SUPPLY CHAIN MANAGEMENT

(SCM)

MIS SCM & RFID Lab

Supply Chain Management (SCM) Chapter 8 of Kroenke

Key Feature: SCM is the great example of where an Information system goes beyond one Enterprise.

Functional Systems vs. Enterprise Most early information systems were designed

for one functional area Accounting Finance Human Resources Etc.

Enterprise = “Entire Company/Organization” Today (post 2000) the vast majority of

commercial information systems try to be “Enterprise” Used by all the functional areas within the business.

Two companies can share an Information System (WTF?)

Example: Large retailer (Walmart) may force suppliers to use their Supply Chain System.

Example: Three long-time partners (supplier, distributor, retailer) may pool resources to develop their own Supply Chain System

The Simple Supply Chain

Complex Supply Chains

Supply Chain Management = SRM + Inventory Management + CRM

SCM may cross enterprise boundaries

MIS SCM & RFID Lab

SCM Planning Functions

Supply Chain Design – optimize network of suppliers, plants, and distribution centers

Forecasting customer demand by sharing demand and supply forecasts instantaneously across suppliers and distributors

MIS SCM & RFID Lab

SCM Execution Functions Materials Management – share accurate

inventory and procurement order information, ensure materials required for production are available in the right place at the right time.

Collaborative Manufacturing – optimize plans and schedules while considering resource, material, and dependency constraints

MIS SCM & RFID Lab

SCM Execution Functions Collaborative Fulfillment –order

management, vehicle scheduling, and support the entire logistics process, including picking, packing, shipping, and delivery in foreign countries

Supply Chain Event Management – monitor every stage of the supply chain process, from price quotation to the moment the customer receives the product, and receive alerts when problems arise – visibility!

MIS SCM & RFID Lab

Business Value of SCM

Benefits of SCM: Reduces production and distribution

costs More information => less inventory, less lead times needed

Improves timeliness of shipments Increases supply chain “velocity” More accurate fulfillment Improves “visibility” of supply chain

MIS SCM & RFID Lab

SCM Benefits

Fewer employees needed to manage supply chain

Better customer satisfaction: less stock-outs

Strategic relationship with suppliers, enables new business partnerships: Collaborative Planning, Forecasting, and

Replenishment systems (CPFR). Collaborative downstream customer

service, marketing, and relationship management.

MIS SCM & RFID Lab

Technical Challenges of SCM

Acquisition of secure extranet Software can be confusing, contradictory

and not sculpted to their needs – difficult to implement.

Emerging standards, high costs.

MIS SCM & RFID Lab

Organizational challenges

Changes company structure: resistance from employees wedded to traditional processes, leads to lack of adequate collaboration among marketing, production, and inventory management departments within a company

Supplier reluctance or incompatibility issues.

Lack of proper demand planning knowledge: leading to inaccurate or overoptimistic demand forecasts. Need new tools and guidelines.

A major challenge: The Bullwhip effect. The bullwhip effect in supply chains occurs when the variability

in size and timing of orders increases at each stage up the chain. Distributors, manufacturers, and suppliers must carry larger

inventories than should be necessary to meet real demand because of the large fluctuations in orders.

It reduces the overall

profitability of a supply

chain. It can be eliminated by

giving all supply chain

participants consumer-

demand information directly

from retailers through

interorganizational

information systems

Fig 8-13 The Bullwhip Effect

How EDI can help …

In lab, You’ll see how Electronic Data

Interchange can helpsmooth out the communications

Investigate HTML and XML Explore RFID technology