E-Commerce and Supply Chain Management (SCM) Chapter 4

Supply Chains A supply chain is the network of activities that deliver a product/service to the customer Sourcing (purchasing) of raw materials, parts, goods for sale, or service inventories Order entry Operations planning Transformation process (manufacturing or services) Quality management Logistics: Transportation (traffic) Distribution (delivering the product to the customer)

Supply Chain for Furniture

Supply Chain Management (SCM) Supply Chain Management is the business function that coordinates the movement of materials and information through the supply chain Objectives of supply chain management Minimize the cost of materials and material movement Minimize inventory investment Ensure timely delivery of materials at every level of the supply chain and to customers Ensure quality of materials used in manufacturing or services

SCM in a Dairy Products Supply Chain

Information Sharing in the Supply Chain Demand: sales forecasts, booked orders, and/or actual sales Custom orders Production plans Product availability Shipping schedules: items, quantities, delivery dates Shipments Suppliers' data on raw material quality

Reducing Inventory Costs in the Supply Chain Channel assembly: Distributors or retailers assemble computers to order, with the manufacturer's brand name Drop shipping: Amazon has publishers ship books directly to Amazon customers Vendor-managed inventory: supplier owns the parts inventory at the customer's plant until the customer uses those parts.

Reducing Inventory Costs in the Supply Chain Retailers transmit point-of-sale data to manufacturers, who ship what is needed. Just-in-Time manufacturing ERP II systems

Operations Issues in Online Sales Inventory management Customer service: product in stock or available for delivery Inventory costs Timely and cost-effective delivery In manufacturing, this often requires short manufacturing lead times Managing customer returns 25% of Internet orders result in a customer return Variety of approaches used: mail, contract package delivery service, brick-and-mortar store

Global Supply Chain Issues Different product requirements in different markets Language barriers Cross-cultural communication issues Fluctuations in the value of money Need for currency hedging Poor telecommunication Poor transportation

Global Supply Chain Issues (2) Problems with global suppliers Poor quality – ISO 9000 certification provides some assurance about supplier quality Use of child labor Failure to pay the local minimum wage Supplier may copy your product designs and sell unauthorized copies of your product (piracy)

Make or Buy Decisions Firms usually do not outsource Activities where they have a superior technology Activities that contribute to a core competency Firms often outsource to obtain superior materials or services, higher quality, lower costs, or superior product designs Firms often outsource to avoid a major capital investment. Choose suppliers whose products, quality, delivery, capacity, and service meet the firm's needs