Copyright 2006 John Wiley & Sons, Inc. Beni Asllani University of Tennessee at Chattanooga Supply Chain Management Operations Management - 5 th Edition Chapter 10 Roberta Russell & Bernard W. Taylor, III

Copyright 2006 John Wiley & Sons, Inc.10-2 Lecture Outline   Supply Chains & Supply Chain Management The bullwhip effect and supply chain uncertainty   Information Technology: A Supply Chain Enabler

Copyright 2006 John Wiley & Sons, Inc.10-3 Lecture Outline (2)  E-business and the supply chain E-business impacts E-business impacts Operations issues in online retailing Operations issues in online retailing  E-procurement

Copyright 2006 John Wiley & Sons, Inc.10-4 Supply Chain  All facilities, functions, activities, associated with flow and transformation of goods and services from raw materials to customer, as well as the associated information flows  An integrated group of processes to “source” or procure, “make,” and “deliver” products  See Figures 10.2 and 10.3, pages  Bullwhip effect: Figure 10.4, page 416

Copyright 2006 John Wiley & Sons, Inc.10-5 Supply Chain Management (SCM)   Managing flow of information through supply chain in order to be responsive to customers, while reducing costs   Keys to effective SCM mutually agreed goals information communication cooperation trust long-term partnerships long-term partnerships

Copyright 2006 John Wiley & Sons, Inc.10-6 Supply Chain Uncertainty   One goal in SCM: respond to uncertainty in customer demand without creating costly excess inventory   Negative effects of uncertainty lateness incomplete orders   Inventory insurance against supply chain uncertainty   Factors that contribute to uncertainty inaccurate demand forecasts long variable lead times quality problems late deliveries incomplete shipments product changes batch ordering price fluctuations and discounts "just-in-case" orders

Copyright 2006 John Wiley & Sons, Inc.10-7 Information Sharing in the Supply Chain: Accurate and Visible Plans  Demand: sales forecasts, booked orders, and/or actual sales  Custom orders or make-to-order requirements  Production plans  Product availability  Shipping schedules: items, quantities, delivery dates  Shipments  Suppliers' data on raw material quality  Collaborative product design

Copyright 2006 John Wiley & Sons, Inc.10-8 Information Technology: A Supply Chain Enabler   Information links all aspects of supply chain   E-business replacement of physical business processes with electronic ones   Electronic data interchange (EDI) a computer-to-computer exchange of business documents   Figures 10.5, p. 418; 10.6, p. 421; 10.10, p. 431   Bar code and point-of-sale data creates an instantaneous computer record of a sale   Radio frequency identification (RFID) technology can send product data from an item to a reader via radio waves   Internet allows companies to communicate with suppliers, customers, shippers and other businesses around the world, instantaneously

Copyright 2006 John Wiley & Sons, Inc.10-9 E-business and Supply Chain   Cost savings and price reductions   Reduction or elimination of the role of intermediaries (retailers & distributors)   Shortening supply chain response and transaction times   Gaining a wider presence and increased visibility for companies   Greater choices and more information for customers

Copyright 2006 John Wiley & Sons, Inc E-business and Supply Chain (cont.)   Improved service as a result of instant accessibility to services   Collection and analysis of voluminous amounts of customer data and preferences (data mining)   Creation of virtual companies   Leveling playing field for small companies   Gaining global access to markets, suppliers, and distribution channels

Copyright 2006 John Wiley & Sons, Inc Operations Issues in Online Retailing  Inventory management Customer service: product in stock or available for delivery Customer service: product in stock or available for delivery Inventory costs Inventory costs  Timely and cost-effective delivery  Managing customer returns 25% of Internet orders result in a customer return 25% of Internet orders result in a customer return Variety of approaches used: postal service, contract package delivery service, brick-and-mortar store Variety of approaches used: postal service, contract package delivery service, brick-and-mortar store

Copyright 2006 John Wiley & Sons, Inc E-procurement   E-catalogue or electronic storefront: Buyers can Purchase products at a fixed price Configure a product from pre-selected options, e.g., Dell computers Discounts with business buyers may be negotiated in advance.

Copyright 2006 John Wiley & Sons, Inc E-procurement   Seller auctions Often used to dispose of surplus goods Buyers bid against each other – highest bid wins Buyers know what the current top bid is and when the auction will end

Copyright 2006 John Wiley & Sons, Inc E-procurement   Reverse auction Suppliers are usually pre-qualified Request for quotation (RFQ): buyer states requirements and selection criteria Suppliers bid against each other RFQ may be revised Online, real time communication between the buyer and various suppliers

Copyright 2006 John Wiley & Sons, Inc E-procurement   Industry exchanges or e-marketplaces Connect buyers and sellers in same industry VerticalNet provides e-marketplaces for different industries MetalSite serves steel industry Provide a range of online services to buyers and sellers Covisint supports collaborative design and purchasing negotiations in the auto industry