Transcript Lecture_Value Chain and IS_IT_Oct8_2007.ppt

Value Chain and IS/IT
V.T. Raja, Ph.D.,
Information
Management
Oregon State University
Value Chain

Discussion questions:
–
–
–
–
–
–
What is the Value Chain (VC)?
Identify the activities of the VC
How is the “service” activity different from “marketing and
sales”? (Don’t “sales” people provide “service”?)
Differentiate between “procurement” activity and “inbound
logistics”
Why study about Value Chain in an IS/IT class?
Explain value chain linkages (internal and external) with the
help of examples.
Value Chain
Activities

Inbound Logistics
–

Operations
–

Involve relationships with suppliers and include all activities
required to receive, store, and disseminate inputs
All activities required to transform inputs into outputs
Outbound Logistics
–
All activities required to collect, store, and distribute output
Value Chain Activities (Continued)

Marketing and Sales
Inform buyers about products/services
– Induce buyers to purchase products/services and facilitate
their purchase
(Stimulate demand for products/services)
– Collect and pass customer feed back to various units in firm
– Estimate expected sales volume
–

Service
–
Activities required to keep the product/service working
effectively for the buyer after it is sold and delivered
Value Chain Activities (Continued)

Procurement
–

Acquisition (actual purchase) of inputs, or
resources, for the firm
Human Resource Management
–
Activities involved in recruiting, training,
developing, compensating, laying off personnel
Value Chain Activities (Continued)

Technological Development
–

Technology purchased/adopted/developed to
bear in the firm’s transformation of inputs into
outputs
Infrastructure (General Administration)
–
Activities include accounting, legal, finance,
planning , public affairs, government relations,
quality assurance and general management
Value Chain and IS/IT: Examples

Inbound Logistics
–
–

Operations
–

Automated Warehousing System;
JIT inventory systems
Computer-Controlled Machining Systems
Outbound Logistics
–
–
Automated Shipment Scheduling Systems
Tracking Systems
Value Chain and IS/IT
Examples (Continued)

Sales and Marketing
–
–

Service
–

On-line Ordering Systems for customer
Sales forecasting
Equipment maintenance systems
Procurement
–
Computerized Ordering Systems and EDI
Value Chain and IS/IT
Examples (Continued)

Technology Development
–

Human Resource Management
–
–
–

Computer-Aided Design Systems
Multi-media database systems
On-line recruiting
Intranet for employee benefits (retirement benefits, medical
benefits etc.)
Infrastructure
–
Electronic scheduling; financial systems, accounting
systems, decision support systems etc.
Value Chain and IT
Source: Laudon and Laudon (2007)
Management Information Systems (10th edition)
Value Chain Linkages
Internal and External

Internal Linkage: Efficiency and/or competitive advantage
gains due to links between two or more VC activities of a firm
–

Example: (Operations and Outbound Logistics; Information
exchanged – Completed order status)
External Linkage: Efficiency, partnership and/or competitive
advantage gains due to link between one VC activity of firm and
external entity (e.g., customer, supplier etc.)
–
Example: Ford ‘s Supplier and Accounts Payable
(Infrastructure); Information exchanged – Payment Information)
Supply-Chain Management

Planning, organizing, directing, and controlling flows of
materials and purchased parts or services
–
–
–

Involves everyone in supply-chain
–

Begins with raw materials
Continues through internal operations
Ends with distribution of finished goods
Example: Your supplier’s supplier
Objective: Maximize product value and decrease
waste incurred in providing it.
Nike’s (Simplified) Supply Chain
Source: Laudon and Laudon (2007)
Management Information Systems (10th edition)
Supply-Chain Costs as a Percent of Sales
Source: Heizer/Render (2004) – Operations Management, 7e
Industry







All industry
Automobile
Food
Lumber
Paper
Petroleum
Transportation
Percent of Sales







52%
67%
60%
61%
55%
79%
62%
Successful Supply-Chain
Management Requires:



A mutual agreement with suppliers on goals
Trust among all elements of the supply chain
Compatible organizational cultures
The Bullwhip Effect
Source: Laudon and Laudon (2007)
Management Information Systems (10th edition)
Supply Chain
Management