Global value model for B2B systems (all)
Logistics management/supply chain (ch10)
Human Resource/support services (+ch10)
Customer Relations Management (ch11)
Manufacturing and process management
Financial management/EDI (+ch12)
Supply Chain Management
Supply Chain Management (SCM) is an outgrowth of
“traditional” logistics management and Enterprise
Resource Planning (ERP)
It extends the management function outside the
organization to both the supplier organizations and
the distribution channels
Good ERP/SCM can increase net revenues 4-6%
SCM has become an expectation for industry
Firms are moving from an process-efficiency driven
to a customer value-benefit focus.
This involves understanding Customer Needs.
Costs are coorelated to uncertainty in the Supply
Chain (enterprise integration SCM software is to
SCM modules address: logistics, manufacturing,
The best-in-practice approaches have been
incorporated in various systems
Major vendors include
Often, organizations find adoption of full
blown ERP/SCM systems require significant
The goal is to simplify routine transactions
and reduce paperwork
Trend is to reduce supplier steering and
partner with the selected suppliers so that
both organizations win
Purchase orders can be issued by DBMS
triggers on inventory
Suppliers can be allowed to replenish
inventory based on agreed upon parameters
The distribution or demand chain is
– Speeding data acquisition
– Controlling inventory, warehousing and
– Reducing paperwork
It also includes invoice auditing and order
What is a Supply Chain? Steps to meet customer
needs. Global competition makes the customer in
control of production, not the manufacturer.
What is SC-management? Coordination of tasks
(order generate, taking, filling, distribution of
products, services and information). Key players
create an extended enterprise.
Is SCM a new concept? No, 25 years. Focus
progresses: efficiency, integration of enterprise,
product made to customer expectations. The last
means more information integration between
Pull (build to order) versus Push (build to stock)
Pull model requires: support product varients,
reduced lead times, improved quality, lower unit cost,
operational excellence, performance measures.
Pull implementation requires: gather customer
demands, make right choices to meet demand, make
informed decisions on materials, deliver goods,
Managers need: unified plan, communication,
coordination to all involved.
Elements of SCM
Planning System for Purchasing Management: right
product, right place, right time. Consumer demand
triggers order up the supply chain. Begin with POS
terminal. Then use information to determine inventory
investment, saftey stock, inventory turns,
System: 1. Order generation and forecast planning,
2. Order taking and entry for replenishment.
Elements of SCM
Execution System for Distribution
Management: facilitate the physical
movement of goods and services. Focus on
Ensure order fulfillment, procurement,
manufacturing, and distribution management
are integrated. .
Elements of SCM
Performance Measurement Systems to study the
health of the approach: accounting and financial
management systems are focus. Electronic
commerce tools such as datawarehousing used to
analyse data without impacting performance of
Use of software agents to let different users set
different criteria for sifting through data. ( ie.
Salespersons, accountants, material planners,
Customer Asset Management: manage proactively,
better understand market and needs.
Integrated Logistics: production planning,
procurement, inventory management.
Financial Management: manage flows through
Supply Chain coordination is also know as Integrated
1 Million stockkeeping units (SKUs), every
product style, size, color.
On-trend, in-stock execution strategies
(optimize selection, minimize inventory)
best price per unit, minimize markdowns.
Order Management Cycle
1. order planning and generation - make sure the
inventory is there.
2. online cost estimation and pricing - find prices,
understand price elasticity of market, yield
3. order receipt and entry - how to interact with
customers, receive requests, what to do with
Order Management Cycle
4. order selection and prioritization - which
customers get served first, better, which orders filled.
5. order scheduling - coordination between
6. order fulfillment and distribution - bringing parts
together, ie. FedEx ships parts to assembly place, not
warehouse. Retailing is not just selling but order
7. order billing and payment management - can the
customer understand the bill.
1. CRI - Store operations and customer service. UPC
- mark, track, exchange product information.
2. RSI - where to keep stock. Partnerships with few
– purchasing - from suppliers
– inventory mgmt - how much in stock, where
– stock control - track movement
– stock movement - receiving, checking, storing, pick-ups,
– distribution operations - ops of warehouse, transport fleet
3. RMI -
– merchandise planning (profitability analysis, markdowns),
– mircomarketing (advertising, targeting customers),
– brand management (package and design).
Horizontal: common functions across industries, ie.
financial and manufacturing. See applications in
Vertical: automate tasks that are specific to a market
Dominate players: SAP, Oracle, PeopleSoft, Baan.
Three-tier software and Intranets become technology
to support enterprise business processes and
philosophy. Use of ubiquitous Web interface.
Packages are good: they include the best practises of
many businesses. They include distilled knowledge.
Important Characteristics of Software for SCM:
– total costs
– access to expanded distribution channels
– ability to integrate new technology
– security is addressed
– tailor to customer from the pre-packaged software with
When a sophisticated SCM system is coupled
with agile manufacturing system, customer
driven manufacturing is possible
A first experiment in this direction is the Levi-
Strauss custom jeans
Most of the computer vendors offer similar
Human Resource and Other
Any other support service in the organization
can also be enhanced by distributed
Human resources management is frequently
addressed as a part of the effort because of
the complexity of modern benefits packages
Recruiting, training, salary administration
Payroll functions including time reporting,
payroll calculation and tax computation
Benefits administration including flexible
spending accounts, pension programs and
Health care benefits management
A big part of the human resources function
involves making information available to
Policies, procedures, options can be
maintained and updated efficiently using
Employee queries related to options and
enrollments can be distributed by intranet
Benefits claims and queries can be submitted
electronically and processed using workflow
Standard queries can be processed and
returned securely by email to the appropriate
Relationships with external agencies can be
facilitated by email and EDI processing