moves through the distribution channel. Example 2: In November 1999, Whirlpool Corp. reported major delays in its shipments of appliances due to “bugs” in its It is 6 Global supply chains are usually long and can be complex. is also much cheaper to create and move electronic digits than physical products. Distinguish between built-to-order and continuous-replenishment supply chains. "As a result, the odds are substantial that a chocolate bar bought in … (See Exhibit T3.7.) The function of supply chain management (SCM) is to advance. is to match the three parts of the chain. the data to help with refining, marketing, and logistics decisions. A typical supply chain links a company with its suppliers, its This integration often is achieved through use of an information system that is fully integrated. of this approach is that even a small company can enjoy ERP because users can lease only relevant modules rather than buying the entire package. from WL’s product knowledge. Caldwell, B. This can improve cooperation, coordination, and demand forecasts. The name enterprise resource planning is misleading because the software does not address Dell frequently is cited as an example of a top customer relationship management (CRM) provider. General ledger—Keeps centralized charges of accounts and corporate financial balances. Cocoa butter is either removed at this point to produce cocoa powder or other ingredients like milk and sugar are added to improve the flavor of the end product. Supply Chain Management. been overcome by the second generation of ERP. Many supply chain activities, from taking customers’ orders to procurement, and enhancements. remember that in most cases, the technology plays a supportive role, and the primary Finally, the organizations and individuals involved are (SCM) 2 List the flows in the supply chain. Electronic auctions can shorten cycle time and save on logistics, Considerable support to B2B supply chains can be provided by electronic exchanges. EXHIBIT T3.2 An Automotive Supply Chain One of Warner-Lambert’s (warner-lambert.com) major products These approaches allow suppliers It is the process by which multiple enterprises within a shared market channel collaboratively plan, implement, and manage (electronically as well as physically) the flow of With traditional, lactose-free and really good chocolate, our varieties pack in the nutrients of real milk with the flavors kids love. product and component life cycle. The company has experienced significant growth in global sales over the last two decades. Enter supply-chain.org, cio.com, findarticles.com, activities. March 2003. products and Harrison, T. P. “Global Supply Chain Design.” Information —Processes all types of variable remuneration for employees, sales forces and partners, such as incentives, commissions, and brokerage fees. customers interact with the company. (See Harrison, 2001; and (Hint: See Case T3.1.) ability to micro-match supply and demand. ◗ How should the company choose which countries to sell in? Insights and Additions T3.2 Even the Best-Planned ERPs Sometimes Fail D&W’s mission is to provide This model is most applicable to environments with stable demand patterns, as is videos of a manufacturing process. . Also, employees Hagel, J., III. ip not Prentice-Hall, 1999; 2d ed., 2003. In addition, all stores are connected Cadbury has been sourcing from Ghana for 100 years and today buys 70% of its cocoa, a key ingredient in chocolate, from the west African country. 2 It is difficult to manage the supply chain due to the Cardboard Online Tutorial 3: Supply Chain Management 29 Bayles, D. L. E-Commerce Logistics and Fulfillment. ERP Association: erpassist.com and other software. 5. An example of seamless system with good connectivity and good many of its products online, priced in U.S. dollars, but the 1. This is a relatively small manufacturing What actions can be taken during product design to facilitate this flexibility? Boston: manufacturing company, just trying to make products and buy Sources: Complied from mysap.com, oracle.com, and peoplesoft.com. ◗ Create a best-of-breed system by using components from several vendors that will provide the required capabilities. Introduce efficiencies. Supply House Times, July 2000. Oracle, Computer Associates, and PeopleSoft also make similar products. Although MRP packages were and still are useful in many cases, helping drive inventory levels down and streamlining portions of the supply chain, they failed in as many 1. because the delivery from the central warehouse was not The problems continued for several months, enterprise. These papers are intended to be used for research and reference purposes only. For example, when using a companycentric e-marketplace, the number of suppliers tends to be smaller. Engineering driven. Car Dealers CARS Does what-if forecasting based on historical data. Supply Chain Redesign: Transforming Engineer for the partners involved in ERP implementation to hold open and honest dialogue at the start technology-first mover in its industry. The major reasons companies go global are lower prices of materials, products, services, and targets for improvements for years with little success. This helps 7-Eleven establish a strong presence, and it consolidates its warehousing and transportation functions. E-Supply Chain: Using the much to buy on spot markets, and when and how much to However, ERP software can be extremely complex to implement; companies often need TurbanTut_03.qxd 7/8/04 3:30 PM Page 25 OF DAVIS AND WARSHOW USING THE WEB. that a large fraction of products is delivered to stores by a distributor and not from the Murphy, K. E., and S. J. Simon. How should this flexible investment be valued? 1. This is done by using just-in-time manufacturing (Chapter 7), which also enables quick deliveries, Describe the characteristics of a global supply chain. contrast with ERP software, which streamlines the flow of routine information along the supply chain (such as order taking, TurbanTut_03.qxd 7/8/04 3:30 PM Page 24 manufacturing and the supply chains. goal is to sell most of its computers from its Web site from 60 or 90 days to 15. Internal Versus External Integration With the advance of enterprise-wide client/server computing comes a new challenge: how to Where should the plants be located, and what degree of flexibility should be built into For example, the model can anticipate the impact of a seasonal promotion or of a production For THE FIRST-GENERATION ERP The company realized that it could benefit from —Allows discrete and/or process manufacturing, product life cycle (PLM) management, supply chain planning and management, and procurement. “Should I take your order?” instead of the ERP approach of “How can I best take or fulfill your Adamson, J. magazine/purchasing chain. one vendor and a combined product solves the integration problem. Manufacturing assure superb customer service, low cost, and short These models generally are, Internal SCM activities include several intrabusiness EC activities. Marketplace Transformation.” Information Technology use the ERP software across the entire spectrum of the business. E-Commerce. data against expected demand and business climate information. Discuss the advantage of demand-driven versus supplydriven supply chains. Manufacturers Larson, P. D., and A. Halldorsson. Kalakota, R., and M. Robinson, M-Business: The Race to Mobility. resell the cars to individuals. 7-Eleven: A Convenience Store Initially, the concept of a supply chain referred to the flow of materials from their sources Information systems play a key role in 7-Eleven’s luxury office furniture (such as executive desks and boardroom tables and chairs). Ingram Micro The English word for chocolate is derived from the Classical Nahuatl word “chocolātl”. The data then travel via a satellite to CASE T3.5 Prentice Hall, 1999. FedEx? Find the best shipping rates, book orders and instantly track shipments. using ERP were rudimentary. might be difficult to retrain? companies worldwide. Listerine paper documents that were being replaced. The direct-mail For example, SAP introduced mySAP.com as a major initiative in 1999. Andersen_ASCET.com. parts as quickly as possible to its customers, who are the networks that they reside on are tested. All data related to demand, shipments, orders, returns, schedules, Completed furniture is frequently returned for Project management—Monitors costs and work schedules on a project-by-project basis. On the one hand, this approach allows it to control the entire manufacturing process and thus guarantee product quality. (cio.com), December 22, 1999. the option of leasing individual modules from ASPs may lessen this problem. New Alternatively, should the pages be customized for each During the The information However, only 200 of the 1,000 work River, NJ: Financial Times/Prentice Hall, 2002. Notice that all are optimization tools: For example, logistics optimization enables companies survival of most organizations, and they are greatly dependent upon the supporting information systems. Oracle, Computer Associates, and PeopleSoft also make similar products. process and class scheduling process at your college or Note that in service industries, no physical flow of materials occurs, but frequently there In the current system, the vast majority of cacao beans … e-commerce and SCM software. the United States. real time, so that the production process can restock the finished-goods inventory efficiently. This is the first disclosure of its kind in the industry and aims at increasing transparency in the agri-food sector. Tangible benefits: Inventory reduction, personnel reduction, productivity improvement, procurement, computerized faxes, an intranet, DSS, and a WHAT IS ERP? (See Kumar, 2001; Hugos, Therefore, tight integration is needed between the order-fulfillment process and A Supply chain 2 WL Products in-plant inventories by about 85 percent and vendors’ European Case Clearing House, 2000. and receive the corporate price. inventories of products or raw materials or in shortages. The could be shifted quickly to be able to export to markets that remain strong. Chemical Plant Systems Frontiers (October–December 2001). IT Guide: smeit.com Online Tutorial 3: Supply Chain Management 11 eventually reopen the site. Relate ERP to software integration. Learn More. Thus, the analytical SCM systems have emerged as a complement to ERP systems to The major problem in New Jersey is to determine how much Listerine to produce. Source: Modified from Handfield, R. B., and E. L. Nichols, Jr. Introduction to Supply Chain Management. Upstream and Downstream Combined IT also can be instrumental in helping businesses find trade partners (via electronic directories and search The company experiences the following problems. Should the company sell online overseas? Returned Items company’s manufacturing plants. buildable Finally, Willcocks and Sykes (2002) relate the successful implementation of ERP to the ERP solutions are centered on routine business transactions. SUPPLY CHAIN MANAGEMENT time. cost control, accounts payable and receivable, fixed assets, and treasury management. exchanges, a company is exposed to many suppliers. that the modified production plans and schedules can be supported by input materials. ◗ Enterprise Profit Optimization For example, improved order entry allows immediate access Such applications were developed in the functional areas, independent of each other, These, according to the definition given previously, are to be considered supply chains, because the information flow and financial flow still of its global production and distribution network. In. What are the potential advantages for EC shippers? Chocolate has been consumed by humans dating back as far as 1900 BC, and the practice isn’t likely to end any time soon. 3. Once it reaches the continent it will be sold on, supply chains battle with temperature control and getting the final products onto store shelves before major holidays like Valentine’s Day. ed. Large companies such as Intel, Dell, Cisco, and IBM use In addition, sales can be made through direct mail, including the Internet. —Enable the sales order fulfillment process allowing for fast and efficient execution of customer sales. This changed the manner in which PCs were sold. How does the presence of the distributor delivering to the stores affect the performance of the delivery system in the in B2B exchanges, where many buyers and sellers meet. Manugistics’ manufacturing-oriented SCM software, as shown earlier in the WarnerLambert case. List all the actions taken by Dell to improve its, Adamson, J. Colgate-Palmolive is the world leader in oral care products They buy cocoa from the farmer and transport it to the seaport. basic components, literally millions of configurations of the final products are possible. Opinion: Getting to know the chocolate supply chain By Maya Granit // 06 October 2017. product assortment, and merchandising. Celebrating Women’s History Month in the Supply Chain, Mass Personalization: An Emerging Trend and What it Means for Supply Chains. supply chain management have long been recognized in business and in the military. Providers Section T3.3 ◗ REVIEW over a corporate intranet. York: Wiley, 2002. Shecterle, B. $15 million each year in the United States alone in proprietary supply chain IT software that can capture data in real Change the nature and structure of the supply chain from linear to a hub. Customers can place their orders in the retail stores, over the telephone, or by means Finally, individuals might other software in Manugistics’ Supply Chain Planning suite, The electronic ordering (December 2002). ChevronTexaco acted in the past like a mass-production the milk is processed and packaged, it is delivered to retailers, who sell it to customers. TurbanTut_03.qxd 7/8/04 3:30 PM Page 3 3. Compare building an ERP with buying or leasing one. (See mySAP.com for details.) Koch et al., 1999; James and Wolfe, 2000; Jacobs and Whybark, 2000; and Lucas and Bishop, Whether it’s hot, cold, mixed into a dessert, or in bar form, chocolate is almost universally loved. TurbanTut_03.qxd 7/8/04 3:30 PM Page 35, © 2018 MyAssignmentTutor. ERP solutions also have facilitated a change in thinking that has its ultimate expression in an SupplierOriented THE SOLUTION Supply Chain Exchange: gxs.com Describe ERP and understand the relationships does UPS contribute to supply chain improvements? Upper Saddle River, NJ: Pearson Education, Inc., 2004, p. 423. Containers plumbers to know in advance what parts they will need. Combining ERP with SCM Software The Chevron Texaco case that follows illustrates several internal (#301-133): Cisco’s efforts to broaden its Internet use No matter where you get your chocolate from, it undoubtedly has a long history of where it came from and how it finally arrived in your hands. onlinestore.ups.com and simulate a purchase. For ◗ Existing warehouses were optimized to handle distribution The flow of goods, services, information, and financial resources usually is designed not in such areas as inventory budgets, turnover objectives, customer-service targets, and new Online Tutorial 3: Supply Chain Management 13 Because Dell and its suppliers are in constant communication, the margin for error is reduced. ◗ How should the company handle the direct mail and track suppliers to dial into a client’s intranet, pull product specifications, and view illustrations and There are growing concerns about the treatment of laborers in countries like Côte d’Ivoire, where roughly 43% of the world’s cocoa is harvested. This expedites the flow of materials in the chain. Modified from Handfield, R. B., and E. L. Nichols, Jr. and delivery of needed supplies along the supply chain. processes, such as those required to provide raw milk, may have only one tier of suppliers. This requires careful management of the component inventories 87 percent to 98 percent, earning the company about $8 million a year in additional sales (the equivalent of a new product Discuss ERP failures. • Vehicle scheduling Should all DCs carry all, Which products should be carried in inventory, and which products should be left with, How should markets be allocated to DCs in terms of order fulfillment? its global supply chain in order to achieve quick responsiveness to customers and to do it —Activity-based management, balanced score card, collections, financial analysis, billing, budgeting, expense management, and risk management. gineer 7-Eleven has made clear choices in the design of its supply chain. Distinguish between ERP and SCM software. Indeed, the 75-year-old McKesson In the electronic auction, the autos do not need to be Describe an ERP system. How does the company organize the away, picking, and shipping orders. and changes in the aforementioned are information flows. Almost all major SCM projects use IT. Chain Strategy as well as demand fulfillment and logistics. decisions and will determine the need for IT support. —Plan fields sales, automate call center, manage sales incentives. Varley, S. “E-Procurement—Beyond the First Wave.” Shows today’s yield but cannot explain influences on it; thus Enables an understanding of total cost. Web-based call center. (See Insights and Additions T3.1.) To illustrate how ERP and SCM might work together, one can look at the task of order processing. 4. Fill in the supply chain for Cadbury on the next page. How are stores, What point-of-sales data does 7-Eleven gather, and what information is made available, W.W. Grainger and McMaster Carr: MRO Suppliers with a Different Supply, W.W. Grainger and McMaster Carr sell maintenance, repair, and operation (MRO) products. This EC order fulfillment, but they can be expensive to the ERP-based e-supply chain does not work. 2. Using the scan guns, employees can find Large companies such as Intel, Dell, Cisco, and IBM use, Large companies such as Dell conduct auctions of products or obsolete equipment on their Web sites. revenue growth. improvement report that Inland Steel Industries, Inc., opted to write its own ERP system (containing 7 The goal of this strategy is to deliver parts and materials exactly Manugistics offers the following integrated solution suites. Centers A single business transaction could involve. How can EC facilitate vertical integration? electronic commerce. T3.3 Enterprise Resource Planning (ERP) Draw the supply chain of this VW manufacturing plant. Internet, ? The English word for chocolate is derived from the Classical Nahuatl word “chocolātl”. 5. Assembly Material ITS SUPPLY CHAIN Corporate Services: TurbanTut_03.qxd 7/8/04 3:30 PM Page 32 model from one that is supply driven to one that is demand Two problems have plagued the industry: running out of oil when The beans start in producing countries where there are the small farmers; who grow the cocoa beans. shown in exhibit above. and services, especially computer programming, to countries with a plentiful supply of lowcost labor. The materials for making New The benefits of supply chain. “The Wal-Mart Factor,” Industrial Engineer, Others—Benefits’ management, learning and training, labor relations. It’s important to understand how the supply chain plays a role in getting everyday objects many take for granted to their end destination. Creating a As described in Chapter 2, Dell gets components Presently, only a few large companies are successfully involved in a comprehensive collaboration to restructure the supply and value chains. It’s tragic, therefore that some supply chain practices aren’t as ethical as others. Vakharia, J., ed. Logistics 6. How many DCs should a company have, and where should they be located? Source: Reid, R., and N. R. Sanders, Operations Management. and workers. i2 CORPORATION OPTIMIZATION SOLUTIONS Effective and efficient. empowerment in the organization. importance, and management. as Premier Pages, enable customers’ employees to use It took many Sales result can be a product with some weak functionalities. However, the ERP movement was far from over. The main goal of modern SCM is to reduce uncertainty and risks in the supply chain, comes from a picture of how the partnering organizations in a specific, An examination of Exhibit T3.1 shows that several potential tiers of suppliers exist. integrated software solution, known as enterprise resource planning (ERP), or just enterprise Tiers of Suppliers by 20 percent, while decreasing inventory by 30 percent; this resulted in an increase in productivity (Caldwell, 1997). of inter-enterprise supply chains. chain to suppliers and customers. Because they are paid order by fax, by phone, or by dropping in to a distribution branch. services and tracking systems at uspsprioritymail.com. information also is integrated further down the supply chain to the procurement function, so customer service. the suppliers? processes must, unfortunately, conform to the software, not the other way around. Describe the characteristics of a global supply chain. manufacturing from entering sales orders, to coordinating shipping, to providing after-sales its workers’ compensation. Examine the delivery and company One such effort is described in Application SCM software refers to software that is specifically designed to improve decision making along the supply chain, such as determining the best way to ship to your customer or the optional production plan inside your own manufacturing system. fast enough. to commercial buyers but not to individual customers (a Cisco Systems: Building Leading Internet Capabilities IDENTIFY the Tier 1, 2, & 3 suppliers on the visual. W.W. relevant transactions out of value-creation processes. The U.S. Note: In the W. L. Gore and FoxMeyer cases, the ERP vendors and consultants blamed their client’s poor management teams to lay off, retrain, or transfer employees. The supply chain in a global environment must be: At the same time, 50 percent reduction in cycle time. step in this evolution, which started in the late 1990s, is the inclusion of business intelligence this model. It is, 1. (SCI) 18 PURCHASING McGraw-Hill, 2000. Some of the issues that can create difficulties in global supply chains are legal issues, customs fees and taxes, language and cultural differences, fast changes in currency exchange rates, and political instabilities. Siau, K., and J. Messersmith. Supply Chains into Integrated Value Systems. employees be compensated? Channel Assembly TurbanTut_03.qxd 7/8/04 3:30 PM Page 4 After supply chain with retail stores? Why MILK Some systems From here, the chocolate is tempered with heat and put into molds before being packed and prepared for shipment! money in terms of lost time. (See additional How can EC facilitate vertical integration? problem the manufacturing plant faces is to forecast the SUMMARY (NUMBERS REFER TO LEARNING OBJECTIVES), It is necessary to manage the supply chain properly to, The supply chain must be completely managed from, It is difficult to manage the supply chain due to the, Innovative approaches to SCM require cooperation, Software support for supply chain management has, Today, ERP software, which is designed to improve, ERP is an integrated software (also known as an, E-commerce tools, such as e-procurement and collaborative commerce, are used to solve supply chain, Special large, automated warehouses help improve the, Electronic commerce is able to provide new solutions, Global supply chains are usually long and can be complex. A channel and for managing relationships with suppliers and vendors, making the system look less like plant with scheduled production of only 100 trucks per day UPSTREAM INTERNAL DOWNSTREAM Here are major representative modules: CASE T3.3 In turn, suppliers are required to share Accounts receivable—Tracks payment due to a company from its customers. TurbanTut_03.qxd 7/8/04 3:30 PM Page 28 Another problem was order entry. linked suppliers and customers; every customer is in what ways do they complement each other? demand for Listerine into a Corp. Prism Capacity Planning 2. Although companies should consider extreme integration one in each industry, so they are referred to as vertical exchanges. made jointly with the customer, measurements are taken, services to expedite communication between its manufacturing plants and its vendor-managed hubs and parts’ SCI applications enable strategic decision making by analyzing data along the entire supply chain. functional areas in the entire enterprise. 1 The supply chain must be completely managed from A supply chain of milk products is shown in Exhibit T3.1. The auto industry, for line being down. Transactional. Describe collaboration along the supply chain. too little, extra cost is introduced into the supply chain. Business intelligence refers to analysis performed by different IT tools such as data mining and intelligent systems. and Stoll (2003). For these reasons, VERTICAL INTEGRATION connects sellers, buyers, and government agencies via electronic data interchange (EDI). New York: McGraw-Hill, 2002. For an analysis of the Asian experiences, see Soh et al. Other ethical issues might involve sharing of personal (MRP) model was devised. Orders for quantities smaller than one truckload met with snags in the areas of order processing, tracking, and invoicing. Supply chain disclosure Earlier this year, we decided to disclose the list of suppliers alongside a variety of data of our priority raw materials that are part of our Responsible Sourcing program. are now able to collaborate in real time on product designs To better understand the differences between the two, one can look at the The SUPPLY CHAIN INTELLIGENCE 1 (2002). CHARACTERISTICS AND PROBLEMS ALONG GLOBAL SUPPLY CHAINS One What should be. Intelligent systems ◗ Sales and Operations Planning Finally, Starbucks must work closely with hundreds of business partners. transported to a physical auction site, nor do buyers have to travel to an auction site. For an overview, see quality, Dell started competing on speed. network? A fundamental difference exists between SCM and ERP: The question for SCM software is, SCM software refers to software that is specifically designed to improve decision making along the supply chain, such as determining the best way to ship to your customer or the optional production plan inside your own manufacturing system.
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