1. E-Commerce and Supply Chain Management (SCM)
Chapter 4

2. Design MGMT 326 Capacity and Facilities Foundations of Operations
Products &
Processes
Quality
Assurance
Planning
& Control
Managing
Projects
Managing
Quality
Introduction
Strategy
Product
Design
Statistical
Process
Control
Process
Design
Just-in-Time & Lean Systems
Supply Chain Management

3. Supply Chain Management (SCM) and E-commerce Chapter 4
What is SCM?
E-commerce
Global Supply Chains:
Inventory
Infrastructure
Product proliferation
Patents
Health & safety
Vertical Integration:
Backward integration
Forward integration
Make-buy decisions
Business-to-business:
Information technologies
Benefits to companies
Managing Suppliers:
Selecting suppliers
Single suppliers vs.
multiple suppliers
Business-to-consumer:
Competition
Inventory management
Delivery options
Managing returns

4. Supply Chains
A supply chain is the network of activities that deliver a product/service to the customer
Sourcing (purchasing) of raw materials, parts, goods for sale, or service inventories
Order entry
Operations planning
Transformation process (manufacturing or services)
Quality management
Logistics:
Transportation (traffic)
Distribution (delivering the product to customers)

5. Dairy Products Supply Chain Figure 4-2, page 100
A company has
more control over
Tier 1 suppliers
than over Tier 2
& Tier 3 suppliers

6. Lessons from the Dairy Products Supply Chain Figure 4-2, page 103
Companies often have several tiers of suppliers.
Your company's Tier 1 suppliers are the firms that your company buys from.
A company has more control over Tier 1 suppliers than over Tier 2 & Tier 3 suppliers

7. Supply Chain Management (SCM)
Supply Chain Management is the business function that coordinates the movement of materials and information through the supply chain

8. Objectives of Supply Chain Management
Minimize the cost of materials and material movement
Minimize inventory investment
Ensure timely delivery of materials at every level of the supply chain and to customers (to ensure product availability and delivery speed)
Ensure quality of materials used in manufacturing or services
If needed, get product design help or other services from suppliers.

9. Supply Chain for Furniture Figure 4.1, page 99

10. Information Sharing in the Supply Chain
The objective of information sharing is to match demand and supply. (What will be available when, and from whom?)
Demand: actual sales, sales forecasts, booked orders, custom orders
Product availability: current inventory, production plans, shipping schedules, shipments
Quality: suppliers' data on quality

11. E-commerce
The use of the Internet and World Wide Web to conduct business
Business-to-business (B2B)
Business-to-consumer (B2C)
Also called e-business

12. Technologies for B2B E-commerce
Electronic data interchange (EDI): electronic exchange of business-related information between companies, using data files in standard formats
Originally, the data files were designed to be processed by computer systems
In Web-based EDI, the supplier or business customer can access the information through the Web

13. Types of Web Sites for B2B E-commerce
Electronic storefronts: Allow buyers to consult an online catalog, place an order, pay or make payment arrangements, and track shipments
Similar to B2C electronic storefronts
Net marketplaces: Allow buyers and sellers in the same industry to negotiate contracts, place orders, track shipments, pay or make payment arrangements, and work together on product design

14. Benefits of B2B E-commerce
Lower administrative costs for purchasing
Low-cost access to global suppliers
Lower inventory investment due to intense price competition and faster shipping
Better product quality because of increased cooperation between buyers and sellers, especially during the product design and development

15. Operations Issues in Business-to-consumer E-commerce
More competitive markets
Inventory management: information sharing in the supply chain helps to reduce inventory costs.
Packing orders for shipment
Delivery
Customer returns

16. Operations Issues in Online Sales Packing Orders for Shipment
Items are identified by bar codes or radio frequency ID (RFID)
Warehouse workers put ordered items in crates
Sorter sends each item to the correct, bar-coded box for the customer who ordered it
Packing slip is printed
Boxes are packed, taped, weighed
Boxes are put on trucks for shipment to customers

17. Operations Issues in Online Sales Delivery
Objective: Deliver when promised, while minimizing delivery costs
Brick-and-mortar stores (like Sears) can ship items to stores for customer pickup.
Other online merchants ship via a package delivery service (like UPS) or U.S. postal service
Online merchants use package delivery services for most shipments to other countries.
Customers usually pay a standard shipping cost – different for U. S. and other countries

18. Operations Issues in Online Sales Customer Returns
Objective: minimize the cost of customer returns and reduce "hassles" for customers
25% of Internet orders result in a customer return
Problems in returning goods are the 2nd biggest reason that consumers don't buy online
Customer usually pays for return shipping
Variety of approaches used to return goods: postal service, contract package delivery service, brick-and-mortar store

19. Operations Issues in Online Sales Customer Returns (2)
Online retailer must ship a replacement item or issue credit to customer
Online retailer must process returned items
Return defective items to supplier for a credit
Good items can often be repackaged, priced, and resold.
This process can be out-sourced.

20. Operations Issues in Global Supply Chains
Inventory levels tend to be higher.
Safety stock: inventory kept to protect a customer against late deliveries from a supplier
Pipeline inventory: inventory that has left a supplier plant but has not yet reached the customer
Both safety stock and pipeline inventory tend to be higher in global supply chains.

21. Operations Issues in Global Supply Chains (2)
Shipping times are usually longer.
Transportation in developing countries is less efficient than in developed countries.
Port congestion causes delays.
Customs and security inspections cause delays.
In ocean shipping, goods arrive in large quantities. The shipment must be broken into smaller quantities (break bulk operations) for shipment to retailers and distributors.

22. Operations Issues in Global Supply Chains (3)
Health and safety of consumers
Infringement of patents and copyrights
Both GM and BMW have accused Chinese firms of patent infringement
Product proliferation: the need to develop different product variations for different countries

23. Sourcing Decisions
Sourcing: deciding which goods or services to make in-house, and which ones to buy
Vertical integration – a measure of how much of the supply chain is owned by the manufacturer
Backward integration – owning or controlling sources of raw material and component parts
Forward integration – owning or controlling the channels of distribution
© 2007 Wiley

24. Make or Buy Decisions
Is product/service technology critical to firm’s success?
Is product/service a core competency?
Is it something your company must do to survive?
If any of the above are true, it is usually wise to make, rather than buy.
© 2007 Wiley

25. Make or Buy Decisions (2)
Who can do a better job: you or a supplier?
Costs – breakeven analysis is used to compare costs. `
Quality
On-time delivery
Product or part designs
Is there a supplier who can meet your firm's requirements in the above areas?