1. Chapter 13 Extending the Organization Along the Supply Chain © Toh Kheng Ho/Age Fotostock America, Inc.

2. Chapter Outline 13.1 Supply Chains 13.2 Supply Chain Management 13.3 Information Technology Support for Supply Chain Management © Lifesizeimages/iStockphoto

3. Learning Objectives 1.Describe the three components and the three flows of a supply chain. 2.Identify popular strategies used in solving different supply chain challenges. 3.Explain how each of the three major technologies that support supply chain management are used.

4. Introduction Opening Case: Campus Quilts Partners with UPS to Manage Its Supply Chain © Stephen Chernin/Stringer/Getty Images, Inc.

5. 13.1 Supply Chains Supply chain The coordinated flow of materials, information, money, and services from raw material suppliers, through factories and warehouses, to the end customers Supply chain visibility The ability of all organizations in a supply chain to access relevant data through the supply chain

6. The Structure and Components of Supply Chains Three segments of supply chains: 1.Upstream Sourcing or procurement from external suppliers Select suppliers; develop the pricing, delivery, and payment Manage inventory, receive and verify shipments, transfer goods to manufacturing facilities 2.Internal Packaging, assembly, or manufacture products Schedule activities necessary for production, testing, packaging, and preparing goods for delivery Monitor quality levels, production output, and worker productivity 3.Downstream Receive customer orders, develop a network of warehouses, select carriers, and generate invoices

7. Figure 13.1 Generic Supply Chain

8. The Structure and Components of Supply Chains Tiers of suppliers A supplier may have one or more subsuppliers The subsupplier may have its own subsupplier(s) Supply chain flows Material flows are the physical products (raw materials, supplies, etc.) that flow along the chain Include reverse flows (or reverse logistics): Returned products, recycled products, and disposal of materials or products Information flows consist of data related to demand, shipments, orders, returns, and schedules Financial flows involve transfer of money, payments, credit card information, etc.

9. 13.2 Supply Chain Management Plan, organize, and optimize the various activities performed along the supply chain in order to maintain partnerships and processes, providing an operational advantage SCM utilizes information systems Many of them are interorganizational information systems (IOSs) IOS involves information flows among two or more organizations

10. The Push Model versus the Pull Model Push model (make-to-stock) Companies make products based on sales forecasts Closely aligned with mass production strategy Incorrect forecast results in over- or underproduction Pull model (make-to-order) Companies make products based on customer orders Closely aligned with mass customization strategy

11. Problems Along the Supply Chain Sources of problems Uncertainties in Demand forecast Delivery times Quality of materials and parts Need to coordinate multiple activities, internal units, and business partners The bullwhip effect

12. Figure 13.2 The Bullwhip Effect Erratic shifts in orders up and down the supply chain

13. Solutions to Supply Chain Problems Vertical integration A business strategy in which a company purchases its upstream suppliers to ensure that its essential supplies are available as soon as they are needed Using inventories Just-in-time (JIT) inventory system Minimize inventory by delivering the precise number of parts to the assembly line at precisely the right time Information sharing Enable vendor-managed inventory (VMI) strategy Supplier manages the inventory

14. 13.3 Information Technology Support for Supply Chain Management Electronic data interchange (EDI) A communication standard allowing business partners to exchange documents (purchase orders, etc.) electronically Extranets Foster collaboration by using the Internet to link business partners to one another’s corporate intranets Web services (See Plug IT In 3)

15. Figure 13.3 Order Fulfillment Without EDI

16. Figure 13.3 Order Fulfillment With EDI

17. Extranet Virtual private network (VPN) technology used to make communication over the Internet more secure Three major types: 1.A company and its dealers, customers, or suppliers Centered on a single company 2.An industry’s extranet Major players in an industry can team up to create an extranet that will benefit all of them 3.Joint ventures and other business partnerships Partners in a joint venture use the extranet as a vehicle for communications and collaboration

18. Figure 13.4 The Structure of an Extranet

19. Portals and Exchanges Enable companies and their suppliers to closely collaborate Two basic types of corporate portals: 1.Procurement portals Automate business processes involved in purchasing or procuring products between a single buyer and multiple suppliers Support upstream in the supply chain 2.Distribution portals Automate the business processes involved in selling or distributing products from a single supplier to multiple buyers Support downstream in the supply chain

20. What’s in IT for ME? Accounting Accountants monitor inventory and cost of goods sold data Understanding SCM facilitated controls and auditing Finance Responsible for analyzing data created and shared among supply chain partners Marketing It is critical to understand how the downstream activities of the supply chain relate to prior chain operations Production/Operations Management SCM activities are vital for the production/operations staff Human Resources Management HR manager must be able to address supply chain issues related to staffing, job descriptions, job rotations, and accountability MIS Design and support SCM systems

21. Closing Case 1: IT Helps Cannondale Manage Its Complex Supply Chain The Problem The IT Solution The Results Questions Describe Cannondale’s complex manufacturing environment and identify some of the problems this environment created. Describe the RapidResponse system’s impact on Cannondale’s global supply chain management.

22. Closing Case 2: Driving Innovation The Problem The IT Solution The Results Questions Describe the benefits that Kimberly-Clark received from its implementation of the JDA system. Why did Kimberly-Clark use JDA software rather than simply adding functionality to its existing transport management system (TMS) system?