1. Rev. 07/22/04SJSU Bus 140 - David Bentley1 Chapter 16 – Supply Chain Management Definition, issues, logistics, EDI, E-commerce, purchasing, make or buy, DRP

2. Rev. 10/28/01SJSU Bus 140 - David Bentley2 Definition of SCM Definition: chain consisting of multiple organizations and organization units operating as customer/supplier links Includes external suppliers and subcontractors Involves internal manufacturing plants, warehouses, and distribution centers Extends to final (external) customers

3. Rev. 10/28/01SJSU Bus 140 - David Bentley3 Factors Leading to SCM Globalization Competitive pressure Move to e-commerce Cost reduction opportunities Ability to share information Greater use of contract manufacturers Desire to manage vertical markets

4. Rev. 10/28/01SJSU Bus 140 - David Bentley4 Key Elements of SCM Determine customer needs Forecast demand Design products to meet customer needs and minimize costs Control operations processes Minimize inventory Strengthen supplier relationships Optimize facility location Improve handling and storage of material

5. Rev. 10/28/01SJSU Bus 140 - David Bentley5 SCM Issues Strategic Building the chain (suppliers, manufacturing facilities, distribution centers, customers) Establishing partnerships Tactical Inventory, procurement, logistics, quality policies Operational Production and inventory planning and control Outsourcing Quality control

6. Rev. 10/24/02SJSU Bus 140 - David Bentley6 Integration Horizontal Integration Acquisition of complementary product lines Example: HP and Compaq Vertical Integration Backward integration (“upstream”) Control of supply Example: Ford Forward integration (“downstream”) Control of customers Example: Apple

7. Rev. 10/24/02SJSU Bus 140 - David Bentley7 Focused Factories Focused factories Emphasis on niche, distinctive competency Limited products and functions Example: HP casting plant HP: Carly Fiorina comments (SJMN 10/24/02) : …in contrast to IBM, HP is not going to be a “vertically integrated company” Focus less and less on component-level innovation Work with key partners (e.g., Intel and Canon) Position itself as broad-based technology company

8. Rev. 03/01/02SJSU Bus 140 - David Bentley8 Logistics Managing movement of materials within the supply chain Traffic management Scheduling, carrier selection, rate and tariff management Electronic Data Interchange (EDI) Internet (B2B, exchanges) Distribution Requirements Planning (DRP) JIT deliveries

9. Rev. 10/28/01SJSU Bus 140 - David Bentley9 Communications Traditional Mail, Phone, Fax EDI Transmission of forecasts, orders, etc. Individual supplier/customer agreements Internet (E-Commerce) Buying and selling using the Internet Business-to-business, business-to-consumer Exchanges

10. Rev. 10/28/01SJSU Bus 140 - David Bentley10 Creating an Effective Supply Chain Key is external and internal partnerships Steps Strategic objectives and tactics Integrate internal part first Extend to suppliers and customers Optimize data management across chain Develop strategic partnerships

11. Rev. 03/02/05SJSU Bus 140 - David Bentley11 SCM Software Vendors Supply Chain Management (SCM) SAP Oracle I2 Technologies Manugistics

12. Rev. 10/26/05SJSU Bus 140 - David Bentley12 Internet Applications Business to business (B2B) Ariba BEA Siebel (being acquired by Oracle) Many others Business to consumer (B2C) Oracle Siebel (being acquired by Oracle) BroadVision Many others

13. Rev. 07/22/04SJSU Bus 140 - David Bentley13 Purchasing - 1 Purchasing activities and interfaces Purchasing cycle Requisition from user or inventory control Supplier selection Order placement Order monitoring and follow-up Order receipt Outsourcing Contract manufacturers

14. Rev. 07/22/04SJSU Bus 140 - David Bentley14 Purchasing - 2 “JIT” purchasing Fewer suppliers More contracts Traditional vs. partnership relationships See Table 16-9, page 718 (and next 2 slides) Supplier selection See Table 16-8, page 717 Supplier audits and certification

15. Rev. 10/24/02SJSU Bus 140 - David Bentley15 Supplier Relationships – 1 Source: Schonberger & Knod, Operations Management, Fourth Edition, 1991 FactorTraditionalPartnership 1. TenureShortLong term 2. AgreementP.O.Contract 3. SourcesManyFew 4. VolumeLowHigh 5. Price (total)HighLow 6. QualityUncertainHigh

16. Rev. 10/24/02SJSU Bus 140 - David Bentley16 Supplier Relationships – 2 Source: Schonberger & Knod, Operations Management, Fourth Edition, 1991 FactorTraditionalPartnership 7. DesignCustomerJoint 8. DeliveryInfrequentFrequent 9. OrderMailKanban 10. ReceiptDockProd’n line 11. PaperworkLotsLittle or none 12. OpennessArms lengthArm-in-arm

17. Rev. 03/22/05SJSU Bus 140 - David Bentley17 Purchasing - 3 Supply Chain Tools Bar coding EDI (Electronic Data Interchange) RFID (Radio Frequency Identification) E-commerce

18. Rev. 03/22/05SJSU Bus 140 - David Bentley18 Purchasing - 4 Make or buy (breakeven analysis) Q BEP = FC / (p – v) Distribution requirements planning (DRP) Aggregate requirements from stores Assign through warehouses to factories

19. Rev. 10/28/01SJSU Bus 140 - David Bentley19 E-Commerce Areas CRM - Seibel, Oracle, BroadVision B2B - SAP, Oracle B2C - BroadVision SCM - SAP, i2 E-Procurement - SAP, Ariba