Ch10 Computer-Based Supply Chain Management and Information Systems Integration

Introduction to Information Technology, 2nd EditionTurban, Rainer & Potter© 2003 John Wiley & Sons, Inc.

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Introduction to Information Technology

2nd EditionTurban, Rainer & Potter

© 2003 John Wiley & Sons, Inc.

Chapter 10:Computer-based Supply Chain Management and Information

Systems IntegrationPrepared by:

Roberta M. Roth, Ph.D.University of Northern Iowa


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Chapter PreviewIn 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 Definitions Flow 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 goods

Continuous Replenishment Constant inventory replenishment based on

expected stable demand Build-to-Order

Customer order triggers production of specific item(s) requested

Channel Assembly Build-to-order with some assembly

performed within the distribution channel


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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 essential Phantom 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

downstream Stockpile 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 management Manufacturing Resource Planning

(MRP II) MRP plus financial and labor planning

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

external business partners In short, Integration is the key


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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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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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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

processes Downstream

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


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Copyright © 2003 John Wiley & Sons, Inc. All rights reserved. Reproductionor translation of this work beyond that permitted in Section 117 of the 1976United Stated Copyright Act without the express written permission of thecopyright owner is unlawful. Request for further information should beaddressed to the Permissions Department, John Wiley & Sons, Inc. Thepurchaser may make back-up copies for his/her own use only and not fordistribution or resale. The Publisher assumes no responsibility for errors,omissions, or damages, caused by the use of these programs or from the use of the information herein.

Ch10 Computer-Based Supply Chain Management and Information Systems Integration

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