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.

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 procurement 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, and 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, and 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. Emerging standards, high costs. MIS SCM & RFID Lab

Organizational challenges Changes company structure: resistance from employees wedded to traditional processes, leads to lack of adequate collaboration among marketing, production, and inventory management departments within a company Supplier reluctance or incompatibility issues. Lack of proper demand planning knowledge: leading to inaccurate or overoptimistic demand forecasts. Need new tools and guidelines. MIS SCM & RFID Lab

A major challenge: The Bullwhip effect. The bullwhip effect in supply chains occurs when the variability in size and timing of orders increases at each stage up the chain. 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. It can be eliminated by giving all supply chain participants consumer- demand information directly from retailers through interorganizational information systems Fig 8-13 The Bullwhip Effect © Pearson Prentice Hall 2009

How EDI can help … In lab, You’ll see how Electronic Data Interchange can help smooth out the communications Investigate HTML and XML Explore RFID technology