IS 466 ADVANCED TOPICS IN INFORMATION SYSTEMS

LECTURER : NOUF ALMUJALLY

15 – 10 – 2011

College Of Computer Science and Information, Information Systems Department

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Lessons Learnt from Lecture5

• SD module• Cameron and Whetton 7 questions of

evaluating ES success• What success measurement models are

available?

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Objectives

• Supply Chain

• SCM Definition

• Components of a SCM System

• Matching Supply and Demand

• Components of a Supply Chain

• The Importance of Supply Chain Management

4Supply Chain Management

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What is a Supply Chain?

• A supply chain is the system of organizations, people, activities, information and resources involved in moving a product or service from supplier to customer.

• Supply chain activities transform raw materials and components into a finished product that is delivered to the end customer.

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Supply Chain

Supplier

Manufacturer

Distributor

Retailer

Customers

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A Supply Chain Example1…

Coke

JNJ

Kellog

P&G

GA

FL

AL

TX

Kroger

suppliers

Super market chains

State distributors

V. Highlands

Peachtree

Ocean Drive

Ft. Laud.

Local stores

En

d c

usto

mer

Publix

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A Supply Chain Example 2…

Coke

JNJ

Kellog

P&G

Center

Western

North

Eastern

Panda

Carrefour

suppliers

Super market chains

State distributors

Riyadh

Karaj

Jeddah

Makah

Local stores

En

d c

usto

mer

Danube

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Supply Chain

• Also referred to as the logistics network• Suppliers, manufacturers, warehouses,

distribution centers and retail outlets – “facilities”

and the

• Raw materials• Work-in-process (WIP) inventory• Finished products

that flow between the facilities

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Supply Chain Processes

The Supply Chain – Another View

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Suppliers Manufacturers Warehouses &Distribution Centers

Customers

Material Costs

TransportationCosts

TransportationCosts Transportation

CostsInventory CostsManufacturing Costs

PlanPlan Source Source Make Make Deliver Deliver Buy Buy

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What Is Supply Chain Management (SCM)?

• A set of approaches used to efficiently integrate Suppliers Manufacturers Warehouses Distribution centers

• So that the product is produced and distributed In the right quantities To the right locations And at the right time

• System-wide costs are minimized and• Service level requirements are satisfied

Plan Source Make Deliver Buy

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Basic supply chain management system

• A basic supply chain management system has five (5) components:

1. Plan• refers to the over-all strategy of the SCM program including the

development of SCM metrics to monitor

2. Source• refers to the suppliers who'll provide you with goods and services

necessary for you to run your business

3. Make • refers to the execution of processes needed to produce, test, and

package your products or services (manufacturing)

4. Deliver• refers to the system for developing a network of warehouses; and

getting the products to the customers

5. Buy• refers to the system of receiving orders from customers; invoicing

customers and receiving payment from them

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Supply Chain Management (SCM)

• Supply Chain Management is the design and management of processes across organizational boundaries with the goal of matching supply and demand in the most cost effective way.

Supply

Demand

Mission impossible: Matching Supply and Demand

• Aims to Match Supply and Demand, profitably for products and services

• Achieves:

The rightProduct

HigherProfits

The rightTime

The rightCustomer

The rightQuantity

The rightStore

The rightPrice

=++ ++ +

Matching Supply and Demand

SUPPLY SIDE DEMAND SIDE

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Why so Difficult to Match Supply and Demand?

• Why is supply chain management difficult?• Different organizations in the supply chain may

have different, conflicting objectives• Manufacturers: long run production, high quality, high

productivity, low production cost• Distributors: low inventory, reduced transportation

costs, quick replenishment capability• Customers: shorter order lead time, high in-stock

inventory, large variety of products, low prices

• Supply chains are dynamic - they evolve and change over time

SCM in a Supply Network

• Supply Chain Management (SCM) ) is concerned with the management and control of the flows of material, information, and finances in supply chains

Supply

Demand

Products and Services

Cash

Supply SideOEMDemand Side

THAILAND INDIA MEXICO TEXAS USN-Tier Suppliers Suppliers Logistics Distributors Retailers

Information

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Supply Chain for

Denim Jeans

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Supply Chain for Denim Jeans (cont.)

Components of a Supply Chain21

• External Suppliers– source of raw material• Tier one supplier supplies directly to the

processor• Tier two supplier supplies directly to tier one• Tier three supplier supplies directly to tier two

• Internal Functions include – processing functions• Processing, purchasing, planning, quality,

shipping

Components of a Supply Chain22

• External Distributors transport finished products to appropriate locations• Logistics managers are responsible for

managing the movement of products between locations. Includes;

• traffic management – arranging the method of shipment for both incoming and outgoing products or material

• distribution management – movement of material from manufacturer to the customer

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The Importance of Supply Chain Management

• Dealing with uncertain environments – matching supply and demand

• U.S Surgical Corporation announced a $22 million loss in 1993 due to “larger than anticipated inventories on the shelves of hospitals”

• Hewlett-Packard and Dell found it difficult to obtain important components for its PC’s from Taiwanese suppliers in 1999 due to a massive earthquake

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The Importance of Supply Chain Management

• Better information sharing among the partners

• The growth of technologies such as the Internet enable greater collaboration between supply chain trading partners

• If you don’t do it, your competitor will

• Availability of SCM technologies on the market

• Firms have access to multiple products (e.g., SAP, Baan, Oracle, JD Edwards) with which to integrate internal processes

Top 25 Supply Chains

• The Top 25 supply chains report comes out in Novembers.

• The table on the right-hand side is from The Second Annual Supply Chain Top 25 prepared by Kevin Riley and Released in November 2005.

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Dell Computer

• Classic case in supply chain management.• Established in 1984, Dell experienced

supply problems in 1993 and thereupon completely redesigned its supply chain process along the lines of what its founder, Michael Dell, called the “direct” model.

• Between 1993 and 1998, Dell's earnings subsequently grew at 65 percent per year.

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Dell Computer (con.)

• Dell's supply chain redesign was based on the following elements.

• First, Dell sells directly to customers, eliminating the wholesaler and retailer.

• Second, Dell also takes advantage of new information technologies in their communications with suppliers who can access Dell's component inventories, production plans, and forecasts in real time and thus keep their production precisely matched to Dell's needs.

• Third, Dell maintains absolute minimum inventory levels at every stage of production, averaging 4 days overall

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Questions ??