Logistics Management/ Supply Chain Management Judith Molka-Danielsen

Overview n Global value model for B2B systems (all) n Logistics management/supply chain (ch10) n Human Resource/support services (+ch10) n Customer Relations Management (ch11) n Manufacturing and process management (ch12) n Financial management/EDI (+ch12)

B2B Inputs Manufacturing Process Management Logistics Management Customer Management Support Services Financial Management

Logistics Management Supply Chain Management n Supply Chain Management (SCM) is an outgrowth of “traditional” logistics management and Enterprise Resource Planning (ERP) n It extends the management function outside the organization to both the supplier organizations and the distribution channels n Good ERP/SCM can increase net revenues 4-6% n SCM has become an expectation for industry

LM-SCM n Firms are moving from an process-efficiency driven focus n to a customer value-benefit focus. n This involves understanding Customer Needs. n Costs are coorelated to uncertainty in the Supply Chain (enterprise integration SCM software is to address this). n SCM modules address: logistics, manufacturing, finance, etc.

LM-SCM Approaches n The best-in-practice approaches have been incorporated in various systems n Major vendors include –SAP –PeopleSoft –Baan n Often, organizations find adoption of full blown ERP/SCM systems require significant organizational change

LM-SCM Components Purchasing Management Distribution Management Requisition Management Supplier Management Invoice Management Inventory Management Warehouse Management

LM-SCM Purchasing/Supplier Management n The goal is to simplify routine transactions and reduce paperwork n Trend is to reduce supplier steering and partner with the selected suppliers so that both organizations win n Purchase orders can be issued by DBMS triggers on inventory n Suppliers can be allowed to replenish inventory based on agreed upon parameters

LM-SCM Distribution Management n The distribution or demand chain is concerned with: –Speeding data acquisition –Controlling inventory, warehousing and shipping –Reducing paperwork n It also includes invoice auditing and order tracking

LM-SCM Fundamentals n What is a Supply Chain? Steps to meet customer needs. Global competition makes the customer in control of production, not the manufacturer. n What is SC-management? Coordination of tasks (order generate, taking, filling, distribution of products, services and information). Key players create an extended enterprise. n Is SCM a new concept? No, 25 years. Focus progresses: efficiency, integration of enterprise, product made to customer expectations. The last means more information integration between organizations.

LM-SCM Fundamentals n Pull (build to order) versus Push (build to stock) models. n Pull model requires: support product varients, reduced lead times, improved quality, lower unit cost, operational excellence, performance measures. n Pull implementation requires: gather customer demands, make right choices to meet demand, make informed decisions on materials, deliver goods, collect payments. n Managers need: unified plan, communication, coordination to all involved.

LM-SCM Elements of SCM n Planning System for Purchasing Management: right product, right place, right time. Consumer demand triggers order up the supply chain. Begin with POS terminal. Then use information to determine inventory investment, saftey stock, inventory turns, replenishment frequency. n System: 1. Order generation and forecast planning, 2. Order taking and entry for replenishment.

LM-SCM Elements of SCM n Execution System for Distribution Management: facilitate the physical movement of goods and services. Focus on operational efficiency. n Ensure order fulfillment, procurement, manufacturing, and distribution management are integrated..

LM-SCM Elements of SCM n Performance Measurement Systems to study the health of the approach: accounting and financial management systems are focus. Electronic commerce tools such as datawarehousing used to analyse data without impacting performance of operational systems. n Use of software agents to let different users set different criteria for sifting through data. ( ie. Salespersons, accountants, material planners, purchasing agents).

LM-SCM Integrating Functions n Customer Asset Management: manage proactively, better understand market and needs. n Integrated Logistics: production planning, procurement, inventory management. n Financial Management: manage flows through financial intermediaries. n Supply Chain coordination is also know as Integrated Workflow Management.

LM-SCM Merchandise management n 1 Million stockkeeping units (SKUs), every product style, size, color. n On-trend, in-stock execution strategies (optimize selection, minimize inventory) n best price per unit, minimize markdowns.

LM-SCM Order Management Cycle (OMC) n 1. order planning and generation - make sure the inventory is there. n 2. online cost estimation and pricing - find prices, understand price elasticity of market, yield management n 3. order receipt and entry - how to interact with customers, receive requests, what to do with soldouts.

LM-SCM Order Management Cycle (OMC) n 4. order selection and prioritization - which customers get served first, better, which orders filled. n 5. order scheduling - coordination between departments needed. n 6. order fulfillment and distribution - bringing parts together, ie. FedEx ships parts to assembly place, not warehouse. Retailing is not just selling but order fulfillment. n 7. order billing and payment management - can the customer understand the bill.

LM-SCM Software Interfaces n 1. CRI - Store operations and customer service. UPC - mark, track, exchange product information. n 2. RSI - where to keep stock. Partnerships with few key suppliers –purchasing - from suppliers –inventory mgmt - how much in stock, where –stock control - track movement –stock movement - receiving, checking, storing, pick-ups, dispatching –distribution operations - ops of warehouse, transport fleet n 3. RMI - –merchandise planning (profitability analysis, markdowns), –mircomarketing (advertising, targeting customers), –brand management (package and design).

LM-SCM Application Software n Horizontal: common functions across industries, ie. financial and manufacturing. See applications in Table 10.1 n Vertical: automate tasks that are specific to a market segment. n Dominate players: SAP, Oracle, PeopleSoft, Baan. n Three-tier software and Intranets become technology to support enterprise business processes and philosophy. Use of ubiquitous Web interface.

LM-SCM Application Software n Packages are good: they include the best practises of many businesses. They include distilled knowledge. n Important Characteristics of Software for SCM: –total costs –access to expanded distribution channels –ability to integrate new technology –security is addressed –tailor to customer from the pre-packaged software with selective options.

LM-SCM Ultimate Goals n When a sophisticated SCM system is coupled with agile manufacturing system, customer driven manufacturing is possible n A first experiment in this direction is the Levi- Strauss custom jeans n Most of the computer vendors offer similar capabilities

Human Resource and Other Support Services n Any other support service in the organization can also be enhanced by distributed electronic processing n Human resources management is frequently addressed as a part of the effort because of the complexity of modern benefits packages

HRM Functions n Recruiting, training, salary administration n Payroll functions including time reporting, payroll calculation and tax computation n Benefits administration including flexible spending accounts, pension programs and defined benefits n Health care benefits management

HRM Information Dissemination n A big part of the human resources function involves making information available to employees n Policies, procedures, options can be maintained and updated efficiently using intranet technology n Employee queries related to options and enrollments can be distributed by intranet

HRM Workflow n Benefits claims and queries can be submitted electronically and processed using workflow systems n Standard queries can be processed and returned securely by to the appropriate person n Relationships with external agencies can be facilitated by and EDI processing