This document discusses supply chain management and key concepts related to SCM. It provides examples of how Dell optimized its supply chain to reduce inventory levels. The document also summarizes the basics of SCM including the key links in the supply chain and how information technology can help manage SCM more effectively through increased visibility, responsiveness to consumer demands, and competitive advantages.

1. Supply Chain Management Chapter 8

2. What are the basics of SCM? Supply Chain consists of all parties involved, directly or indirectly, in the procurement of a product or raw material SCM : involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness & profitability

3. Take Dell for Example! Dell assembles nearly 80,000 computers every 24 hours! Roughly 10 years ago (like many competitors) Had warehouses with 20-25 days worth of inventory Today, Dell doesn’t have a single warehouse and carries only 2 hours worth of inventory in its factories and a maximum of just 72 hours across its entire operation How’d they do it?

4. Dell-like Supply Chain Plan Supply Chain starts with the customer: by cutting out retailers and selling directly to its customers, Dell is in a far better position to forecast real customer demand 2. Replace Inventory with Information!: to operate with close to zero inventory, Dell communicates constantly with its suppliers. It sends out status updates 3 times per day from its assembly plants; every week it updates its quarterly demand forecasts. By making communication its highest priority, Dell ensures the lowest possible inventory 3. If you cannot measure it, you cannot manage it: Dell knows what works because it measures everything from days in inventory to the time it takes to build a PC. As Dell slashed those numbers it got more efficient 4. Complexity slows you down: Dell cut the # of its core suppliers from several hundred to about 25. It standardizes critical PC components, which streamlined its manufacturing. Dell got faster by making things simpler 5. Create a watershed mind-set: Dell is not content with incremental improvement; it demands massive change. Each year, it wants its Austin-based PC assembly plant—already very fast—to improve production by 30%. “you don’t get big results if you don’t challenge people with big goals”

5. What has changed in terms of business focus? In the past, companies focused primarily on manufacturing and quality improvements within their own 4 walls. Now companies extend their effort to influence the entire SCM to include CUSTOMERS and SUPPLIERS!

6. BASICS OF SUPPLY CHAIN The supply chain has three main links : Materials flow from suppliers and their “upstream” suppliers at all levels Transformation of materials into semi-finished and finished products through the organization’s own production process Distribution of products to customers and their “downstream” customers at all levels

7. BASICS OF SUPPLY CHAIN Organizations must embrace technologies that can effectively manage supply chains Think of a business that you recently had a problem with, placing an order, receiving an order; Identify 1 or 2 areas where the business could improve its SCM with technology / information systems

8. Information technology’s role in the Supply Chain At this point, the notion of virtually seamless information links within and between organizations is an essential element of integrated supply chains Despite this however, remember: Privacy and security of customer information and intellectual capital remain a major concern and should be built into the system

9. 5 basic SCM components Use metrics to meet demand Find reliable suppliers—deal with pricing, delivery, and payments with suppliers Manufacture product or service—Metric intensive! Logistics: deals with the processes & controls for efficient and effective transport and storage of supplies from supplier to customer Process for allowing customers to return defective and excess products

10. INFORMATION TECHNOLOGY’S ROLE IN THE SUPPLY CHAIN IT’s primary role is to create integrations or tight process and information linkages between functions within a firm

11. Factors Driving SCM Although people have talked about it for a very long time, integrated SCM as only been made possible recently due to development of advances in technology

12. Visibility Supply chain visibility – the ability to view all areas up and down the supply chain

13. Consumer Behavior Companies can respond faster and more effectively to consumer demands through supply chain enhances Demand planning software – generates demand forecasts using statistical tools and forecasting techniques Consumers are demanding more today Why?

14. Competition Supply chain planning (SCP) software – uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain Supply chain execution (SCE) software – automates the different steps and stages of the supply chain Having a efficient & effective SCM means having a competitive advantage over competitors

15. Speed

16. Benefits of SCM Many are obvious; Cost control/ savings Productivity improvements Inventory reductions / improvements Improved visibility into demand/supply Quality improvements Maintain/gain competitive advantage Perfect example: NEC & Epson Deliver Global SCM Reform for Printer Supplies;

17. Drivers of SCM Facilities Inventory Transportation Information SCM like we have said provides metrics by which we can measure efficiency IT metrics and effectiveness IT metric These metrics are driven by the 4 drivers;

18. Facilities : addresses the process or transformation of inventory into another products or stores inventory before it moves to the next facility Factors to consider are Location Capacity Operational design

19. Inventory : addresses the strategy employed to maintain low inventories but also maintain a rapid turnover time to meet demand! Management & Control software helps address this Transportation: a major cost in the SCM strategy Software again is providing solutions for organizations through Global inventory management systems Transportation planning software & Distribution management software

20. Information Driver An organization must decide what information is most valuable in efficiently reducing costs or improving effectiveness SCM strategies then consider; Information Sharing Push vs . Pull information strategy In a push technology environment, organizations send information. In a pull technology environment, organizations receive or request information

21. Customer Relationship Management (CRM) Basics & Business Benefits of CRM

22. Most Valuable Customers Organizations can use the RFM formula to determine who is its MVC’s! Recency : how recently a customer purchased items Frequency : how frequently a customer purchases items Monetary value : how much a customer spends on each purchase

23. Customer Relationship Management CRM: involves managing all aspects of a customers relationship with an organization to increase customer loyalty, retention, and an organization’s profitability. CRM acknowledges industries that they are migrating from the traditional product-focused organization toward customer-driven organizations. Why?

25. Brief History: the 80’s 1980 Business Processes - In the case of larger, key clients it was a valuable tool for keeping the lines of communication open and tailoring service to the client’s needs. In the case of smaller clients, however, it tended to provide repetitive, survey-like information that cluttered databases and didn’t provide much insight.

26. 1990 Resource Planning - In the 1990’s companies began to improve on Customer Relationship Management by making it more of a two-way street. Instead of simply gathering data for their own use, they began giving back to their customers not only in terms of the obvious goal of improved customer service, but in incentives, gifts and other perks for customer loyalty. 2000 Customer Relationship Management - Life blood of most sales and service based business.

27. CRM-Supporting technologies self-service 24x7 support AVR’s (automated voice response phone systems) Password Resets Via Email

28. CRM Solutions Web Based Applets Intra/Extranet Share Point Office Online Business Contact Manager Shared Calendars Open Source Dynamics Oracle SQL Intuit (QuickBooks, Peachtree)

29. Customer Satisfaction Because businesses recognize that customers have more choices and often already come with a considerable amount of product knowledge Businesses need to do everything they can to acknowledge customer demand, preferences, demographic info, etc.. To ensure that customers are satisfied!

30. BUSINESS BENEFITS OF CRM CRM enables an organization to : Provide better customer service Make call centers more efficient Cross sell products more effectively Help sales staff close deals faster Simplify marketing and sales processes Discover new customers Increase customer revenues

31. Benefits Explained CRM is a business philosophy based on the premise that those organizations that understand the needs of the individual customers are best positioned to achieve sustainable competitive advantage in the future CRM in many cases is about sifting through information to reveal trends, explain outcomes, and predict results so that businesses can increase response rates& identify profitable customers

32. Operational and Analytical CRM Operational CRM – supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers Analytical CRM – supports back-office operations and strategic analysis and includes all systems that do not deal directly with the customers

33. Operational and Analytical CRM

34. Using IT to Drive Operational CRM

35. Sales and Operational CRM The sales department was the first to begin developing CRM systems with sales force automation – a system that automatically tracks all of the steps in the sales process

36. Sales and Operational CRM technologies Sales management CRM system – automates each phase of the sales process, helping individual sales representatives coordinate and organize all of their accounts Contact management CRM system – maintains customer contact information and identifies prospective customers for future sales Opportunity management CRM system – targets sales opportunities by finding new customers or companies for future sales

37. Sales and Operational CRM CRM Pointers for Gaining Prospective Customer Get their attention Value their time Overdeliver Contact frequently Generate a trustworthy mailing list Follow up

38. USING IT TO DRIVE ANALYTICAL CRM Personalization – when a Web site knows enough about a persons likes and dislikes that it can fashion offers that are more likely to appeal to that person Analytical CRM relies heavily on data warehousing technologies and business intelligence to glean insights into customer behavior These systems quickly aggregate, analyze, and disseminate customer information throughout an organization Analytical CRM has the ability to provide an organization with information about their customers that was previously impossible to locate, and the resulting payback can be tremendous.

39. CUSTOMER RELATIONSHIP MANAGEMENT’S EXPLOSIVE GROWTH CRM Business Drivers

40. CURRENT TRENDS: SRM, PRM, AND ERM Current trends include: Supplier relationship management (SRM) – focuses on keeping suppliers satisfied by evaluating and categorizing suppliers for different projects, which optimizes supplier selection Partner relationship management (PRM) – focuses on keeping vendors satisfied by managing alliance partner and reseller relationship that provide customers with the optimal sales channel Employee relationship management (ERM) – provides employees with a subset of CRM applications available through a Web browser

41. The End of the line: ERP Enterprise Resource Planning & Collaboration Systems

42. ERP Integrates all departments and functions throughout an organization into a single IT system (or integrated set of IT systems so that employees can make decisions by viewing enterprise wide information on all business operations Really? What about access control & authentication? Remember Information Security!!!

43. Powerful Organizational Tools Reasons ERP Systems are Powerful Organizational Tools ERP is a logical solution to the mess of incompatible applications that had sprung up in most businesses ERP addresses the need for global information sharing and reporting ERP is used to avoid the pain and expense of fixing legacy systems

44. Core & Extended Components Core : traditional components included in most ERP systems and they primarily focus of internal operations Extended : extra components that meet organizational needs that focus primarily on external operations

45. ERP: Key to e-business success Applications such as SCM, CRM, and ERP are the backbone of e-business Integration of these applications allows the unlocking of information to make it available to any user, anywhere, anytime

46. PeopleSoft: MainStreet Component PeopleSoft CRM X SCM X Financial management X HRM X Service Automation X Supplier relationship Management X Enterprise Performance management X Business Intelligence Learning Management Order management Manufacturing Marketing Sales

47. THE CONNECTED CORPORATION Many companies purchase modules from an ERP vendor, an SCM vendor, and a CRM vendor and must integrate the different modules together Middleware – several different types of software which sit in the middle of and provide connectivity between two or more software applications Enterprise application integration (EAI) middleware – packages together commonly used functionality which reduced the time necessary to develop solutions that integrate applications from multiple vendors EAI example, if a company is looking at purchasing Siebel CRM and they find out the Siebel has already built many integrations to PeopleSoft financials, it would be more inclined to purchase the product

48. Risk and ERP Costs : is a major risk to implementing ERP. Can easily start in the millions of dollars, which includes hardware, software, professional services, and internal staff costs Implementation : can take an average of 23 months…..

49. Additional Risks Lie in the integration layer of joining different types of application systems. Integration at the Enterprise level is generally achieved through Web-Services Web Services: is defined by the W3C as "a software system designed to support interoperable machine-to-machine interaction over a network Establishes communication with HTTP and uses XML solutions Again, how do we establish security when joining disparate systems? Integration needs to also address access control, authentication, and use encryption