Week 9A – Supply Chain Management Chapter 10

1. SJSU Bus 140 - David Bentley Week 9A – Supply Chain Management Chapter 10 Definition, issues, logistics, EDI, E-commerce

2. SJSU Bus 140 - David Bentley Definition of SCM • Definition: chain consisting of multiple organizations and organization units operating as customer/supplier links • Includes external suppliers and subcontractors • Involves internal manufacturing plants, warehouses, and distribution centers • Extends to final (external) customers

3. SJSU Bus 140 - David Bentley Related Terms and Concepts • Includes all relevant activities of organizations and units from prior slide • Value chain essentially the same today • Focuses on added value • May cover raw material to end user • Demand chain used less frequently • May cover manufacturer to end user

4. SJSU Bus 140 - David Bentley Supply Chain Example Intel Contract manufacturer Hewlett-Packard Ingram Micro Fry’s You or me

5. SJSU Bus 140 - David Bentley Inventory Considerations • Inventory serves as a buffer(“decouples”) supply and demand and protects any member of the chain from variation in either • Bullwhip effect relates to magnification effect as buffer grows upstream • Can ultimately lead to collapse

6. SJSU Bus 140 - David Bentley Recent Areas of Interest • Sustainability • Social, cultural, and environmental concerns • Takes a long-term view • May conflict with financial objectives • Information technology (see later slide) • Dramatically increases ability to plan and control • Dramatically reduces certain time elements

7. SJSU Bus 140 - David Bentley Factors Leading to SCM • Globalization • Competitive pressure • Move to e-commerce • Cost reduction opportunities • Ability to share information • Greater use of contract manufacturers • Desire to manage vertical markets

8. SJSU Bus 140 - David Bentley Key Elements of SCM • Determine customer needs and wants • Forecast demand • Design products to meet customer needs/wants and minimize costs • Control operations processes • Minimize inventory • Strengthen supplier relationships • Optimize facility location • Improve handling and storage of material

9. SJSU Bus 140 - David Bentley SCM Issues at 3 Levels • Strategic • Building the chain (suppliers, manufacturing facilities, distribution centers, customers) • Establishing partnerships • Tactical • Inventory, procurement, logistics, quality policies • Operational • Production and inventory planning and control • Outsourcing • Quality control

10. SJSU Bus 140 - David Bentley Integration • Horizontal Integration • Acquisition of complementary product lines • Examples: HP and Compaq; PSA • Vertical Integration • Backward integration (“upstream”) • Control of supply • Example: Ford • Forward integration (“downstream”) • Control of customers • Examples: Apple; Gateway

11. SJSU Bus 140 - David Bentley Focused Factories • Focused factories • Emphasis on niche, distinctive competency • Limited products and functions • Example: HP casting plant • HP: Carly Fiorina comments (SJMN 10/24/02): • “…in contrast to IBM, HP is not going to be a “vertically integrated company” • Focus less and less on component-level innovation • Work with key partners (e.g., Intel and Canon) • Position itself as broad-based technology company

12. SJSU Bus 140 - David Bentley Sourcing Strategies • Many suppliers (not recommended) • Few suppliers (risk) • Vertical integration (backward) • Joint ventures (NUMMI) • Keiretsu networks (supplier support) • Virtual companies (specialists)

13. SJSU Bus 140 - David Bentley Control of the Supply Chain • Big supplier, many small customers • Amazon and you • Big customer, many small suppliers • GM and auto parts manufacturers • Equal size suppliers and customers • Big businesses • Small businesses • See text section, pp. 439-442

14. SJSU Bus 140 - David Bentley Logistics • Managing movement of materials within the supply chain • Traffic management • Scheduling, carrier selection, rate and tariff management • Electronic Data Interchange (EDI) • Internet (B2B, exchanges) • Distribution Requirements Planning (DRP) • “JIT” deliveries

15. SJSU Bus 140 - David Bentley Communications • Traditional • Mail, Phone, Fax • EDI • Transmission of forecasts, orders, etc. • Individual supplier/customer agreements • Internet (E-Commerce) • Buying and selling using the Internet • Business-to-business, business-to-consumer • Exchanges

16. SJSU Bus 140 - David Bentley Creating an Effective Supply Chain • Key is external and internal partnerships • Steps • Strategic objectives and tactics • Integrate internal part first • Extend to suppliers and customers • Optimize data management across chain • Develop strategic partnerships

17. SJSU Bus 140 - David Bentley SCM Software Vendors • Supply Chain Management (SCM) • SAP • Oracle • JDA Software Group • I2 Technologies (acquired in 2010) • Manugistics (acquired in 2006) • Sage Software

18. SJSU Bus 140 - David Bentley Internet Applications (B2C) • Oracle (Redwood Shores) • Including Siebel (San Mateo) • Acquired by Oracle (June 2006) • BroadVision(Redwood City) • Many others

19. SJSU Bus 140 - David Bentley E-Commerce Areas • CRM - Oracle (including Seibel), BroadVision • B2B - SAP, Oracle • B2C - BroadVision • SCM - SAP, Oracle, JDA, Sage • E-Procurement • SAP • Ariba (acquired by SAP Q3 2012)