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“SCM, SRM, CRM, and ERP”
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Supply Chain Management
Uses information technology to endow computerized intelligence to an ever-growing network of raw material suppliers, factories, warehouses, distribution centers, and points of sale. Each player in the supply chain conducts business with the latest and best information, and products move from point-of-origin to consumption as quickly as possible and at the least cost.
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A Supply Chain for Bread
Stage of Production Value Added Value of Product Farmer produces and harvests wheat $0.25 Wheat transported to mill $0.08 $0.33 Mill produces flour $0.15 $0.48 Flour transported to baker $0.56 Baker produces bread $0.44 $1.00 Bread transported to grocery store $1.08 Grocery store displays and sells bread $0.21 $1.29 Total Value-Added
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Value-Added Value added The difference between the cost of inputs
and the value or price of outputs. Capital Inputs Land Labor Transformation/ Conversion process Outputs Goods Services Value added Control Feedback
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Value-Added Value-Added Value-Added Value-Added Value-Added Value-Added
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Pull/Push Systems Push system: System for moving work where output is pushed to the next station as it is completed Pull system: System for moving work where a workstation pulls output from the preceding station as needed. (e.g. Kanban) (Assume fast response time for key activities along the chain)
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of Supply Chain Management
(Missing slide) Wal-Mart The Poster Boy of Supply Chain Management
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Some Characteristics of Wal-Mart’s “Cross Docking”Technology as
Applied to Their Supply Chain Cross Docking is a logistics approach that permits goods to cross from one loading dock to another to minimize the time that goods spend in a distribution center. It is supported by a private satellite communications system with sends point-of-sale data to some 4000 venders, permitting less reliance on forecasting and less inventory in the system. Cross Docking reduces Wal-Mart’s cost of sales by up to 3% compared to industry standards.
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Some Comments on Accounting and Finance:
------> the pace of change by the FASB (Financial Accounting Standards Board) in reference to recognizing software properly on financial statements. What did they eventually change? ------> a wait by the FASB on the impact of SCM on financial statements. What is this impact? From transparencies, show job inquiry and salary surveys on CBA Departments
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SRM — E-Procurement Supplier Relationship Management: The practices needed to establish the business rules, and the understanding needed for interacting with suppliers of products and services of varied criticality to the profitability of the enterprise. E-Procurement: A set of applications and B2B information management processes that support the buying of direct and indirect goods and services.
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Supplier Relationship Management
Supplier Relationship Management Spans Functional and Enterprise Boundaries Design Forecasting Planning and Scheduling Manu-facturing and Packaging and Operations Distribution and Outbound Logistics Purchasing Inbound Logistics Inventory Management Supplier-Shared Reporting, Analytics and Re-Evaluation
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SCM-SRM Goals Improve speed and time to market
Reduce supply variability Improve collaborative decision making Lower the costs of supplier “ownership” Reduce inventory levels Drive Return on Relationships Develop Competitive Advantage
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SCM-SRM Benefits Reduction in Costs Reduction in Operating Expenses
Competitive Advantage
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SCM- SRM Inhibitors and Accelerators
Not on CEO Radar Scope “Comfortable” with Existing Suppliers Lack of Cross-Business Cooperation Doubt Suppliers’ Value Lack of Comprehensive Applications and synchronized information Bidding Practices Price as Sole Criteria Accelerators ↑Improved Buying Processes ↑Supply Chain Cost Cutting ↑Improved Bottom Line ↑Global Sourcing ↑Collaborative Commerce ↑Improved Competitiveness
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Why SCM-SRM Matters: Cost of Goods Compared to Revenue
1999 Fortune 500 Sales (millions) 113,910 257,477 153,831 85,629 281,740 1,109,949 778,602 102,437 184,426 119,800 39,676 85,800 520,961 53,665 204,400 217,739 748,439 337,707 Profit Avg. % Sales 0.34 5.39 -0.47 9.75 3.59 4.03 3.63 1.35 4.18 4.21 7.88 3.50 9.54 -3.61 17.32 3.60 Purch. $ % of Sales 64.60 61.30 58.60 51.70 50.80 47.20 45.60 42.40 42.10 40.00 36.20 35.60 34.30 34.00 33.80 25.50 18.49 Industry Metals Chemicals Engineering, Construction Beverages Computers, Office Equipment Motor Vehicle and Parts Electronics, Electrical Equip. Railroads Aerospace Airlines Scientific, Photo, Control Equip. Forrest and Paper Products Telecommunications Mining, Crude Oil Production Pharmaceuticals Food Petroleum Refining Utilities, Gas, and Electric Highest Impact Medium Impact Lower Impact
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New Rules/New Realities
Because of a move to improve operations, more than 45 percent of the value produced by Fortune 500 companies will be purchased. Downward price pressures are the norm on the revenue generating side of businesses. Increased profits can only come through a reduction in supply chain costs. Competitiveness is dependent on improved supplier relationships to reduce supply chain and operational costs.
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About 15 percent of global enterprises had implemented the supplier performance, procurement and operational management measures needed to develop the supply base as a competitive weapon.
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Fortune 500 enterprises will move strongly to SRM methodologies or they will incur profit reductions of close to 2 percent.
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Recommendations Develop SRM practices that: 1) link business goals to SRM practice, 2) are based on cross-functional information sharing and processes, 3) are based on measurable results, and 4) are based on complete supplier performance, not just price. Re-engineer sourcing practices along with the implementation of strategic-sourcing or e-procurement applications. Implementation of the applications alone will not assist an enterprise and may actually be disruptive to supplier relationships. When procured goods or services are critical to the value-generating mechanism, enterprises should negotiate for quality, delivery and price performance, not just goods and services. These components of the supplier relationship should have an associated monetary value.
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Successful SCM-SRM Implementation
Collaborate on Forecasts Information Notify and Respond to Sourcing Requests Perform Contract Negotiations Exchange design changes to improve time to market Exchange Order Throughout the Purchasing Cycle Share Performance Information The large titles are Supplier Interaction areas - i.e. Procure, Replenish The Red Items are current eBusiness functions provided The Blue Items are next release/future eBusiness function items The Black items are future vision but not yet planned to a release. Applications for eBusiness enable you to build stronger relationships with your supplier. They are about about having a 360 degree view of your supplier and how each of your business processes works to keep that customer happy, well serviced and productive. The last 10 years of business have been focused on an internal perspective, on how you could run your business more efficiently. Times have changed, and now the most innovative companies focus on expanding markets, driving revenue. This is achieved by focusing the enterprise on the customer and how each of their business processes interacts with the customer, whether it’s obvious processes such as marketing, selling, and servicing, but also production and fulfillment as well as administration. Let’s look in each category features common to all purchasing situations. A ‘must have’ for any organization looking to quickly improve productivity of employees involved in the procurement and payment cycle. Suppliers use these transactions to perform administrative tasks and keep their systems in sync with your, removing the administrative burden from your employees. Suppliers can view purchase orders online, use sort and filter functions to display, and drill down into line item detail. Suppliers can use the schedule page to review existing PO schedules, change orders, and planned purchase orders. Suppliers can view account balances and drill down to access a list of invoices for any open balance. Suppliers can also view invoices and drill down to invoice details. Suppliers can also view receipts to identify when shipped materials have been received, and drill down to access invoice information. The Maintain contacts and address features allow authorized employees of your suppliers to update their personnel information, and your PeopleSoft system automatically incorporates those changes. Allow Suppliers to Maintain their Information Exchange Inventory Levels and Replenishment requests View and Resolve Account Balances and Payment Status
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Successful SCM-SRM Implementation
(Missing slide) Collaborate on Forecasts Information Notify and Respond to Sourcing Requests Perform Contract Negotiations Exchange design changes to improve time to market Exchange Order Throughout the Purchasing Cycle Share Performance Information The large titles are Supplier Interaction areas - i.e. Procure, Replenish The Red Items are current eBusiness functions provided The Blue Items are next release/future eBusiness function items The Black items are future vision but not yet planned to a release. Applications for eBusiness enable you to build stronger relationships with your supplier. They are about about having a 360 degree view of your supplier and how each of your business processes works to keep that customer happy, well serviced and productive. The last 10 years of business have been focused on an internal perspective, on how you could run your business more efficiently. Times have changed, and now the most innovative companies focus on expanding markets, driving revenue. This is achieved by focusing the enterprise on the customer and how each of their business processes interacts with the customer, whether it’s obvious processes such as marketing, selling, and servicing, but also production and fulfillment as well as administration. Let’s look in each category features common to all purchasing situations. A ‘must have’ for any organization looking to quickly improve productivity of employees involved in the procurement and payment cycle. Suppliers use these transactions to perform administrative tasks and keep their systems in sync with your, removing the administrative burden from your employees. Suppliers can view purchase orders online, use sort and filter functions to display, and drill down into line item detail. Suppliers can use the schedule page to review existing PO schedules, change orders, and planned purchase orders. Suppliers can view account balances and drill down to access a list of invoices for any open balance. Suppliers can also view invoices and drill down to invoice details. Suppliers can also view receipts to identify when shipped materials have been received, and drill down to access invoice information. The Maintain contacts and address features allow authorized employees of your suppliers to update their personnel information, and your PeopleSoft system automatically incorporates those changes. Allow Suppliers to Maintain their Information Exchange Inventory Levels and Replenishment requests View and Resolve Account Balances and Payment Status
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Issues The complex nature of supplier relationships
The technology landscape Competition versus collaboration Gains and challenges related to supplier relationship management New measures on the financial strength of supply chain members
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Simulation Modeling of Supply Chains as Networks
(Missing slide) Note: Arrows (or network arcs) represent transportation links
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