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Introduction to Information Technology

Chapter 10:Computer-based Supply Chain Management and Information

Systems Integration

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Chapter Preview

In this chapter, we will study:The concept of a supply chainFour ways of implementing a supply chainProblems that can occur within a supply

chain leading to poor business performanceUse of IT to resolve supply chain problemsHow supply chain management should be

integrated with other business functionsEffect of e-Commerce on supply chains

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Supply Chain DefinitionsFlow of materials, information,

payments, and services, from suppliers through factories and warehouses, to end customers

Includes all organizations and processes that create and deliver products, information, and services to the end customers

Supply chain management - planning, organizing, coordinating, and controlling all activities in the supply chain

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Simplified Supply Chain

Upstream Internal Downstream

Suppliers

Organization’s production

processes, including materials handling,

inventory management, manufacturing, quality control

Distributorsmaterial

information

moneyRetailers

Customers

material

information

money

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Types of Supply Chains

Integrated Make-to-Stock Real-time demand tracking triggers

production to restock finished goodsContinuous Replenishment

Constant inventory replenishment based on expected stable demand

Build-to-Order Customer order triggers production of

specific item(s) requested

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Global Supply Chains

Many economic factors promote extending the supply chain globally

E-commerce enables global supply chains

Global supply chains are longer and more complex

Use of information technology essential

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Problems in the Supply Chain

How much are we going to sell? (demand forecasts)

How long will it take? (for supplies to arrive; shipments to be received)

What if the supplies are defective? (quality control)

What if my order gets lost or miscommunicated?

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More Problems in the Supply Chain

Bullwhip Effect Wild swings in orders due to lack of

coordination and trust among supply chain members

Information sharing is essentialPhantom Stockouts

Inventory is reportedly not available, when in fact it is on hand

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Overcoming Supply Chain Problems

Vertical Integration Own everything upstream and

downstreamStockpile Inventory

Eliminate risk and uncertainty by hoarding massive inventories; very expensive

Improve Supply Chain Management Build trust and coordination through

IT enabled supply chain support

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How IT Supports the Supply Chain

Material Requirements Planning (MRP) Early model that integrated production,

purchasing, and inventory managementManufacturing Resource Planning (MRP

II) MRP plus financial and labor planning

Enterprise Resource Planning (ERP) Extension to entire enterprise, plus

external business partnersIn short, Integration is the key

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How IT Supports the Supply Chain

Integrated Value Chain Multiple enterprises within a shared

market channel collaborate throughout the entire shared chain to enhance perceived customer value

Chain members act as an extended enterprise

Benefits to each chain member occur as entire chain is optimised

Idealized goal only achieved in a few cases at present

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How IT Supports the Supply Chain

Enterprise Resource Planning (ERP) Systems Initially focused on integrating all

departments and functions within an organization

Recently have extended to suppliers and customers

Focus was on transaction processing, not decision support and continuous planning

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How IT Supports the Supply Chain

Supply Chain Management (SCM) Software Standalone software targeting the

planning and decision making needed for supply chain management

Integrated ERP and SCM Build linkages between ERP package

and SCM package Extend ERP to incorporate needed

SCM functions Addition of business intelligence

(analysis)

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Extending Supply Chain through e-Commerce

Upstream Change procurement methods

Internal Use of intranet to enhance internal

processesDownstream

Alter (streamline) selling practices through direct Web selling, auctions, or exchanges

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e-Commerce Supply Chain Issues

EC has generated problems in the order fulfilment part of the supply chain Delivering what the customer ordered

in a timely way Providing customer support

EC must continue to improve through More efficient order processing Better fulfilment processes, such as

automated warehouses Provide simple mechanism for

customers to return products

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Chapter Summary

Understanding and managing the supply chain is critical to success

Many supply chain problems can be resolved through improving information flows

IT can supply needed support to supply chain management

Electronic commerce may reshape the supply chain