong.
Nevertheless, it's vitally important that they get it right, or else severe -- and
potentially disastrous -- supply chain glitches can occur.

"The bullwhip effect is as true today as it ever was in modern, elongated

global supply chains where small errors at the front are magnified
throughout the process," observes Andrew Kinder, director of product
marketing for supply chain management at Infor, an enterprise software
provider. Kinder offers these 10 tips to gauge your company's demand
planning preparedness, and help guide you to getting the forecasts right.

1. Get the process right. Demand planning is a sub-process within sales

and operations planning or integrated business planning, not a stand-
alone activity. Create an integrated business plan that is a cross-company
activity and drives the rest of the business forward for profitably meeting
customer demand.
2. Decide what levels you need to plan demand at that make sense
for your business. Some companies analyze and plan demand at the
product family level, customer level or geographic level. The way you
forecast and plan demand is unique to your business. Don't be dictated by
limitations of your IT technologies -- and be prepared to change how you
plan demand according to changes in your business.
3. Demand planning is a collaborative process, not a test of
statistical algorithms. The statistics provide a solid foundation to work
with, but the real value comes from over-laying knowledge that systems
cannot possibly know. Deploy internal collaboration before external
collaboration, recognizing that the closer you get to the true demand
signal, the better the forecast will be.
4. Demand planning is not just forecasting. Forecasting is a component
of demand planning and relates to your best estimate of future demand.
Companies that excel in this area will challenge the forecast (and the
integrated business plan) and seek opportunities to influence demand
through marketing events and promotions to bring the forecast more in
line with the company plan.
5. You can't control what you can't measure. Put the right set of linked
key performance indicators in place and measure regularly against these.

xliv
 6. Educate before training. Because the demand planning process is
cross-functional, many people input to the forecast without realizing the
importance of their contributions. As a result, the quality of their
contributions may suffer. A good educational program will help everyone
understand their contribution and impact on the performance of the
demand plan.
7. Cleanse the data so you don't spend all your time questioning it and
losing confidence in the process, which can create a breeding ground for
others to second-guess the demand plan and produce their own version.
Demand planning deals with huge quantities of data and robust processes
are required to keep the data cleansed.
8. Trust the numbers and manage by exception. 80% of your return
can be achieved by reviewing 20% of the items.
9. Use the error in your forecast to positive effect. A good statistical
forecast will have an appropriate error which drives an appropriate safety
stock target. This leads to good inventory management and delivers
higher service with lower total inventory.
10. Deploy a proven best-in-class solution. A recent Aberdeen study
shows that companies that excel in demand management -- reporting
higher forecast accuracies and lower inventories -- are two-and-a-half
times as likely to have implemented a best-in-class demand planning
system.

THE demand planning

Since the supply chain management of Renata Limited is a pull model supply
chain, they aim at their product quality. This is done at the commencement
of every year and absorbs the amendment as needed throughout the year.
They term it as block list based on which suppliers from in and outside of the
country are ordered to provide raw materials on time. Following are the
steps the tread when set the demand.

• Response from the field force: They have got an efficient field force that
visits their customers, doctors and chemist, in particular make a demand
plan that would survive for the coming period based on their findings.

• Make regional demand schedule: As not every region of their market need
the same product in same quantity, they make a regional demand schedule
based on the data coming from the field force that indicate different trends
for territory.

xlv
• Adjustment with the forecasted trend: Once they got the regional demand
schedule they adjust it with the forecasting based on the sales of previous
years and quantity the total needs for that year.

• Adjustment with the stock in hand: The finished goods in hand and the
returned goods form the market is subtracted from the total demanded
amount for that year. Company normally holds 8 weeks inventory level in
end, front and back, of finished goods and raw materials.

• Technology and time lag: The technology used here is intranet that helps
every field force unit to update the present demand condition at the end of
the day, every working day. Since the downstream supply chain is more
updated and automated the time lag is least, 12 hours. This can be checked
at any moment.

District
Regional Sales National
Field Force Sales Manager
Sales Manager Manager Sales Manager
(DSM)

The supply planning

The supply planning starts when the demand schedule is finalized for the
upcoming year. As supply comes from outside of the country, there are
regulatory measurements to be followed. The total demand is placed in a
block list that is presented to the related government agency for approval.
So following are the steps, we can say, are treaded in supply planning.

• Block list and approval: Once the demand schedule is ready, it is formatted
into a block list and seeks the permission for import. This is done for supplies
from outside. For inside oriented supply no such steps need to be
maintained.

• Tender float: According to the approved block list the company calls the
eligible agents who can purchase the raw materials in favor of the company.

xlvi
 There is a communication maintained between these agents and company to
supply the materials on time. This is manual.

• Segregating into lots: Then suppliers are asked to supply the raw material
needed in each month. The forecasted demand of each month is
communicated to the suppliers and they perform their job.

• Monthly production: According to the demand the company goes for monthly
production target. This may vary as per demand.

• Distribution: The Company has got 15 sales depots across the country which
supplies the finished product to each district according to their monthly
need. There is a central inventory that keeps connection with the depots and
upcoming supply needs.

• Technology used: The technology used here to keep connection with

suppliers is mail communication. Since they maintain a safety stocks in both
front and back end and production is segregated into months, this mail
communication serves their purpose well.

Recommendation:
In near future, they have the plan to use Planning Based Improvement
process to strengthen their Information System & Supply Chain
Management, as per their opinion.
Nevertheless we can forward some recommendation based on our
understanding of the current position of supply chain management and
overall information system. They are

• They need to acknowledge the pressure from the competitors and

should understand the leaders of their sector that how they are
managing the IS and Supply chain.

xlvii
 • As long as the other related parties in their supply chain network are
not concerned B2B e-commerce and as long as there are legacy
system in the regulatory framework, a not integrated supply chain
network isn’t possible. So there should be a pressure from the industry
people to have it done.

• In future business arena there should be an industrial practice of IS

and Supply chain network so that downstream supply chain can be
more extended and reaches to consumers.

Conclusion

To conclude, we say it is very vital for a player in pharmaceuticals industry to

concentrate on the Information System and Supply Chain Management. The
value addition in each stage would be more precise and quantifiable once
they started to use a sophisticated supply chain management. The
investment in this task will surely give and it is much waited for those who
are entering into the foreign territory.

xlviii