Learning outcomes

Identify the main elements of supply chain management
and their relationship to the value chain and value
networks

Assess the potential of information systems to support
supply chain management and the value chain.
Management issues

Which technologies should we deploy for supply
chain management and how should they be
prioritized?

Which elements of the supply chain should be
managed within and beyond the organization and
how can technology be used to facilitate this?
Introduction to SCM
SCM is the integration of key business processes from
end user through original suppliers that provides
products, services, and information that add value
for customers and other stakeholders
Global Supply Chain Forum (GSCF)
Supplier
Manufacturer
Distributor
Retailer
Upstream
Downstream
Customer
Supply Chain Management

Supply chain management (SCM) is the management of the flow
of goods.

It includes the movement and storage of raw materials, work-inprocess inventory, and finished goods from point of origin to point
of consumption.

Interconnected or interlinked networks, channels and
node
businesses
are
involved
in
the
provision
of products and services required by end customers in a supply
chain.
SCM: Definition

“ Supply chain management has been
defined
as
the
"design,
planning,
execution, control, and monitoring of
supply chain activities with the objective of
creating net value, building a competitive
infrastructure,
leveraging
worldwide
logistics, synchronizing supply with demand
and measuring performance globally. “

1. Planning:
Advanced planning and scheduling
Optimization
Distribution planning
Collaborative planning, forecasting and
replenishment
2. Sourcing:
Indirect or e-procurement
Direct material sourcing
Supplier relationship management

3. Manufacturing:
Product life cycle Management
Enterprise asset Management
Enterprise production Management
Supply-chain control
Product development Management

4. Management:
Supply-chain event Management
Process management
Supply-chain visibility
5. Execution:
Fulfillment
Logistics collaboration
Transportation Management
Global trade management

6. Selling:
E-commerce platforms
Catalog management
Order management
Customer-relationship Management.
SCM – some definitions
Supply chain management (SCM):
The coordination of all supply activities of an
organization from its suppliers and partners to its
customers.
1. Upstream supply chain:
Transactions between an organization and its
suppliers and intermediaries, equivalent to buy-side
e-commerce.
SCM – some definitions
2. Downstream supply chain:
Transactions between an organization
and its customers and intermediaries,
equivalent to sell-side e-commerce.
Members of the supply chain
Members of the supply chain: (a) simplified view, (b) including intermediaries
ECR
ECR is focused on demand management
aimed at creating and satisfying
customer demand by optimizing product
assortment strategies, promotions, and
new product introductions. It creates
operational efficiencies and costs savings
in the supply chain through reducing
inventories and deliveries.
Objective and strategies
Objectives and strategies for effective
consumer response (ECR)
Using technology to support
SCM

Early implementation(1989-1993):
 PC-based EDI purchasing system

Electronic trading gateway(1990-1994):
 EDI-based but involved a wider range of parties

The move towards Internet commerce (1996
onwards):
 Provide a lower-cost alternative to traditional
EDI
A history of SCM at BHP Steel

Early implementation(1989-1993):
This was a PC-based EDI purchasing system.

Objectives:
 reduce
data errors to 0
 reduce administration costs
 improve management control
 reduce order lead time
A history of SCM at BHP Steel

Benefits included:

rationalization of suppliers to 12 major partnerships
(accounting for 60% of invoices).
 80% of invoices placed electronically by 1990.
 7000 items were eliminated from the warehouse, to be
sourced directly from suppliers, on demand.
 Shorter lead times in the day to day – from 10 days to 26
hours for items supplied through a standard contract and
from 42 days to 10 days for direct-purchase items.

Barriers:

Mainly technological. Another significant barrier is the cost in
time and money in the initial set-up. The preliminary
expenses and time that arise from the implementation,
customization and training can be costly.
Electronic trading gateway 1990-1994

Character
 Also
EDI-based, but involved a wider range of parties
both externally (from suppliers through to customers)
and internally (from marketing, sales, finance,
purchasing and legal)

Aim
 Provide
a combined upstream and downstream supply
chain solution to bring benefits to all parties
Continued….

Learning's

The difficulty of getting customers involved
– only four were involved after 4 years,
although an industry-standard method for
data exchange was used. This was
surprising since suppliers had been
enthusiastic adopters.
From 1994, there was no further uptake of
this system.
The move towards Internet commerce
1996 onwards
The Internet was thought to provide a lower-cost alternative to
traditional EDI for smaller suppliers and customers, through using
a lower-cost value-added network.

Objectives:
 Extend the reach of electronic communications with supply
chain partners.
 Broaden the type of communications to include catalogue
ordering, freight forwarding and customer ordering.

Barriers:

The main barriers to implementation at this stage have been
business issues, i.e. convincing third parties of the benefits
of integration and managing the integration process.
Continued….

Barriers:
 The
main barriers to implementation at this stage have
been business issues, i.e. convincing third parties of
the benefits of integration and managing the integration
process.
A typical supply chain
(example from The B2B Company)
A simple model of supply chain

Acquisition of resources (inputs)

Transformation (process)

Products and services (outputs)
E-Procurement

The e-procurement value chain consists of indent
management, e-Tendering, e-Auctioning, vendor
management, catalogue management, Purchase
Order Integration, Order Status, Ship Notice, eInvoicing, e-Payment, and contract management
E-Invoicing
Electronic invoicing is a form of electronic
billing.
E-invoicing methods are used by trading
partners, such as customers and their suppliers, to
present and monitor transactional documents
between one another and ensure the terms of their
trading agreement are being met. These
documents include invoices, purchase orders, debit
notes, credit notes, payment terms and instructions
and remittance advices.
What is logistics?
Logistics is the management of the flow of goods
between the point of origin and the point of consumption
in order to meet some requirements
Used to refer specifically to the management of logistics
or inbound and outbound logistics

Inbound logistics:
The management of material resources
organization from its suppliers and other partners

entering
an
Outbound logistics:
The management of material resources supplied from an
organization to its customers and intermediaries
Push and pull supply chain
models
Push and pull approaches to supply chain management
The Value Chain

A model that considers how supply chain
activities can add value to products and
services to be delivered to the customer
Restructuring the internal value
chain

Some weaknesses in the traditional
value chain:

Most applicable to manufacturing of
physical products

It is a one-way chain involved with pushing
products to the customer

Does not emphasize the importance of
value networks
Deise et al. (2000) adapted
a new model
Two alternative models of the value chain: (a) traditional value chain model
(b) revised value chain model
Towards virtual organization

An organization which uses information and
communication technology to allow it to operate
without clearly defined physical boundaries between
different functions;
 Lack of physical structure
 Reliance of knowledge
 Use of communications technology
 Mobile work
 Boundary less and inclusive
 Flexible and responsive
Benefits of applying IS to SCM

Increased efficiency of individual processes:
 Benefit: Reduced cycle time and cost per order

Reduced complexity of the supply chain


Benefit: Reduced cost of channel distribution and
sale
Improved data integration between elements of the
supply chain:
 Benefit: Reduced cost of paper processing
Continued….


Reduced cost through outsourcing:
 Benefits: Lower costs through price competition
and reduced spend on manufacturing capacity
and holding capacity. Better service quality
through contractual arrangements?
Innovation:
 Benefit: Better customer responsiveness.
Benefits of SCM

Better visibility to customers and trading partners

Better business engagement processes

Less human dependency

Productivity improvement

Consistent, secure and reliable data exchange

Shorter cycle times

End to end system feeds expandability to other sites
Benefits to buying company

Increased convenience through 24 hours a day, 7 days a
week, 365 days ordering

Increased choice of supplier leading to lower costs

Faster lead times and lower costs through reduced
inventory holding

The facility to tailor products more readily

Increased information about products and transactions
such as technical data sheets and order histories
IS-supported downstream SCM

Involves selling direct to customers

Operating a strategy of disintermediation by reducing
the role of its branches
DELL EXAMPLE

Dell Computer is breaking the boundaries between
departments
to
develop
next-generation
capabilities in supply chain management. Dell is an
excellent example for breaking the boundaries. Dell
Computer Corporation is the world’s leading direct
computer systems company, with more than 16 000
employees in 33 countries. Dell has completed a
supply chain program called DSi2 to rapidly
develop next-generation capabilities in supply
chain management for the organization.
DELL
The new capabilities are focused on breaking the boundaries
between departments through:

. redesigning materials requirements planning (MRP) processes
and configuring i2’s Supply Chain Planner (SCP) tool

. enabling collaboration with suppliers regarding forecast and
purchase
information
and
configuring
i2’s
Rhythm
Collaboration Planner (RCP) tool

. assimilating and summarizing global demand and supply data
from each of Dell’s regions and providing the business
community visibility to this much sought-after data

e-commerce and supply chains – breaking down
boundaries 437 automating factory scheduling processes
the
AMAZON EXAMPLE

Customers of Amazon interact with its website and carry out a
number of functions including:

browsing readers’ reviews of books;

reading feature articles about books and authors similar to those
found in magazines and newspapers;

searching for details of a book based on information such as the
author's name or the title of the book;

browsing the books which are the Amazon bestsellers;

ordering books using credit cards or some other similar payment
method;

tracking the progress of an order.
Amazon

Behind the scenes of the Amazon site are a number
of conventional functions which are found in all
retailing applications, these include:

stock management: keeping track of what books
are in stock and ordering titles when stocks become
low;

payment management: paying suppliers of books for
those that have been delivered;

customer payment management: keeping track of payments
made by customers and of payments made by credit card
companies and banks which correspond to the customer
payments;

delivery: the process of sending books to customers;

market analysis: the process of analyzing sales in order to
determine what books to order and which to discount in the
future. This analysis occurs at both the customer level and at a
temporal level in that customer preferences are processed and
the times and dates when they express these preferences are
analyzed; for example, in order to answer questions such as what
books sell well at Christmas or at Easter?
Top Companies with Best SCM

The 2013 top 25 are:
1 Apple
2 McDonald's
3 Amazon.com
4 Unilever
5 Intel
6 P&G
7 Cisco Systems
8 Samsung Electronics
9 Coca Cola Company
10 Colgate-Palmolive
Top Companies with Best SCM

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Dell
Inditex
Wal-Mart Stores
Nike
Starbucks
PepsiCo
H&M
Caterpillar
3M
Lenovo Group
Nestlé
Ford Motor
Cummins
Qualcomm
Johnson & Johnson
Responsibilities of SCM
Manager

Planning delivery timetables

Ensuring stores have enough stock

Making sure suppliers have enough stock to meet
demand

Overseeing the ordering and packaging process

Monitoring stock levels

Tracking products through depots to make sure
they arrive at their destination

Overseeing arrival of shipments
Responsibilities of SCM
Manager

material resource planning

enterprise resource planning

audit and monitor suppliers

source components under pressure

establish new suppliers

monitor and develop existing supply chain

initiate and lead cost-saving initiatives

negotiate and manage contracts