589SCM.ppt

04/12/23 ECT 589 Susy Chan, Ph.D. 1

ECT 589 ECT 589 E-Commerce

Management

Week #5

Supply Chain Management

Source: Gartner, HBR, McKinsey Reports, Lee & Whang


Agenda

Market News Supply Chain Management Exploiting Virtual Value Chain Integrated Supply Chain Management Moore Medical Discussion


e-Business Application Architecture

Supply Chain Mgmt

Selling Chain Mgmt

Sta

keh

old

ers

Business Partners,Suppliers, Resellers

Distributors,

Customers, Resellers

Em

plo

yees

HR

MS/

E-P

rocu

rem

en

t

Fin

ance

Auditin

gM

gm

t Contro

l

BI EAI

CRM

ERP

Logistics

Pro

ductio

n

Distrib

utio

n

Mark

etin

g

Sale

s

Cust S

vce


Defining SCM

A “process umbrella” under which products are created and delivered to customers.

The complex network of relationships that organizations maintain with trading partners to source, manufacture, and deliver products

A network of autonomous or semi-autonomous business entities collectively responsible for procurement, manufacturing, and distribution activities associated with one or more families of related products.


Vendors Plants DCs Customers


Stakeholders along the supply chain have different and frequently conflicting objectives.

Accordingly, they often operated independently, resulting in a phenomenon called the bullwhip effect on demand and supply .

Bullwhip Effect


Bullwhip Effect

Source: Johnson & Pike, 1999


Suppliers

Europe DCSuppliers

Suppliers Subassembly

PC Board

Suppliers

ASIC

Assembly

Asia DC

US DC

Resellers

Resellers

Resellers

Customers

Customers

Customers

Source: Supplychain onlineASIC: Application-Specific Integrated Circuit;

An Example of SC for Computer Printers


Globalization of business: Worldwide dispersion of manufacturing and distribution facilities.

Proliferation of product variety Increasing complexity of supply networks Shortening of the product life cycles Responsiveness over efficiency. Companies’ willingness to accept lower margins to

maintain and increase market share.

Trends Driving SCM Investments

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SCM: A Process View

Material Flows involves physical product flowing from suppliers to customers through the chain and reverse material flows: product returns, servicing, recycling and disposal

Information Flows involves demand forecasts, order transmissions, and delivery status report

Financial Flows involves credit card information, credit terms, payment schedules, and consignment and title ownership arrangements

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Supplier Manufacturing Distribution Retailer Consumer

A Process View of the Supply Chain

Supply Chain Planning

Supply Chain Execution

Product Flows Product Flows Product Flows Product Flows

Information Flows

Payment Flows

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Strategic Decisions Long term, closely linked to coporate strategy and

guide supply chain polices. Operational Decisions

Short term, day-to-day activities Major Decision Areas

Location Production Inventory Transportation (distribution)

Supply Chain Decisions

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Supply Chain Planning

OrderCommitment

Advanced Scheduling

Demand Planning

TransportationPlanning

Distribution Planning

CustomerOrder

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Supply Chain Execution

OrderEntry

FulfillmentPlanning

OrderConfirm.

Forecasting

AggregateInventoryPlanning

MPS/Sourcing

InventoryAvailabilitySchedule Production

Allocateinventory

Productionscheduling

DistributionScheduling

Order Planning Process

Distribution Process

Pick &Load

scheduledelivery

customerService

Replenishment Process

Production Process

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Three Supply Chain Strategies

Current: Enterprise Focus (Nabisco) Create stores of inventory to address bullwhip

effect Near Term: Partner Focus (P&G)

Collaborative Systems Emerging: Direct Focus (Dell)

Build to Order direct supply chain Adaptive supply change Intelligent supply chain

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Internet’s Impact on SCM

Supply Chain Integration Coordination and collaboration among supply chain

partners through “supply chain integration.” Product design and development, procurement, production,

inventory, distribution. Post-sales service support, and marketing through supply networks, services, and business models

Information is replacing inventory. Industry Structure

Competition between firms vs. competition between supply chains

E-Business Webs

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SCI: Four Key Dimensions

Lee & Whang 2001)

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Information Integration

Sharing of information among members of the supply chain

For example: • Sharing demand data, inventory status, capacity plan, production schedules, promotion plan and shipment schedules in real-time and online basis can increase efficiency and responsiveness

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Electronic Information Integration• Companies, across a supply chain,

coordinate their product, financial and information flows using the electronic technology and the Internet

• Internet Info Hubs: • Open standards, permitting easy, universal, secure, and access to a wide audience at a low cost• Instantly process and forward all relevant information to appropriate parties• Hub is a node in the data network where multiple organizations interact in pursuit of information integration, data storage, and information processing

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Important factors for electronic business integrations

Well defined channels of communication - well defined with roles and responsibilities

Performance measures - measure and monitored performance of all member of the supply chain

Incentives - aligned incentive for all members in order for supply chain integration to work

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Planning Synchronization

•Joint design and execution of plans for product introduction, forecasting and replenishment through sharing information

All member in the supply chain synchronize their order fulfillment plans so that the replenishment are made to meet the same objective.

•Collaborative Planning, Forecasting and Replenishment initiative (CPFR)

•Both buyer and seller use the Internet to establish a forecast and replenishment plan

•Share ground rules•Agree on critical actions•Share forecasts •Detect major variances•Exchange ideas•Collaborate to reconcile differences

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Internet Planning Synchronization • The Internet delivery – Internet-based collaboration

• Share demand data • Collaborate closely on promotions and replenishment• Facilitate the geographically dispersed company’s

ability to check demand and supply levels and respond quickly to potential mismatch problem

• Shorten the new product development times• IP and Knowledge Sharing

• Create Universal data network for design data• Sharing intellectual properties• Speed up design and introduction process• Leverage knowledge capital critical and design

process

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Workflow Coordination

Streamlines the automated workflow activities between supply chain partners

Workflow coordination also means what and how we can do with the shared informationFor example:

• Procurement activities from a manufacturer to a supplier can be tightly coupled to increase efficiencies of time, accuracy, and cost

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Electronic Workflow Coordination

• The Internet permit companies to automate the critical business processes• E-workflow coordination includes

• Procurement - dynamically link the buyer into real-time trading communities to reduce operational cost and increase efficiency

• Order execution- Internet-based service to facilitate and process orders, coordinate rebates, discounts

• Engineering change - handle the quick change in product rollover in a timely fashion

• Design Optimization• Financial Exchanges – Internet link to process financial

exchanges

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New Business Models

Redefine logistics flows of business partners

The roles and responsibilities of members may changes to improve overall supply chain efficiency• For example:

• Apply new rules between partners, who may join to create new products, pursue mass customization, and penetrate new market and customer segment

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New Electronic Business Models

• With the new concept of Internet integrated supply chain, new developing strategies and business models are adopted by companies• Virtual Resource – Internet based secondary markets

handles the excess inventory and reduce cost

• Supply Chain Restructuring – Use information technologies to restructure the logistic flows of product to gain efficiencies

• Product Upgrades – Use the Internet to upgrade hardware product, including onsite upgrade or physical replacement by installing software over the Internet

• Mass Customization – Use Internet to allow customer configure specific order options tailored to their taste and preferences

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New Electronic Business Models - cont

• Service and Support – Perform PC support – check viruses, alert customer and provide online fixes. Data is gathered remotely using the Internet

• From Products to Services – Internet-based services for personal finance, tax preparation and financial tools. Services are hooked up from backend financial Institutes to end-users

• Multi-channel Click-and Mortar Fulfillment – Use the Internet to capture online order, use local store to fulfill order and delivery

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The next wave

• Demand management – e-business provide enough demand data. Using the extensive data, companies proprietary scientific methods, sophistical statistical analyses and optimization techniques,business can help companies to optimize their demand management decisions• Provide up-to-the-minute capacity and resource data• Companies can target demand creation program – discount,

rebates, regional or niche marketing to stimulate demand

• Market Intelligent – By using the above data, data mining and data analysis can properly derive business intelligent• Use the business intelligent to plan merchandise decision,

promotion plans, and new product development decisions• Business can use this data and perform this function as a service

to customers for profitability and market positions

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Source: Henry Co

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Extended-enterprise SCM solutions

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Extended-Enterprise SCM Applications Targeted at providing a single enterprise (usually

the channel master) with a solution that enables it to better manage its supply chain processes and integrates itself into the processes and application architectures of its trading partners.

Distributed order management. Supplier relationship management execution. E-sourcing Supply chain inventory visibility Reverse logistics support Adaptive demand management

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B2B C-Commerce Solutions

Not owned by a single enterprise, but are used to manage the multi-enterprise interactions within a value chain. The participants in a particular ecosystem will engage these services to collaborate and transact.

Example: Uniform Code Council (UCC) for participants in the retail and consumer goods value chain to access product data.

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UCCNet: A B2B C-Commerce Solution

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Competitive Advantages through SC Integration

Dramatic returns through efficiency improvements Better asset utilization Faster time to market Reduction in total order fulfillment times Enhanced customer service and responsiveness Penetrating new markets Higher return on assets Higher share order value

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2004 Hype Cycle for SCM

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Classifying B2B Hubs

How business buy

systematic sourcing

spot sourcing

What business buyoperating input manufacturing inputs

MRO Hubs

Aggregation

Catalog Hubs

aggregation

Yield Managers

Matching

Exchanges

AggregationMatching

Source: E-Hubs 2000

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How Companies Conduct Purchases

Strategic sourcing Long-term contracts based on negotiation between the sellers

and buyers Can be supported more effectively and efficiently through a

streamlined supply chain Spot buying

Purchasing of goods and services at market prices, as determined by supply and demand in a dynamic manner. Buyers and sellers do not know each other. Eg. Stock exchanges, or commodity exchanges (oil, sugar, corn)

Can be more economically supported by the 3rd party exchange

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E-Procurement

Procurement management: the coordination of all the activities pertaining to purchasing goods and services for an organization

Inefficiencies in procurement management of indirect materials – MRO – aggregation of catalogues

Reverse Auction for procurement of direct materials, e.g.. GE, GM, RFP process

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Value Propositions

MRO Hubs Consolidated MRO catalog Efficiency, low cost, disintermediate fulfillment

Catalog Hubs Automate the sourcing, reducing transaction cost

Yield Mangers Hubs a high degree of price and demand volatility High fixed cost asset

Exchange Hubs Relationship management Easier trading

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Aggregation & Matching – Value Mechanism

Aggregation: Large # of sellers and buyers, reduced transaction, static pricing , one-stop shopping Benefits: purchasing cost is high, specialized products,

large SKU, fragmented supplier chain, buyers not sophisticated, pre-negotiated contracts, meta catalog

Matching: Dynamic pricing, bid, auction, player’s role is fluid Benefits: products are commodities or near-commodities

and can be traded sight unseen; massive trading volumes to transaction costs; buyers and sellers are sophisticated; use spot sourcing to smooth the peaks and valleys of supply and demand, logistics and fulfillment can be conducted by third parties, demand and prices and volatile

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Next Week

Next Session: Eastman Chemical Case E-Procurement Issues

Documents

589SCM.ppt