Supply Chain Management IST 421 Fall 2005

Vertical Market Companies are united through a common owner Example: Carnegie Steel company. Controlled mills where the steel was manufactured mines where the iron ore was extracted the coal mines that supplied the coal the ships that transported the iron ore and the railroads that transported the coal to the factory the coke ovens where the coal was coked

Horizontal Market A business sells a product in different markets Example: GAP Inc. controls three distinct companies Banana Republic Old Navy GAP brand

Supply Chain Management Supply chains support the flow of goods and services from their origin to their endpoint – the customer.

Supply Chain Management

Supply Chain Management Supply Chain Management (SCM) comprises business-management applications that provide guidance on which products to manufacture, when, and where they should be distributed. The category includes: software that manages plant scheduling, demand forecasting, ordering raw materials Etc.

Supply Chain Management Prior to 1999, most companies were looking at the supply chain from an internal perspective. The emphasis was on bringing together the operations of manufacturing, planning and scheduling with sales and marketing. Many companies turned to Enterprise Resource Planning (ERP) and advance planning and scheduling systems to bring together the procurement process internally.

Supply Chain Management Performance measurements – Cash-to-cash cycle time: the time from paying for raw materials to collecting cash from the customer. Efficient SCM processes do this in 30 days vs. 100 days. Total SCM cost: cost of buying and handling inventory, processing orders, and information systems support. Efficient SCM incur costs equal to 5% of sales vs. costs equal to 12% of sales.

Supply Chain Management Other Performance measurements – Initial fill rate: % of the order that the supplier provided in the first shipment Initial-order lead-time: time needed for the supplier to fill the order On-time performance: how often the supplier meets agreed to requested delivery dates

Packaged Applications Market leaders SAP Oracle Baan State-of-the-art client/server or internet/intranet architectures

Integrated Supply Chain Supply chain or value chain is the flow of goods and services from their points of origin to the ultimate consumer. Fully integrated supply chain can react to consumer demand in minutes High-value opportunity for most businesses

Integrated Supply Chain Step 1: Automate and optimize major business processes within each member organization. Step 2: Extend the enterprise to all members in the supply chain

Exercise What would be a supply chain for our semester project which is a services based industry?

Enterprise Resource Planning

ERP Evolution Integrated applications seem obvious today Complex hardware and software system not feasible until the 1990’s ERP systems evolved as a result Development of hardware & software technology Development of a vision of integrated information systems

ERP Evolution Integrated Vision: Materials Requirements Planning (MRP) used for inventory tracking Electronic Data Interchange (EDI) enabled processing of purchases avoided paper purchase orders & invoicing systems Start of Supply-Chain Management

ERP Evolution Business model started in 1930’s by Alfred P. Sloan – Functional Model of Business Organization During economic problems of 1980’s and 1990’s, view changed to cross-functional processes. Michael Hammer’s 1993 book, Reengineering the Corporation: A Manifesto for Business Revolution

ERP Evolution ERP software was seen as a solution to business problems Number of ERP vendors: SAP PeopleSoft Oracle Baan J.D. Edwards

ERP Applications Best-of-Breed approach Each ERP vendor has perceived specialty SAP – Production Planning & Materials Management PeopleSoft – Human Resources As is install or customize?

ERP Applications Failed package installation projects Dell Computers cancelled implementation Owens-Corning lengthy implementation FoxMeyer drug company (bankrupt) lawsuit In a fortune 500 company, software, hardware and consulting fees exceed $100 million and take years to fully implement

ERP Applications Most use three-tier architecture Presentation layer Application server layer Database layer Various integration techniques Proprietary EDI, COM, CORBA, Java

ERP Applications Business Vision – What business problem is being addressed? Adopt “best practices” addressed by software vs. customization?

ERP Applications Returns expected? Realized returns? 33% of companies saw a cost savings in sales order management 34% reduced personnel needs More sales can be generated through streamlined process Reduced frustration Realized returns?

Customer Relationship Management

Customer Relationship Management CRM allows companies to: gather customer data swiftly, identify the most valuable customers over time, and increase customer loyalty by providing customized products and services. Reduces the costs of serving these customers Makes it easier to acquire similar customers down the road.

CRM as Corporate Strategy Software used to identify customer needs - profile Used to build long-term relationships Build an integrated, company-wide profile of each customer Present a single “face” to each customer All customer contacts with the company are recorded in database

CRM as Set of Activities Some companies use sub-set of features for specific activities Segmenting customers Data Warehouse / Data Mining Analyze and manipulate data Looking for patterns in information Looking for relationships unknown Look at customers by volume, profitability, or other measures

CRM as Set of Activities One-to-One Marketing Once a customer is categorized, products, promotions, and pricing are tailored Cross-selling – related products Upselling – higher-margin products in the same line

CRM as Set of Activities SFA (sales-force automation) Customer contacts logged into database Also called “lead management software” Track transaction from initial lead to post-sale Sales Campaign Management Software Organize a marketing campaign Compile results

CRM as Set of Activities Marketing Encyclopedias Database of promotional literature about products Routed to sales reps or customers as needed Call Center Automation Knowledge management database containing information about product Customer service access to assist customers

Customer Relationship Management Most successful CRM projects begin with specific goals and objectives. Cost reduction, Revenue production Sales efficiency

Customer Relationship Management Dell Computer Corp. Customers enter orders for computers using web page. Order goes to the shop floor, purchasing Status of order is posted on web page for customer to see

Customer Relationship Management BMG Music Service Web site contacts the data warehouse upon customer login Customer’s web page is configured to offer music based on customer’s preferences

Customer Relationship Management Holophane Corp Manufacture roadway lighting Sales rep’s take orders, which are custom made Implemented sales force automation software – order is uploaded to the home office Customer queries can be answered by service representative using database

Customer Relationship Management What are examples we encounter everyday? How do you feel about companies building these massive profiles of you?