Virtual supply chain management

IHEC Carthage 2013/2014 1

VIRTUAL SUPPLY CHAIN MANAGEMENTThe ultimate Supply Chain Management Strategy

TarekJallab2LFG3


Outline

I. Introduction

II. What is a Supply Chain?

III. Supply Chain Management (SCM)

IV. Virtual Supply Chain Management

1. Terminology 2. Virtual Purchasing and Supply

Organization3. Virtual Organization4. Virtual Integration5. Virtual Supply Chain

V. Supply-chain management across the Internet

VI. Conclusion


Introduction

What do you do well? Who could do it better? Those are the questions organizations must answer to analyze core competencies and the best-suited suppliers.

One of the most leading-edge topics for purchasing and supply management professionals, the virtual supply chain allows organizations to connect, receive mutual benefit, and align business strategies for the prime amount of time.


Introduction

Now you see it, now you don't. At the other extreme, far from the long-term strategic alliance that focuses on continuous improvement and increasingly integrated relationships, lies the virtual supply chain. Still directed toward the same ultimate goals of today's supply chains - satisfying the customer, efficiency, and cost-effectiveness - this virtual supply chain has a different look. It relies on relationships that can fill a need for a given moment of time and is structured in such a way that formation, practice, and dissolution are conducted with ease.


What is a Supply Chain?

A Supply Chain consists of organizations that successively transform raw materials into intermediate goods, then to final good, and finally deliver them to customers.

A Supply Chain consists of all stages involved, directly or indirectly, in fulfilling customer request .



The global network used to deliver products and services from raw materials to the end customer through engineered flows of information, physical distribution and cash.

SUPPLY DEMAND

Information

Product

Cash



Supply Chain Illustration


Supply Chain for Denim Jeans 1/2


Supply Chain for Denim Jeans 2/2


Supply Chain for Beer


Supply Chain Management (SCM)

Developed in 1980s.

Supply chain management (SCM) is the process of planning, implementing, and controlling the operations of the supply chain as efficiently as possible .

Express the need to integrate the key business processes, from end user through original suppliers.



The basic idea behind the SCM is that companies and corporations involve themselves in a supply chain by exchanging information regarding market fluctuations, production capabilities.

The primary objective of supply chain management is to fulfill customer demands through the most efficient use of resources.

Effective Supply Chain Mgt. is the next logical step towards increased profits and market share.



Managing flow of information through supply chain in order to attain the level of synchronization that will make it more responsive to customer needs while lowering costs.

Supply chain management deals with linking the organizations within the supply chain in order to meet demand across the chain as efficiently as possible.


Virtual Supply Chain Management

1) Terminology The word "virtual" might conjure up images of the latest high-tech equipment, simulated strategy games, or gadgets that alter reality with surprising ease. However, contrary to the concepts so prevalent in the entertainment industry, virtual organizations and virtual supply chains have different interpretations in the business and supply management world.



1) Terminology Most are familiar with the concept of virtual teaming, where several individuals get together for a project or discussion, although they're not together in the physical sense. Thanks to technology, people can meet via computer hookups and telecommuting phone lines. Taking this concept and applying it to purchasing departments, organizations, and supply chains can lead to the following models.



2) Virtual Purchasing and Supply Organization A department takes on a virtual quality if portions of its responsibilities are shifted or assigned to other various business units within the same organization. Some organizations describe the transformation as taking a fragmented organization that had fragmented purchasing processes, and aligning the various departments so that all purchasing processes flow through common practices, but not a common department. The virtual aspect results in the actual purchasing procedures being handled not by an isolated purchasing department, but by a process steering group comprised of members from the various business functions.



3) Virtual Organization Take this concept one step further and

imagine a virtual organization, one that doesn't exist in a physical sense, but functions nonetheless. In this instance, an organization may be an umbrella for several outsourcing operations, but not necessarily a physical entity. The single organization is virtual in the sense that it is not traditionally "tangible." There may be figureheads and individuals facilitating all of the third-party relationships, but all core processes, whether manufacturing, service, administrative, or operational, are performed outside the "virtual" organization.



3) Virtual Organization Virtual organizations are called "imaginary organizations", held together by trust, synergies of the partners, contract and information technology [Hedberg et al. 1994]. They operate without long-term relationships, can be enabled or dissolved easily on a real-time basis. Virtual corporation seems to be the strategy for structuring and improve the corporation for the coming century [Davidov and Malone 1992]. Virtual companies are characterized by a networks of internal and external relations that constantly change.



4) Virtual Integration What Is Virtual Integration? Virtual integration is a new form of value chain management. Under such a system, the links of the value chain are brought together by informal arrangements among suppliers and customers. Shipments of the components that your firm needs can be easily arranged through the Internet or a networked computer system. The same type of arrangement allows you to fully serve your customers in ordering, services, or any other needs.



4) Virtual Integration Why Virtual Integration? Today the vision for many manufacturers is to become virtual companies, owning only the brand and the customer. The design, system development, product sourcing, logistics, and even final assembly can all be outsourced to supply chain partners. Increasingly the goal is to replace physical assets with information in such a way that every member of this extended supply chain benefits. This forces the move from an environment of ‘hard wired integration’, where relationships are arms-length and adversarial, even across functional boundaries within the organization, to an environment based on ‘negotiated sourcing’, where non-core activities are outsourced and collaborative partnerships are the norm.



4) Virtual Integration Integrating E-business Business processes must not only incorporate timely company information – for improved customer relationship management, supply chain management, and beyond, they must also be kept up-to-date with fast-changing business needs. E-business facilitating these processes is the way most business soon will be transacted. Whether or not you ever plan to sell products or services over the Web, your most important customer or supplier may one day insist upon using Web for all transaction.

The fastest growing companies are moving aggressively to bring e-business into all their operations. They align their systems with their fast-changing business priorities and use these systems strategically, for growth. In addition, successful businesses are employing information technology to gather and interpret data about their ultimate customers, including demographics, trends, and buying behavior.



5) Virtual Supply Chain Virtual supply chains are "production and distribution systems utilizing a formal physical network structure, and operating through a network of separate organizations" [Chandrashekar and Schary 1999]. There are no permanent members, they are called in for particular projects and may not be visible for other members. Virtual supply chains are not serial chains but rather flexible networks with fast, real-time electronic communication.



5) Virtual Supply Chain Virtual supply chain operates in

changing business environment. The virtual supply chain often focuses on the solution to concrete tasks and projects. After solving the task and completing the project, virtual supply chain is dissolved and new one is formed with new combinations of partners. The dominant organization in the chain, called often as a "broker" uses temporary partners for a specific task. The dominant firm replaces fixed connections with flexible ones, based on prior selection of alternatives that require managers to communicate tasks to members. This form of coordination has been possible only with the extensive use of advanced computer technologies and telecommunication [Townsend et al. 1998].


Supply-chain management across the Internet

Developing supply-chain management on the Web

Good supply-chain management is essential for a successful company. Supplychain management can reach beyond the boundaries of a single company to The current issue and full text archive of this journal is available at share that information between suppliers, manufacturers, distributors, and retailers. This is where the Internet plays a central role. The ability to focus on one layer of the supply chain has enabled organisations, such as AOL and lastminute.com to be far more innovative. Shifts towards the development of a virtual supply-chain architecture focuses much more emphasis on the importance of knowledge and intellect in creating value. An adoption of an integrated approach throughout the supply chain requires a trade-off between autonomy and control to which the balance is unique, between each supply partner relationship.



Web-based relationships in the supply chain

The growth of Web-based electronic commerce has created a number of approaches to creating a model of how it impacts on business.

The Web enables all suppliers in a supply chain to identify and co-ordinate data transfers with each other. Research laboratories, pharmaceutical distributors and end-users, for example, can all swap information on new product developments, specific diseases, and treatments within these settings.



Case in Point Dell Inc. When Dell Inc. first began using the

Internet to expand their business, the company had three basic objectives:

to make it easier to do business with Dell,

to reduce the cost of doing business with Dell, and

to enhance their customer relationships.

Starting in 1996, by 1999 Dell was selling more than $35 million per day over the Internet.



Case in Point Dell Inc. "But for Dell, online commerce was only

the beginning," writes Michael Dell, the Founder & CEO of Dell Computer Corporation . “ Because we viewed the Internet as a central part of our IT strategy, we started to view the ownership of information differently, too. Rather than closely guarding our information databases, which took us years to develop, we used Internet browsers to essentially give that same information to our customers and suppliers – bringing them literally inside our business. This became the key to what I call a virtually integrated organization – an organization linked not by physical assets, but by information. By using the Internet to speed information from between companies, essentially eliminating inter-company boundaries, it would be possible to achieve precision and speed-to-market for products and services in ways not dreamed possible before. It would be the ultimate business system for a digital economy."


Conclusion

Virtual supply chains may hold the key. These systems are designed for flexibility, complexity and speed in managing networks of suppliers, manufacturers, distributors and warehousing agents virtually. Common system protocols which allow efficient communication, collaboration and coordination amongst the different vendors will let everyone work together as if they were one large business.

Apart from that, Internet-enabled infrastructure allows ease of implementation of cross-checking of inventory levels, order status as well as expected product delivery schedules. In fact, problems can be spotted and addressed with speed to minimize downtime or effects on production schedule. Ultimately, customer satisfaction is paramount and everyone is working towards that one goal of ensuring that their best is provided.


Conclusion

The Internet, as a means of virtual organizing, has become a central part of a commercial drive towards systemic innovation and the re-evaluation by many of value creation. A major shift in the communications between business organisations is taking place, which is actually redefining organisations and commercial transactions. The Internet has become a key element in molding and propelling business into new directions in the traditional marketplace and emerging marketspace.

Finally, a virtual supply chain that networks all parties together is something that is inevitable in order to increase profitability and reduce costs. Collaboration amongst different parties is necessary in the virtual world as this is the only way in which businesses can thrive. Failure to adopt new and better management strategies will only be detrimental to the business as competitors take over and are able to do a much better job than you. In fact, these practices will be more of the norm in the near future.


References

en.wikipedia.org/wiki/Supply chain

http://www.mba.tuck.dartmouth.edu/pages/faculty/dave.pyke/case_studies/supply_chain_or_ms.pdf

www.e-lberta/pdf/efc_supply_chain_basics.pdf

www.supplychainseminars.com/

en.wikipedia.org/wiki/Supply_chain_management

http://www.1000ventures.com/business_guide/im_value_chain_virtual%20integration.html

http://www.webpronews.com/the-virtual-supply-chain-the-ultimate-supply-chain-management-strategy-2005-07

http://www.ism.ws/pubs/ By Roberta J. Duffy, writer for Purchasing Today®. May 2000 Purchasing Today®, page 47.Thank You