Second International Conference on Computer Research and Development
An Intelligent Online Supply Chain Management System for Improved Decision Making On Supplier Selection
Arrey Marssaille SMA Ida Farisha Moer Alim Shah
Chan Gaik Yee Faculty of Information Technology Multimedia University, Cyberjaya, Malaysia
[email protected]
Faculty of Information Technology Multimedia University,Cyberjaya, Malaysia
[email protected] creativity and machine intelligance, online supply chain management system could be built to meet the objective of applying information technology (IT) to efficiently automate business processes for attaining a sustainable environment. In this paper, we introduce an OSCMS with added functionality that will further enrich the existing benefits obtained due to improved decision making on supplier selection.
Abstract—The trend of efficient business practice is towards automating business processes by building a system that would simultaneously provide for a sustainable environment together with improved decision making. By applying current internet technology with a touch of creativity and machine intelligence, our online supply chain management system (OSCMS) is built to meet the objective of applying information technology (IT) to efficiently automate business processes for attaining a sustainable environment together with improved decision making. In this paper, we introduce an OSCMS with added functionality, vendor evaluation function that will further enrich the existing benefits of reducing costs, improving customer service and sales.
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Keywords-supply chain management; business process automation; sustainable environment; vendor evaluation; machine intelligence
I.
INTRODUCTION
Now-a-days, the trend of efficient business practice is towards automating business processes by building a system that would simultaneously provide for a sustainable environment as well as improved decision making. Online Supply Chain Management System (OSCMS) would be such a system! OSCMS focuses mainly on the supply, distribution, monitoring of goods and services and the interactions with vendors (suppliers) within and out of the organization. Hence, an optimal output in terms of cost, time and resources could be achieved in this kind of system by applying internet technology. As reported in the research findings in [3] that the important features which most organizations (regardless of which industry they are from) look for in such a system would be: they must be able to reduce operating, logistic and distribution costs, improve customer service levels, increase orders, sales and market shares. Studies from [3, 8] had showed that supply chain management system or similar variation of such system had indeed provided the mentioned benefits to the organizations. For example a case study in [8] had revealed the fact that after implementing their warehouse management system, the company was able to increase workers’ productivity by 35%, freight costs were reduced by 16% and damaged goods in transit declined by 50%. Therefore, we strongly believe that by applying current internet technology with a touch of 978-0-7695-4043-6/10 $26.00 © 2010 IEEE DOI 10.1109/ICCRD.2010.179
BACKGROUND
As about 80% of software development projects go over time, budget or fail to deliver expected results [9], and while about 30% of Malaysian businesses are manufacturing businesses [5] demanding effcicent and effective supply chain management systems, it is indeed necessary to conduct in-depth reviews and studies on existing similar systems related to supply chain management. For example, after going through some literature reviews, it is found that there is a need for supply chain management system to include functionalities for managing goods storage location [1] and movement of goods [7]. After reviewing some case studies, it is recommended to integrate supply chain management system with ERP (Enterprise Resource Planning) system [4] and inventory management system [6]. What can be gathered from these studies is that basically for a manufacturing industry, online supply chain management system aims to automate the following processes: customer placing the order, manufacturer fulfilling the customer order, manufacturers purchase from suppliers of raw materials, and suppliers of raw materials delivering the supplies to the manufacturers. To link all these processes together, refer to Figure 1-Supply chain management process workflow for an overall graphical view. Based on these studies, our OSCMS therefore has included the following modules to cater for the required functionalities: procurement management, warehouse management, logistic management, vendor relationship management, query and reporting. Refer to Figure 2 – OSCM system overview for details. As reported in [2, 3], one of the main problem of most existing supply chain mangement systems is that they fail to manage the risks imposed by suppliers due to poor or break down in communication during procurement process.
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Figure 1. Supply chain management process workflow.
The risks involved are for example, the supplier fails to deliver products on time, fail to deliver the required quality products, fail to provide efficient after sales service or support and so on. Therefore, with a touch of creativity and the addition of machine intelligence, our OSCMS has a vendor evaluation function under the vendor relationship management module to solve the above mentioned problem and further reduce the use of papers, hence further savings on time, fuel and simultaneously improved decision making on supplier selection. Before the manufacturer issues the purchase order to buy raw supplies from the vendors or suppliers, the manufacturer would be able to select the most appropriate suppliers to buy from. This could be accomplished by selecting the supplier from a list of suppliers who have been previously evaluated and ranked. By selecting the most appropriate supplier with the highest ranking will reduce the chance of returning unqualified raw supplies to the suppliers. Thus savings on issuing credit/debit notes; further savings on paperwork and time. Not only this, fuel could be saved due to the reduction in the number of trips to return the unqualified raw supplies and re-delivery of the qualified supplies again. In fact OSCMS is a paperless system whereby all paperbased forms, such as customer orders, purchase orders, bills, invoices and so on are being transformed into electronic or digital form and transmitted over the internet. In addition to this, payments made by customers to the manufacturers and payments made by the manufacturers to the suppliers are done electronically as well. This again solves another problem reported by [3] that supply chain processes are not linked and centralized. Using OSCMS, there is a great savings on papers, hence savings on costs and more meaningfully reduction in cutting down trees and forests! This shall provide a “greener” world for our next generations!
Figure 2. OSCM system overview.
III.
THE IMPLEMENTED SOLUTION
The above mentioned functionalities are built into the OSCM system developed by the co-authors of this paper: Arrey Marssaille SMC and Ida Farisha Meor Alim Shah. The system is built under the Microsoft .Net platform where Visual Studio 2005 is used to build the front-end graphical user interface and Microsoft SQL Server 2005 is used for storage of backend database. The following figures show some screen shots of the vendor evaluation function: Figure 3-Vendor evaluation criteria, Figure 4-View vendor evaluation rating, Figure 5–Generate purchase order and choose vendor, Figure 6-Generate good receipt and check status. The vendor evaluation function is used to evaluate the performance of the vendors based on certain criteria. Refer to Figure 3 – Vendor evaluation criteria for some example of criteria. All together, there are 13 criteria. Those criteria not listed in figure 3 are: quality of service provided, competitiveness of terms and conditions, credit rating, overall financial condition, reputation of vendor, quality of design, level of assistance provided, expertise of sales staff and expertise of technical support staff. Each criterion will be given a rating and a point value, for example there are 5 category of rating namely very bad with point value of 1, bad with point value of 2, average with point value of 3, good with point value of 4 and very good with point value of 5 as shown in figure 3. At the end of the evaluation for a certain vendor, all the points for each criterion will be summed up as a total score for the vendor. Refer to Figure 4 – View vendor evaluation for an example that displays the points obtained for each criterion and the total score.
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Figure 3. Vendor evaluation criteria.
All vendors who supply a particular type of raw materials will be ranked according to the total score they received from the evaluation. When the manufacturer wants to purchase the raw materials, he can then select the highest ranked vendor to purchase the raw materials from (refer to Figure 5– Generate purchase order and choose vendor). When the manufacturer receives the raw supplies from the vendor, he can then double check whether the goods are the required ones by checking on the quality and click on the button whether the goods are returnable or satisfactory as shown in Figure 6- Generate goods receipt and check status.
Figure 5. Generate purchase order and choose vendor.
By going through this vendor evaluation process, the manufacturer could make a better decision and avoid buying from bad vendors hence reducing the risk of getting unqualified raw supplies. In addition, this can also cut down on re-shipment or re-delivery, thus saving on time and fuel as well. IV.
CONCLUSION AND FUTURE ENHANCEMENT
As can be seen that the vendor evaluation function of this OSCMS helps to improve the decision making of the manufacturer on supplier selection and at the same time reduce further the operating, distribution and logistic costs, thus saving in time and fuel consumption by avoiding delivery of returnable raw supplies and re-delivery of the qualified supplies. However, there is one drawback in this system or function; it doesn’t cater for the case when there is more than one vendor who has the same raking or same total score. One suggestion for future improvement on this is to include an algorithm to determine which vendor will have the shortest route for delivery of the raw supplies to the manufacturer’s various warehouses. For example, the distance of each vendor’s warehouse to the manufacturer’s warehouse can be pre-computed and in the event that more than one good ranking supplier can supply the raw supplies, then the one with the shortest distance between the vendor and the manufacturer will be selected. In this way, there will be further reduction in distribution cost because of savings in fuel consumption.
Figure 4. View vendor evaluation rating.
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[4] [5] [6] [7] [8]
[9]
Figure 6. Generate goods receipt and check status
All in all, it can be concluded that with the current internet and information technologies, together with the developers’ creativities coupled with machine intelligence, online supply chain management systems can be used to automate business processes efficiently for better decision making and at the same time attaining a sustainable environment. Perhaps in the very near future, this supply chain management system would be able to operate over the wireless or mobile platform whereby customers and manufacturers can send in orders through wireless devices as well. REFERENCES [1]
[2]
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