Presentation on theme: "E-Commerce and Supply Chain Management (SCM)"— Presentation transcript:
1 E-Commerce and Supply Chain Management (SCM) Chapter 4
2 Management 326 Operations and Strategy Designing an Operations System ImprovinganOperationsSystem(Just-in-Time)OperationsandStrategyDesigninganOperationsSystemManaginganOperationsSystemInventory Managementfor Independent DemandSupply Chain Management
3 Chapter Outline Supply chains and supply chain management Information sharing in the supply chainTactics for reducing inventory costs in the supply chainPoint-of-sale data & automatic replenishmentVendor-managed inventoryPostponementDrop shippingOperations management issues in online sales
4 Why Supply Chain Management is Important Supply chain management impactsCosts and inventory investmentCustomer serviceProduct availability and deliveryProduct or service quality (through choice of suppliers)Product design
5 Lessons from the Dairy Products Supply Chain Figure 4-2, page 103 Companies often have several tiers of suppliers.Your company's Tier 1 suppliers are the firms that your company buys from.A company has more control over Tier 1 suppliers than over Tier 2 & Tier 3 suppliers
6 Supply ChainsA supply chain is the network of activities that deliver a product/service to the customerSourcing (purchasing) of raw materials, parts, goods for sale, or service inventoriesOrder entryOperations planningTransformation process (manufacturing or services)Quality managementLogistics:Transportation (traffic)Distribution (delivering the product to customers)
7 Lessons from the Jeans Supply Chain (not shown in textbook) A company's supply chain affects its performance and competitiveness.If a problem arises, a company is likely to blame the Tier 1 supplier. Consumers will blame the retailer or the manufacturer.Information technology is used to coordinate supply chain activities, both within each company and between companies
8 Supply Chain Management (SCM) Supply Chain Management is the business function that coordinates the movement of materials and information through the supply chainYour suppliers should help your firm achieve its competitive objectives
9 Objectives of Supply Chain Management Minimize the cost of materials and material movementMinimize inventory investmentEnsure timely delivery of materials at every level of the supply chain and to customers (product availability)Ensure quality of materials used in manufacturing or servicesIf needed, get product design help or other services from suppliers.
10 Information Sharing in the Supply Chain Figure 4.1, page 102 The objective of information sharing is to match demand and supply. (What will be available when, and from whom?)Demand: actual sales, sales forecasts, booked orders, custom ordersProduct availability: current inventory, production plans, shipping schedules, shipmentsQuality: suppliers' data on quality
11 Tactics for Reducing Inventory Costs (1) Point-of-sale Data (POS) Retailers collects point-of-sale data at the cash register and updates inventory by SKU (stock keeping unit) in real time. SKU's are marked with bar codes or radio frequency ID (RFID) tags. Retailer has options:Use point-of-sale data to forecast future sales and transmit order to manufacturer.Automatic replenishment: retailer transmits point-of-sale data to manufacturers, who determines the retailer's current needs and ships what is needed.Vendor-managed inventory (next slide)
12 Tactics for Reducing Inventory Costs (2) Vendor-Managed Inventory (VMI) in Retailing VMI in retailing: The supplier electronically accesses the retailer's database for sales information for the supplier's products.Supplier ships what is needed. (automatic replenishment)Supplier is responsible for updating the customer's database when goods are shipped.Supplier is responsible for anticipating customer's future needsPioneered by Wal-Mart (Retail Link software)
13 Tactics for Reducing Inventory Costs (3) Vendor-Managed Inventory in Manufacturing Supplier WarehouseWabco AircraftBrake FactoryPartsWabco Assembly LineVMI in manufacturing: supplier maintains a parts inventory at the customer's plant.When the customer needs parts, a supplier employee transfers the parts to the production area.Then the supplier bills the customer for the parts.
14 Tactics for Reducing Inventory Costs (4) Postponement Produce a generic product. Complete a final product variant when you have an order or can accurately estimate trends.Benetton has suppliers make white sweaters and then dye them just before they are shipped to Benetton stores.Postponement often requires re-designing the product or doing process steps in a different order.
15 Tactics for Reducing Inventory Costs (5) Drop Shipping When a customer orders from Company A, some or all of the order may be shipped by Company A's suppliers.Order & paymentAmazon distributioncenterCustomer ordersfrom AmazonFrequently ordered itemsOrdereditemOrderSupplier who sells a less frequently ordered itemmakes a drop shipment
16 Operations Issues in Online Sales Inventory managementPacking orders for shipmentDeliveryCustomer returns
17 Operations Issues in Online Sales Packing Orders for Shipment Items are identified by bar codes or radio frequency ID (RFID)Warehouse workers put ordered items in cratesSorter sends each item to the correct, bar-coded box for the customer who ordered itPacking slip is printedBoxes are packed, taped, weighedBoxes are put on trucks for shipment to customers
18 Operations Issues in Online Sales Delivery Objective: Deliver when promised, while minimizing delivery costsBrick-and-mortar stores (like Sears) can ship items to stores for customer pickup.Other online merchants ship via a package delivery service (like UPS) or U.S. postal serviceOnline merchants use package delivery services for most shipments to other countries.Customers usually pay a standard shipping cost – different for U. S. and other countries
19 Operations Issues in Online Sales Customer Returns Objective: minimize the cost of customer returns and reduce "hassles" for customers25% of Internet orders result in a customer returnProblems in returning goods are the 2nd biggest reason that consumers don't buy onlineCustomer usually pays for return shippingVariety of approaches used to return goods: postal service, contract package delivery service, brick-and-mortar store
20 Operations Issues in Online Sales Customer Returns (2) Online retailer must ship a replacement item or issue credit to customerOnline retailer must process returned itemsReturn defective items to supplier for a creditGood items can often be repackaged, priced, and resold.