1. ORF 401 - Electronic Commerce Spring 2009 April 6, 2009 Week 9 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 Traditional View: Raw Materials Refining and processing Part manufacturing Finished goods assembly Warehousing Retailers Consumers E-Commerce can play an important role in each node and arc of the Logistics Cycle Recycling XXX Cycle Modern XXXXXXX In reality the Cycle is much more complicated

2. ORF 401 - Electronic Commerce Spring 2009 April 6, 2009 Week 9 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

3. ORF 401 - Electronic Commerce Spring 2009 April 6, 2009 Week 9 Transactions in Integrated Logistics Sources of Supply 68,000 Agricultural, forestry and fishery establishments 35,000 Mining establishments 492,000 Contract construction est. 355,000 Manufacturing establishments 210,000 Transportation, communications and utility establishments 440,000 Wholesale establishments 1,441,000 Retail establishments 504,000 Financial, insurance and real estate establishments 1,811,000 service establishments 5,807,000 Sources of supply Units of Demand 92,830,000 Household units 5,807,000 Sources of supply trading with each other 98,637,000 Units of demand Billions of transactions

4. ORF 401 - Electronic Commerce Spring 2009 April 6, 2009 Week 9 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

5. ORF 401 - Electronic Commerce Spring 2009 April 6, 2009 Week 9 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

6. ORF 401 - Electronic Commerce Spring 2009 April 6, 2009 Week 9 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)

7. ORF 401 - Electronic Commerce Spring 2009 April 6, 2009 Week 9 Supporting Systems Strategic Planning Systems - –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,

8. ORF 401 - Electronic Commerce Spring 2009 April 6, 2009 Week 9 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

9. ORF 401 - Electronic Commerce Spring 2009 April 6, 2009 Week 9 Transportation Function –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