SUPPLY CHAIN MANAGEMENT

1. SUPPLY CHAIN MANAGEMENT (SCM)

2. 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

3. 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.

4. Most Common Enterprise Systems • Enterprise Collaboration Systems (ECS) • Natural 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).

5. How Big can an IS be? • 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?

6. 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

7. The Simple Supply Chain

8. Complex Supply Chains

9. Supply Chain Management = SRM + Inventory Management + CRM

10. SCM may cross enterprise boundaries

11. SCM Planning Functions • Supply Chain Design • optimize network of suppliers, plants, and distribution centers • Forecasting customer demand • by sharing demand and supply forecasts instantaneously across suppliers and distributors MIS SCM & RFID Lab

12. SCM Execution Functions • Materials Management • share accurate inventory and 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

13. SCM Execution Functions • Collaborative Fulfillment • order management, vehicle scheduling, etc. • support the entire logistics process, • including picking, packing, shipping, and delivery in foreign countries • 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! MIS SCM & RFID Lab

14. 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

15. 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

16. Technical Challenges of SCM • 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

17. Organizational challenges • Changes company structure • 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 MIS SCM & RFID Lab

18. Bullwhip Effect

19. Bullwhip Effect • The variability in size and timing of orders increases at each stage up the chain.

20. Bullwhip Negative Impact • 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 • Great example of how an IS can solve a problem that was previously unsolvable.

21. Bullwhip Prevention • 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 following same data standards • Two companies investing in the same SCM platform • Requires using the same system or technology

22. A major challenge: The Bullwhip effect. • 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

23. Electronic Data Interchange (EDI) • Old-fashioned term that means: • How do different systems share data… • Refers to data format but also • Physical connection • Before the Internet/WWW companies were connecting their computer systems (Private Extranet) • Now, EDI happens over Secure Internet Connections

24. In Lab… • You’ll see how Electronic Data Interchange can help • smooth out the communications (compatible data) • increase the velocity of information between Suppliers  Retailers • Investigate XML (Software Technology) • Explore RFID technology (Hardware Technology)