Managing Information Technologies Across the Supply Chain

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 2 Information Flows What are some of the key functions information flows perform?

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 3 Key Functions of Information Flows Plan or kick-off physical flows –Customer order, production plan, etc. Record and retrieve status and plans –Check inventory levels, shipping schedule, etc. Codify decision rules and planning values –Standard costs and times, inventory reorder points, etc. Record and report performance –Quality levels, on-time delivery, actual costs, etc.

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 4 Supply Chain Information Needs Strategic decision making long-range plans to meet organization’s mission Focus on long-term decisions Least structured of all Greatest user discretion Flexibility Tactical planning plans to coordinate actions across supply chain Focus is on tactical decisions Plans physical flows Greater user discretion Form Flexibility Routine decision making support rule-based decision making Fairly short time frames Limited user discretion Accuracy Timeliness Limited flexibility Execution and transaction processing record / retrieve data & control physical / monetary flows Very short time frames, very high volumes Highly automated Standardized business practices Ideally no user intervention Accuracy Timeliness Supply Chain Activity Characteristics Performance Dimensions purpose for Information Flows

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 5 Strategic decision making Tactical planning Routine decision making Execution and transaction processing Customer Internal Supply Supplier Relationship Chain Management Relationship Management Management Supply Chain Information Flows

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 6 What is “perfect” Information? Perfect information is: –Accurate –Timely –Correct in detail and form –Shared –Complete –Other dimensions?

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 7 Costs of “imperfect” Information What are some of the costs associated with information that is: –Inaccurate? (e.g., inventory or order info.) –Late?(e.g., forecast changes) –Incomplete in detail / form? (e.g., quarterly sales $ forecast)? –Not shared?(e.g., engineering changes)

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 8 Diagnosing and Improving Supply Chain Information Flows 1.Map the business process(es) containing the information flows of interest 2.Develop an information flow profile that identifies potential performance gaps in the information flows 3.Use continuous improvement techniques to identify the causes of these gaps 4.Use the plan-do-check-act (PDCA) cycle to plan and implement improvements aimed at closing these gaps

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 9 1.Map the business process(es) and information flows 2.Identify potential performance gaps in the information flows 3.Identify the causes of these gaps 4.Use the plan-do-check-act cycle to close the gaps Improving Information Flows Process Mapping

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 10 1.Map the business process(es) and information flows 2.Identify potential performance gaps in the information flows 3.Identify the causes of these gaps 4.Use the plan-do-check-act cycle to close the gaps Accuracy Timeliness Reliability Detail and form Availability Other Poor Excellent Improving Information Flows Identify Gaps / Information Flow Profile

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 11 1.Map the business process(es) and information flows 2.Identify potential performance gaps in the information flows 3.Identify the causes of these gaps 4.Use the plan-do-check-act cycle to close the gaps Accuracy Timeliness Reliability Detail and form Availability Poor Excellent Improving Information Flows Information Flow Profile - II

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 12 1.Map the business process(es) and information flows 2.Identify potential performance gaps in the information flows 3. Identify the causes of these gaps 4.Use the plan-do-check-act cycle to close the gaps  To what extent is the information flow less than perfect?  What are the benefits and costs associated with closing this gap?  Look for “low-hanging fruit”, not necessarily high-tech solutions Improving Information Flows Gap Analysis

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 13 1.Map the business process(es) and information flows 2.Identify potential performance gaps in the information flows 3.Use continuous improvement techniques to identify the causes of these gaps 4.Use the plan-do-check-act cycle to close the gaps Improving Information Flows Root Cause Analysis Root cause analysis – A process by which organizations brainstorm about possible causes of problems (referred to as “effects”) and then, through structured analysis and data-gathering efforts, gradually narrow the focus to a few root causes ProcessPersonnel Material Equipment Poor dispatching Lack of training Truck breakdown Late deliveries

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 14 1.Map the business process(es) and information flows 2.Identify potential performance gaps in the information flows 3.Identify the causes of these gaps 4.Use the plan-do-check-act cycle to close the gaps Improving Information Flows PDCA to Close Gaps Do Act Check Plan

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 15 1.Map the business process(es) and information flows 2.Identify potential performance gaps in the information flows 3.Identify the causes of these gaps 4.Use the plan-do-check-act cycle to close the gaps Accuracy Timeliness Reliability Detail and form Availability Diagnosing and Improving Supply Chain Information Flows Do Act Check Plan MethodManpower Material Machinery Drilling too slow Overtime/Overtime/ SteelSteel WoodWood Lathe not calibrated defects

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 16 Supply Chain Information Systems Strategic decision making Tactical planning Routine decision making Execution and transaction processing SRM applications DSS CRM applications Network design Warehouse & transportation planning Warehouse management & transportation execution Suppliers Internal supply Customers Logistics chain ERP applications

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 17 Supply Chain Information Systems Enterprise Resource Planning (ERP) Systems Strategic decision making Tactical planning Routine decision making Execution & transaction processing Suppliers Internal supply Customers Logistics chain SRM applications DSS CRM applications Network design Warehouse & transportation planning Warehouse management & transportation execution ERP applications Large, integrated computer- based business transaction processing and reporting systems. ERP systems pull together all of the classic business functions such as accounting, finance, sales, and operations into a single, tightly integrated package that uses a common database.  Traditional strengths in routine decision making and in execution and transaction processing  Captures data to support higher- level decision support systems (DSS)

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 18 SRM applications DSS CRM applications Network design Warehouse & transportation planning Warehouse management & transportation execution Supply Chain Information Systems Decision Support Systems (DSS) Strategic decision making Tactical planning Routine decision making Execution & transaction processing Suppliers Internal supply Customers Logistics chain Computer-based information systems that allow users to analyze, manipulate, and present data in a manner that aids higher-level decision making

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 19 SRM applications DSS CRM applications Network design Warehouse & transportation planning Warehouse management & transportation execution Supply Chain Information Systems Supplier Relationship Management (SRM) Strategic decision making Tactical planning Routine decision making Execution & transaction processing Suppliers Internal supply Customers Logistics chain Computer-based information systems designed to plan and manage the firm’s external linkages with its suppliers. Example applications:  Design collaboration  Sourcing decisions  Negotiations  Buy process  Supply collaboration

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 20 SRM applications DSS CRM applications Network design Warehouse & transportation planning Warehouse management & transportation execution Supply Chain Information Systems Customer Relationship Management (CRM) Strategic decision making Tactical planning Routine decision making Execution & transaction processing Suppliers Internal supply Customers Logistics chain Computer-based information systems designed to plan and manage the firm’s external linkages with its customers. Example applications:  Market analysis  Sell process  Order management  Call/service center management

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 21 SRM applications DSS CRM applications Network design Warehouse & transportation planning Warehouse management & transportation execution Supply Chain Information Systems Logistics Systems I Strategic decision making Tactical planning Routine decision making Execution & transaction processing Suppliers Internal supply Customers Logistics chain Network Design Applications: Logistics information systems that address such long-term strategic questions as facility location and sizing, as well as transportation networks.

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 22 SRM applications DSS CRM applications Network design Warehouse & transportation planning Warehouse management & transportation execution Supply Chain Information Systems Logistics Systems II Strategic decision making Tactical planning Routine decision making Execution & transaction processing Suppliers Internal supply Customers Logistics chain Warehouse and Transportation Planning Systems: Logistics information systems that support tactical planning efforts by allocating “fixed” logistics capacity in the best possible way, given business requirements.

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 23 SRM applications DSS CRM applications Network design Warehouse & transportation planning Warehouse management & transportation execution Supply Chain Information Systems Logistics Systems III Strategic decision making Tactical planning Routine decision making Execution & transaction processing Suppliers Internal supply Customers Logistics chain Warehouse Management and Transportation Execution Systems: Logistics information systems that initiate and control the movement of materials between supply chain partners

©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield Chapter 16, Slide 24 Advanced Concepts – Levels of Value Provided by Information Visibility Information displays the physical and monetary flows in the supply chain Mirroring Information can replace physical processes with virtual ones Creation of new customer relationships Information can create new sources of value / new products and services “How can we exploit these information flows?”