This document discusses supply chain management and the role of information technology. It provides examples of how Dell and IBM reengineered their supply chains using IT. The key points are: 1) Dell transformed its supply chain through just-in-time manufacturing, mass customization, locating near suppliers, online ordering, and monitoring productivity. IT played a key role through e-commerce, extranets, and creating an online community. 2) IBM reduced a business process cycle time from 7 days to less than 1 day through a decision support system that automated tasks and data access. 3) IT integration tools like ERP and SCM systems provide benefits like reduced costs, improved customer satisfaction, and increased visibility across organizations

1. Supply Chain, Enterprise
Resources Planning, and
Business Processes Engineering
4-1
Presented by-
Ayisha kowsar A
MBA

2. IT for Management
Prof. Efraim Turban
4-2
Learning Objectives
• Understand the concept of the supply chain,
its importance, and management.
• Describe the problems of managing the
supply chain and some innovative solutions.
• Trace the evolution of software that support
activities along the supply chain.
• Define business processing reengineering
(BPR) and understand its relationship with
the supply chain.

3. IT for Management
Prof. Efraim Turban
4-3
Learning Objectives
• Describe the networked organization and
identify its benefits.
• Demonstrate the role of IT in supporting BPR.
• Describe mass customization, cycle time
reduction, self-directed teams, and
empowerment.
• Define business alliances and virtual
corporations.
• Understand the relationships among enterprise
resources planning (ERP), supply chain
management (SCM), and electronic commerce.

4. IT for Management
Prof. Efraim Turban
4-4
How Dell Reengineered and Managed
its Supply Chain to Become #1
• The Problem
– price war, and on the verge of bankruptcy
• The Solution
– using just-in-time manufacturing
– using mass customization
– locating within 15 minutes of Dell’s suppliers
– doing most orders on the Web
– shipping by UPS
– selling standard computers to large corporations
– testing new PC models at the same time as the
networks’ solutions are developed
– monitor productivity and rate of return on
investment, on all products

5. IT for Management
Prof. Efraim Turban
4-5
• What Role did IT Play?
– electronic commerce with customers
– extranet for suppliers
– Using the Internet to create a community
around its supply chain
• The Results
– become the number one PC seller
– be considered one of the world’s best-
managed and profitable companies
How Dell Reengineered and Managed
its Supply Chain to Become #1

6. IT for Management
Prof. Efraim Turban
4-6
Essentials of the Supply Chains
• Dell case demonstrates that:
– by introducing a new business model one can change the
manner in which business is done and may even capture
the leadership in its industry
– by introducing major customer-related changes, one can
improve the communication and customer services
– by improving logistics system along the entire supply
chain, Dell integrated its own suppliers into its supply
chain, efficiently and effectively
– Dell created flexible and responsive manufacturing systems
– the changes are considered to be a complete reengineering
– Dell supports all of the above by extensive use of electronic
commerce, the Internet, extranet and intranets

7. IT for Management
Prof. Efraim Turban
4-7
Essentials of the Supply Chains
• Supply Chain
– the flow of material, information, and
services from raw material suppliers
through factories and warehouses to the
end customers
• Supply Chain Management (SCM)
– to plan, organize, and coordinate all the
supply chain’s activities

8. IT for Management
Prof. Efraim Turban
4-8
Essentials of the Supply Chains
• Benefits
reduce uncertainty and
risks in the supply chain
positively affecting inventory
levels, cycle time, business
processes, and customer service
increase profitability
and competitiveness

9. IT for Management
Prof. Efraim Turban
4-9
Essentials of the Supply Chains
• The Components of Supply Chain
– Upstream supply chain
• includes the organization’s first-tier
suppliers and their suppliers
– Internal supply chain
• includes all the processes used by an
organization in transforming the inputs of
the suppliers to outputs
– Downstream supply chain
• includes all the processes involved in
delivering the products to final customers

10. IT for Management
Prof. Efraim Turban
4-10
Supply Chain
2nd Tier
Suppliers
2nd Tier
Suppliers
2nd Tier
Suppliers
1st Tier
Suppliers
1st Tier
Suppliers
Assembly/
Manufacturing and
Packaging
Distribution
Centers Retailers Customers
TheGenericProcess
Upstream Internal Downstream
Corrugate
Paper Co.
Lumber
Company
Label
Manufacturing
Grain
Producer
Processing
Facility
Distribution
Centers Stores Customers
TheCereal
ManufacturingProcess
Packaging
Grain Cereal
Packaged
Cereal
Box
Paperboard
Labels

11. IT for Management
Prof. Efraim Turban
4-11
Problems Along
the Supply Chains
• Uncertainties
– demand forecast, which influenced by competition,
prices, weather conditions, technological
development, and customers’ general confidence
– delivery times, which depend on several factors
ranging from machine failures to road conditions
and traffic jams, that way interfere with shipments
• Symptoms of poor SCM
– poor customer service, which hinders people from
getting the product or service when and where
needed, or gives them a product of poor quality
– High cost, low (or no) profit

12. IT for Management
Prof. Efraim Turban
4-12
Some Solutions to
the Supply Chain Problems
• Vertical integration - building inventories
• Coordination of all different activities
• Use outsourcing rather than do-it-yourself
during demand peaks
• ‘Buy’ rather than ‘make’ production inputs
whenever appropriate
• Configure optimal shipping plans
• Create strategic partnerships with suppliers
• Use just-in-time approach to purchasing
• Use fewer suppliers
• Use IT to support the above

13. IT for Management
Prof. Efraim Turban
4-13
The Evaluation of
Computerized Aids
Inventory
Purchasing
Production
scheduling
MRP
1960
Production
Management+
MRP
Finance,
labor
MRP II
1970
Major
Manufacturing
Resources
+
MRP II
All internal
resources
ERP
1980
Coordinated
Manufacturing
and Service
Transactions
+
ERP
Internal customers
and suppliers
Internal
SCM
1990
Extended
ERP/SCM+
Internal
ERP/SCM
External suppliers
and customers
Extended
SCM
2000
Extreme/
Integration+

14. IT for Management
Prof. Efraim Turban
4-14
Why Integration?
• Tangible benefits
– Inventory reduction, personnel reduction,
productivity improvement, order
management improvement, financial-close
cycle improvements, IT cost reduction,
procurement cost reduction, cash
management improvements, revenue/profit
increases, transportation logistics cost
reduction maintenance reduction, and on-
time delivery improvement

15. IT for Management
Prof. Efraim Turban
4-15
Why Integration?
• Intangible benefits
– Information visibility, new/improved
processes, customer responsiveness,
standardization, flexibility,
globalization, and business
performance.

16. IT for Management
Prof. Efraim Turban
4-16
Integrating the Supply Chain
• After the introduction of computer-based
information, companies started to
integrate the links of the supply chain
• New forms of organizational
relationships and the information
revolution, especially the Internet and
electronic commerce, have brought SCM
to the forefront of management attention

17. IT for Management
Prof. Efraim Turban
4-17
Enterprise Resources Planning
(ERP)
• Objective
– to integrate all departments and
functions across a company onto a
single computer system that can
serve all of the enterprise’s needs
• Results
– productivity improvement
– increases customer satisfaction

18. IT for Management
Prof. Efraim Turban
4-18
SAP - The Complete Solution
• SAP R/3 is comprised of four major
application categories - accounting,
manufacturing, sales, and human resources -
containing more than 70 modules
• SAP R/3 allows companies to automate or
eliminate many costly and error-prone manual
communication procedures
• SAP implementation is very complex and
consequently very expensive

19. IT for Management
Prof. Efraim Turban
4-19
Example of How R/3 Work
• Step 1 : Brazilian retailer orders, via the Internet,
1,000 shoes from International Shoe Co. A sales
rep takes the order, routes it to R/3’s ordering
module, R/3 checks the retailer credit, price, etc.
The order is approved.
• Step 2 : Simultaneously R/3’s inventory module
checks the stocks and notifies the rep that half the
order can be filled immediately from stock. The
other half will be manufactured and delivered in 5
days directly from the factory in Taiwan.

20. IT for Management
Prof. Efraim Turban
4-20
Example of How R/3 Work
• Step 3 : R/3’s manufacturing module schedules the
production in Taiwan and instructs the warehouse (in
Chinese) to ship the shoes to Brazil and print up an
invoice (in Portuguese).
• Step 4 : R/3’s human resources module calculates
labor requirements. Due to a shortage, the personnel
manager in Taiwan is instructed to get temporary
workers.
• Step 5 : R/3’s material planning module notifies the
purchasing manager about a shortage of purple dye.
A purchase order is automatically issued.

21. IT for Management
Prof. Efraim Turban
4-21
Example of How R/3 Work
• Step 6 : The customer logs on via the extranet
to the company’s sneakers division. He can
see that 500 shoes were shipped from the
regional warehouse. This is done with R/3
tracing capabilities.
• Step 7 : Based on data from R/3’s forecasting
and financial modules, the CEO can determine
both demand and profitability per product.
The financial module also converts all foreign
moneys to $U.S., whenever needed

22. IT for Management
Prof. Efraim Turban
4-22
ERP
• Pros
– provides a single interface for managing all the
routine activities performed in manufacturing
– can integrate several hundred applications
– plays critical role in getting small- and medium-
sized manufacturers to focus on business processes
• Cons
– need to change existing business processes to fit
SAP’s the format
– never meant to fully support supply chains
– difficult to build, operate, change and maintain

23. IT for Management
Prof. Efraim Turban
4-23
First Generation ERP
• Supported routine transactional activities
• Excelled in transaction management
• Generated reports which provided a
snapshot of the business at a point in time
• Did not support the continues refining and
enhancing of plans as changes and events
occur, up to the very last minute before
executing the plan

24. IT for Management
Prof. Efraim Turban
4-24
Second Generation ERP
• Adds decision support and
business intelligence capabilities
• Integration of database
management systems (DBMS)
and spreadsheets in Excel or
Lotus 1-2-3
• It is Web-based
• Integrates CRM and EC

25. IT for Management
Prof. Efraim Turban
4-25
Application Service Providers
and ERP Outsourcing
• Application service providers (ASP)
– a software vendor that offers to lease ERP-
based applications to other businesses
– offerings are evident in ERP-added
functions such as electronic commerce,
customer relationship management (CRM),
datamarts, desktop productivity, human
resources information systems (HRMS),
and other supply chain-related applications

26. IT for Management
Prof. Efraim Turban
4-26
Global Supply Chains
• IT provides EDI, communication
options, online expertise in sometimes
difficult and fast-changing regulations
• IT can be instrumental in helping
businesses find trade partners
• IT facilitates outsourcing of products and
services, especially IT programming, to
countries with plentiful supply of labor,
at low cost

27. IT for Management
Prof. Efraim Turban
4-27
Business Process
Reengineering (BPR)
• Fundamentally rethinking and
radically redesigning business
processes, in order to achieve
dramatic improvements in
quality, cost, speed and service

28. IT for Management
Prof. Efraim Turban
4-28
The Need for BPR
• Three Cs
– Customers today know what they want, what they
are willing to pay, and how to get products and
services on their own terms.
– Competition is continuously increasing with
respect to price, quality, selection, service, and
promptness of delivery.
– Change continues to occur. Markets, products,
services, technology, the business environment,
and people keep changing, frequently in an
unpredictable and significant manner.

29. IT for Management
Prof. Efraim Turban
4-29
Problem of the Stovepipe
• “Stovepipe” because of lack of
cooperation between functional areas
(vertical dimension)
• Business process reengineering (BPR),
which undertakes a fundamental change
in specific business processes, integrates
information required for good decision
making

30. IT for Management
Prof. Efraim Turban
4-30
Need for
Information Integration
Business processes across functional areas and
organizational boundaries.
Distribution
Logistics,
ServicesPurchasing Finance R & D Production Sales Distribution
Vendors,
Suppliers Organization Customers
Product development
Order fulfillment
Planning, resourcing, and control
Customer service

31. IT for Management
Prof. Efraim Turban
4-31
IBM Credit Corporation
Reduced Cycle Time by 90%
• The old process
– took an average of seven days
• The reengineered process
– a simple DSS provides the deal structurer with
the guidance needed
– the program guides the generalist in finding
information in the databases, plugging
numbers into an evaluation model, and pulling
standardized clauses - ‘boilerplate’-from a file
– electronic communication and collaboration

32. IT for Management
Prof. Efraim Turban
4-32
The Enabling Role of
Information Technology in BPR
• Shared databases, Internet client/server architecture, intranet
• Expert systems, neural computing
• Telecommunication and networks: client/server intranet
• Decision support systems, enterprise support systems, expert systems
• Wireless communication and portable computers, the web, electronic mail
• Interactive videodisk, desktop teleconferencing,electronic mail
• Tracking technology, groupware, workflow software, search engines
• High-performance computing systems, intelligent agents
• Groupware and group support systems,telecommunication, electronic mail,
client/server
• CAD/CAM, CASE tools, online systems for JIT decision making, expert
systems
• CAD/CAM, electronic data interchange, imaging processing
• Artificial intelligence, expert systems
• Robots, imaging technologies, object-oriented programming, expert
systems, geographical information systems (GIS)

33. IT for Management
Prof. Efraim Turban
4-33
Retooling of IT for BPR
• Get a good understanding of the current
installed base of information systems
applications and databases
• Understand the existing infrastructure in
terms of computing equipment,
networks, and the like, and their
relationships to the current available
software, procedures, and data

34. IT for Management
Prof. Efraim Turban
4-34
Tools for BPR
• Simulation and visual simulation tools
• Flow diagrams
• Work analysis
• Rapid application development
• Other tools (e.g. CAD/CAM, imaging
technologies, EDI, interorganizational systems
and expert systems)
• Integrated tool kits
• Workflow software
• The Web

35. IT for Management
Prof. Efraim Turban
4-35
Ford’s Process Redesign
Payment
OLD PROCESS
Purchasing
Ford receiving
Accounts payable
Supplier
Purchase
order
Copy of
purchase
order
Goods
Receiving document
Invoice
500 Employees
NEW PROCESS
Purchasing
Ford receiving
Accounts payable
Supplier
Purchase
order
Goods
Payment
125 Employees
Data-
base

36. IT for Management
Prof. Efraim Turban
4-36
From Mass Production
to Mass Customization
• Mass production
– a company produces a large quantity of
an identical standard product
• Mass customization
– a company produces large volumes, yet
customizes each product to the
specifications of individual customers

37. IT for Management
Prof. Efraim Turban
4-37
Push-based Supply Chain vs.
Pull-based Supply Chain
PUSH PULL
Manufacturer
Retail Distribution
Center
Retail Store
Customers
Purchase Merchandise Manufacturer
Retail Distribution
Center
Retail Store
Customers
Purchase Merchandise

38. IT for Management
Prof. Efraim Turban
4-38
Cycle Time Reduction
• IT allows the combination or elimination
of steps, and the expedition of various
activities in the process
• Telecommunications and especially the
Internet and intranets cut communications
time through the use of e-mail and EDI
and allows collaboration in design and
operations of products and services

39. IT for Management
Prof. Efraim Turban
4-39
Reengineering Organizations
• An Example - Bank
– Customer deals with a single point of contact, the
account manager
– Account manager is responsible for all bank
services, and provides all services to the customer,
who receives a single statement for all accounts
– IT provides account manager with expert advice on
specialized topics, such as loans
– By allowing easy access to the different databases,
the account manager can answer queries, plan, and
organize the work with customers

40. IT for Management
Prof. Efraim Turban
4-40
Networked vs. Hierarchical
Organization
Hierarchical Organization Networked Organization
Formal
Highly structured
Manage
Control
Direct
Employees a cost
Information management -owned
Hierarchical Organizations
Risk avoidance
Individual contributions
Informal
Loosely structured
Delegate/lead
Ownership/participation
Empower
Employees an asset
Information shared ownership
Flatter Organizations
Risk management
Team contributions











41. IT for Management
Prof. Efraim Turban
4-41
From Hierarchy to a Network
Hierarchical
Organization
Flattened
Organization
Network
Organization

42. IT for Management
Prof. Efraim Turban
4-42
Empowerment
• The vesting of decision-making or
approval authority in employees
• Giving permission to the workforce to
unleash, develop, and utilize their skills
and knowledge to their fullest potential,
for the good of the organization as well
as for themselves, and providing the
framework in which this can be done

43. IT for Management
Prof. Efraim Turban
4-43
Empowerment’s Relationship
to Information Technology
• IT provides the right information, at the right
time, at the right quality, and at the right cost
• IT provides tools that will enhance the
creativity and productivity of employees, so
they can make self-decisions, as well s the
quality of their work
• IT provides online training, uses multimedia,
and even apply intelligent computer-aided
instruction to employees who need more
skills and higher levels of skills

44. IT for Management
Prof. Efraim Turban
4-44
Teams
• Types of teams
– permanent or work group teams
– problem-solving teams
– quality circles, participating teams
– management teams
– virtual teams
• IT plays a critical role in empowering team
members and providing the necessary
communication links among teams

45. IT for Management
Prof. Efraim Turban
4-45
Virtual Corporations
• Virtual corporation is an organization
composed of several business partners
sharing costs and resources for the
purpose of producing a product or service
• Major attributes
– excellence – full utilization
– opportunism – lack of borders
– trust – adaptability to change
– technology

46. IT for Management
Prof. Efraim Turban
4-46
How IT Supports
Virtual Corporation
• IT allows communication and collaboration among
the dispersed business partners
• Standard transactions in the interorganizational IS are
supported by EDI and EFT
• The Internet is the infrastructure for these and other
technologies
• Modern database technologies and networking permit
business partners to access each other’s databases
• ERP software is extensively used to support standard
transactions among business partners

47. IT for Management
Prof. Efraim Turban
4-47
Buying and Selling
Along the Supply Chain
• Upstream activities
– Bidding
– Consolidation of vendors’ catalogues in buyer’s site
– Onsite specialty stores
– Other purchases
– Buying knowledge
– Internal SCM activities
• Downstream activities
– Selling on your own web site
– Auctions on your web site
• Upstream and Downstream combined

48. IT for Management
Prof. Efraim Turban
4-48
Implementing EC Solutions
Along the Supply Chain
• Build in yourself, in house
• Outsource the job
• Integrate EC with ERP
• Integration with CRM and DSS
• Componentization

49. IT for Management
Prof. Efraim Turban
4-49