1. Supply Chain Management
Optimizing the Pipeline
Copyright © 2016 – Curt Hill

2. Introduction
In a previous presentation we saw an example supply or value chain
This is on the next slide
Copyright © 2016 – Curt Hill

3. Example Value Chain A mining company produces ore
They sell it to a metals company
The metals company refines it
They produce iron sheets and rods
A milling company buys rods and sheets
They produce nuts and bolts
The car company buys the nuts and bolts
They produce cars
The dealer buys the cars and sells to consumer
Copyright © 2016 Curt Hill

4. More Introduction We will cover two topics in this area:
Supply Chain Management
Customer Relations Management
The usual consideration is that supply chain management is upstream and customer relations management is downstream
CRM most often deals with the general public
Rather than B2B customers
CRM is in a subsequent presentation
Copyright © 2016 – Curt Hill

5. Supply Chain
Collection of companies involved in moving a product from the suppliers of raw materials to the suppliers of intermediate components, then to final production, then to the customer
A network or tree is more apt than chain since businesses have multiple suppliers, who have multiple suppliers
Copyright © 2016 – Curt Hill

6. Pictorially Depicted Copyright © 2016 – Curt Hill
Copyright © 2016 Pearson
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7. Electronic Commerce
As we saw in the ERP SIM some B2B transactions may be automated
90% of all EC in the US
We can expect that percent to decrease as rest of world catches up
Prior to internet this was done with Electronic Data Interchange (EDI)
More recently, Web Services are the means to do this
Portals and Marketplaces are also used
Copyright © 2016 – Curt Hill

8. Portals Companies establish portals
These are extranets run by the company buying and selling
They make it easier for electronic communication with either suppliers or customers
Businesses in the supply network
Not generally individuals
These may provide the proprietary information needed to interact with the enterprise
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9. Marketplaces Similar to a portal except owned by a third party
Allow many business buyers and sellers to communicate in an efficient forum
Allows smaller enterprises to participate
Most, but not all, are specific to particular industry
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10. Five Largest Marketplaces
Alibaba – see next slide
ThomasNet.com
Formerly the Thomas Register of American Manufacturer
1.8 million buyers a month
IndiaMART
1.5 million a month
Trade India
EC21
Korean with 600K / month
Copyright © 2016 – Curt Hill

11. Alibaba Chinese and founded in 1999
Largest global e-commerce site for small and medium sizes
18 million buyers from 240 countries
The organization is worth an estimated 140 billion
It’s IPO is expected to be the largest since Facebook
Copyright © 2016 – Curt Hill

12. The iPhone Supply Chain
Foxconn is world’s largest electronics contract manufacturer
Involved in several labor controversies, has a history of employee suicides
Copyright © 2016 – Curt Hill

13. Benefits Just-in-Time Production Vendor-Managed Inventory
Inventory delivered only when needed
Minimizes stock and handling costs
Reduces obsolescence charges
Vendor-Managed Inventory
Vendors track usage and ship supplies as needed
Reduces procurement and inventory resupply costs
Copyright © 2016 – Curt Hill

14. Benefits Reducing the Bullwhip Effect Corporate Social Responsibility
Increasing swings in inventory due to poor forecasting
AKA Forrester effect
Coordinated supply chain helps mitigate this
Corporate Social Responsibility
Product recalls are easier to manage
Sustainable business practices
Copyright © 2016 – Curt Hill

15. Example: Walmart Effective user of technologies for supply chain
Vendor-managed inventory
Suppliers monitor inventory in Walmart’s warehouses
Cross-docking: direct transfers from inbound to outbound truck trailers
Powerful CRM capabilities as well

16. Supply Chain Optimization
Most ERPs have Supply Chain Management (SCM)
SC Planning
SC Execution
SC Visibility and Analytics
Next slide shows some of the functions from SAP
Copyright © 2016 – Curt Hill

17. SAP Derived Information
SCM Module
Key Uses
Demand planning and forecasting
Forecast and plan anticipated demand
Safety stock planning
Assign optimal safety and target stock levels
Distribution planning
Optimize the allocation of available supply
Supply network collaboration
Work with partners across the supply network
Materials management
Ensure production materials are available
Manufacturing execution
Support production processes
Order promising
Provide answers to customer queries
Transportation execution
Manage logistics
Warehouse management
Support receiving, storing, and picking of goods
Supply chain analytics
Monitor key performance indicators
Copyright © 2016 – Curt Hill

18. SCM Strategy Tradeoffs
Supply Chain Efficiency
Minimizes cost, but increased risk of stock-outs
May sacrifice customer service
Supply Chain Effectiveness
Maximizes likelihood of meeting objectives
Increased costs associated with
Redundancy
Sticking levels
Cross-functionality
Copyright © 2016 – Curt Hill

19. Tradeoffs Strategy Effectiveness Efficiency
Procurement
More inventory Multiple source
Less inventory Single source
Production
Transportation
Copyright © 2016 – Curt Hill

20. SCM Tradeoffs Strategy Effectiveness Efficiency
Procurement
More inventory Multiple source
Less inventory Single source
Production
General purpose
More facilities
Excess capacity
Special purpose
Fewer facilities
Less capacity
Transportation
Fast Delivery Times
More Warehouse
Longer Delivery Times
Fewer/Smaller warehouses
Copyright © 2016 – Curt Hill

21. SCM Planning and Tools
The supply chain plan starts with demand planning, and works backwards through the distribution plan, the production plan, and finally to the sourcing plan to determine what materials need to be sourced and when to ensure effective business operations.
Copyright © 2016 – Curt Hill

22. SCM Planning Demand Planning and Forecasting Distribution Planning
Use historical data and what is gleaned from data mining
Build a demand forecast
Distribution Planning
How to move products to distributors
Transportation planning
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23. SCM Planning Again Production Scheduling
Coordinate product/service creation
Create production plan
Inventory and Safety Stock Planning
Developing inventory estimates
Determine optimal inventory levels
Create sourcing plan
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24. SCM Execution Putting planning into action
We are not moving just product
We must also move information
Orders
Status
Financial assets
This all needs to be as efficient as possible
This implies automation
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25. Two Flow Types Product Flow Information Flow
Movement of goods from supplier to production to distribution to consumer
RFID is an important enabling technology
Information Flow
Movement of information through supply chain
Such as order processing and delivery status updates
XML is an enabling technology covered in another presentation
Copyright © 2016 – Curt Hill

26. One more Financial Flow
Movement of financial assets through supply chain
Payment schedules, consignment, ownership
Linkages to electronic banking and financial institutions
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27. RFID Radio Frequency IDentification
Typically a reader generates a signal
Passive RFID tags use the power of the signal to transmit a signal with identification back to the reader
Range is usually a few feet
There also be active tags
With own power
These have a range of hundreds of feet
Copyright © 2016 – Curt Hill

28. B2B Financial Transactions
Safe and easy among well known enterprises
There are risks
Especially with enterprises without much of a track record
A supplier may send goods of inferior quality
They may be slow to be delivered
Worse yet no products shipped at all
A buyer may fail to pay or pay promptly
Copyright © 2016 – Curt Hill

29. Visibility and Analytics
We would like to know about how external events might impact the supply chain
This is supply chain visibility
Will weather slow delivery or make for an inferior agricultural product?
Will a labor strike impact delivery?
Supply chain analytics gives us the ability to monitor the progress
Allows us to alter how we go about things
Copyright © 2016 – Curt Hill

30. Finally There is more to know We will see presentations on Of course!
Web services
XML
CRM
Copyright © 2016 – Curt Hill