IS 466 ADVANCED TOPICS IN INFORMATION SYSTEMS LECTURER : NOUF ALMUJALLY 15 – 10 – 2011 College Of Computer Science and Information, Information Systems Department

Lessons Learnt from Lecture5 SD module Cameron and Whetton 7 questions of evaluating ES success What success measurement models are available? 2

Objectives Supply Chain SCM Definition Components of a SCM System Matching Supply and Demand Components of a Supply Chain The Importance of Supply Chain Management 3

Supply Chain Management 4

What is a Supply Chain? A supply chain is the system of organizations, people, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform raw materials and components into a finished product that is delivered to the end customer. 5

Supply Chain SupplierManufacturer Distributor RetailerCustomers 6

A Supply Chain Example1… Coke JNJ Kellog P&G GA FL AL TX Kroger suppliers Super market chains State distributors V. Highlands Peachtree Ocean Drive Ft. Laud. Local stores End customer Publix 7

A Supply Chain Example 2… Coke JNJ Kellog P&G Center Western North Eastern Panda Carrefour suppliers Super market chains State distributors Riyadh Karaj Jeddah Makah Local stores End customer Danube 8

Supply Chain 9 Also referred to as the logistics network Suppliers, manufacturers, warehouses, distribution centers and retail outlets – “facilities” and the Raw materials Work-in-process (WIP) inventory Finished products that flow between the facilities

Supply Chain Processes 10

The Supply Chain – Another View 11 SuppliersManufacturersWarehouses & Distribution Centers Customers Material Costs Transportation Costs Transportation Costs Transportation Costs Inventory Costs Manufacturing Costs Plan Source Make Deliver Buy

What Is Supply Chain Management (SCM)? 12 A set of approaches used to efficiently integrate  Suppliers  Manufacturers  Warehouses  Distribution centers So that the product is produced and distributed  In the right quantities  To the right locations  And at the right time System-wide costs are minimized and Service level requirements are satisfied Plan Source Make Deliver Buy

Basic supply chain management system 13 A basic supply chain management system has five (5) components: 1. Plan refers to the over-all strategy of the SCM program including the development of SCM metrics to monitor 2. Source refers to the suppliers who'll provide you with goods and services necessary for you to run your business 3. Make refers to the execution of processes needed to produce, test, and package your products or services (manufacturing) 4. Deliver refers to the system for developing a network of warehouses; and getting the products to the customers 5. Buy refers to the system of receiving orders from customers; invoicing customers and receiving payment from them

Supply Chain Management (SCM) Supply Chain Management is  the design and management of processes  across organizational boundaries  with the goal of matching supply and demand  in the most cost effective way. SupplyDemand Mission impossible: Matching Supply and Demand 14

Aims to Match Supply and Demand, profitably for products and services Achieves: The right Product Higher Profits The right Time The right Customer The right Quantity The right Store The right Price = Matching Supply and Demand SUPPLY SIDEDEMAND SIDE

Why so Difficult to Match Supply and Demand? Why is supply chain management difficult? Different organizations in the supply chain may have different, conflicting objectives Manufacturers: long run production, high quality, high productivity, low production cost Distributors: low inventory, reduced transportation costs, quick replenishment capability Customers: shorter order lead time, high in-stock inventory, large variety of products, low prices Supply chains are dynamic - they evolve and change over time 16

SCM in a Supply Network Supply Chain Management (SCM) ) is concerned with the management and control of the flows of material, information, and finances in supply chains Supply Demand Products and Services Cash Supply SideOEMDemand Side THAILAND INDIA MEXICO TEXAS US N-Tier Suppliers Suppliers Logistics Distributors Retailers Information

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Supply Chain for Denim Jeans 19

Supply Chain for Denim Jeans (cont.) 20

Components of a Supply Chain 21 External Suppliers– source of raw material Tier one supplier supplies directly to the processor Tier two supplier supplies directly to tier one Tier three supplier supplies directly to tier two Internal Functions include – processing functions Processing, purchasing, planning, quality, shipping

Components of a Supply Chain 22 External Distributors transport finished products to appropriate locations Logistics managers are responsible for managing the movement of products between locations. Includes; traffic management – arranging the method of shipment for both incoming and outgoing products or material distribution management – movement of material from manufacturer to the customer

The Importance of Supply Chain Management 23 Dealing with uncertain environments – matching supply and demand U.S Surgical Corporation announced a $22 million loss in 1993 due to “larger than anticipated inventories on the shelves of hospitals” Hewlett-Packard and Dell found it difficult to obtain important components for its PC’s from Taiwanese suppliers in 1999 due to a massive earthquake

The Importance of Supply Chain Management 24 Better information sharing among the partners The growth of technologies such as the Internet enable greater collaboration between supply chain trading partners If you don’t do it, your competitor will Availability of SCM technologies on the market Firms have access to multiple products (e.g., SAP, Baan, Oracle, JD Edwards) with which to integrate internal processes

Top 25 Supply Chains The Top 25 supply chains report comes out in Novembers. The table on the right-hand side is from The Second Annual Supply Chain Top 25 prepared by Kevin Riley and Released in November 2005.

26 Dell Computer Classic case in supply chain management. Established in 1984, Dell experienced supply problems in 1993 and thereupon completely redesigned its supply chain process along the lines of what its founder, Michael Dell, called the “direct” model. Between 1993 and 1998, Dell's earnings subsequently grew at 65 percent per year.

27 Dell Computer (con.) Dell's supply chain redesign was based on the following elements. First, Dell sells directly to customers, eliminating the wholesaler and retailer. Second, Dell also takes advantage of new information technologies in their communications with suppliers who can access Dell's component inventories, production plans, and forecasts in real time and thus keep their production precisely matched to Dell's needs. Third, Dell maintains absolute minimum inventory levels at every stage of production, averaging 4 days overall

Questions ?? 28