Transcript Supply Chain Management

SUPPLY CHAIN
MANAGEMENT
(SCM)
Supply Chain Management (SCM)
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
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
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Most early information systems were designed for one
functional area
Accounting
 Finance
 Human Resources
 Etc.
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Enterprise = “Entire Company/Organization”
Today (post 2000) the vast majority of commercial
information systems try to be “Enterprise”
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Used by all the functional areas within the business.
Most Common Enterprise Systems
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Enterprise Collaboration Systems (ECS)
 Natural
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for communication to involve enterprise
Customer Relationship Management
 Sales
(Marketing) is so natually connected to
accounting, operations (especially post-sale services)

Enterprise Resource Planning (ERP)
 Simply
a more integrated CRM (Investment/Finance
component, more strategic, long-term process).
How Big can an IS be?
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Can an Information System be so large that it
integrated two or more enterprises/companies?
Why would two or more companies what to share a
common Information System?
Two companies can share an
Information System (WTF?)
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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
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Supply Chain Design
 optimize
network of suppliers, plants, and
distribution centers
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Forecasting customer demand
 by
sharing demand and supply forecasts
instantaneously across suppliers and distributors
MIS SCM & RFID Lab
SCM Execution Functions
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Materials Management
share accurate inventory and order information,
 ensure materials required for production are available
in the right place at the right time.

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Collaborative Manufacturing
optimize plans and schedules
 while considering resource, material, and dependency
constraints
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MIS SCM & RFID Lab
SCM Execution Functions
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Collaborative Fulfillment
order management, vehicle scheduling, etc.
 support the entire logistics process,
 including picking, packing, shipping, and delivery in
foreign countries

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Supply Chain Event Management
monitor every stage of the supply chain process
 from price quotation to the moment the customer
receives the product
 receive alerts when problems arise – visibility!
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MIS SCM & RFID Lab
Business Value of SCM
Benefits of SCM:
 Reduces production and distribution costs

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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
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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
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Acquisition of secure extranet
Software can be confusing, contradictory and not
sculpted to their needs – difficult to implement.
Not everyone follows the same standards
High startup costs for SCM systems
MIS SCM & RFID Lab
Organizational challenges
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Changes company structure
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resistance from employees =>
leads to inadequate collaboration within departments across
department
Even companies
Supplier reluctance
Data Incompatibility issues.
Lack of proper demand planning knowledge
It can take time for
 Suppliers to understand retailers
 Vice versa
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MIS SCM & RFID Lab
Bullwhip Effect
Bullwhip Effect
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The variability in size and timing of orders
increases at each stage up the chain.
Bullwhip Negative Impact
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Can create a cycle of stock-outs followed by excess
inventory.
 Stock-outs
= Lost Sales/Revenue
 Excess Inventory = High Costs

Difficult to stop the bullwhip cycle
 caused
by natural delays in the transmission of
information through a supply chain
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Great example of how an IS can solve a problem
that was previously unsolvable.
Bullwhip Prevention
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It can be eliminated by giving all supply chain
participants consumer-demand information directly
from retailers through inter-organizational
information systems.
Solution can comes in two forms:
 Two
SCM’s being integrated in real-time
 Requires
 Two
following same data standards
companies investing in the same SCM platform
 Requires
using the same system or technology
A major challenge: The Bullwhip effect.
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The bullwhip effect in supply chains occurs when
 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.
Fig 8-13 The Bullwhip Effect
© Pearson Prentice Hall 2009
Electronic Data Interchange (EDI)
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Old-fashioned term that means:
How do different systems share data…
 Refers
to data format but also
 Physical connection
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Before the Internet/WWW companies were
connecting their computer systems (Private Extranet)
Now, EDI happens over Secure Internet Connections
In Lab…
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You’ll see how Electronic Data Interchange can help
 smooth
out the communications (compatible data)
 increase the velocity of information between Suppliers
 Retailers
1.
2.
Investigate XML (Software Technology)
Explore RFID technology (Hardware Technology)