1. Supply Chain Management
Can’t talk about e-commerce without discussing the process by which goods are transformed from raw materials to final disposition. The major benefit of e-commerce is the efficiency which it adds to this process.
We have a Global Logistics Chain
Recycling
XXX Cycle
Modern XXXXXXX
Traditional View:
In reality the Cycle is much more complicated
Raw Materials
Refining and processing
Part manufacturing
E-Commerce can play an important role in each node and arc of the Logistics Cycle
Finished goods assembly
Warehousing
Retailers
Consumers
April 17, 2006
Week 10

2. Elements of Supply Chain Mgmt.
Customer Asset Management- managing the flow of information about customers
Forecasting, Sales, Marketing, Customer Service, Cost Estimation, Pricing, Order entry & reservations, Order selection
A typical department store has 1 million SKUs (Stock Keeping Units)
Integrated Logistics- managing the flow of information about customers
Procurement, Inventory management, Warehousing, Transportation
Involves an enormous volume of transactions
much of which is done with EDI (Electronic Data Interchange) Standards
(agile) Manufacturing- managing of the production process
Production planning, Manufacturing, Assembly
Financial & Account Mgmt- managing of financial flows with intermediaries
Billing, Accounting, Payment mgmt
April 17, 2006
Week 10

3. Transactions in Integrated Logistics
Billions of transactions
Sources of Supply
Units of Demand
35,000 Mining establishments
92,830,000 Household units
68,000 Agricultural, forestry and fishery establishments
210,000 Transportation, communications and utility establishments
355,000 Manufacturing establishments
5,807,000 Sources of supply trading with each other
440,000 Wholesale establishments
492,000 Contract construction est.
504,000 Financial, insurance and real estate establishments
1,441,000 Retail establishments
98,637,000 Units of demand
1,811,000 service establishments
5,807,000 Sources of supply
April 17, 2006
Week 10

4. Role of e-commerce in SCM
Allows for different supply model:
PUSH (build to stock) the traditional approach
Anticipate demand, store supply inventories in nearby warehouses, regular delivery to customers
Works great as long as everything operates according to PLAN
When the PLAN changes then the momentum associated with the PUSH model causes problems
PULL (Build to order) The demand drives the model in real time.
Example: Person in supermarket checks out, bar codes are scanned
adjusted are demand forecasts, pricing and promotional activities
which adjust forecasts of warehouse inventories,
which adjust orders from suppliers,
which adjust orders from manufacturers,
which adjust orders of raw materials
April 17, 2006
Week 10

5. Role of e-commerce in SCM
The PULL model requires that all elements of the Logistics Chain be agile,i.e. able to reach to changing conditions
Example in the transportation area:
10 years ago the buzz word was “just in time” deliveries
This just supports a planned PUSH type economy
The new approach is to be able to manage and control the transportation in a dynamic “real-time” environment
It is now important that
Know where everything is if I need to know it
I have accurate ETA’s
be able to redirect (control) the shipments
Can’t manage nor control if I don’t know where it is and what it’s state is.
None of this can be done without e-commerce
April 17, 2006
Week 10

6. Performance Measures
Availability - Having the product where and when it is needed
Stock-out Frequency - probability of stockout
Fill Rate - Ratio of Units delivered / Units ordered
Orders Shipped Complete
Operational Performance
Speed - elapsed time from when order is placed until it is delivered
Consistency - Ratio of Units delivered / Units ordered
Flexibility - ability to handle extraordinary requests (e.g., changes in destination, new products, phase outs, recalls, rush orders)
April 17, 2006
Week 10

7. Supporting Systems Strategic Planning Systems - Tactical Planning -
Alliance, partnership acquisition formulation
Tactical Planning -
Vehicle routing & scheduling, Inventory mgmt., Facility location, Integration and outsourcing
Operational Control -
Dispatch, Real-time decision systems, Customer service
Management Systems
Customer service measures, Production measurement, Quality measurement, Asset management
Transactional Systems
Order entry, Shipping, Pricing, Receiving,
April 17, 2006
Week 10

8. Integrated Logistics Inventory management
Inventories can be a significant percentage of assets (~ 30%)
Cost of inventory:
Capital cost, Taxes, Insurance, Obsolescence, Storage
Fear of Stock-out a major cause of inventories
Perceived uncertainty Leads to excess hoarding ( and a hiding of the hoarded inventory, which leads to more uncertainty)
Role of e-Commerce
No need for Point-of-Sale inventory
Better visibility of information will reduce perceived Uncertainty
April 17, 2006
Week 10

9. Transportation Function Participation Modes Economic factors
Product movement
Product storage
Participation
Shipper
Carrier
Consignee (receiver)
3rd party facilitator
Government
Modes
Economic factors
Distance, Volume, Density,Speed, ETA reliability, Handling, Liability (loss & damage), Deadheading
April 17, 2006
Week 10