1. Welcome Strategies of Network Companies Jonathan Wareham Jonathan.wareham@esade.edu

2. 1.What are Supply Chain Management Systems? 2.How do they work? 3.What can they do? 4.What can they not do? 5.An economic model of virtual organizations – The WS paradigm Topics

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

4. RFID Tags

5. Tags can be attached to almost anything: pallets or cases of product vehicles company assets or personnel items such as apparel, luggage, laundry people, livestock, or pets high value electronics such as computers, TVs, camcorders What is RFID? -- The Tags

6. Are All Tags The Same? Basic Types: Active  Tag transmits radio signal  Battery powered memory, radio & circuitry  High Read Range (100 meters) Passive  Tag reflects radio signal from reader  Reader powered  Shorter Read Range (10cm – 5 meters)

7. RFID the Supply Chain TagReaderAntennaMiddlewareSupply chain execution - Coiled antenna of reader creates magnetic field with coiled antenna of tag - Transmits identification data to a reader -Transmit data to middleware -Associates tag info with product info -Process information from reader -Filters data -Sends data to backend servers - Backend SCE or ERP systems receives Information

8. How far, how fast, how much, how many, attached to what? Low Frequency No regulation Penetrate materials (water, wood, tissue well) Slow read speed Small range No penetration of iron and steel Medium Frequency Little data, small distance Thin tags Low cost High data rates Govt regulated Non mental penetrating High Frequency Penetrate materials Small tag size High data transfer Long range Non-water or tissue penetrating Non-regulated in some regions expensive

9. Where can RFID add value?  From Manufacturing  Into a Store’s Back Room Inventory  On the Shelf  At the Cash Register  Through Distribution  Transportation  Out the Door as an anti-theft device

10. Top 100 Suppliers: FSuppliers will mark inbound cases and pallets with RFID - 1 January 2005 - May, 2003 specification calls for ≈256 bit read/write tag 1 EPC tag per carton – 100% read on conveyor 1 EPC tag per pallet – 100% read at Inbound dock Conveyor speed of up to 600 feet per minute 3 Texas Distribution Centers January 2005

11. Why???  Stock management /perishables (field to fork)  In-stock levels  Invoice reconciliation: damaged, deductions, performance penalties, etc.  Scan Based Trading or VMI  Improved analytics & POS data  All reads available to suppliers within 30 minutes

12. Guidelines for using RFID  Bar codes cannot be used  Counting versus identification (reverse logistics)  Use of 3Party logistics and suppliers  Data collection is chaotic (battlefields, hospitals, retails shops)  Exact configuration of the good must be maintained  Counterfeit protection  High Risk scenarios, drugs, hospitals  Collecting data outside of retailer (smart refrigerators, medicine cabinets, etc)

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

14. Example Problem Space Client PO Service Credit Service Inventory Service Purchase Order Credit Check Reserve Inventory Credit Response Inventory Response Invoice Consolidate Results

15.  Sell 50,000 computers with only 4 days of inventory  Keep few suppliers very close  30 suppliers 75% of materials  When order is made, signal is sent to supplier, 90 minutes later, supplies are delivered to Dell.  “We sell what we have, we don´t sell what we don´t have”

16. Dell From HBR  Have as few suppliers as possible  In real time, communicate your inventory levels and replenishment needs to them  Order from suppliers only when you receive demand from customers.

17. Example Problem Space Client PO Service Credit Service Inventory Service Purchase Order Credit Check Reserve Inventory Credit Response Inventory Response Invoice Consolidate Results

19. Example: Self-describing data “ABC47-Z”, “100”, “STL”, “C”, “3”, “28” Data stream in a typical interface… ABC47-Z 100 STL C 3 28 Same data stream in XML…

21. XML Auction Demo

22. Other Web Services Partner Web Service Partner Web Service Data Access and Storage Tier Application Business Logic Tier YourCompany.com Internet + XML Web Services Overview Application Model Other Applications End Users

23. Mail Calendar News Finance Weather Other Svcs Ads Web Services Overview Portals

25. Web Service Demos  WebMethods.net  http://www.webservicelist.com/ http://www.webservicelist.com/  http://www.xmlwebservices.cc/index _Samples.htm#Top http://www.xmlwebservices.cc/index _Samples.htm#Top  http://www.asitis.co.uk/web- services/

26. Underlying Technologies Web Services Stack Ubiquitous Communications: Internet Universal Data Format:XML Wire Format: Service Interactions:SOAP Description: Formal Service Descriptions:WSDL Simple, Open, Broad Industry Support Directory: Publish & Find Services:UDDI Inspection: Find Services on server:DISCO

27. Underlying Technologies Web Services Stack Directory http://www.uddi.org UDDI DISCO WSDL SOAP Inspection http://www.ibuyspy.com/ibuyspy.disco Description http://www.ibuyspy.com/ibuyspycs/InstantOrder.asmx?wsdl Wire Format Locate a Service Link to Discovery Document (XML) Request Discovery Document Return Discovery Document (XML) Return Service Description (XML) Return Service Response (XML) Request Service Request Service Description Web Service Client UDDI or other directory service Web Service

28. SCM Software –Who?

29. What does SCM software do?  2 Main Functions: Tracking & Optimization 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

30. The Bullwhip Effect CustomerRetailerDistributorFactoryTier 1 supplierEquipment Upstream amplification of demand variation Progression of a brushfire to an inferno!

31. Machine Tools at Bullwhip Tip

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

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

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

35. Differences  Bringing vertical coordination to the network… but how? 3,500 modular parts 30+ suppliers Over 1,000,000 parts in just one car!

36. Ronald Coase (1937) Why do we have firms? there must be some cost in using the price mechanism. Price discovery/search costs Contract negotiation Long term stability of supply sources (uncertainty) Ergo, operation of the market costs something, and by forming and organization and letting some authority to allocate resources, some costs are saved

37. Basic attributes of transactions  Specificity  Frequency  Duration  Complexity  Uncertainty  Difficulty of measuring performance  Connectedness

38. Asset Specificity  Investments made to allow two parties to exchange but has little or no value outside of the exchange relationship  Site specificity  Physical-asset specificity  Dedicated assets  Human capital  Lead to higher transaction costs and the problem of “hold-up”

39. Specificity & Frequency

40. Market Hierarchy Asset specificity Product Complexity IT, Complexity & Specificity

41. Example Problem Space Client PO Service Credit Service Inventory Service Purchase Order Credit Check Reserve Inventory Credit Response Inventory Response Invoice Consolidate Results

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