1. University of Northern Iowa
Introduction to Information Technology 2nd Edition Turban, Rainer & Potter © 2003 John Wiley & Sons, Inc.
Chapter 10:
Computer-based Supply Chain Management and Information Systems Integration
Prepared by:
Roberta M. Roth, Ph.D.
University of Northern Iowa

2. Chapter Preview In this chapter, we will study:
The concept of a supply chain
Four ways of implementing a supply chain
Problems that can occur within a supply chain leading to poor business performance
Use of IT to resolve supply chain problems
How supply chain management should be integrated with other business functions
Effect of e-Commerce on supply chains

3. Supply Chain Definitions
Flow of materials, information, payments, and services, from suppliers through factories and warehouses, to end customers
Includes all organizations and processes that create and deliver products, information, and services to the end customers
Supply chain management - planning, organizing, coordinating, and controlling all activities in the supply chain
Global systems – systems connecting two or more companies in two or more countries
Electronic data interchange (EDI) – electronic movement of business documents between business partners
Electronic funds transfer (EFT) – transfer of money using telecommunications
Extranets – extended Intranets that link business partners
Shared databases – databases that business partners both have access to
Integrated messaging – delivery of and fax messages through a single communication system.

4. Simplified Supply Chain
Downstream
Internal
Upstream
material
Distributors
information
Organization’s production processes, including materials handling, inventory management, manufacturing, quality control
material
money
Suppliers
information
money
Retailers
Customers

5. Types of Supply Chains Integrated Make-to-Stock
Real-time demand tracking triggers production to restock finished goods
Continuous Replenishment
Constant inventory replenishment based on expected stable demand
Build-to-Order
Customer order triggers production of specific item(s) requested
Channel Assembly
Build-to-order with some assembly performed within the distribution channel
Global systems – systems connecting two or more companies in two or more countries
Electronic data interchange (EDI) – electronic movement of business documents between business partners
Electronic funds transfer (EFT) – transfer of money using telecommunications
Extranets – extended Intranets that link business partners
Shared databases – databases that business partners both have access to
Integrated messaging – delivery of and fax messages through a single communication system.

6. Global Supply Chains
Many economic factors promote extending the supply chain globally
E-commerce enables global supply chains
Global supply chains are longer and more complex
Use of information technology essential
Global systems – systems connecting two or more companies in two or more countries
Electronic data interchange (EDI) – electronic movement of business documents between business partners
Electronic funds transfer (EFT) – transfer of money using telecommunications
Extranets – extended Intranets that link business partners
Shared databases – databases that business partners both have access to
Integrated messaging – delivery of and fax messages through a single communication system.

7. Problems in the Supply Chain
How much are we going to sell? (demand forecasts)
How long will it take? (for supplies to arrive; shipments to be received)
What if the supplies are defective? (quality control)
What if my order gets lost or miscommunicated?
Global systems – systems connecting two or more companies in two or more countries
Electronic data interchange (EDI) – electronic movement of business documents between business partners
Electronic funds transfer (EFT) – transfer of money using telecommunications
Extranets – extended Intranets that link business partners
Shared databases – databases that business partners both have access to
Integrated messaging – delivery of and fax messages through a single communication system.

8. More Problems in the Supply Chain
Bullwhip Effect
Wild swings in orders due to lack of coordination and trust among supply chain members
Information sharing is essential
Phantom Stockouts
Inventory is reportedly not available, when in fact it is on hand
Global systems – systems connecting two or more companies in two or more countries
Electronic data interchange (EDI) – electronic movement of business documents between business partners
Electronic funds transfer (EFT) – transfer of money using telecommunications
Extranets – extended Intranets that link business partners
Shared databases – databases that business partners both have access to
Integrated messaging – delivery of and fax messages through a single communication system.

9. Overcoming Supply Chain Problems
Vertical Integration
Own everything upstream and downstream
Stockpile Inventory
Eliminate risk and uncertainty by hoarding massive inventories; very expensive
Improve Supply Chain Management
Build trust and coordination through IT enabled supply chain support
Global systems – systems connecting two or more companies in two or more countries
Electronic data interchange (EDI) – electronic movement of business documents between business partners
Electronic funds transfer (EFT) – transfer of money using telecommunications
Extranets – extended Intranets that link business partners
Shared databases – databases that business partners both have access to
Integrated messaging – delivery of and fax messages through a single communication system.

10. How IT Supports the Supply Chain
Material Requirements Planning (MRP)
Early model that integrated production, purchasing, and inventory management
Manufacturing Resource Planning (MRP II)
MRP plus financial and labor planning
Enterprise Resource Planning (ERP)
Extension to entire enterprise, plus external business partners
In short, Integration is the key
Global systems – systems connecting two or more companies in two or more countries
Electronic data interchange (EDI) – electronic movement of business documents between business partners
Electronic funds transfer (EFT) – transfer of money using telecommunications
Extranets – extended Intranets that link business partners
Shared databases – databases that business partners both have access to
Integrated messaging – delivery of and fax messages through a single communication system.

11. How IT Supports the Supply Chain
Integrated Value Chain
Multiple enterprises within a shared market channel collaborate throughout the entire shared chain to enhance perceived customer value
Chain members act as an extended enterprise
Benefits to each chain member occur as entire chain is optimised
Idealized goal only achieved in a few cases at present
Global systems – systems connecting two or more companies in two or more countries
Electronic data interchange (EDI) – electronic movement of business documents between business partners
Electronic funds transfer (EFT) – transfer of money using telecommunications
Extranets – extended Intranets that link business partners
Shared databases – databases that business partners both have access to
Integrated messaging – delivery of and fax messages through a single communication system.

12. How IT Supports the Supply Chain
Enterprise Resource Planning (ERP) Systems
Initially focused on integrating all departments and functions within an organization
Recently have extended to suppliers and customers
Focus was on transaction processing, not decision support and continuous planning
Global systems – systems connecting two or more companies in two or more countries
Electronic data interchange (EDI) – electronic movement of business documents between business partners
Electronic funds transfer (EFT) – transfer of money using telecommunications
Extranets – extended Intranets that link business partners
Shared databases – databases that business partners both have access to
Integrated messaging – delivery of and fax messages through a single communication system.

13. How IT Supports the Supply Chain
Supply Chain Management (SCM) Software
Standalone software targeting the planning and decision making needed for supply chain management
Integrated ERP and SCM
Build linkages between ERP package and SCM package
Extend ERP to incorporate needed SCM functions
Addition of business intelligence (analysis)
Global systems – systems connecting two or more companies in two or more countries
Electronic data interchange (EDI) – electronic movement of business documents between business partners
Electronic funds transfer (EFT) – transfer of money using telecommunications
Extranets – extended Intranets that link business partners
Shared databases – databases that business partners both have access to
Integrated messaging – delivery of and fax messages through a single communication system.

14. Extending Supply Chain through e-Commerce
Upstream
Change procurement methods
Internal
Use of intranet to enhance internal processes
Downstream
Alter (streamline) selling practices through direct Web selling, auctions, or exchanges
Global systems – systems connecting two or more companies in two or more countries
Electronic data interchange (EDI) – electronic movement of business documents between business partners
Electronic funds transfer (EFT) – transfer of money using telecommunications
Extranets – extended Intranets that link business partners
Shared databases – databases that business partners both have access to
Integrated messaging – delivery of and fax messages through a single communication system.

15. e-Commerce Supply Chain Issues
EC has generated problems in the order fulfilment part of the supply chain
Delivering what the customer ordered in a timely way
Providing customer support
EC must continue to improve through
More efficient order processing
Better fulfilment processes, such as automated warehouses
Provide simple mechanism for customers to return products
Global systems – systems connecting two or more companies in two or more countries
Electronic data interchange (EDI) – electronic movement of business documents between business partners
Electronic funds transfer (EFT) – transfer of money using telecommunications
Extranets – extended Intranets that link business partners
Shared databases – databases that business partners both have access to
Integrated messaging – delivery of and fax messages through a single communication system.

16. Chapter Summary
Understanding and managing the supply chain is critical to success
Many supply chain problems can be resolved through improving information flows
IT can supply needed support to supply chain management
Electronic commerce may reshape the supply chain
Global systems – systems connecting two or more companies in two or more countries
Electronic data interchange (EDI) – electronic movement of business documents between business partners
Electronic funds transfer (EFT) – transfer of money using telecommunications
Extranets – extended Intranets that link business partners
Shared databases – databases that business partners both have access to
Integrated messaging – delivery of and fax messages through a single communication system.

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