Chapter 4 PowerPoint

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Chapter 4 PowerPoint

  1. 1. E-Commerce and Supply Chain Management (SCM) Chapter 4
  2. 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. 3. Supply Chain Management (SCM) and E-commerce Chapter 4 What is SCM? E-commerce <ul><li>Business-to-business: </li></ul><ul><li>Information technologies </li></ul><ul><li>Benefits to companies </li></ul><ul><li>Business-to-consumer: </li></ul><ul><li>Competition </li></ul><ul><li>Inventory management </li></ul><ul><li>Delivery options </li></ul><ul><li>Managing returns </li></ul><ul><li>Global Supply Chains: </li></ul><ul><li>Inventory </li></ul><ul><li>Infrastructure </li></ul><ul><li>Product proliferation </li></ul><ul><li>Patents </li></ul><ul><li>Health & safety </li></ul><ul><li>Vertical Integration: </li></ul><ul><li>Backward integration </li></ul><ul><li>Forward integration </li></ul><ul><li>Make-buy decisions </li></ul><ul><li>Managing Suppliers: </li></ul><ul><li>Selecting suppliers </li></ul><ul><li>Single suppliers vs. </li></ul><ul><li>multiple suppliers </li></ul>
  4. 4. Supply Chains <ul><li>A supply chain is the network of activities that deliver a product/service to the customer </li></ul><ul><ul><li>Sourcing (purchasing) of raw materials, parts, goods for sale, or service inventories </li></ul></ul><ul><ul><li>Order entry </li></ul></ul><ul><ul><li>Operations planning </li></ul></ul><ul><ul><li>Transformation process (manufacturing or services) </li></ul></ul><ul><ul><li>Quality management </li></ul></ul><ul><ul><li>Logistics: </li></ul></ul><ul><ul><ul><li>Transportation (traffic) </li></ul></ul></ul><ul><ul><ul><li>Distribution (delivering the product to customers) </li></ul></ul></ul>
  5. 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. 6. Lessons from the Dairy Products Supply Chain Figure 4-2, page 103 <ul><li>Companies often have several tiers of suppliers. </li></ul><ul><ul><li>Your company's Tier 1 suppliers are the firms that your company buys from. </li></ul></ul><ul><ul><li>A company has more control over Tier 1 suppliers than over Tier 2 & Tier 3 suppliers </li></ul></ul>
  7. 7. Supply Chain Management (SCM) <ul><li>Supply Chain Management is the business function that coordinates the movement of materials and information through the supply chain </li></ul>
  8. 8. Objectives of Supply Chain Management <ul><li>Minimize the cost of materials and material movement </li></ul><ul><li>Minimize inventory investment </li></ul><ul><li>Ensure timely delivery of materials at every level of the supply chain and to customers (to ensure product availability and delivery speed) </li></ul><ul><li>Ensure quality of materials used in manufacturing or services </li></ul><ul><li>If needed, get product design help or other services from suppliers. </li></ul>
  9. 9. Supply Chain for Furniture Figure 4.1, page 99
  10. 10. Information Sharing in the Supply Chain <ul><li>The objective of information sharing is to match demand and supply. (What will be available when, and from whom?) </li></ul><ul><li>Demand: actual sales, sales forecasts, booked orders, custom orders </li></ul><ul><li>Product availability: current inventory, production plans, shipping schedules, shipments </li></ul><ul><li>Quality: suppliers' data on quality </li></ul>
  11. 11. E-commerce <ul><li>The use of the Internet and World Wide Web to conduct business </li></ul><ul><ul><li>Business-to-business (B2B) </li></ul></ul><ul><ul><li>Business-to-consumer (B2C) </li></ul></ul><ul><li>Also called e-business </li></ul>
  12. 12. Technologies for B2B E-commerce <ul><li>Electronic data interchange (EDI): electronic exchange of business-related information between companies, using data files in standard formats </li></ul><ul><ul><li>Originally, the data files were designed to be processed by computer systems </li></ul></ul><ul><ul><li>In Web-based EDI, the supplier or business customer can access the information through the Web </li></ul></ul>
  13. 13. Types of Web Sites for B2B E-commerce <ul><li>Electronic storefronts: Allow buyers to consult an online catalog, place an order, pay or make payment arrangements, and track shipments </li></ul><ul><ul><li>Similar to B2C electronic storefronts </li></ul></ul><ul><li>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 </li></ul>
  14. 14. Benefits of B2B E-commerce <ul><li>Lower administrative costs for purchasing </li></ul><ul><li>Low-cost access to global suppliers </li></ul><ul><li>Lower inventory investment due to intense price competition and faster shipping </li></ul><ul><li>Better product quality because of increased cooperation between buyers and sellers, especially during the product design and development </li></ul>
  15. 15. Operations Issues in Business-to-consumer E-commerce <ul><li>More competitive markets </li></ul><ul><li>Inventory management: information sharing in the supply chain helps to reduce inventory costs. </li></ul><ul><li>Packing orders for shipment </li></ul><ul><li>Delivery </li></ul><ul><li>Customer returns </li></ul>
  16. 16. Operations Issues in Online Sales Packing Orders for Shipment <ul><li>Items are identified by bar codes or radio frequency ID (RFID) </li></ul><ul><li>Warehouse workers put ordered items in crates </li></ul><ul><li>Sorter sends each item to the correct, bar-coded box for the customer who ordered it </li></ul><ul><li>Packing slip is printed </li></ul><ul><li>Boxes are packed, taped, weighed </li></ul><ul><li>Boxes are put on trucks for shipment to customers </li></ul>
  17. 17. Operations Issues in Online Sales Delivery <ul><li>Objective: Deliver when promised, while minimizing delivery costs </li></ul><ul><li>Brick-and-mortar stores (like Sears) can ship items to stores for customer pickup. </li></ul><ul><li>Other online merchants ship via a package delivery service (like UPS) or U.S. postal service </li></ul><ul><li>Online merchants use package delivery services for most shipments to other countries. </li></ul><ul><li>Customers usually pay a standard shipping cost – different for U. S. and other countries </li></ul>
  18. 18. Operations Issues in Online Sales Customer Returns <ul><li>Objective: minimize the cost of customer returns and reduce &quot;hassles&quot; for customers </li></ul><ul><ul><li>25% of Internet orders result in a customer return </li></ul></ul><ul><ul><li>Problems in returning goods are the 2 nd biggest reason that consumers don't buy online </li></ul></ul><ul><li>Customer usually pays for return shipping </li></ul><ul><li>Variety of approaches used to return goods: postal service, contract package delivery service, brick-and-mortar store </li></ul>
  19. 19. Operations Issues in Online Sales Customer Returns (2) <ul><li>Online retailer must ship a replacement item or issue credit to customer </li></ul><ul><li>Online retailer must process returned items </li></ul><ul><ul><li>Return defective items to supplier for a credit </li></ul></ul><ul><ul><li>Good items can often be repackaged, priced, and resold. </li></ul></ul><ul><li>This process can be out-sourced. </li></ul>
  20. 20. Operations Issues in Global Supply Chains <ul><li>Inventory levels tend to be higher. </li></ul><ul><ul><li>Safety stock: inventory kept to protect a customer against late deliveries from a supplier </li></ul></ul><ul><ul><li>Pipeline inventory: inventory that has left a supplier plant but has not yet reached the customer </li></ul></ul><ul><ul><li>Both safety stock and pipeline inventory tend to be higher in global supply chains. </li></ul></ul>
  21. 21. Operations Issues in Global Supply Chains (2) <ul><li>Shipping times are usually longer. </li></ul><ul><ul><li>Transportation in developing countries is less efficient than in developed countries. </li></ul></ul><ul><ul><li>Port congestion causes delays. </li></ul></ul><ul><ul><li>Customs and security inspections cause delays. </li></ul></ul><ul><ul><li>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. </li></ul></ul>
  22. 22. Operations Issues in Global Supply Chains (3) <ul><li>Health and safety of consumers </li></ul><ul><li>Infringement of patents and copyrights </li></ul><ul><ul><li>Both GM and BMW have accused Chinese firms of patent infringement </li></ul></ul><ul><li>Product proliferation: the need to develop different product variations for different countries </li></ul>
  23. 23. Sourcing Decisions <ul><li>Sourcing: deciding which goods or services to make in-house, and which ones to buy </li></ul><ul><li>Vertical integration – a measure of how much of the supply chain is owned by the manufacturer </li></ul><ul><ul><li>Backward integration – owning or controlling sources of raw material and component parts </li></ul></ul><ul><ul><li>Forward integration – owning or controlling the channels of distribution </li></ul></ul>© 2007 Wiley
  24. 24. Make or Buy Decisions <ul><li>Is product/service technology critical to firm’s success? </li></ul><ul><li>Is product/service a core competency? </li></ul><ul><li>Is it something your company must do to survive? </li></ul><ul><li>If any of the above are true, it is usually wise to make, rather than buy. </li></ul>© 2007 Wiley
  25. 25. Make or Buy Decisions (2) <ul><li>Who can do a better job: you or a supplier? </li></ul><ul><ul><li>Costs – breakeven analysis is used to compare costs. ` </li></ul></ul><ul><ul><li>Quality </li></ul></ul><ul><ul><li>On-time delivery </li></ul></ul><ul><ul><li>Product or part designs </li></ul></ul><ul><li>Is there a supplier who can meet your firm's requirements in the above areas? </li></ul>

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