The Existing Barriers To Free Flow Information Commerce Essay


There are a few barriers exist to the free flow of information among the members of a company's supply chain. First of all, workers are required to move parts long distances for no reason because the company's flow of materials through the factory was inefficient (Norman M. Scarborough, Douglas L. Wilson and Thomas W. Zimmerer, p.630). Besides that, Ducati are forced to trim its roster of vendors to 175 because some suppliers simply refused to participate (Norman M. Scarborough, Douglas L. Wilson and Thomas W. Zimmerer, p.630).

Generally, vertically linked organisations from raw material sources to end users includes in supply chain (ANU H. BASK1* & JARI JUGA2, 2001, p.138). Supply Chain Management is known as a wider concept covering all business processes between these organisations (Bowersox et al., 1999; Cooper et al., 1997a; Lambert et al., 1998). Good supply chain management will define who will stay and who will leave the market (Martins & Laugeni, 2002). There is a downstream flow of material from the factory via the factory warehouse, the distributor and the retailer to the customer. (Bernhard J. Angerhofer, Marios C. Angelides, p.343). Orders (information flow) flow upstream and there is a delay associated with each echelon in the chain, representing, for instance, the production lead-time or delays for administrative tasks such as order processing. (Bernhard J. Angerhofer, Marios C. Angelides, p.343). "Forrester Supply Chain" or Forrester Model is a simple four-level supply chain which is consisting of factory, a warehouse, a distributor and a retailer (Bernhard J. Angerhofer, Marios C. Angelides, p.343).

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Forester effect or bullwhip effect is a common problem to those who deal with supply chain management. According to (Lee, Padmanabhan, & Whang, 1997), this effect occurs when there is a lack of coordination among the elements of the supply chain at the moment when there is a variation in the quantity demanded by the final client, with the reactions of suppliers tending to be amplified at each passage upstream through the chain. All of them react increasing or diminishing the orders differently from what is really necessary, seeking to protect themselves.

The lack of coordination felt mainly by the Forester effect is caused by two reasons which are the different stages of the supply chain has conflicting objectives, and the information sent among the different stages suffers delays and distortions according to Chopra & Meindl (2001)

Managers overcome those barriers by implementing shorter delivery times, more reliable delivery promises, fewer schedule disruptions, lower stock levels, fewer quality problems and stable prices which are offered by Integrated Supply Chain Management (Christopher, 1998).

System Dynamics is a computer-aided approach for analysing and solving complex problems with a focus on policy analysis and design. Industrial Dynamics defined as the study of the information feedback characteristics of industrial activity to show how organizational structure, amplification (in policies), and time delays (in decision and actions) interact to influence the success of the enterprise (Forrester 1961). It treats the interactions between the flows of information, money, orders, materials, personnel, and capital equipment in a company, an industry, or a national economy. The application of System Dynamics Modelling to Supply Chain Management has its roots in Industrial Dynamics (Forrester 1958, 1961). The "Forrester Model" is a model of a production-distribution system. This model is described in terms of six interacting flow systems, namely the flows of information, materials, orders, money, manpower, and capital equipment.

RFID (Radio Frequency Identification) is an emerging technology intended to complement or replace traditional barcode technology to identify, track, and trace items automatically (Zaheeruddin Asif, Munir Mandviwalla, 2005, p.393). The drive toward adopting RFID is being further enhanced by mandates from large retailers such as Wal-Mart and Target, and the US Department of Defense, who require all suppliers to implement this technology within the next few years ( Zaheeruddin Asif, Munir Mandviwalla, 2005, p.394). RFID is claimed to add intelligence to and to minimize human intervention in the item identification process by using electronic tags. The tags are significantly different from printed barcodes in their capacity to hold data, the range at which the tags can be read, and the absence of line-of-sight constraints (Zaheeruddin Asif, Munir Mandviwalla, 2005, p.393). RFID can be used to reduce labor costs, reduce out-of-stock supply chain cost, reduction in theft, improved tracking through warehousing and distribution centers and reduced inventory holding and carrying costs (Zaheeruddin Asif, Munir Mandviwalla, 2005, p.393). A key goal of supply chain management is greater speed and cost effectiveness [Lee, 2004]. Marketing tends to focus on pricing, customers, and product. An RFID-enabled integrated supply chain will likely lead to greater speed and perhaps, over time, lower costs.However, speed and cost are the relatively easy and obvious goals of RFID enabling a supply chain. Lee et al. [1997] propose information sharing, channel alignment, and operational efficiency as strategies to counteract the "bullwhip effect"

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Sterman (1989, p.345) presents a generic model of a stock management system which forms the basic structure in an environment for a decision-making experiment. This generic stock management structure is applicable to Ducati such as raw material ordering, production control, or at a macroeconomic level, the control of the stock of money. The physical stock and low structure of the system, and the decision rules used to control the system are parts of the model.

Ducati's managers could use the "Beer Game" (Sterman 1984, p.345) to conduct an experiment on managing a simulated industrial production and distribution system. The Beer Game presents a multi-echelon production distribution system, containing multiple actors, non-linearities, feedbacks and time delays throughout the supply line.

Ducati's managers can include top management commitment; cross-functional teams with feedback between management and staff, and the use of new information systems to overcome the barriers to the free flow of information (Bernhard J. Angerhofer, Marios C. Angelides, p.344).Time compression strategies based on simulation allow to predict supply chain performance improvements( Towill, 1996b) Ducati's managers can over the barriers by using re-engineering strategies which are reduction in all lead-times such as material, information and cash-flows, elimination of time delays in decision points and provision of marked information to all upstream decision makers.

Collaborative management envisages the reduction of negative consequences of the bullwhip effect or the lack of coordination in supply chains. It can be said that the main objective of collaborative management is to obtain, by means of shared planning, a greater precision in sales forecasts and replenishment for all in the chain (not for one or two chain members). As a result, it is possible to decrease the inventory along the supply chain and obtain better service levels that in turn tend to result in sales increases and cost reductions (Skjoett-Larsen, Thernoe, & Andresen, 2003).

According to Retzlaff-Roberts & Nichols (1997), simulation offers an effective analytical tool for organizations that need to measure the performance of a cycle time in the environment of supply chains.

For Pedgen, Shannon,& Sadowski (1995), simulation is the process of projecting

a computer model of a real system and conducting experiments with this model with the purpose of understanding its behavior and/or evaluating strategies for its operation.

In this way, simulation models of supply chains may be used to study several processes that may comprise factories, distribution centers, and transport systems, among others (Miller & Pegden 2000).

Supply chain simulation is used in decision taking in the case of implementing a new supply chain, or for performing modifications to existing chains. These changes may be classified in two categories: Structural and Operational. Structural decisions affect the supply chain in long terms; however, operational decisions affect the supply chain in short terms. Simulation may be used as a tool to assist decision taking in both cases (Pundoor, 2001).

According to Maria (1997), Pedgen, Shannon, & Sadowski (1995), Banks, et al., (2002), and Chang & Makatsoris (2001), simulation assists the understanding of the entire process and characteristics of the supply chain by means of graphics and charts. Simulation has the capacity to capture data for analysis. Users may model unexpected events in certain areas and understand the impact of these to the supply. The risk inherent to changes in planning can be diminished drastically by simulation. Several alternatives may be tested by users before making the change to planning. Stimulation can be used to investigate the impact of changes due to a greater demand for components of the supply chain. Relations between suppliers and other components of the supply chains can be used to rationalize the number and size of order lots, using as a basis the total of costs, quality, flexibility and responsibilities. Opportunities can also be used to diminish the varieties of product components and standardize them throughout the supply chains.