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  • 1. E-Commerce and Supply Chain Management (SCM) Chapter 4
  • 2. MGMT 326 Foundations of Operations Introduction Strategy Managing Projects Quality Assurance Capacity and Facilities Planning & Control Products & Processes Product Design Process Design Managing Quality Statistical Process Control Just-in-Time & Lean Systems Supply Chain Management
  • 3. Supply Chain Management (SCM) and E-commerce Chapter 4 What is SCM? E-commerce
    • Business-to-business:
    • Information technologies
    • Benefits to companies
    • Business-to-consumer:
    • Competition
    • Inventory management
    • Delivery options
    • Managing returns
    • Global Supply Chains:
    • Inventory
    • Infrastructure
    • Product proliferation
    • Patents
    • Health & safety
    • Vertical Integration:
    • Backward integration
    • Forward integration
    • Make-buy decisions
    • Managing Suppliers:
    • Selecting suppliers
    • Single suppliers vs.
    • multiple suppliers
  • 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 2 nd 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?