CE 13 - Interorganizational Processes: Supply Chain Management
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  • 1. Interorganizational Processes: Supply Chain Management Chapter Extension 13
  • 2.
    • Q1: What are typical interorganizational processes?
    • Q2: What is a supply chain?
    • Q3: What factors affect supply chain performance?
    • Q4: How does supply chain profitability differ from organizational profitability?
    • Q5: What is the bullwhip effect?
    • Q6: How do information systems affect supply chain performance?
    Study Questions Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE13-
  • 3.
    • Interorganizational process
      • One in which process activities occur in two or more independent organizations
      • Cooperation is governed by negotiation and contract, and conflict resolution is done by negotiation, arbitration, and litigation
      • Varies in scope and complexity
        • Simple—retailer processes credit card transaction. Retailer, customer, and credit card company, possibly bank part of payment process
        • Complex—Boeing, General Electric, and other companies for supplying engines and parts for 787 aircraft
    • Purpose of chapter extension: To understand principles of generic supply chain management
    Q1: What Are Typical Interorganizational Processes? Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE13-
  • 4.
    • Network of organizations and facilities that:
      • Transforms raw materials into products delivered to customers
      • Works with companies and consumers up and down the chain
        • Customers order from retailers
        • Retailers order from distributors
        • Distributors order from manufacturers
        • Manufacturers get raw materials from suppliers
        • Transportation companies, warehouses, and inventories also involved
    Q2: What Is a Supply Chain? (video) Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE13-
  • 5.
    • Figure CE13-1
    Supply Chain Relationships Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE13-
  • 6.
    • Figure CE13-2
    Supply Chain Example: REI Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE13-
  • 7.
      • Facilities
        • Location, size, and operations methodology (places where products are fabricated, assembled, or stored)
      • Inventory
        • Size, inventory management
        • Raw materials, in-process work, and finished goods
        • Balance between availability and cost
        • Frequency and size of orders
      • Transportation
        • Movement of materials
        • Transportation mode and routing decisions influence speed and costs
    Q3: What Factors Affect Supply Chain Performance? Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE13-
  • 8.
      • Information
        • Requests, responses, and communications between organizations
        • Purpose of the information
          • Transactional, such as orders and order returns
          • Informational, such as the sharing of inventory and customer order data.
        • Availability
          • Ways in which organizations share their information and when
        • Means
          • Methods by which information is transmitted
    Q3: What Factors Affect Supply Chain Performance? (cont’d) Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE13-
  • 9.
    • Figure CE13-3
    Drivers of Supply Chain Performance Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE13-
  • 10.
    • Supply Chain Profitability
      • Difference between sum of revenue generated and sum of costs incurred
    • Maximum profit from chain
      • Cannot be achieved if each organization maximizes its profits in isolation
      • Profitability increases when one or more operate at less than its own maximum profitability
    • Why?
      • When one supplier loses sale due to out-of-stock, others in supply chain lose revenue
    Q4: How Does Supply Chain Profitability Differ from Organizational Profitability? Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE13-
  • 11.
    • Variability in the size and timing of orders increases at each stage up the supply chain, from customer to supplier
    • Natural dynamic of multistage nature of supply chain
      • Unrelated to erratic customer demand
      • Large fluctuations force distributors, manufacturers, and suppliers to carry larger inventories
      • Reduces overall profitability of supply chain
    • Eliminate bullwhip by giving participants access to consumer-demand information
      • Interorganizational information systems needed to share data
    Q5: What Is the Bullwhip Effect? Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE13-
  • 12.
    • Figure CE13-4
    The Bullwhip Effect Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE13-
  • 13.
      • Reduce cost of buying and selling
        • Sourcing, buying, and selling all faster, easier, more effective
    • Increase supply chain speed
        • Dollar value of goods exchanged in given period of time
    • Enable suppliers and customers to reduce inventory size and costs
    • Fix bullwhip effect problem
    • Improve delivery scheduling
        • Enable just-in-time inventory
        • Allow manufacturers to reduce raw materials inventory size
    • Do not optimize supply chain profitability
    Q6: How Do Information Systems Affect Supply Chain Performance? Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE13-
  • 14.
    • Distributor has developed information system that reads data up and down supply chain
      • Store inventories of all retailers are low. You know retailers will be sending rush orders. You have overstocked on supply. You query manufacturers’ database and find finished goods are low. You increase your price claiming extra transportation costs, but increase was to increase your profit instead.
      • Competitor has large supply as well, and does not increase price, so you sell no product. You want to track competitor’s inventories, which can be estimated by watching on manufacturer side and comparing to decrease sales on retail side. You know what was made, sold, and left competitor’s inventory.
    Ethics Guide: The Ethics of Supply Chain Information Sharing Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE13-
  • 15.
      • Your agreement with customers permits you to query their inventory levels, but only for orders they have with you. You are not to query orders they have with your competitors. A system has a flaw and allows you to query all orders.
      • Assume same agreement as situation C. One of your developers writes a program allowing you to exploit a hole in retailer’s security system. This gives you access to all of retailer’s sales, inventory, and order data.
    • Legal? Ethical? Smart? What’s the risk to you and your business?
    • How do you protect your systems and data in a supply chain?
    Ethics Guide (cont’d) Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE13-
  • 16.
    • Q1: What are typical interorganizational processes?
    • Q2: What is a supply chain?
    • Q3: What factors affect supply chain performance?
    • Q4: How does supply chain profitability differ from organizational profitability?
    • Q5: What is the bullwhip effect?
    • Q6: How do information systems affect supply chain performance?
    Active Review Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall CE13-
  • 17. CE13- All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2010 Pearson Education, Inc.   Publishing as Prentice Hall