Supply Chain Management
Systems
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Learning Objectives
1. Describe the three components and the three flows of a
supply chain.
2. Identify popular strategies for solving different challenges of
supply chains.
3. Explain the utility of each of the three major technologies
that support supply chain management.
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Outline
 Supply Chains and Supply Chain Management
 Information Technology Support for Supply Chain
Management
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Supply Chains
 Supply chain is the flow of materials, information, money, and
services from raw material suppliers, through factories and
warehouses, to the end customers.
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It includes the organizations and processes that create and deliver
products, information, and services to end customers.
 Flows of the supply chain
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Material: physical products, raw materials, supplies, etc. that flow along
the chain.
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Material flows also include reverse flows (or reverse logistics)—returned
products, recycled products, and disposal of materials or products. A supply chain
thus involves a product life cycle approach, from “dirt to dust.”
Information: data related to demand, shipments, orders, returns, and
schedules, as well as changes in any of these data
Finance: money transfers, payments, credit card information and
authorization, payment schedules, e-payments, and credit-related data.
 Video
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Supply Chains
GENERIC SUPPLY
CHAIN
 Supply chain visibility
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The ability for all organizations in a supply chain to access or view
relevant data on purchased materials as these materials move
through their suppliers’ production processes and transportation
networks to their receiving docks.
 Supply chain efficiency
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SUPPLY CHAINS
iPhone Supply Chain
Bombardier supply chain
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Supply Chain Management
 Supply chain management (SCM): to plan, organize, and optimize
the various activities performed along the supply chain.
 Interorganizational information system (IOS): information flows
among two or more organizations.
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Reduces costs of routine business transactions
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Improves quality of information flow by reducing or eliminating errors
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Compresses cycle time in fulfilling business transactions
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Eliminates paper processing and its associated inefficiencies and costs
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Makes transfer and processing of information easier for users
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PUSH MODEL AND PULL MODEL
 Push model (aka make-to-stock), the production process
begins with a forecast (an educated guess) as to customer
demand.
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Predict products customers will want and the quantity of each
product.
Produces the amount of products in the forecast in mass and sells,
or “pushes,” those products to consumers.
Under and over forecast create problem
 Pull model (aka make-to-order), the production process
begins with a customer order.
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Companies make only what customers want, a process closely
aligned with mass customization.
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PROBLEMS ALONG THE SUPPLY CHAIN
 Poor customer service
 Poor quality product
 High inventory costs
 Loss of revenues
 The problems along the supply chain arise primarily
from two sources:
1. Uncertainties
2. The need to coordinate multiple activities, internal units, and
business partners
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THE BULLWHIP EFFECT
The bullwhip effect is erratic shifts in orders up and down the supply chain
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Solutions to Supply Chain Problems
 Vertical Integration is a business strategy in which a
company purchases its upstream suppliers to ensure that its
essential supplies are available as soon as they are needed.
 Using inventories
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Just-in-time (JIT) inventory system – systems that deliver the
precise number of parts, called work-in-process inventory, to be
assembled into a finished product at precisely the right time.
 Information sharing – can be facilitated by electronic data
interchange and extranets.
 Vendor-managed inventory (VMI) – occurs when the supplier,
rather than the retailer, manages the entire inventory
process for a particular product or group of products.
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Information Technology Support for Supply
Chain Management
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Electronic Data Interchange (EDI) - a
communication standard that enables
business partners to exchange routine
documents electronically.
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Minimize data entry errors
Length of messages are shorter
Messages are secured
Reduces cycle time
Increases productivity
Enhances customer service
Minimizes paper usage and storage
Limitations
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Sometimes business processes must be
restructured
EDI is being replaced by XML-based web
services
Multiple EDI standards exist
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Information Technology Support for Supply
Chain Management
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An extranet allows external business
partners to enter the corporate intranet,
via the Internet, to access data, place
orders, check the status of those orders,
communicate, and collaborate. It also
enables partners to perform self-service
activities such as checking inventory
levels.
Extranets use virtual private network
(VPN) technology to make
communication over the Internet more
secure.
Major benefits:
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Faster processes
Information flow
Improved order entry and customer service
Lower costs
Overall improved business effectiveness
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Information Technology Support for Supply
Chain Management
Portals and Exchanges – Web services
 Portals enable companies and their suppliers to collaborate
very closely
 Procurement portals: automate the business processes
involved in purchasing or procuring products between a
single buyer and multiple suppliers
 Distribution portals: automate the business processes
involved in selling o distributing products from a single
supplier to multiple buyers
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SUMMARY
 Supply chain is the flow of materials, information, money, and
services from raw material suppliers, through factories and
warehouses, to the end customers.
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three components: upstream, internal, downstream
three flows: material, information, financial
Two major challenges: demand forecast, bullwhip effect
IT support for supply chain management: EDI, extranets, portals and exchanges
 Electronic data interchange (EDI) is a communication standard
that enables the electronic transfer of routine documents, such as
purchasing orders, between business partners.
 Extranets are networks that link business partners over the
Internet.
 Corporate Portals offer a single point of access through a web
browser to critical business information in an organization.
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