E-Commerce and Supply Chain Management
(SCM)
Chapter 4
MGMT 326
Foundations
of Operatio
ns
Foundations
of Operatio
nsIntroduction
Introduction
StrategyStrategy
ManagingProjects
ManagingProjects
QualityAssuran
ce
QualityAssuran
ce
Capacityand
Facilities
Capacityand
Facilities
Planning& ControlPlanning& Control
Products &
Processes
Products &
Processes
Product
Design
Product
Design
ProcessDesignProcessDesign
ManagingQuality
ManagingQuality
Statistical
ProcessControl
Statistical
ProcessControl
Just-in-Time & Lean Systems
Just-in-Time & Lean Systems
Supply Chain ManagementSupply Chain Management
Supply Chain Management (SCM) and E-commerce Chapter 4
Supply Chain Management (SCM) and E-commerce Chapter 4
What is SCM?What is SCM? E-commerceE-commerce
Business-to-business:•Information technologies•Benefits to companies
Business-to-business:•Information technologies•Benefits to companies
Business-to-consumer:•Competition • Inventory management•Delivery options•Managing returns
Business-to-consumer:•Competition • Inventory management•Delivery options•Managing returns
Global Supply Chains:•Inventory•Infrastructure •Product proliferation• Patents• Health & safety
Global Supply Chains:•Inventory•Infrastructure •Product proliferation• Patents• Health & safety
Vertical Integration:•Backward integration •Forward integration •Make-buy decisions
Vertical Integration:•Backward integration •Forward integration •Make-buy decisions
Managing Suppliers:•Selecting suppliers•Single suppliers vs. multiple suppliers
Managing Suppliers:•Selecting suppliers•Single suppliers vs. multiple suppliers
Supply Chains A supply chain is the network of activities that deliver
a product/service to the customer Sourcing (purchasing) of raw materials, parts,
goods for sale, or service inventories Order entry Operations planning Transformation process (manufacturing or services) Quality management Logistics:
Transportation (traffic) Distribution (delivering the product to
customers)
Dairy Products Supply ChainFigure 4-2, page 100
A company has more control overTier 1 suppliersthan over Tier 2 & Tier 3 suppliers
Lessons from theDairy Products Supply Chain
Figure 4-2, page 103
Companies often have several tiers of suppliers. Your company's Tier 1 suppliers are the
firms that your company buys from. A company has more control over Tier 1
suppliers than over Tier 2 & Tier 3 suppliers
Supply Chain Management (SCM)
Supply Chain Management is the business function that coordinates the movement of materials and information through the supply chain
Objectives of Supply Chain Management
Minimize the cost of materials and material movement
Minimize inventory investment Ensure timely delivery of materials at every
level of the supply chain and to customers (to ensure product availability and delivery speed)
Ensure quality of materials used in manufacturing or services
If needed, get product design help or other services from suppliers.
Supply Chain for FurnitureFigure 4.1, page 99
Information Sharing in the Supply Chain
The objective of information sharing is to match demand and supply. (What will be available when, and from whom?)
Demand: actual sales, sales forecasts, booked orders, custom orders
Product availability: current inventory, production plans, shipping schedules, shipments
Quality: suppliers' data on quality
E-commerce The use of the Internet and World
Wide Web to conduct business Business-to-business (B2B) Business-to-consumer (B2C)
Also called e-business
Technologies for B2B E-commerce
Electronic data interchange (EDI): electronic exchange of business-related information between companies, using data files in standard formats Originally, the data files were designed to be
processed by computer systems In Web-based EDI, the supplier or business
customer can access the information through the Web
Types of Web Sites forB2B E-commerce
Electronic storefronts: Allow buyers to consult an online catalog, place an order, pay or make payment arrangements, and track shipments Similar to B2C electronic storefronts
Net marketplaces: Allow buyers and sellers in the same industry to negotiate contracts, place orders, track shipments, pay or make payment arrangements, and work together on product design
Benefits of B2B E-commerce Lower administrative costs for purchasing Low-cost access to global suppliers Lower inventory investment due to intense
price competition and faster shipping Better product quality because of increased
cooperation between buyers and sellers, especially during the product design and development
Operations Issues inBusiness-to-consumer E-
commerce
More competitive markets Inventory management:
information sharing in the supply chain helps to reduce inventory costs.
Packing orders for shipment Delivery Customer returns
Operations Issues in Online Sales
Packing Orders for Shipment
Items are identified by bar codes or radio frequency ID (RFID)
Warehouse workers put ordered items in crates
Sorter sends each item to the correct, bar-coded box for the customer who ordered it
Packing slip is printed Boxes are packed, taped, weighed Boxes are put on trucks for shipment to
customers
Operations Issues in Online Sales
Delivery
Objective: Deliver when promised, while minimizing delivery costs
Brick-and-mortar stores (like Sears) can ship items to stores for customer pickup.
Other online merchants ship via a package delivery service (like UPS) or U.S. postal service
Online merchants use package delivery services for most shipments to other countries.
Customers usually pay a standard shipping cost – different for U. S. and other countries
Operations Issues in Online Sales
Customer Returns Objective: minimize the cost of customer
returns and reduce "hassles" for customers 25% of Internet orders result in a customer return Problems in returning goods are the 2nd biggest
reason that consumers don't buy online Customer usually pays for return shipping Variety of approaches used to return goods:
postal service, contract package delivery service, brick-and-mortar store
Operations Issues in Online Sales
Customer Returns (2)
Online retailer must ship a replacement item or issue credit to customer
Online retailer must process returned items Return defective items to supplier for
a credit Good items can often be repackaged,
priced, and resold. This process can be out-sourced.
Operations Issues in Global Supply Chains
Inventory levels tend to be higher. Safety stock: inventory kept to protect a
customer against late deliveries from a supplier
Pipeline inventory: inventory that has left a supplier plant but has not yet reached the customer
Both safety stock and pipeline inventory tend to be higher in global supply chains.
Operations Issues in Global Supply Chains (2)
Shipping times are usually longer. Transportation in developing countries is
less efficient than in developed countries. Port congestion causes delays. Customs and security inspections cause
delays. In ocean shipping, goods arrive in large
quantities. The shipment must be broken into smaller quantities (break bulk operations) for shipment to retailers and distributors.
Operations Issues in Global Supply Chains (3)
Health and safety of consumers Infringement of patents and
copyrights Both GM and BMW have accused
Chinese firms of patent infringement Product proliferation: the need to
develop different product variations for different countries
© 2007 Wiley 23
Sourcing Decisions Sourcing: deciding which goods or services to
make in-house, and which ones to buy Vertical integration – a measure of how much
of the supply chain is owned by the manufacturer Backward integration – owning or controlling
sources of raw material and component parts
Forward integration – owning or controlling the channels of distribution
© 2007 Wiley 24
Make or Buy Decisions Is product/service technology critical to
firm’s success? Is product/service a core competency? Is it something your company must do
to survive? If any of the above are true, it is usually
wise to make, rather than buy.
Make or Buy Decisions (2)
Who can do a better job: you or a supplier? Costs – breakeven analysis is used to
compare costs. ` Quality On-time delivery Product or part designs
Is there a supplier who can meet your firm's requirements in the above areas?
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