SUPPLY CHAIN MANAGEMENT

(SCM)

Supply Chain Management (SCM)

 Chapter 8 of Kroenke  Key Feature: SCM is the great example of where an Information system goes beyond one Enterprise.

MIS SCM & RFID Lab

Functional Systems vs. Enterprise

   Most early information systems were designed for one functional area  Accounting  Finance  Human Resources  Etc.

Enterprise = “Entire Company/Organization” Today (post 2000) the vast majority of commercial information systems try to be “Enterprise”  Used by all the functional areas within the business.

Two companies can share an Information System (WTF?)  Example: Large retailer (Walmart) may force suppliers to use their Supply Chain System.

 Example: Three long-time partners (supplier, distributor, retailer) may pool resources to develop their own Supply Chain System

The Simple Supply Chain

Complex Supply Chains

Supply Chain Management = SRM + Inventory Management + CRM

SCM may cross enterprise boundaries

SCM Planning Functions

 Supply Chain Design – optimize network of suppliers, plants, and distribution centers  Forecasting customer demand and supply forecasts instantaneously across suppliers and distributors by sharing demand MIS SCM & RFID Lab

SCM Execution Functions  Materials Management – share accurate inventory and procurement order information, ensure materials required for production are available in the right place at the right time.  Collaborative Manufacturing – optimize plans and schedules while considering resource, material, and dependency constraints MIS SCM & RFID Lab

SCM Execution Functions

 Collaborative Fulfillment –order management, vehicle scheduling, and support the entire logistics process, including picking, packing, shipping, and delivery in foreign countries  Supply Chain Event Management visibility!

– monitor every stage of the supply chain process, from price quotation to the moment the customer receives the product, and receive alerts when problems arise – MIS SCM & RFID Lab

Business Value of SCM

Benefits of SCM:

 Reduces production and distribution costs    More information => less inventory, less lead times needed Improves timeliness of shipments  Increases supply chain “velocity”  More accurate fulfillment  Improves “visibility” of supply chain MIS SCM & RFID Lab

SCM Benefits    Fewer employees needed to manage supply chain Better customer satisfaction: less stock-outs Strategic relationship with suppliers, enables new business partnerships:  Collaborative Planning, Forecasting, and Replenishment systems (CPFR).

 Collaborative downstream customer service, marketing, and relationship management. MIS SCM & RFID Lab

Technical Challenges of SCM

 Acquisition of secure extranet  Software can be confusing, contradictory and not sculpted to their needs – difficult to implement.  Emerging standards, high costs.

MIS SCM & RFID Lab

Organizational challenges  Changes company structure: resistance from employees wedded to traditional processes, leads to lack of adequate collaboration among marketing, production, and inventory management departments within a company  Supplier reluctance or incompatibility issues.

 Lack of proper demand planning knowledge: leading to inaccurate or overoptimistic demand forecasts. Need new tools and guidelines.

MIS SCM & RFID Lab

 A major challenge: The Bullwhip effect.

The bullwhip effect in supply chains occurs when the variability in size and timing of orders increases at each stage up the chain.

 Distributors, manufacturers, and suppliers must carry larger inventories than should be necessary to meet real demand because of the large fluctuations in orders.

 It reduces the overall profitability of a supply chain.

 It can be eliminated by giving all supply chain participants consumer demand information directly from retailers through interorganizational information systems Fig 8-13 The Bullwhip Effect © Pearson Prentice Hall 2009

How EDI can help …

In lab,  You’ll see how Electronic Data Interchange can help smooth out the communications  Investigate HTML and XML  Explore RFID technology