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  • 1. ECT 589 ECT 589 E-Commerce Management Week #5 Supply Chain Management Source: Gartner, HBR, McKinsey Reports, Lee & Whang
  • 2. Agenda
    • Market News
    • Supply Chain Management
    • Exploiting Virtual Value Chain
    • Integrated Supply Chain Management
    • Moore Medical Discussion
  • 3. e-Business Application Architecture Supply Chain Mgmt Selling Chain Mgmt Stakeholders Business Partners, Suppliers, Resellers Distributors, Customers, Resellers Employees HRMS/ E-Procurement Finance Auditing Mgmt Control BI EAI CRM ERP Logistics Production Distribution Marketing Sales Cust Svce
  • 4. Defining SCM
    • A “process umbrella” under which products are created and delivered to customers.
    • The complex network of relationships that organizations maintain with trading partners to source, manufacture, and deliver products
    • A network of autonomous or semi-autonomous business entities collectively responsible for procurement, manufacturing, and distribution activities associated with one or more families of related products.
  • 5. Vendors Plants DCs Customers
  • 6.
    • Stakeholders along the supply chain have different and frequently conflicting objectives.
    • Accordingly, they often operated independently, resulting in a phenomenon called the bullwhip effect on demand and supply .
    Bullwhip Effect
  • 7. Bullwhip Effect Source: Johnson & Pike, 1999
  • 8. Suppliers Europe DC Suppliers Suppliers Subassembly PC Board Suppliers ASIC Assembly Asia DC US DC Resellers Resellers Resellers Customers Customers Customers Source: Supplychain online ASIC: Application-Specific Integrated Circuit; An Example of SC for Computer Printers
  • 9.
    • Globalization of business: Worldwide dispersion of manufacturing and distribution facilities.
    • Proliferation of product variety
    • Increasing complexity of supply networks
    • Shortening of the product life cycles
    • Responsiveness over efficiency.
    • Companies’ willingness to accept lower margins to maintain and increase market share.
    Trends Driving SCM Investments
  • 10. SCM: A Process View
    • Material Flows involves physical product flowing from suppliers to customers through the chain and reverse material flows: product returns, servicing, recycling and disposal
    • Information Flows involves demand forecasts, order transmissions, and delivery status report
    • Financial Flows involves credit card information, credit terms, payment schedules, and consignment and title ownership arrangements
  • 11. Supplier Manufacturing Distribution Retailer Consumer A Process View of the Supply Chain Supply Chain Planning Supply Chain Execution Product Flows Product Flows Product Flows Product Flows Information Flows Payment Flows
  • 12.
    • Strategic Decisions
      • Long term, closely linked to coporate strategy and guide supply chain polices.
    • Operational Decisions
      • Short term, day-to-day activities
    • Major Decision Areas
      • Location
      • Production
      • Inventory
      • Transportation (distribution)
    Supply Chain Decisions
  • 13. Supply Chain Planning Order Commitment Advanced Scheduling Demand Planning Transportation Planning Distribution Planning Customer Order
  • 14. Supply Chain Execution Order Entry Fulfillment Planning Order Confirm. Forecasting Aggregate Inventory Planning MPS/ Sourcing Inventory Availability Schedule Production Allocate inventory Production scheduling Distribution Scheduling Order Planning Process Distribution Process Pick & Load schedule delivery customer Service Replenishment Process Production Process
  • 15. Three Supply Chain Strategies
    • Current: Enterprise Focus (Nabisco)
      • Create stores of inventory to address bullwhip effect
    • Near Term: Partner Focus (P&G)
      • Collaborative Systems
    • Emerging: Direct Focus (Dell)
      • Build to Order direct supply chain
      • Adaptive supply change
      • Intelligent supply chain
  • 16. Internet’s Impact on SCM
    • Supply Chain Integration
      • Coordination and collaboration among supply chain partners through “supply chain integration.”
      • Product design and development, procurement, production, inventory, distribution. Post-sales service support, and marketing through supply networks, services, and business models
    • Information is replacing inventory.
    • Industry Structure
      • Competition between firms vs. competition between supply chains
      • E-Business Webs
  • 17. SCI: Four Key Dimensions Lee & Whang 2001 )
  • 18. Information Integration
    • Sharing of information among members of the supply chain
    • For example:
      • Sharing demand data, inventory status, capacity plan, production schedules, promotion plan and shipment schedules in real-time and online basis can increase efficiency and responsiveness
  • 19. Electronic Information Integration
    • Companies, across a supply chain, coordinate their product, financial and information flows using the electronic technology and the Internet
    • Internet Info Hubs:
    • Open standards, permitting easy, universal, secure, and access to a wide audience at a low cost
    • Instantly process and forward all relevant information to appropriate parties
    • Hub is a node in the data network where multiple organizations interact in pursuit of information integration, data storage, and information processing
  • 20. Important factors for electronic business integrations
    • Well defined channels of communication
    • - well defined with roles and responsibilities
    • Performance measures
    • - measure and monitored performance of all member of the supply chain
    • Incentives
    • - aligned incentive for all members in order for supply chain integration to work
  • 21. Planning Synchronization
    • Joint design and execution of plans for product introduction, forecasting and replenishment through sharing information
      • All member in the supply chain synchronize their order fulfillment plans so that the replenishment are made to meet the same objective.
    • Collaborative Planning, Forecasting and Replenishment initiative (CPFR )
          • Both buyer and seller use the Internet to establish a forecast and replenishment plan
            • Share ground rules
            • Agree on critical actions
            • Share forecasts
            • Detect major variances
            • Exchange ideas
            • Collaborate to reconcile differences
  • 22. Internet Planning Synchronization
    • The Internet delivery – Internet-based collaboration
      • Share demand data
      • Collaborate closely on promotions and replenishment
      • Facilitate the geographically dispersed company’s ability to check demand and supply levels and respond quickly to potential mismatch problem
      • Shorten the new product development times
    • IP and Knowledge Sharing
        • Create Universal data network for design data
        • Sharing intellectual properties
        • Speed up design and introduction process
        • Leverage knowledge capital critical and design process
  • 23. Workflow Coordination
    • Streamlines the automated workflow activities between supply chain partners
    • Workflow coordination also means what and how we can do with the shared information
    • For example:
      • Procurement activities from a manufacturer to a supplier can be tightly coupled to increase efficiencies of time, accuracy, and cost
  • 24. Electronic Workflow Coordination
    • The Internet permit companies to automate the critical business processes
      • E-workflow coordination includes
        • Procurement - dynamically link the buyer into real-time trading communities to reduce operational cost and increase efficiency
        • Order execution - Internet-based service to facilitate and process orders, coordinate rebates, discounts
        • Engineering change - handle the quick change in product rollover in a timely fashion
        • Design Optimization
        • Financial Exchanges – Internet link to process financial exchanges
  • 25. New Business Models
    • Redefine logistics flows of business partners
    • The roles and responsibilities of members may changes to improve overall supply chain efficiency
    • For example:
      • Apply new rules between partners, who may join to create new products, pursue mass customization, and penetrate new market and customer segment
  • 26. New Electronic Business Models
    • With the new concept of Internet integrated supply chain, new developing strategies and business models are adopted by companies
      • Virtual Resource – Internet based secondary markets handles the excess inventory and reduce cost
      • Supply Chain Restructuring – Use information technologies to restructure the logistic flows of product to gain efficiencies
      • Product Upgrades – Use the Internet to upgrade hardware product, including onsite upgrade or physical replacement by installing software over the Internet
      • Mass Customization – Use Internet to allow customer configure specific order options tailored to their taste and preferences
  • 27. New Electronic Business Models - cont
      • Service and Support – Perform PC support – check viruses, alert customer and provide online fixes. Data is gathered remotely using the Internet
      • From Products to Services – Internet-based services for personal finance, tax preparation and financial tools. Services are hooked up from backend financial Institutes to end-users
      • Multi-channel Click-and Mortar Fulfillment – Use the Internet to capture online order, use local store to fulfill order and delivery
  • 28. The next wave
      • Demand management – e-business provide enough demand data. Using the extensive data, companies proprietary scientific methods, sophistical statistical analyses and optimization techniques,business can help companies to optimize their demand management decisions
        • Provide up-to-the-minute capacity and resource data
        • Companies can target demand creation program – discount, rebates, regional or niche marketing to stimulate demand
      • Market Intelligent – By using the above data, data mining and data analysis can properly derive business intelligent
        • Use the business intelligent to plan merchandise decision, promotion plans, and new product development decisions
        • Business can use this data and perform this function as a service to customers for profitability and market positions
  • 29. Source: Henry Co
  • 30. Extended-enterprise SCM solutions
  • 31. Extended-Enterprise SCM Applications
    • Targeted at providing a single enterprise (usually the channel master) with a solution that enables it to better manage its supply chain processes and integrates itself into the processes and application architectures of its trading partners.
    • Distributed order management.
    • Supplier relationship management execution.
    • E-sourcing
    • Supply chain inventory visibility
    • Reverse logistics support
    • Adaptive demand management
  • 32. B2B C-Commerce Solutions
    • Not owned by a single enterprise, but are used to manage the multi-enterprise interactions within a value chain. The participants in a particular ecosystem will engage these services to collaborate and transact.
    • Example: Uniform Code Council (UCC) for participants in the retail and consumer goods value chain to access product data.
  • 33. UCCNet: A B2B C-Commerce Solution
  • 34. Competitive Advantages through SC Integration
    • Dramatic returns through efficiency improvements
    • Better asset utilization
    • Faster time to market
    • Reduction in total order fulfillment times
    • Enhanced customer service and responsiveness
    • Penetrating new markets
    • Higher return on assets
    • Higher share order value
  • 35. 2004 Hype Cycle for SCM
  • 36. Classifying B2B Hubs How business buy systematic sourcing spot sourcing What business buy operating input manufacturing inputs MRO Hubs Aggregation Catalog Hubs aggregation Yield Managers Matching Exchanges Aggregation Matching Source: E-Hubs 2000
  • 37. How Companies Conduct Purchases
    • Strategic sourcing
      • Long-term contracts based on negotiation between the sellers and buyers
      • Can be supported more effectively and efficiently through a streamlined supply chain
    • Spot buying
      • Purchasing of goods and services at market prices, as determined by supply and demand in a dynamic manner. Buyers and sellers do not know each other. Eg. Stock exchanges, or commodity exchanges (oil, sugar, corn)
      • Can be more economically supported by the 3 rd party exchange
  • 38. E-Procurement
    • Procurement management: the coordination of all the activities pertaining to purchasing goods and services for an organization
    • Inefficiencies in procurement management of indirect materials – MRO – aggregation of catalogues
    • Reverse Auction for procurement of direct materials, e.g.. GE, GM, RFP process
  • 39. Value Propositions
    • MRO Hubs
      • Consolidated MRO catalog
      • Efficiency, low cost, disintermediate fulfillment
    • Catalog Hubs
      • Automate the sourcing, reducing transaction cost
    • Yield Mangers Hubs
      • a high degree of price and demand volatility
      • High fixed cost asset
    • Exchange Hubs
      • Relationship management
      • Easier trading
  • 40. Aggregation & Matching – Value Mechanism
    • Aggregation: Large # of sellers and buyers, reduced transaction, static pricing , one-stop shopping
      • Benefits: purchasing cost is high, specialized products, large SKU, fragmented supplier chain, buyers not sophisticated, pre-negotiated contracts, meta catalog
    • Matching : Dynamic pricing, bid, auction, player’s role is fluid
      • Benefits: products are commodities or near-commodities and can be traded sight unseen; massive trading volumes to transaction costs; buyers and sellers are sophisticated; use spot sourcing to smooth the peaks and valleys of supply and demand, logistics and fulfillment can be conducted by third parties, demand and prices and volatile
  • 41. Next Week
    • Next Session: Eastman Chemical Case
    • E-Procurement Issues