Chapter 9: Extending The Organization Supply Chain Management (SCM)

Learning Outcomes

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CHAPTER 9

EXTENDING THE ORGANIZATION

SUPPLY CHAIN MANAGEMENT

Learning Outcomes
1. List and describe the components of a typical supply chain
2. Define the relationship between decision making and supply chain management 3. Describe the four changes resulting from advances in IT that are driving supply chains 4. Summarize the best practices for implementing a successful supply chain management system
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Chapter 9: Extending The Organization Supply Chain Management (SCM)

Basics of Supply Chain

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Supply chain management (SCM) involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability The supply chain has three main links: Materials flow from suppliers and their upstream suppliers at all levels Transformation of materials into semi-finished and finished products through the organizations own production process Distribution of products to customers and their downstream customers at all levels

Chapter 9: Extending The Organization Supply Chain Management (SCM)

Summary

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List and describe the components of a typical supply chain

The components of a typical supply chain include: Suppliers supplier, Supplier, Manufacturer, Distributor, Retailer, Customer, Customers Customer

Supply Chain Management (SCM) Systems

SCM is the process of effectively managing the components of an extended value chain--from suppliers, through manufacturing and distribution chain, and to the consumers.
SCM information systems use technology to more effectively manage supply chains

Benefits of Supply Chain

Cost/ Sweater

Manufacturer

Distributor

Retailer

Customer

$48.50

Manufacturer

Retailer

Customer

$40.34

Manufacturer

Customer

$20.45

Supply Chain Management (SCM) Systems

A typical SCM system might address the following issues:
Planning Vendor selection Manufacturing Logistics Customer relationship

Supply Chain Management (SCM) Systems

Chapter 9: Extending The Organization Supply Chain Management (SCM)

Basics of Supply Chain

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This is the strategic portion of supply chain management. A company must have a plan for managing all the resources that go toward meeting customer demand for products or services. A big piece of planning is developing a set of metrics to monitor the supply chain so that it is efficient, costs less, and delivers high quality and value to customers.
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Chapter 9: Extending The Organization Supply Chain Management (SCM)

Basics of Supply Chain

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Companies must carefully choose reliable suppliers that will deliver goods and services required for making products. Companies must also develop a set of pricing, delivery, and payment processes with suppliers and create metrics for monitoring and improving the relationships.

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Chapter 9: Extending The Organization Supply Chain Management (SCM)

Basics of Supply Chain

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This is the step where companies manufacture their products or services. This can include scheduling the activities necessary for production, testing, packaging, and preparing for delivery. This is by far the most metric-intensive portion of the supply chain, measuring quality levels, production output, and worker productivity.
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Chapter 9: Extending The Organization Supply Chain Management (SCM)

Basics of Supply Chain

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This step is commonly referred to as logistics. Logistics is the set of processes that plans for and controls the efficient and effective transportation and storage of supplies from suppliers to customers. During this step, companies must be able to receive orders from customers, fulfill the orders via a network of warehouses, pick transportation companies to deliver the products, and implement a billing and invoicing system to facilitate payments.
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Chapter 9: Extending The Organization Supply Chain Management (SCM)

Basics of Supply Chain

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This is typically the most problematic step in the supply chain. Companies must create a network for receiving defective and excess products and support customers who have problems with delivered products.

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Chapter 9: Extending The Organization Supply Chain Management (SCM)

Information Technologys Role in the Supply Chain

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ITs primary role is to create integrations or tight process and information linkages between functions within a firm

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Chapter 9: Extending The Organization Supply Chain Management (SCM)

Information Technologys Role in the Supply Chain

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more visible models of different ways to do things in the supply chain have emerged. High visibility in the supply chain is changing industries

Factors Driving SCM

companies must respond to demanding customers through supply chain enhancements

increased competition makes any organization that is ignoring its supply chain at risk of becoming obsolete

Supply Chain Management

as the pace of business increases through electronic media, an organization's supply chain must respond efficiently, accurately, and quickly
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The functions or roles of information technology in the supply chain management:

1.Visibility. supply chain visibility is the ability to view all areas up and down the supply chain.

2. Consumer behavior. companies can respond more faster and more effectively to consumer demands through supply chain enhances.

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3. Competition. the method that been used by IT in order to bring competition advantage:

Supply chain planning (SCP) software - advanced mathematical algorithms. - Use mathematical models to predict inventory level based on the efficient flow of resources into the supply chain.

Supply chain execution (SCE) software - automates the different steps and stages of the supply chain. - e.g : automatically sending purchase orders to vendors when inventories reach specified levels

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4. Speed. by IT, supply chain management can gain the 'speed'.

Factors fostering supply chain speed: 1. Pleasing customers has become something of a corporate obsession. 2. Information is crucial to managers abilities to reduce inventory and human resource requirements to a competitive level. 3. Information flows are essential to strategic planning for and deployment of resources.

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Chapter 9: Extending The Organization Supply Chain Management (SCM)

Information Technologys Role in the Supply Chain

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Supply chain visibility the ability to view all areas up and down the supply chain Bullwhip effect occurs when distorted product demand information passes from one entity to the next throughout the supply chain

Visibility

To explain the bullwhip effect, discuss a product that demand does not change, such as diapers. The need for diapers is constant, it does not increase at Christmas or in the summer, diapers are in demand all year long. The number of newborn babies determines diaper demand, and that number is constant. Retailers order diapers from distributors when their inventory level falls below a certain level, they might order a few extra just to be safe Distributors order diapers from manufacturers when their inventory level falls below a certain level, they might order a few extra just to be safe Manufacturers order diapers from suppliers when their inventory level falls below a certain level, they might order a few extra just to be safe

Eventually the one or two extra boxes ordered from a few retailers becomes several thousand boxes for the manufacturer. This is the bullwhip effect, a small ripple at one end makes a large 21 wave at the other end of the whip.

Chapter 9: Extending The Organization Supply Chain Management (SCM)

Information Technologys Role in the Supply Chain

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Consumer Behavior

Companies can respond faster and more effectively to consumer demands through supply chain enhances Demand planning software generates demand forecasts using statistical tools and forecasting techniques

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Chapter 9: Extending The Organization Supply Chain Management (SCM)

Information Technologys Role in the Supply Chain

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Competition

Supply chain planning (SCP) software uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain SCP depends entirely on information for its accuracy Supply chain execution (SCE) software automates the different steps and stages of the supply chain SCE can be as simple as electronically routing orders from a manufacturer to a supplier

SCP and SCE both increase a companys ability to compete

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Chapter 9: Extending The Organization Supply Chain Management (SCM)

Information Technologys Role in the Supply Chain

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Three factors fostering speed:Speed

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Chapter 9: Extending The Organization Supply Chain Management (SCM)

Supply Chain Management Success Factors

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Chapter 9: Extending The Organization Supply Chain Management (SCM)

Supply Chain Management Success Factors

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Supply Chain Management Success Factors

1. Make the sale to suppliers A large part of any SCM system extends beyond the organization to the suppliers. Since the organization has very little control over anything external to itself, these pieces are typically the most complicated to build, develop, and implement. Be sure suppliers are on board with the benefits that the SCM system will provide to ease SCM implementation difficulties 2. Wean employees off traditional business practices If the organization cannot convince people that using the SCM software is worthwhile, the employees will probably find a way to continue performing their job without using the software

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Chapter 9: Extending The Organization Supply Chain Management (SCM)

Supply Chain Management Success Factors

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Supply Chain Management Success Factors

3. Ensure the SCM system supports the organizational goals Be sure to se`lect SCM software that supports organizational goals and strategies

4. Deploy in incremental phases and measure and communicate success

Designing the deployment of the SCM system in incremental phases is the most successful deployment method.

The BIG BANG approach implementing everything all at once fails 90 percent of the time

5. Be future oriented An SCM system, like all systems, must scale to meet future demands
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Chapter 9: Extending The Organization Supply Chain Management (SCM)

SCM Success Stories

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Top reasons why more and more executives are turning to SCM to manage their extended enterprises

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Chapter 9: Extending The Organization Supply Chain Management (SCM)

Summary

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Define the relationship between decision making and supply chain management

SCM enhances decision making. Collecting, analyzing, and distributing transactional information to all relevant parties, SCM systems help all the different entities in the supply chain work together more effectively. SCM systems provide dynamic holistic views of organizations. Users can drill down into detailed analyses of supply chain activities in a process analogous to DSS. Without SCM systems, organizations would be unable to make accurate and timely decisions regarding their supply chain
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Chapter 9: Extending The Organization Supply Chain Management (SCM)

Summary

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Describe the four changes resulting from advances in IT that are driving supply chains

Although people have been talking about the integrated supply chain for a long time, it has only been recently that advances in information technology have made it possible to bring the idea to life and truly integrate the supply chain. Visibility, consumer behavior, competition, and speed are a few of the changes resulting from advances in information technology that are driving supply chains

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Chapter 9: Extending The Organization Supply Chain Management (SCM)

Summary

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Make the sale to suppliers

Wean employees off traditional business practices Ensure the SCM system supports the organizational goals Deploy in incremental phases and measure and communicate success Be future oriented

Summarize the best practices for implementing a successful SCM system

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