Supply Chain Management • Definition

• an integrative approach, consists of all stages involved, directly or indirectly, in fulfilling customer requests • It functions include not only to manufacturing and suppliers, but also transporters, warehouses, retailers, and customers themselves (to p2) • Its efficiency deals with the enforcement of driving components on their new product development, marketing, operations, distribution, finance and customer services 1 (to p3)

Capacity, inventory level, delivery schedule, payment terms Supplier Manufacturing Distributor Retail Outlet Order, return requests, repair and service requests, payments Customer Supply Chain Management: major entities 2

Supply Chain Management • What makes SCM success?

– Driving forces (to p4) (to p6)

• Traditional IS for SCM

• Based on Intranet, whereby it still highly dependent on the EDI technology for information interchange • Obstacles (to p7) • Solutions to the problems (to p8) 3

Driving Forces of SCM • It driving forces:

• inventory (raw materials sourcing, WIP, and its finished goods) • transportation (logistic of good transferring) • facilities (hardware of storage facilities) • information (IS systems)

• These forces are adopted interactively in a decision making process for SCM

(to p5) 4

Supply Chain Decision-making Framework

Competitive Strategy Supply Chain Strategy

Efficiency

Inventory Supply Chain Structure Transportation Driving Forces Facilities

Responsibilities

(to p3) Information 5

SUPPLY-CHAIN MANAGEMENT

CUSTOMERS ORDER PROCESSING PLANNING & FORECASTING SUPPLIERS PROCUREMENT ACCOUNTING PRODUCTION LOGISTICS SERVICES SHIPPING INVENTORY

An integrative system for an SCM firm

DISTRIBUTORS

6 (to p3)

Obstacles to achieving strategic fitness of SCM

1. Increasing variety of products 2. decreasing product life cycles – increase the uncertainty in supplying of goods 3. increasingly demanding customers 4. fragmentation of supply chain ownership – due to less vertical integrated 5. Globalization increase competition 6. difficulty executing new strategies (to p3) 7

Changing facet of SCM

1. Adopting E-business concept

•

• • Overcome the restriction of EDI application (how?) Expansion of worldwide operations

Benefits

(to p9)

2. Adopting third party logistics

– (to p14) Such as services of outsourcing firms – Now most jobs such as distribution logistic, manufacturing, and assemblies may be rendered by TPL firms (to p15) – The

IS dependency of SCM firms

8 (to p16)

Revenue Impact of e-Business

• E-B enhancing the following advantages: – offering direct sales to customers – providing 24-hour access of information from any location – aggregating personalization and customization of information – speeding up time to market – implementing flexible pricing – allowing price and service discrimination – facilitating efficient funds transfer (to p10) Example 1: Dell Example 2: Amazon (to p12) 9 (to p8)

Example 1 SCM for Dell

Customer Dell Supplier Dell Supply Chain

Pull

(direct process) Customer Retail Store PC Manufacturing

Pull

Supplier Conventional PC supply chain (to p11) 10

Factor

Revenue

Impact of E-B on Dell Performance

Impact

Increase Inventory costs Decrease Facilities costs Decrease Transportation cost Increase

Primary Causes

Direct sales to customer Flexible pricing Large variety of customers Faster new product introduction Fast delivery of customer order Aggregation of commonality Geographical aggregation Information sharing No retail outlets Customer participation in ordering Higher outbound transportation cost 11 (to p9)

Cut short process

Example 2 Amazon.com

Customer Customer

Pull Pull

Amazon Retail Store Warehouse Distributor Publisher Amazon supply chain Publisher Conventional bookstore supply chain 12 (to p13)

Impact of E-B on Amazon.com Performance

Factor

Revenue

Impact

Increase Decrease

Primary Causes

Convenience Large variety of books Distributor margins Downward price pressure Inability to browse Geographical aggregation Inventory costs Facilities costs Decrease Decrease Transportation cost Increase Increase No retail outlets, only warehouse No cashier required Each customers order is picked ad packed Higher outbound transportation cost 13 (to p9)

Concept of TPL

• Third party logistics, also known as outsourcing logistics, is a concept of which supply chains firms hiring outsource agents to take care of their non-core business activities so they could concentrate on their core-businesses and re engineering.

• The adoption of third party logistics has an advantage that outsourcing agents could take charge of daily operations of non-core businesses such as transportation, inventory, assembly, and distribution. Offering value-added services to their clients are also known as some of distinctive features render by third party logistics firms that may otherwise be neglected by supply chains firms. (to p8) 14

IS in SCM

Without the TPL With TPL Could be based on the Enterprise Information System that implement through Intranet or e-Business (by internet technology) 1.

2.

Now based on two systems: The one on the right hand side The e-business system provided by the TPL (reason is that now partial information, such as inventory, delivery status, are controlled by them) (read it from the paper by Chow in my web site) 15 (to p8)

SCM in HK • Established a logistic center

– “Logistics park” – Near airport island, allocated total of 1,255 hectares – Third party logistics park • Two logistics centers (south and east commercial district in the about site) – e-commerce logistic center by SEAL (South East Asia Logistics limited) • Reserved 30000 sq meter site Tseung Kwan O – Major/other obstacles?

(to p17) 16

Future researches

Topics: • What is the strategic impact of e-B technologies on the supply chain • How has the Internet impacted supply chain operations, from the procurement of raw materials to productions and distribution of finished goods • What performance enhancements and challenges can firms expect by using IT • How have online exchanges impacted procurement • How has the presence of information brokers impacted information flows • How do collaborative ideas and technologies improve supply chain visibility • What are the challenges of integrating e-Business technologies into supply chain operations (to p18) 17

Sample References

• • • • Kajita, H. and Ohta, T., Third party logistics function for constructing virtual company – study of assignments in Japanese business, Journal of Business Logistics, 2, 2001, 131-138. Vakharia, A.J., e-Business and supply chain management, Decision Sciences, 33(4), 2002, 495-504.

Frohlich, M.T. e-Integration in the supply chain: Barriers and Performance, Decision Sciences, 33(4), 2002, 537-556. Narasimhan, R. and Kim S.W., Information system utilization strategy for supply chain integration, Journal of Business Logistics, 22(2), 2001, 51-75.

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