Supply Chain Management Presentation to Mr. Starinsky & IS 560 Class
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Transcript of Supply Chain Management Presentation to Mr. Starinsky & IS 560 Class
IS560 Enterprise System
Supply Chain Management Presentation to Mr. Starinsky & IS 560 Class
Prepared by:
Lucy ChenJianjun HuangDon Janjaroen Mollie LimpranaThomas PinkowskiCynthia Saving
March 15, 2004
IS 560 Enterprise Systems - DePaul University2
Agenda
Wal-Mart Background What is Supply Chain Management Supply Chain Technology at Wal-Mart Benefit of SCM to Wal-Mart Best of Breed Practice Benefits of SCM to others
IS 560 Enterprise Systems - DePaul University3
Wal-Mart Background
About Wal-Mart
Wal-Mart is a global retail organization, in the business of serving customers.
In the United States, their operations are centered operating retail stores and
membership warehouse clubs. International, they are centered on retail stores,
warehouse clubs and restaurants. Their business is to offer customers quality
merchandise at low prices. Wal-Mart mission is to be the place where prices
are low and value and customer service are high everyday.
IS 560 Enterprise Systems - DePaul University4
Wal-Mart Background
Background on the Wal-Mart's SCM
Wal-Mart has established critical strategies in multiple functional
areas to hit its goals for supply chain management excellence:
Financial Operations Logistics Processes People
IS 560 Enterprise Systems - DePaul University5
Wal-mart Background
Wal-Mart's Financials
Wal-Mart’s Net sales (in millions) for the three fiscals years ended January 31,
2003 as follows:
Fiscal Year Wal-Mart Stores SAM’S CLUB International Other Total CompanyTotal Company Increase from Prior Fiscal Year
2003 $ 157,121 $ 31,702 $ 40,794 $ 14,907 $ 244,524 12%
2002 139,131 29,395 35,485 13,788 217,799 14%
2001 121,889 26,798 32,100 10,542 191,329 16%
IS 560 Enterprise Systems - DePaul University6
Supply Chain ….
“encompasses all activities
associated with the flow and transformation
of goods from the raw materials through to the end user.
Material and information flow both up
and down the supply chain.”
What is Supply Chain Management
IS 560 Enterprise Systems - DePaul University7
Supply Chain Management ….
“is the integration of these activities
through improved supply chain relationships,
to achieve a sustainable
competitive advantage.”
Handfield, R & Nicholas Jr., E 1999, Introduction to Supply Chain Management, Prentice Hall, New Jersey
What is Supply Chain Management
IS 560 Enterprise Systems - DePaul University8
Management beyond the borders of an organization
What is Supply Chain Management
UpstreamThe upstream business partners are the external organizations that supply products or services to an organization.
DownstreamThe downstream supply chain is the organizations external distribution channels, processes, and functions that the product passes through on its way to the end customer.
IS 560 Enterprise Systems - DePaul University9
What is Supply Chain Management
IS 560 Enterprise Systems - DePaul University10
Elements of the Internal Supply Chain
SCM includes the management of organization’s internal components in the supply
chain:
What is Supply Chain Management
ProductDesign
InventoryManagement
OrderManagement
LogisticsManagement
ProductionScheduling
DistributionManagement
PurchaseManagement
InternalSCM
IS 560 Enterprise Systems - DePaul University11
Information System in Supply Chain Management
Centralization of information flow Order management
Total visibility of resources and processes
Data interchange between partners within supply chain Data capture:
Monitoring of processes
Events happening across the supply chain
Automated forecasting, planning, scheduling
What is Supply Chain Management
IS 560 Enterprise Systems - DePaul University12
Supplier Relations
In SCM, the single most important ingredient is supplier relationships. It is important that the relationships are managed well, which each party involved have mutual confidence in other members of the partners in the supply chain. These types of inter-organizational relationships are called strategic alliances. A strategic alliance is a process wherein participants willingly modify basic business practices to reduce duplication and waste while facilitating improved performance.[1]
[1] Schmitz, J., Frankel, R., & Frayer, D., 1995, ‘ECR Alliance: A Best Practice Model,’ Joint Industry Project on Efficient Consumer Response, 1995.
What is Supply Chain Management
IS 560 Enterprise Systems - DePaul University13
Supply Chain Technology at Wal-Mart
Retail Link
Provides communication between Wal-Mart and suppliers.
Manages purchase orders and invoices.
Provides suppliers with sales and inventory data at every store.
IS 560 Enterprise Systems - DePaul University14
Supply Chain Technology at Wal-Mart
Data Warehouse
101 terabytes
Largest of any Fortune 500 company
2 years worth of sales transaction history
Transactions available in data warehouse the next day
120,000 trend analysis queries every week from vendors
IS 560 Enterprise Systems - DePaul University15
Supply Chain Technology at Wal-Mart
Vendor Involvement
Wal-Mart success depends on vendors’ analysis.
Wal-Mart expects vendors to lower prices over time.
Vendors often need to make technology and business process
changes to use Retail Link effectively.
Largest vendors have employees stationed at Wal-Mart corporate
headquarters.
IS 560 Enterprise Systems - DePaul University16
Benefit of SCM to Wal-Mart
Retail Link system
More than 10,000 Wal-Mart suppliers use Retail Link to monitor
sales of their goods at the store level and replenish inventories as
needed.
Integrates into one of the largest data warehouses around, with
more than 100 terabytes of information.
Make daily transactions details (more than 10 million daily)
available to every Wal-Mart store by 4 a.m. the next day.
Today, over 7,000 suppliers access Retail Link and get answers to any question at any time. Averages 120,000 of these complex trend analysis questions each week.
IS 560 Enterprise Systems - DePaul University17
Benefit of SCM to Wal-Mart
Through Retail Link, suppliers/vendors can retrieve:
Purchase Orders
Sales performance data Determine how many of their products were sold at Wal-Mart the
previous day Examine the effects of markdowns or returns on their inventory Access reports on sales over a period of up to two years, as well as
sales forecasts for their products for up to one year
Inventory levels
Invoice status
IS 560 Enterprise Systems - DePaul University18
Benefit of SCM to Wal-Mart
“It’s really all about service to our customers. Our investment
in this technology helps our supplier partners and Wal-Mart
buyers provide customers with what they want: the right
product in the right store at the right price.”
---- Tom Coughlin, President and CEO of the Wal-Mart
IS 560 Enterprise Systems - DePaul University19
Benefit of SCM to Wal-Mart
Benefit of SCM to Wal-Mart
Increasing visibility into all business transaction on a timely basis
Streamlining the physical pick pack process leading to reduced errors
and redundant labor
Eliminating charge backs and fines by retailer compliance and permitting
access to all data from EDI through shipping
Keeps inventory costs down
Quickly and effectively predict the needs of customers in different areas
and from different backgrounds
IS 560 Enterprise Systems - DePaul University20
Best of Breed Practice
Wal-Mart's Best of Breed practice on SCM
Wal-Mart was one of the first retailers that seriously invest in it's IT
infrastructure. This gave Wal-Mart stronger foundation in information
technology comparing to competitors.
Initially developed its own information system (Retail Link), then later
outsourced it to third party. Wal-Mart understands it needs best. Develop
what they want first, after everything is on the track, outsource it to third
party.
The system itself is relatively user-friendly. Wal-Mart's partner doesn't
need time to learn to use new application. Data can be easily exported to
standard formats like Excel or Access
IS 560 Enterprise Systems - DePaul University21
Best of Breed Practice
Wal-Mart's Best of Breed practice on SCM
Relevant information is available to its partner. This information will help its partner make a production planning according to current
trend. This relationship is based on a trust that partner will not release these information
to competitors.
The system is dynamic and adjust quantity of orders according to current situation.
Bottled water, gasoline container was almost emptied from Wal-Mart's shelves on
September 11 and flags sold out on September 12. Wal-Mart's system was able to detect
change in buying pattern and trigger orders to restock accordingly.
Wal-Mart must be able to get most up-to-date information out of the system to do be able to do proper prediction.
It keeps looking for a better way to track its inventory. (RFID)
IS 560 Enterprise Systems - DePaul University22
Best of Breed Practice
Wal-Mart's Best of Breed Practice on SCM
Always Low Prices concept. All items must be at lowest price possible.
The goal is to reduce costs in various ways: Wal-Mart uses technology to manage its inventory and replenishment system. Relevant information is available to everyone which greatly helps suppliers and Wal-
Mart do various planning. Wal-Mart itself can use pricing knowledge to make a bargain
with supplier. On the other hand, supplier knows how well its product sells and able to
plan the production accordingly.
IS 560 Enterprise Systems - DePaul University23
Best of Breed Practice
Wal-Mart has high expectation on its suppliers.
No early or late shipment is acceptable.
Wal-Mart does not do a business with business partner that does not
meet its requirement. Levi's had to invest a large amount of money to improve the
supply chain system according to Wal-Mart requirement.
IS 560 Enterprise Systems - DePaul University24
Benefits of SCM to others
Benefits of SCM to other businesses and organizations can be viewed as
Cost and Financial
Retailers
Manufacturers
Distributors
Streamlined inventories and
reduced costs Reduced errors and redundant
laborIncreased visibility of all business
transactionImproved return on inventory
investmentOptimized transportation costs,
routes, and load timesIncrease cost savings from
outsourcing for low cost materialsE.g. Dell and Intel have created an
increasingly streamlined supply chain
model with mass-customization and
customer-direct capabilities.
Improvements
IS 560 Enterprise Systems - DePaul University25
Benefits of SCM to others
Benefits of SCM to other businesses and organizations can be viewed as
Processes
Improvements
Manufacturers Construction companies Automotive industry
Improved forecast accuracy as well as resource and distribution planning
Improved manufacturing and replenishment cycle time
Enhanced manufacturing scheduling
Increased effectiveness of planning and decision making
Improved overall efficiency in production
Enhanced a seamless multi-channel shopping
Reduced supplier base
E.g. Cisco uses the Internet to enable deep process integration of all levels of the extended supply chain.
IS 560 Enterprise Systems - DePaul University26
Benefits of SCM to others
Benefits of SCM to other businesses and organizations can be viewed as
Services
Improvements
Retailers Service companies
Reduced out-of-stock situations
Improved order fill rates
Increased ship-complete and on-time
percentages
E.g. Wal-Mart uses the replenish
model to keep their shelves full and
penalize their suppliers for late
shipment.
IS 560 Enterprise Systems - DePaul University27
Questions ?