1. Supply Chain Management Software
Welcome
Supply Chain Management Software
Jonathan D. Wareham

2. Agenda When firms cooperate, compete and exchange
problems with traditional supply chain management (SCM)
problems this creates for manufacturers
problems this creates for their suppliers
problems this creates for consumers
Supply Chain Management Software
Who is doing it
What is working, what is not…

3. Quiz ? days a box of cereal spends in the supply chain?
Distorted information causes total inventory in the pharmaceutical supply chain to exceed ? days. $? in savings to be realized.
$ ? wasted because of poor coordination in the food industry supply chain
$ ? Boeing write-off in 1997 due to supply chain inefficiencies

4. Quiz A box of cereal spends 104 days in the supply chain
Distorted information causes total inventory in the pharmaceutical supply chain to exceed 100 days. $11 billion in savings to be realized
Poor coordination wasting $ 30 billion annually in the food industry
$ 2.6 billion Boeing write-off in 1997 due to supply chain inefficiencies

5. Defining SCM
SCM is the coordination of material, information and financial flows between and among enterprises participating in the demand fulfillment process for a product or service.
Spans multiple organizations and industries
Coordination and integration of flows essential for the modern enterprise

6. Gates: Business @ The Speed of Thought
A digital nervous system is the corporate, digital equivalent of the human nervous system, providing a well-integrated flow of information to the right part of the organization at the right time. A digital nervous system consists of the digital processes that enable a company to perceive and react to its environment, to sense competitor challenges and customer needs, and to organize timely responses.

7. Gates: Business @ The Speed of Thought
A digital nervous system requires a combination of hardware and software; it's distinguished from a mere network of computers by the accuracy, immediacy, and richness of the information it brings to knowledge workers and the insight and collaboration made possible by the information.

8. Scott McNealy on Gates’ View
He is right - I would be very nervous if my systems were based on their platforms and products!

9. Beer Game video

10. Traditional supply chain obsolescence
Direction of flow of demand
Direction of flow of product
Point of differentiation
Distribution costs
Market mediation costs
Manufacturers
Tier-I Suppliers
Distribution Centers
Tier-II Suppliers
Retailers
Customer Zones
Raw Material vendor

11. The Bullwhip Effect Upstream amplification of demand variation
Progression of a brushfire to an inferno!
Customer
Retailer
Distributor
Factory
Tier 1 supplier
Equipment

12. Machine Tools at Bullwhip Tip

13. The Diaper Supply Chain!
Ripples to tidal waves
Stockpiles and stockouts
Insufficient or excessive capacities
Higher costs

14. The “bullwhip effect” - four key causes
What is the Problem?
The “bullwhip effect” - four key causes
Demand signal processing
Currently only order information is shared (not actual sales)
Need to instead share POS retail data (sell-through data)
Order batching (retailers only order periodically)
Infrequent access to demand information
Order rationing
retailers order popular items excessively
Hoarding of scare products (inflate demand order of scarce product to ensure that you have it on-hand)
Special Promotions
Alter the normal pattern of product demand from customer; so that it’s impossible to understand the “true” demand

15. Interorganizational Systems: CRP
BIG RETAILER
< 3% stock outs
< 14days inventory
Warehouse 1
P&G
Warehouse 2

16. Before CRP BIG RETAILER P&G Budget Actual Volume discounts
Warehouse 1
P&G
Warehouse 2
Volume discounts
New product promos
Here and now discounts
Trade marketing
Bonuses….

17. Interorganizational Systems
Integration of supply chain across companies
Degrees of integration: information, process, property rights
Increased efficiencies through
optimal production/logistics planning
lower inventories
increased flexibility
customer satisfaction
Oh brave new world, this is wonderful…But…

18. But…. Look out for proprietary systems with high specificity Lock-in
Sharing processes is optimal from logistics viewpoint, but remember ‘knowledge of time and place’
Additional information acquired by one party can reduce bargaining power of other. Competitive industries like retailing, grocery and electronics has demonstrated many examples of this….

19. Solutions to Improve Sales Forecasting
Vendor Managed Inventory
Collaborative Forecasting and Replenishment
Quantity-Flexible contracts
(as contrasted with rigid contracts)
Buyer allowed to make limited changes to forecast information, which is then shared with suppliers. Supplier only ships enough for the “newest” forecast. Why is this helpful?

20. Types of Shared Information
Inventory information
Transition to echelon-based inventory systems
Upstream companies can determine when and what to produce
Downstream companies can improve service levels with less inventory
The Apple-Fritz Supplier Hub
Fritz manages entire inbound logistics for Apple
Consolidates freight, clears customs, manages the hub, manages local transportation to Apple
FLEX system

21. Types of Shared Information
Sales Data
Variance of orders greater than that of sales
The “bullwhip effect” - four key causes
Demand signal processing
Move to sharing sell-through data and POS retail data
Order batching
Infrequent access to demand information
Order rationing
Hoarding of scare products
Promotions

22. Types of Information Sharing
Production/Delivery Schedule
Improves due-date estimation
Expand planning horizons
Other Information Sharing
Performance metrics
Capacity information

23. Models of Information Sharing
Information Transfer Model
Transfer information to the other who maintains the database for decision-making
XML, Web Services, EDI, FAX
EDI Limitations
Multiple industry-specific standards
Rigid design for transaction processing
Rigid text formats
Batch-oriented
Installation costs

24. Challenges
Aligning incentives of different partners Channel Management Example
Trust and cooperation
Confidentiality of shared information
Anti-trust implications, such as possible price fixing behavior
Timeliness and accuracy of information
Processes, not technology..
Technological constraints

25. SCM Software –Who?

26. What does SCM software do?
Factory Scheduling
Bar Code Warehouse Management
Transportation Routing and Scheduling
Inter Organizational Systems
Collaborative Planning & Optimization
Multi – echelon optimization
E-Procurement & Marketplaces
Supplier Contract Management
RFID Management Systems