BS3912 Week 6 1

Managing e-Business & High Technology (6)

Last Week – e-Business Strategy (Chaffey Chapter 5)» Putting together the pieces of a strategy

This Week

» Review of module» Introduction to Supply chain management (Chaffey Ch.6)

– What are main elements of SCM?– How do they relate to value chain and value network?– What is rôle of IS in managing SCM to enhance value?

» Assignment workshop

BS3912 Week 6 2

Review of Module

Already covered What’s special about managing

high-tech companies? Case-study: IBM e-Business Brain-storming assignment ideas Challenges of introducing

e-business to an organization e-Environment analysis – SLEPT e-Business Strategy

(Chaffey Chapter 5)

This week» Supply-Chain Management » Assignment Workshop

To be done » Building a (e)business-case» Assignment workshop» Integrating the supply-chain» e‑procurement» Planning to implement

e‑commerce» The Future of Work

What’s missing? What should we do differently?

BS3912 Week 6 3

The Supply Chain

Most companies create value by processing inputs to produce outputs» Fairly obvious in case of manufacturing» Also applies to trade; even to pure services

Inputs arrive via an upstream supply chain» We manage this via “Inbound logistics”

Outputs leave through a downstream supply chain» Which we manage with “Outbound logistics”

Logistics companies are intermediaries who support outsourcing of some of the logistics activity

BS3912 Week 6 4Chaffey (2007) Fig 6.1

Elements of Supply Chain

Simplified View

BS3912 Week 6 5

Material and Information Flows

Every time you arrange the flow of goods and services along the supply chain, Data must flow too

For example:» Our warehouse stock falls below order threshold» We send order to supplier» Supplier sends goods» Supplier invoices us» We send payment transfer request to BACS

This data-intensive nature of supply chain makes it amenable to e-Business enhancement

BS3912 Week 6 6

Supply Chain can be a Network

Suppliers

Our Manuf. Company

Supplier Warehouse

Wholesaler

B2B retailer or Exchange

Distributor

Supplier Agent

Our Warehouse

Wholesaler

Retailer or Exchange

Distributor

Our Company Agent

Customer

B2B

B2C

B2B

B2C

Heavily adapted from Chaffey fig 6.2 (2001)

Upstream Downstream

BS3912 Week 6 7

Push or Pull?

“You can have it any color, so long as it’s black”(reputed to have been said of Model T Ford, by Ford)

Push involves» Innovation by manufacturer

(e.g. new product development)» Identifying a target market» Recruiting channels to push product into that market

Pull is an approach that’s growing fast» Find out what the market wants» Respond with rapid, targeted development» Supply at rate determined by market (e.g. Print on Demand)

BS3912 Week 6 8Based on Chaffey (2007) Fig 6.3

Push Approach to SCM

Typical Aim: Optimize production for cost & efficiency Characteristics: Manufacturer-led product development

Poor data integrationLong cycle and response times, Large inventories needed

Use of IS: Independent data mgt by chain membersLimited use of EDI

Supplier Manufacturer Distributor Retailer Customer

Push to customer

BS3912 Week 6 9

Pull approach to SCM

Typical Aim: Enhance product/service quality Characteristics: Driven by Market Research; Technology

used for research and data integration;Short cycle & response times;Low inventory levels through JIT

Use of IS: Integrated internal systemsInformation sharing across supply-chainExtensive use of B2B technologies

Supplier Manufacturer Distributor Retailer Customer

Pull from customer

Based on Chaffey (2007) Fig 6.3

BS3912 Week 6 10

The Value Chain Analysis used to focus on “Direct” and “Indirect”

» Primary activities that get goods/services to the consumer,versus » Support activities that provide infrastructure

Companies could sink into chaos by reducing investment in internal support (or become fat investing too much)

Chaffey (p.277*) offers a different model, where both elements add value over a wide range of activities» Recognizes value of each activity within a purpose» This analysis opens up opportunities to specialize» Or for integration along the supply chain* p.223 in 2nd edn

BS3912 Week 6 11

Traditional and Revised Models

Not so much a revision as a

different view of the way activities

are integrated

Chaffey (2007) Fig 6.4

BS3912 Week 6 12

Value Network

Term recognizes that value isn’t added by a constant chain, but varies between products, and with time» We should always consider a variety of suppliers» Potentially with variants of inbound logistics

Chaffey’s Fig 6.5 shows how this can support outsourcing» Driven by strategy (e.g. “core business,” “core capabilities”)» May want to use partners to integrate activities,

not only as suppliers or distributors

Clearly, stock-holding does not contribute much value, as we only need what’s required immediately

BS3912 Week 6 13Chaffey (2007) Fig 6.5

Give examples ofInternet Service ProviderWide Area NetworkApplication Service Provider

Value Network of an Organization

BS3912 Week 6 14

Restructuring the Supply Chain

Trend in mid-C20 was towards Vertical Integration» BMC bought Pressed Steel and other component suppliers» General Motors bought AC-Delco» Most oil companies remain vertically-integrated

Outsourcing boom of late C20 disaggregated companies» Motor manufacturers now mainly assembly plants» Most computers are built from bought-in components» Focus is on hanging on to unique technologies

Alternative approach is “Virtual Integration”» Rely totally on third-party suppliers, but» Integrate them into your SCM

BS3912 Week 6 15Chaffey (2007) Fig 6.7

Integration and Disintegration

BS3912 Week 6 16

What is “ordering online”?

If you already have a supplier/purchaser relationship» Orders can be pretty informal (e.g. e-mail), or» Use web-based form-filling, still by humans» Invoices can follow by conventional routes

Relationship can be automated» Purchaser’s system orders from suppliers’ systems» Requires secure systems to ensure transactions cannot be

repudiated and that supplier will be paid Or we can build relationships on the fly

» Using B2B exchanges» Or, given standards, we can shop around directly

BS3912 Week 6 17Chaffey (2007) Fig 6.8

e-business applications in Europe

BS3912 Week 6 18Chaffey (2007) Fig 6.9 Source: DTI (2004), Fig. 7.5b

Integrating with Suppliers

BS3912 Week 6 19

How Online Ordering Develops

Figure from last week

from Chaffey (2001)

BS3912 Week 6 20Chaffey (2007) Fig 6.10 Source: DTI (2004), Fig. 5.2f

Barriers to implementing integrated SCM

BS3912 Week 6 21

BACS makes this possible

from Chaffey (2001)

BS3912 Week 6 22

Information Systems for SCM

JIT won’t work unless you have shared planning» Example: if Tesco does a BOGOF on Baxter’s soup,

can Baxter’s crank up production fast enough?» Supply planning needs to consider aspects of demand

planning

ERP (Enterprise Resource Planning) systems like SAP handle all operational activities» Supported by operational database and» Data warehouse (tactical support for the planning process)

BS3912 Week 6 23Chaffey (2007) Fig 6.11

Typical IS Infrastructure for SCM

BS3912 Week 6 24

Tesco Case Study (Chaffey p.292)

Based on Nairn’s Financial Times article 3 May 2000 Goal was to enhance collaboration across supply chain Network linked 1300 of 2000 suppliers (96% by volume)

» 350 receive EDI messages: demand, stock, forecasts» Goal is to shift product mgt responsibility to supplier» Funding from suppliers (£100 to £100K, depending on size)» Suppliers now often see problems before Tesco

Promotions management added in 1999» St Ivel saved 30% on annual promotion costs

“Seamless planning” with input shared between Tesco and the supplier

BS3912 Week 6 25Chaffey study site slide 6.23

Tesco Information Exchange

BS3912 Week 6 26

SCM Strategy ProcessStrategy element SCM approach of Hughes et al. (1998)Situation analysisGather Data

Internal assessment of current approachesExternal analysis of marketplace trends

Objective setting Define target returns and release of shareholder value

Strategy Develop SCM strategies to achieve the goals

Tactics Prioritize operational improvements – quick wins

ActionsImplement change,Challenge thinking

Form SCM strategy forum to assess the needsAnalyse value-added, costs, cycle time for SCMExecutive-led projects to scrutinize key processesAllocate business devt strategies to executives

ControlMeasure outcome

Integrate SC measurement in corporate reviewsAdjust baseline to maintain pressure

Based on Chaffey (2007) Table 6.2

BS3912 Week 6 27

Alternative Strategies for Changing SCM

Chaffey (2007) Fig 6.12

Extent

Timescale

BS3912 Week 6 28

Summary

SCM Coordinates all supply activities of a company» Upstream/Inbound –

getting the inputs needed to create added value» Downstream/Outbound –

routing the outputs to customers, directly or indirectly

“Chain” is usually a network

Inputs include:» Items incorporated in our products (steel, screws, circuits)» Things we need to run our business (paper, toner, desks)

Ideally, we optimize every element of the supply network