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									            Supply Chain Management Systems

                   Supply Chain Processes


• Plan: Balances aggregate demand and supply to
  develop a course of action

• Source: Processes that procure goods and
  services needed to create a specific product or
  service

• Make: Processes that transform a product into a
  finished state to meet planned or actual demand
            Supply Chain Management Systems

                   Supply Chain Processes


• Plan: Balances aggregate demand and supply to
  develop a course of action

• Source: Processes that procure goods and
  services needed to create a specific product or
  service

• Make: Processes that transform a product into a
  finished state to meet planned or actual demand
• Visibility : See physical operations more
  effectively through information. Information can
  be used for effective coordination of value chain
  activities.
• Mirroring capability : In this stage, virtual
  activities are substituted for physical ones. A
  parallel value chain is created.
• New customer relationships : The company can
  draw on the flow of information in the virtual
  value chain to deliver value to customers in new
  ways.
   Information flows in Supply Chain Management

• Information is overriding element
• Need for databases
• Master files: Information about customers, products,
  materials, suppliers, transportation, production and
  distribution data- do not require frequent processing
• Status files- heart of transaction processing- track orders
  and infrastructure status- updated daily.
• Essentially using the same information to make all plans
  right from structuring the network to processing every
  day supply chain tasks.
            Supply Chain Management Systems

            Information and Supply Chain Management


• Just-in-Time: Scheduling system for minimizing
  inventory by having components arrive exactly at
  the time they are needed and finished goods
  shipped as soon as they leave the assembly line

• Bullwhip Effect: Distortion of information about
  demand for a product as it passes from one entity
  to the next across the supply chain
Supply Chain Management Systems

        The bullwhip effect




           Figure 10-4
• The Bullwhip Phenomenon



• Volatility amplification along the network
• Increase in demand variability as we move upstream
  away from the market
• Mainly because of lack of communication and
  coordination
• Delays in information and material flows
•   Bullwhip effect occurs because of various reasons:
•   Order Batching - Accumulate orders
•   Shortage gaming- Ask for more than what is needed
•   Demand forecast updating
           Important points to keep in mind

• Segment customers based on service needs.
• Modify the supply chain to meet these service
  requirements profitably.
• Customize the logistics network.
• Develop forecasts collaboratively involving every link
  of the supply chain.
• Locate the leverage point where the product is
  unalterably configured to meet a single requirement
• Delay product differentiation till the last possible
  moment.
• Assess options such as modularized design or
  modification of manufacturing processes that can
  increase flexibility.
• Cultivate warm relationships with suppliers.
• Efficient supply chain management has to be
  accompanied by a technology strategy.
ITALIAN CLOTHING MANUFACTURE
•   Warehousing and transportation   6
•   Inventory                             5
•   Late delivery returns                 2
•   Obsolescence                          20
•   Lost sales                       60

• Need to minimize obsolescence costs
• Minimize product range flexibility
• Reduce product development cycle
    Dell’s Direct Business Model of Virtual
                   Integration
• Advantages of a tightly coordinated supply chain
  traditionally facilitated by vertical integration.
• Combined with focus and specialization.
• Leveraging on investments others have made and
  focusing on delivering solutions and systems to
  customers
• Fewer things to manage - fewer things go wrong
• Suppliers’ engineers part of Dell’s Design team
• Have only a few partners
     Dell’s Direct Business Model of Virtual
                    Integration
• Share information with partners in Real time fashion.
• Stitch together a business with partners that are treated
  as if they are inside the company.
• Change focus from how much inventory there is to how
  fast it is moving
• Assets collect risks around them one way or the other.
• Limited or no testing - Eg. Sony Monitors
    Dell’s Direct Business Model of Virtual
                   Integration
• Only three Manufacturing centers - Austin, Ireland and
  Malaysia.
• Inventory levels and replenishment needs sometimes
  conveyed to vendors on hourly basis.
• Substitute information for inventory and ship only
  when we have real demand from real end customers
• Clever segmentation - Focus on institutional markets -
  70% to very large customers with annual purchases
  exceeding $1 million.
     Dell’s Direct Business Model of Virtual
                    Integration
• Exit from retail business after wrong entry in 1989.
• Segmentation - closeness to customers and access to
  valuable information.
• Demand forecasting as a critical sales skill
• Help global customers, manage their total purchase of
  PCs by selling them a standard product
• Dell server loads software on customers’ computers
• Meet customers’ needs faster and more efficiently
  than any other model.
          Li and Fung, Hong Kong

•   Founded in 1906
•   Today 35 offices in 20 countries
•   1997 revenues of $ 1.7 billion
•   Largest export trading company in Hong Kong
•   Customers- American and European retailers
•   Sources clothing and other consumer goods
    ranging from toys to fashion accessories to
    luggage
• Order from Europe
• Buy yarn from Korea
• Weave and dye in Taiwan
• Buy Japanese zippers made in China
• Make the garments in Thailand in five different
  factories
• Pulling apart the value chain and optimizing at each
  step
• Victor Fung
 “ Today, assembly is the easy part. The hard part is managing
  your suppliers and the flow of parts.“ Good supply chain
  management strips away time and cost from product delivery
  cycles. Our customers have become more fashion driven,
  working with six or seven seasons a year instead of just two or
  three. Once you move to shorter life cycles, the problem of
  obsolete inventory increases dramatically. With customer
  tastes changing rapidly and markets segmenting into narrow
  niches, it’s not just fashion products that are becoming
  increasingly time sensitive.”
• Endorsement by Stan Shih, CEO, Acer
• Buying right things
• Reaching into suppliers to ensure that certain things
  happen on time and at the right quality level.
• Buyer informs five weeks before delivery.
• Reserve undyed yarn from yarn supplier.
• Lock up capacity in weaving and dyeing mills.
• Outsourcing not same as leaving suppliers to do the
  worrying.
• Single factories are too small to have much buying power
  and to demand faster deliveries from suppliers.
• To shorten delivery cycle, need to go upstream to
  organize production.
• Li & Fung able to delay commitment to a particular
  fashion trend.
• Integrated logistics management
• Elimination of consolidators in container shipments
• Smokeless factory
   –   Design
   –   Procurement
   –   Inspection of raw materials
   –   Production planning
   –   Line balancing
   –   Inspection of finished goods
   –   No worker ownership
   –   No labour management
“ If we don’t own factories, can we say we are in
   manufacturing? Absolutely, because of the 15 steps in
   the manufacturing value chain, we probably do 10.”
• Basic operating unit is the division.
• Divisions focused on serving single customers or
   groups of small customers.
• Less emphasis on geographic grouping
• Merchandising decisions decentralized
• Financial controls and operating procedures tightly
   centralized.
• Strong focus on inventory and working capital
   management.
Supply Chain Management Systems

 Key supply chain management processes




              Figure 10-3
Supply Chain Management Systems

        The bullwhip effect




           Figure 10-4
            Supply Chain Management Systems

             Supply Chain Management Applications



          Global Supply Chain Issues

• Typically span greater geographic distances and
  time differences than domestic supply chains

• Strategy may need to reflect foreign government
  regulations and cultural differences
Supply Chain Management Systems

Push versus pull-based supply chain models




               Figure 10-6
Supply Chain Management Systems

 The future Internet-driven supply chain




              Figure 10-7
Customer Relationship Management Systems
Customer loyalty management process map




              Figure 10-9
           Customer Relationship Management Systems
               Operational and Analytical CRM


• Market Segmentation: Dividing a heterogeneous
  market into smaller, more homogeneous
  subgroups where marketing efforts can be more
  specifically targeted and effective
Customer Relationship Management Systems
    Analytical CRM data warehouse




            Figure 10-10
                Customer Relationship Management Systems
                    Operational and Analytical CRM

   Firms could analyze customer data to focus on:

• Profitability levels

• Numbers, types, or usage of multiple products

• Product pricing

• Total revenue anticipated

• Likelihood of acquiring a new product
                Customer Relationship Management Systems
   Benefits and Challenges of Customer Relationship Management Systems

           Benefits of Customer Relationship
                Management Systems

• Increased customer satisfaction

• Reduced marketing costs and more effective
  marketing

• Lower costs for customer acquisition and
  retention
                 Customer Relationship Management Systems
    Benefits and Challenges of Customer Relationship Management Systems

    Customer Relationship Management Systems
                     Challenges

• Costs run higher for organizations with global
  operations

• Failure rate for CRM systems can run as high as 55%
  to 75% because of cost overruns, integration
  challenges, and poor user acceptance of the new
  system
               Customer Relationship Management Systems
  Benefits and Challenges of Customer Relationship Management Systems

 Metrics for Customer Relationship Management

• Cost per lead

• Cost per sale

• Number of repeat customers

• Reduction of churn
               Customer Relationship Management Systems
  Benefits and Challenges of Customer Relationship Management Systems

      Metrics for Customer Relationship Management

• Customer satisfaction

• Number or percentage of problems/complaints

• Lead generation rate

• Lead conversion rate

• Sales closing rate
 Integration in the supply chain

• What is Supply Chain Integration
  • the degree to which the firm can strategically
    collaborate with their supply chain partners
    and collaboratively manage the intra- and
    inter-organization processes to achieve the
    effective and efficient flows of
     •   Product and services
     •   Information
     •   Money
     •   Decisions

  • With the objective of providing the maximum value to
    the customer at low cost and high speed
Integration in the supply chain

• Measures of integration
   – Access to planning system
   – Sharing production plans
   – Joint EDI access / networks
   – Knowledge of inventory mix / levels
   – Packaging customization
   – Delivery frequencies
   – Common logistical equipment / containers
   – Common use of third-party logistics
      Integration in the supply chain
• Internal integration: function to function

      Purchasing               Production              Distribution

                            High productivity of     Keep warehousing
        Low price
                            machine and labor        operation smooth


  Unreliable delivery and                            Post-manufacturing
                              High batch size
        low quality                                operation being resisted


                              Poor available       Additional complexity of
                               distribution         customizing products
     Integration in the supply chain
Inter-company collaboration: a manual approach
                              Strategic Collaboration
                                      Decision Flow
                                 Products & Services Flow
      Enterprise                                                Enterprise
                              Information & Knowledge Flow
          A                                                                     B
                                      Financial Flow




                                                                END CUSTOMERS
              RAW MATERIALS




                                  Products & Services Flow

                                 Information & Knowledge Flow

                                       Financial Flow

                                      Decision Flow
         Integration in the supply chain
• Electronic collaboration

          Transactional
   The electronic execution of
           transaction
      Information sharing         Electronic
    The electronic sharing or    collaboration
    exchange of information
     Collaboration planning
     Strategic, tactical and
     operational exchange
            Integration in the supply chain



Information flow
in apparel supply
      chain

								
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