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Virtual Supply Chains

Supply Chain Concepts. A supply chain is the flow of materials, information, payments, and services from raw materials to the end customers using suppliers, through factories and warehouses.Supply Chain Management (SCM) is a way to improve the overall performance of a supply chain by coordinating a

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Virtual Supply Chains

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    1. Virtual Supply Chains Ryan Horvath 11/14/2004

    2. Supply Chain Concepts A supply chain is the flow of materials, information, payments, and services from raw materials to the end customers using suppliers, through factories and warehouses. Supply Chain Management (SCM) is a way to improve the overall performance of a supply chain by coordinating all of the supply chain activities.

    3. Virtual Supply Chains Since the invention of the internet more and more companies have begun to use virtual supply chains. Companies have outsourced some part of their supply chain with the help of internet technology, so in essence they have a virtual process.

    4. How can a Virtual Supply Chain Save the Company Money? Reduces the cost of processing an order Reduces overhead costs. Overhead costs include: employee cost, building rent, and anything else that is used during the process that isn't part of the final product. Lowers transportation costs Lowers inventory costs

    5. Benefits of a Virtual Supply Chain Transactions can occur immediately so that will speed up the process The internet has made it possible for companies use global resources as well as have a global customer base The internet allows there customers to place orders at any time of the day The internet has made it easy for companies to keep prices and information current. Gives companies freedom to select from a variety of service providers and manufacturers

    6. Some Considerations When using a virtual supply chain the companies give up direct control of the order fulfillment process They also provide the company more flexibility in design changes because of lowered overhead costs

    7. Key Terms Drop Shipping – a retailer passes customer orders directly to a manufacturer or wholesaler, which then ships the order directly to the customer with the retailer’s label on it. Channel Assembly – where members of the distribution channel act as if they were assembly stations in the factory.

    8. Dell Example Dell requires many parts and if any one out of the hundreds of parts isn’t right then it messes up the whole chain. Dell uses an extranet where their suppliers can gain access to real-time order trends and demands so they can plan for long term. This keeps everything moving smoothly.

    9. Sources Krajewski, Lee and Ritzman, Larry. Operations Management: Processes and Value Chains. Seventh Edition. Prentice Hall, Upper Saddle River, NJ, 2002. McLean, Turban and Wetherbe. Information Technology for Mangement: Transforming Organizations in the Digital Economy. Fourth Edition. John Wiley & Sons, Inc. Hoboken, NJ. 2004.

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