Supply Chain Management (SCM)

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

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.

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).

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?

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

The Simple Supply Chain

Complex Supply Chains

Supply Chain Management = SRM + Inventory Management + CRM

SCM may cross enterprise boundaries

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

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

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

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

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

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

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

Bullwhip Effect

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

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.

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

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

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

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)