ByBijith Varghese

Neenu T. HariSalini C. Babu

Sreekanth

CONTENTSINTRODUCTION TO SCMTRADITIONAL ISE-BUSINESSIMPACT OF E-BUSINESSEXAMPLE-DELL

Supply ChainA supply chain is the network of

all the activities involved in delivering a finished product/service to the customer

Sourcing of: raw materials, assembly, warehousing, order entry, distribution, delivery.

Supply Chain Management

Supply Chain Management is the vital business function that coordinates all of the network links

Coordinates movement of goods through supply chain from suppliers to manufacturers to distributors

Promotes information sharing along chain like forecasts, sales data, & promotions

An integrative approach, consists of all stages involved, directly or indirectly, in fulfilling customer requests

Its functions include not only manufacturers and suppliers, but also transporters, warehouses, retailers, and customers themselves

Supplier Manufacturing Distributor CustomerRetail Outlet

Capacity, inventory level, delivery schedule, payment terms

Order, return requests, repair and service requests, payments

Components of a Supply ChainExternal Suppliers– source of raw material

Tier one supplier supplies directly to the processorTier two supplier supplies directly to tier oneTier three supplier supplies directly to tier two

Internal Functions - include processing functionsProcessing, purchasing, planning, quality, shipping

External Distributors transport finished products to appropriate locationsLogistics managers are responsible for traffic

management and distribution management

7

SHIPPINGSHIPPING INVENTORYINVENTORY

PLANNING & PLANNING & FORECASTINGFORECASTING

ORDER ORDER PROCESSINGPROCESSING

PRODUCTIONPRODUCTION

PROCUREMENTPROCUREMENT

ACCOUNTINGACCOUNTING

SUPPLIERSSUPPLIERSCUSTOMERSCUSTOMERS

LOGISTICS LOGISTICS SERVICESSERVICES

DISTRIBUTORSDISTRIBUTORS

INTRANET/INTRANET/

EXTRANETEXTRANET

An integrative system for an SCM firm

Traditional IS for SCM

Obstacles to achieving strategic fitness of SCM

1. Increasing variety of products2. decreasing product life cycles3. increasingly demanding customers4. fragmentation of supply chain ownership5. Globalization - increase competition

6. difficulty executing new strategies

Solution to the problemChanging facet of SCM

1. Adopting E-business concept: E-commerce is defined as the use of the

Internet and the Web to transact businessTwo types of e-commerce are

• Business-to-business (B2B) and• Business-to-consumer (B2C)

2. Adopting third party logistics•Such as services of outsourcing firms•Now most jobs such as distribution logistic, manufacturing, and assemblies may be rendered by TPL firms

The Role of E-business in a Supply ChainActivities:• Providing product and other information• Negotiating prices and contracts• Placing and receiving orders• Tracking orders• Filling and delivering orders• Paying and receiving payment

SUPPLY CHAIN DECISIONSThere are four major decision areas in supply

chain management: Location, Production, Inventory, and Transportation (distribution), and there are

both short term and long-term elements in each of these decision areas.

Impact:2 categories.The benefits are divided into two partsBenefits to Organisation:

Inventory ManagementMaximizing warehouse spaceMinimizing goods shrinkage

Benefits to Consumers:Value Innovation in customer serviceMinimizing errors in delivery

The Impact of Internet on Supply ChainRevenue Impact Cost Impact

Revenue Impact

• Direct salesIncreased margin from eliminating intermediaries

Product information:Flexibility on price and promotionsWider product portfolio offeringFaster time to market

Negotiating prices and contract termsPrice and service customizationDownward price pressure due to increase

competition

Revenue Impact (cont.)Order placement and tracking:

Access at anytime from any placeFulfillment:

Shorter response timeIncreased choice of delivery options

Payment:Efficient funds transfer may improve cash flow

Cost Impact

Facility costs:Site costs: eliminate intermediaries or retail

and distribution sitesProcessing costs: customer participation,

smoothed capacity requirementsInventory costs:

Reduce cycle stockReduce safety stock

Cost Impact (cont.)Transportation costs:

InboundOutbound

Information sharing improves supply chain coordination:Shared planning and forecasting

Eg: SCM for DellCustomer

Retail Store

PC Manufacturing

Supplier

Conventional PC supply chain

Pull

Dell Supply Chain

Customer

Dell

Supplier

Pull

(direct process)

Material costs account for 74%($21 billion) a year for dell.

Improving SCM by 0.1% has bigger impact than improving manufacturing process by 10% .

Changing technology obsoletes Materials’ value by almost 1% per week .

Rely on market forecasting to drive Production.

Technological breakthroughs cause very short Product life cycles

Why SCM is so Important in PC business

Need to hold inventory at each step in value chain .

Have to pay suppliers first before getting paid from customers .Caught with short supplies of hot products- lost sales.

Stuck with excess inventories of slow selling products .

With about 2,000 product transitions a year, the ability to reduce product time to market is critical.

Competitors’ Disadvantages vis-à-vis Dell

Dell’s Competitive Advantages Dell is having one of the best SCM in the world.

90% supplies ordered online using integrated websites of supplier and Dell (B2B).

95% of suppliers situated very close to assembly plant hence coordination is easier.

Dell’s factories have only 7 hrs worth of inventory for most items whereas industry wise it is around 10 days.

15 suppliers provide almost 85% of all supplies.

Dell gets paid by customers and then pays to its suppliers.

Impact of E-B on Dell PerformanceFactor Impact Primary Causes

Revenue Increase

§ Direct sales to customer

§ Flexible pricing

§ Large variety of customers

§ Faster new product introduction

§ Fast delivery of customerorder

Inventory costs Decrease

§ Aggregation of commonality

§ Geographical aggregation

§ Information sharing

Facilities costs Decrease

§ No retail outlets

§ Customer participation inordering

Transportationcost

Increase

§ Higher outboundtransportation cost

Conclusion: Impact of e-BusinessE-B enhancing the following advantages:

offering direct sales to customersproviding 24-hour access of information from any

locationaggregating personalization and customization of

informationspeeding up time to market implementing flexible pricingallowing price and service discrimination facilitating efficient funds transfer

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