Graduate School of Business

Graduate School of Business
Chapter 7 E-Supply Chains, Collaborative Commerce, and Corporate Portals Jason C.H. Chen, Ph.D. Professor of MIS Graduate School of Business Gonzaga University Spokane, WA USA

Learning Objectives Define the e-supply chain and describe its characteristics and components. List supply chain problems and their causes. List solutions to supply chain problems provided by EC. Describe RFID supply chain applications. Define c-commerce and list the major types.

Learning Objectives Describe collaborative planning and Collaboration, Planning, Forecasting, and Replenishing (CPFR) and list the benefits of each. Discuss integration along the supply chain. Understand corporate portals and their types and roles. Describe e-collaboration tools such as workflow software and groupware.

BUSINESS FOCUS Customer centric What they need/want?
E-BUSINESS Customer centric SCM CRM BPR ERP Demands Products What they need/want? How many they need/want? When they need/want? How to reach them? Who are the customers? Where are the customers? Their purchasing habits HOW TO REACH THEM? IT/INTERNET/E-BUSINESS

The Product Life Cycle Introductory Stage Growth Maturity
Decline Stage Total Market Sales Time The product life cycle (PLC) concept is based on four premises: Products have a limited life Product sales pass thru distinct stages, each with different marketing implications Profits from a product vary at different stages in the life cycle Products require different strategies at different life cycle stages Total Market Profit N

7.1 E-Supply Chains supply chain
The success of organizations (private, public, and military) depends on their ability to manage the flow of materials, information, and money into, within, and out of the organization Such a flow is referred to as Supply chain involves activities that take place during the entire product life cycle including the movement of information, money and individuals involved in the movement of a product or a service supply chain

FIVE BASIC SUPPLY CHAIN MANAGEMENT COMPONENTS
Best Buy checks inventory levels at each of its 750 stores in North America as often as every half-hour with its SCM system, taking much of the guesswork out of inventory replenishment Supply chain management improves ways for companies to find the raw components they need to make a product or service, manufacture that product or service, and deliver it to customers Plan – This is the strategic portion of supply chain management. A company must have a plan for managing all the resources that go toward meeting customer demand for products or services. A big piece of planning is developing a set of metrics to monitor the supply chain so that it is efficient, costs less, and delivers high quality and value to customers (marketing, sales depts) Source – Companies must carefully choose reliable suppliers that will deliver goods and services required for making products. Companies must also develop a set of pricing, delivery, and payment processes with suppliers and create metrics for monitoring and improving the relationships. Make – This is the step where companies manufacture their products or services. This can include scheduling the activities necessary for production, testing, packaging, and preparing for delivery. This is by far the most metric-intensive portion of the supply chain, measuring quality levels, production output, and worker productivity. Deliver – This step is commonly referred to as logistics. Logistics is the set of processes that plans for and controls the efficient and effective transportation and storage of supplies from suppliers to customers. During this step, companies must be able to receive orders from customers, fulfill the orders via a network of warehouses, pick transportation companies to deliver the products, and implement a billing and invoicing system to facilitate payments. Return – This is typically the most problematic step in the supply chain. Companies must create a network for receiving defective and excess products and support customers who have problems with delivered products (service dept). Plan Source Make Deliver Return

E-Supply Chains Definitions and Concepts supply chain
The flow of materials, information, money, and services from raw material suppliers through factories and warehouses to the end customers e-supply chain A supply chain that is managed electronically, usually with Web technologies

E-Supply Chains (Firms) (Suppliers)

E-Supply Chains (cont.)
Supply chain parts Upstream supply chain activities of a manufacturing company with its suppliers (1st tiers) and their connections to their suppliers (2nd tiers) Internal supply chain in-house processes for transforming the inputs from the suppliers into the outputs Downstream supply chain activities involved in delivering the products to the final customers procurement is the major activity major concerns are production management, manufacturing, and inventory control attention is directed at distribution, warehousing, transportation, and after-sale service

BASICS OF SUPPLY CHAIN Organizations must embrace technologies that can effectively manage supply chains What is (are) the elements added in the model? CLASSROOM EXERCISE (e.g., any potential pitfalls of erroneous or missing information [upstream flows], suppliers can react in near real-time to fluctuations in end-customer demand) Supply Chaining Break your students into groups and ask them to design a supply chain for an organization of their choice Ask your students to try to choose an organization that is currently experiencing supply chain issues, perhaps an organization where the student has had recent issues, such as not receiving an order, receiving an incorrect order, or receiving someone else's order Be sure to have them list the names of the suppliers, manufacturers, distributors, retailers, and customers Ask the students to identify one or two areas where the organization can improve its supply chain Have each group present their supply chains to the class along with their recommendations for improvement Involvement (integration)

Interconnecting relationships between organizations
The Value System: Interconnecting relationships between organizations Def. The value system is a collection of firm value chains connected through a business relationship. The value chain for a company in a particular industry is embedded in a larger stream of activities that we term the “value system”. The value system includes the value chains of suppliers, who provide inputs (such as raw materials, components, and purchased services) to the company’s value chain. The company’s product often passes through its channels’ value chains on its way to the ultimate buyer. Finally, the product becomes a purchased input to the value chains of its buyers, who use it to perform one or more buyer activities. A company can create competitive advantage by optimizing or coordinating these links to the outside. The company, suppliers, and channels can all benefit through better recognition and exploitation of such linkages. Every value activity has both a physical and an information-processing component. The physical component includes all the physical tasks required to perform the activity. The information-processing component encompasses the steps required to capture, manipulate, and channel the data necessary to perform the activity. Every value activity creates and uses information of some kind. E.g., logistics activity (p.152) and service activity Downstream value Upstream value Firm value N

E-Supply Chains supply chain management (SCM)
A complex process that requires the coordination of many activities so that the shipment of goods and services from supplier right through to customer is done efficiently and effectively for all parties concerned. SCM aims to minimize inventory levels, optimize production and increase throughput, decrease manufacturing time, optimize logistics and distribution, streamline order fulfillment, and overall reduce the costs associated with these activities

E-Supply Chains e-supply chain management (e-SCM)
The collaborative use of technology to improve the operations of supply chain activities as well as the management of supply chains The success of an e-supply chain depends on: The ability of all supply chain partners to view partner collaboration as a strategic asset A well-defined supply chain strategy Information visibility along the entire supply chain Speed, cost, quality, and customer service Integrating the supply chain more tightly

E-Supply Chains Activities and infrastructure of E-SCM
Supply chain replenishment E-procurement Supply chain monitoring and control using RFID Inventory management using wireless devices Collaborative planning Collaborative design and product development E-logistics Use of B2B exchanges and supply webs

E-Supply Chains e-procurement
The use of Web-based technology to support the key procurement processes, including requisitioning, sourcing, contracting, ordering, and payment. E-procurement supports the purchase of both direct and indirect materials and employs several Web-based functions such as online catalogs, contracts, purchase orders, and shipping notices collaborative planning A business practice that combines the business knowledge and forecasts of multiple players along a supply chain to improve the planning and fulfillment of customer demand

E-Supply Chains Infrastructure for e-SCM
Electronic Data Interchange (EDI) Extranets Intranets Corporate portals Workflow systems and tools Groupware and other collaborative tools

E-Supply Chains Determining the Right Supply Chain Strategy
Functional products are staple products (e.g., groceries and gasoline) that have stable and predictable demand and call for a simple, efficient, low-cost supply chain Innovative products (e.g., fashion and high-technology) tend to have higher profit margins, volatile demand, and short product life cycles. These products require a supply chain that emphasizes speed, responsiveness, and flexibility rather than low costs

7.2 Supply Chain Problems and Solutions
Typical problems along the supply chain Slow and prone to errors because of the length of the chain involving many internal and external partners Large inventories without the ability to meet demand Incorrect demand forecasting Insufficient logistics infrastructure Vehicle failures to road conditions Poor quality

Supply Chain Problems and Solutions (cont.)
: Erratic shifts in orders up and down supply chains Creates production and inventory problems Stockpiling can lead to large inventories Effect is handled by information sharing - Bullwhip effect Bullwhip effect --- poor demand forecasts, price fluctuations, order batching, rationing within the supply chain -- distorted or late information can lead to: tremendous inefficiencies, excessive inventories, poor customer service, lost revenues, ineffective shipments, and missed production schedules. (or INSUFFICIENT DEMAND) collaborative commerce (c-Commerce) N

The Bullwhip Effect Retailer Wholesaler Distributor Factory customer
External Demand Retailer Order lead time Delivery lead time Wholesaler Order lead time Delivery lead time Distributor In recent years many suppliers and retailers have observed that while customer demand for specific products does not vary much, inventory and back-order levels fluctuate considerably across their supply chain. For instance, in examining the demand for Pampers disposal diapers, executives at Procter & Gamble noticed an interesting phenomenon. As expected, retail sales of the product were fairly uniform; there is no particular day or month in which the demand is significantly higher or lower than any other, However, the executives noticed that distributors’ orders placed to the factory fluctuated much more than retail sales. In addition, P&G’s orders to its suppliers fluctuated even more. This increase in variability as we travel up in the supply chain is referred to as the bullwhip effect. Figure 4.5 illustrates a simple four-stage supply chain: a single retailer, a single wholesaler, a single distributor, and a single factory. The retailer observes customer demand and places orders to the wholesaler. The wholesaler received products from the distributor who places orders to the factory. Order lead time Delivery lead time Factory Production lead time

Supply Chain Problems and Solutions
The Need for Information Sharing along the Supply Chain EC Solutions along the Supply Chain Order taking Order fulfillment Electronic payments Managing risk Inventories can be minimized Collaborative commerce

7.3 Key Enabling Supply Chain Technologies: RFID and Rubee
radio frequency identification (RFID) Tags that can be attached to or embedded in objects, animals, or humans and use radio waves to communicate with a reader for the purpose of uniquely identifying the object or transmitting data and/or storing information about the object

Key Enabling Supply Chain Technologies: RFID and Rubee

LIMITATIONS OF RFID For small companies, the cost of the system may be too high The restriction of the environments in which RFID tags are easily read Different levels of read accuracy at different points along the supply chain Concerns over customer privacy Agreeing on universal standards Connecting the RFIDs with existing IT systems

Bidirectional, on-demand, peer-to-peer radiating transceiver protocol under development by the Institute of Electrical and Electronics Engineers It relies on low-frequency magnetic waves to track products and transfer information. It excels in situation where RFID has limitations.

7.4 Collaborative Commerce
collaborative commerce (c-commerce) The use of digital technologies that enable companies to collaboratively plan, design, develop, manage, and research products, services, and innovative EC applications collaboration hub The central point of control for an e-market. A single c-hub, representing one e-market owner, can host multiple collaboration spaces (c-spaces) in which trading partners use c-enablers to exchange data with the c-hub

Collaborative Commerce
(Linear)

Collaborative Commerce (collaborative network)
(Inter-networked)

grid computing A form of distributed computing that involves coordinating and sharing computing, application, data, storage, or network resources across dynamic and geographically dispersed organizations service-oriented architecture (SOA) An architectural concept that defines the use of services to support a variety of business needs. In SOA, existing IT assets (called services) are reused and reconnected rather than the more time consuming and costly reinvention of new systems

Representative Examples of E-Collaboration vendor-managed inventory (VMI) The practice of retailers’ making suppliers responsible for determining when to order and how much to order Information sharing between retailers and suppliers Retailer–supplier collaboration Lower transportation and inventory costs and reduced stockouts Reduction of design cycle time Reduction of product development time

Collaborative Commerce (cont.)
Information sharing between retailers and suppliers: P&G and Wal-Mart Wal-Mart provides P&G access to sales information on every item P&G makes for Wal-Mart Accomplished done electronically P&G has accurate demand information Wal-Mart has adequate inventory How? How? IS must be designed so that sharing becomes easy.

Exhibit 7.7 Collaborative Commerce Example: Target’s Extranet (an example, this model can be also employed to other apps) Public Internet GE Private VAN Connection Via VPN, encryption Global reach added Private line Secure Web Applications Customer service Portal services Inventory management Quality assurance Supply chain Process design New products Budget control E-procurement Security Access control Registration Authentication Digital signature Certification GE InterBusiness Partner extranet Legacy System EDI ERP

The Wal-Mart Supply Chain
4 3-a 3-b 1-a 1-b 1-c Russel_OM(ch07) 2-a 2-b

Barriers to C-Commerce Most organizations have achieved only moderate levels of collaboration because of: A lack of internal integration, standards, and networks Security and privacy concerns, and distrust over who has access to and control of information stored in a partner’s database Internal resistance to information sharing and to new approaches A lack of internal skills to conduct c-commerce

SCM SUCCESS STORIES Top reasons why more and more executives are turning to SCM to manage their extended enterprises How does SCM help an organization control costs and save costs? The role of SCM is evolving, and it is not uncommon for suppliers to be involved in product development and for distributors to act as consultants in brand marketing CLASSROOM EXERCISE SCM Again Break your students into groups and ask them to identify how each of the “Top reasons executives are using SCM to manage extended enterprises” in the Figure is supported by an SCM system For example, how does SCM help an organization control costs and save costs? Ans: Organizations gain visibility into their supply chains through an SCM system. This allows them to identify such things as inefficient and ineffective business process. Fixing these processes helps the organization control costs and save money. The answers to these questions will vary, and the goal of the activity is for students to understand the many different benefits an organization can gain through an SCM system

BREAK-1 Application Case 7.1: Nike’s Supply Chain: Failure and Eventual Success (p.315)

E-Supply Chains and Collaborative Planning
e-supply chain management (e-SCM) The collaborative use of technology to improve the operations of supply chain activities as well as the management of supply chains collaborative planning A business practice that combines the business knowledge and forecasts of multiple players along a supply chain to improve the planning and fulfillment of customer demand

7.5 Collaborative Planning and CPFR
In collaborative planning, business partners—all have real-time access to point-of-sale order information manufacturers suppliers distribution partners other partners CFPR: collaboration, planning, forecasting, and replenishment Purpose: Collaborative planning is designed to synchronize production plans and product flows, optimize resource utilization over an expanded capacity base, increase customer responsiveness, and reduce inventories. And to get products to customers as quickly as possible . What is CPFR?

Collaborative Planning, CPFR, and Collaborative Design
collaborative planning, forecasting, and replenishment (CPFR) Project in which suppliers and retailers collaborate in their planning and demand forecasting to optimize flow of materials along the supply chain

Exhibit 7.9 The Collaborative Planning and CPFR Process
Production material Process Forecast Requirements Purchase Requirements Customer Orders Returns& Repairs Delivered Orders Planning Manufacturing Order-Fulfillment Procurement Order Capture Design Requirements Settlements Suppliers Enterprise Customers Support Processes Source: E-Business and ERP: Transforming the Enterprise by Norris, G., et al.,John Wiley & Sons, Inc., 2000

advanced planning and scheduling (APS) systems Programs that use algorithms to identify optimal solutions to complex planning problems that are bound by constraints

product lifecycle management (PLM) Business strategy that enables manufacturers to control and share product-related data as part of product design and development efforts

Competition SCP and SCE in the supply chain P E O P L E F L O W S
Material Flows Product/Service Flows Ask your students to determine the different types of information flows that would be represented in an SCP system Ask your students to determine the different types of payment flows that would be represented in an SCE system

7.6 Supply Chain Integration
How Information Systems Are Integrated Internal integration includes connecting applications with databases and with each other and connecting customer-facing applications (front end) with order fulfillment and the functional information systems (back end) Integration with business partners connects an organization’s systems with those of its external business partners

Order Fulfillment at Amazon.com
Russel_OM(ch07)

Supply Chain Integration
Web Services An architecture enabling assembly of distributed applications from software services and tying them together Integration along the Extended Supply Chain Information integration along the extended supply chain—all the way from raw material to the customer’s door

7.7 Corporate (Enterprise) Portals
Corporate portals offer employees, business partners, and customers an organized focal point for their interactions with the firm A gateway for entering a corporate Web site, enabling communication, collaboration, and access to company information Corporate portals facilitate e-collaboration. A large number of tools and methodologies are also available that facilitate e-collaboration.

Corporate (Enterprise) Portals
Types of Corporate Portals 1. Generic portals Portals for suppliers and other partners Customer portals Employee portals Executive and supervisor portal mobile portals Portals accessible via mobile devices, especially cell phones and PDAs

Corporate (Enterprise) Portals (cont.)
2. Functional portals : Portals that store data and enable users to navigate and query these data : Portals that allow collaboration Information portals Collaborative portals

Justifying Portals Portals offer benefits that are difficult to quantify Developing Portals Many vendors offer tools for building corporate portals as well as hosting services

7.8 Collaboration-Enabling Tools: From Workflow to Groupware
Workflow: The movement of information as it flows through the sequence of steps that make up an organization’s work procedures Workflow systems: Business process automation tools that place system controls in the hands of user departments to automate information processing tasks Workflow management: The automation of workflows, so that documents, information, and tasks are passed from one participant to the next in the steps of an organization’s business process Corporate portals facilitate e-collaboration. A large number of tools and methodologies are also available that facilitate e-collaboration. The key to workflow management is the 1) tracking of process-related information and 2) the status of each activity of the business process. The major activities to be managed are job routing and monitoring, document imaging, document management, supply chain optimization, and control of work. Collaborative workflow applications: address project-oriented and collaborative processes.

Collaboration-Enabling Tools: Workflow (cont.)
Three major categories of workflow applications: project-oriented and collaborative types of processes goal: to empower knowledge workers mission-critical, transaction-oriented, high-volume processes goal: to improve productivity and quality of BP. cross between collaborative and production goal: to reduce clerical costs in systems with a low volume of complex transactions. Collaborative workflow Production workflow Collaborative workflow -- the focus of an enterprise solution for collaborative flow is on allowing workers to communicate, negotiate, and collaborate within a unified environment Production workflow -- Used in a single department or a certain set of users within a department -- employ database access, intelligent forms Administrative workflow -- the flow is predefined, but it can be changed if needed Administrative workflow

Collaboration-Enabling Tools: Workflow (cont.)
Benefits of workflow management systems Cycle time reduction Productivity gains Improved process control Improved quality of services Lower staff training costs Lower management costs Improved user satisfaction More effective collaboration and knowledge sharing Improved control of business processes: -- with far less management intervention and fewer chances for delays or misplaced work than other systems Improved quality of services -- thru quicker response times with the best person available Lower staff training costs -- the work can be guided thru complex procedures (systems) Lower management costs -- enable managers to concentrate on nurturing employees and handling special cases rather than on routine reporting and distribution issues Improved user satisfaction -- users typically have greater confidence that they are doing the best they can, and -- they enjoy greater satisfaction when completing their work with fewer conflicting requirements

Collaboration-Enabling Tools: Groupware
Provide a way for groups to share resources and opinions Groupware technology products are fairly inexpensive and can be easily incorporated into existing IS. Software products that support collaboration, over networks, among groups of people who share a common task or goal

Collaboration-Enabling Tools: Group Decision Support Systems (GDSS)
Electronic (Virtual) meetings: Online (Web-based) meetings whose members are in different locations, frequently in different countries Group decision support system (GDSS): An interactive computer-based system that facilitates the solution of semistructured and unstructured problems by a group of decision makers The events of Sep. 11 and the economic slowdown of have made virtual meetings more popular, e.g., cost savings on travel expenses. Improvements in supporting technology, reductions in the price of the technology, and the acceptance of virtual meetings as a respected way of doing business are fueling their growth. GDSS: goal is to improve the productivity of the decision-making meetings, either by speeding up the decision-making process or by improving the quality of the resulting decisions, or both.

Multiple participants
Components of the DSS The DSS DBMS MBMS DGMS Software System Environment Task Multiple participants (the legislators) DBMS: DataBase Management Systems MBMS: ModelBase Management Systems DGMS: DialoGue Management Systems User

Components of GDSS HARDWARE SOFTWARE PROCEDURES PEOPLE

Burr-Brown GDSS session room
Participants’ stations Facilitator’s station

Framework: Group Decision Support
Duration of Decision-Making Session Framework: Group Decision Support The purpose and configuration of a a GDSS will vary according to the DURATION of the decision-making session and the degree of physical proximity of group members. N

Figure: A Model of a GDSS
Topic commentor (examine each of the divisional 5-year plans) Figure: A Model of a GDSS #9 Voting Issue Analyzer (organize and sort the comments) Electronic Brainstorming (generate ideas)

Teleconferencing

USAF Air Staff Innovation center
Training room USAF Fusion center USAF Fusion center DSS Decision center Airline Institute USAF Air Staff Innovation center Teleconferencing

Collaboration-Enabling Tools: GDSS (cont.)
Major characteristics of a GDSS Its goal is to support the process of group decision makers by providing automation of subprocesses using information technology tools It is a specially designed information system, not merely a configuration of already-existing system components. It encourages generation of ideas, resolution of conflicts, and freedom of expression

Collaboration-Enabling Tools: GDSS (cont.)
GDSSs improve the decision-making process by: providing structure to the planning process support parallel processing of information and idea generation make larger meetings possible

Decision Support and Intelligent Systems
Same Time Different Time GSS in a Decision Room Web-based GSS Multimedia Presentation Systems Whiteboard Document sharing GSS in a Decision Room Web-based GSS Workflow management system Document sharing , V-mail Same Place Web-based GSS Whiteboard , V-mail Workflow management system Document sharing Computer conferencing with memory Data conferencing: Virtual meeting in which geographically dispersed groups work on documents together and to exchange computer files during videoconferences Web conferencing is conducted on the Internet few as two and as many as thousands of people allows users to simultaneously view something interaction takes place via messaging or a simultaneous phone teleconference is much cheaper than videoconferencing because it runs on the Internet Web-based GSS Whiteboard Document sharing Videoconferencing Audioconferencing Computer conferencing , V-mail Different Place Decision Support Systems and Intelligent Systems, Efraim Turban and Jay E. Aronson, 6th edition.

INFORMATION TECHNOLOGY’S ROLE IN THE SUPPLY CHAIN
Four Factors Driving SCM Visibility Consumer Behavior SUPPLY CHAIN MANAGEMENT Information technology – only recently have advances in IT made it possible to bring the idea of a truly integrated supply chain to life Visibility – more visible models of different ways to do things in the supply chain have emerged. High visibility in the supply chain is changing industries, as Wal-Mart demonstrated (e.g., Dell – ordering process) Consumer behavior – companies must respond to demanding customers through supply chain enhancements Competition – increased competition makes any organization that is ignoring its supply chain at risk of becoming obsolete Speed – as the pace of business increases through electronic media, an organization's supply chain must respond efficiently, accurately, and quickly Speed Competition

Goal and Strategy: Organizational vs. SCM
Goals/ Objectives Organizational Strategy SCM Strategy Efficiency IT metrics measures the performance of the IT system including throughput, speed, availability, etc. Effectiveness IT metrics measure the impact IT has on business processes and activities including customer satisfaction, conversion rates, sell-through increases, etc. Throughput Speed Availability Efficiency Effectiveness How can SCM Strategy be achieved? IT Customer satisfaction Conversion rate Sell-thru increases

USING IT TO DRIVE THE SUPPLY CHAIN
The four primary drivers of supply chain management Facilities Inventory Transportation Information Organizations use these four drivers to support either a supply chain strategy focusing on efficiency or a supply chain strategy focusing on effectiveness IT It might be beneficial to review efficiency and effectiveness since this section requires the students to have a solid understanding of efficiency and effectiveness Efficiency IT metrics – measures the performance of the IT system including throughput, speed, availability, etc. Effectiveness IT metrics – measure the impact IT has on business processes and activities including customer satisfaction, conversion rates, sell-through increases, etc. Organizations use the four primary drivers to support their supply chain strategy Facilities – processes or transforms inventory into another product, or it stores the inventory before shipping it to the next facility Inventory – offsets discrepancies between supply and demand Transportation – moves inventories between the different stages in the supply chain Information – an organization must decide how and what information it wants to share with its supply chain partners

Efficiency Efficiency Effectiveness Facilities Efficiency Effectiveness Inventory IS/IT Supply Chain Strategy Organizational Goals Efficiency Effectiveness Analyzing the design of a supply chain in terms of efficiency and effectiveness Facility – processes or transforms inventory into another product, or it stores the inventory before shipping it to the next facility Three primary facilities components (efficiency vs. effectiveness) Location: centralized vs. decentralized Capacity: minimal excess vs. large amounts of excess Operational design: product focus vs. functional focus Capacity: Efficiency A company can save money by building a facility that is only big enough to handle production requirements Effectiveness By spending more money and building in a lot of extra capacity, an organization can be prepared to handle unexpected future events Operational Design: Operational design efficiency – product focus design allows the facility to become highly efficient at producing one single product, increasing efficiency Operational design effectiveness – functional focus design allows the facility to perform a specific function on many different types of products, increasing effectiveness Transportation Efficiency Effectiveness Information Effectiveness

Efficiency Location Capacity Operational design Facilities Inventory Cycle Safety IS/IT Supply Chain Strategy Organizational Goals Facility – processes or transforms inventory into another product, or it stores the inventory before shipping it to the next facility Three primary facilities components (efficiency vs. effectiveness) Location: centralized vs. decentralized Capacity: minimal excess vs. large amounts of excess Operational design: product focus vs. functional focus Cycle inventory – the average amount of inventory held to satisfy customer demands between inventory deliveries Cycle inventory efficiency – holding small amounts of inventory and receiving orders weekly or even daily Cycle inventory effectiveness – holding large amounts of inventory and receiving inventory deliveries only once a month Safety inventory – extra inventory held in the event demand exceeds supply Safety inventory efficiency – holding small amounts of safety inventory Safety inventory effectiveness – holding large amounts of safety inventory Method of transportation efficiency– choosing an inexpensive method of transportation increases efficiency, but also typically increases delivery time Method of transportation effectiveness – choosing an expensive method of transportation to ensure speedy delivery increases effectiveness Information sharing efficiency – freely share lots of information to increase the speed and decrease the costs of supply chain processing A company can save money by sharing information with everyone involved in the supply chain For example, if a company posts its inventory list in a location where everyone on the Internet can access it – then all kinds of companies can bid on the inventory goods Information sharing effectiveness – share only selected information with certain individuals, which will decrease the speed and increase the costs of supply chain processing It costs a company to be selective on what types of information it shares with its different partners It takes time and money to safeguard information, which is what the company would have to do to ensure it didn’t get into the wrong hands Transportation Method Route Information Information sharing Push vs. pull Effectiveness

Centralized Supply at Honda America
Russel_OM(ch07)

The E-Automotive Supply Chain
SUPPLY CHAIN PROCESS AUTOMOTIVE PAST E-AUTOMOTIVE Customer sales Push—sell from inventory Pull—Build-to-order Production Goal of even and stable production Focus on customer demand, respond with supply chain flexibility Distribution Mass approach Fast, reliable, and customized to get cars to specific customer location Customer relationships Dealer-owned Shared by dealers and manufacturers Managing uncertainty Large car inventory at dealers Small inventories with shared information and strategically placed parts inventories Procurement Batch-oriented; dealers order based on allocations Orders made in real time based on available-to-promise information Product design Complex products don’t match customer needs Simplified products based on better information about what customers want Russel

BREAK-2 Application Case 7.6: Poste Italiane Gains Efficiency and Compliance Through Implementing Workflow Systems (p.346)

Managerial Issues How difficult is it to introduce e-collaboration?
How much can be shared with business partners? Can they be trusted? Who is in charge of our portal and intranet content? Who will design the corporate portal? Should we conduct virtual meetings?

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