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Supply Chain Information Systems and Electronic Commerce

Supply Chain Information Systems and Electronic Commerce. Chapter 18. Chapter Overview. Evolution of e-SCM systems An overview of the e-supply chain Drivers of new supply chain systems and applications Enterprise resource planning systems Purchasing databases and data warehouses.

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Supply Chain Information Systems and Electronic Commerce

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  1. Supply Chain Information Systems and Electronic Commerce Chapter 18 CENGAGE LEARNING Monczka – Handfield – Giunipero – Patterson

  2. Chapter Overview • Evolution of e-SCM systems • An overview of the e-supply chain • Drivers of new supply chain systems and applications • Enterprise resource planning systems • Purchasing databases and data warehouses Purchasing & Supply Chain Management, 4e

  3. Chapter Overview • Technology for electronic communication between buyers and sellers • E-sourcing suites • E-sourcing basics • Supplier relationship management • E-sourcing and supply: fully integrated systems Purchasing & Supply Chain Management, 4e

  4. The Electronic Revolution in SCM • Continued growth in web-based supply chain tools and solutions • Greater sophistication in e-SCM system expenditures • Fewer software providers • Increasing capabilities • Shorter project implementation life cycles • Improved pricing and terms Purchasing & Supply Chain Management, 4e

  5. Evolving e-SCM Tools • Point-of-sale systems • RFID • Product life cycle software • Bid optimization • Computerized negotiation models • E-mobile environment (laptops, PDAs, and smart cell phones) Purchasing & Supply Chain Management, 4e

  6. Supply Chain Information Flows • Record and retrieve critical data • Execute and control physical and monetary flows • Automate routine decisions • Support planning activities • Support higher-level tactical and strategic decision making • Move and share information cross firms and between users Purchasing & Supply Chain Management, 4e

  7. Decision Making CRM Internal SCM SRM Strategic Decision Making Supply Chain Planning Tactical Decision Making Routine Decision Making Transaction Processing

  8. Transaction Processing • Information flows record and retrieve critical data • Execute and control physical and monetary flows • Little or no human intervention • Bar code system to track location Purchasing & Supply Chain Management, 4e

  9. Routine Decision Making • Oftentimes automated • Exceptions dealt with manually • Automated inventory management systems • Order quantities • Reorder points Purchasing & Supply Chain Management, 4e

  10. Supply Chain Planning • Decide on technologies for next generation of products or services • Identify supply base requirements • Forecasted demand • Production decisions • Projected cash flows Purchasing & Supply Chain Management, 4e

  11. Strategic Decision Making • Search for data patterns or relationships • Customer segment analysis • Product life cycle forecasting • “What if” analyses • Need for flexibility for data manipulation and presentation • Decision support systems (DSS) Purchasing & Supply Chain Management, 4e

  12. SCM Systems Map

  13. Enterprise Resource Planning • Large, dedicated business transaction processing and reporting systems • Integrates all classic business functions together • Uses common database • Best for routine decision making and transaction processing Purchasing & Supply Chain Management, 4e

  14. ERP System Overview Finance Accounting Finance Sales Operations Purchasing Central Database Purchasing & Supply Chain Management, 4e

  15. SRM/CRM Applications SRM Applications CRM Applications Market analysis Sell process Order management Call and service center management • Design collaboration • Sourcing decisions • Negotiations • Buy process • Supply collaboration Purchasing & Supply Chain Management, 4e

  16. Network Design Applications • Where should we locate warehouses? • How large should our transportation fleet be? • Based on simulation and optimization modeling Purchasing & Supply Chain Management, 4e

  17. Transportation - Warehouse Planning • Used to allocate fixed logistics capacity • How many units should we ship from each warehouse to each demand point? • Optimization modeling based on warehouse capacities, customer demand levels, and shipping costs Purchasing & Supply Chain Management, 4e

  18. Execution Systems • Kick off and control movement of materials between supply chain partners • Where to store • Where to go pick items up • How many to pick • Bar code systems • Global positioning systems Purchasing & Supply Chain Management, 4e

  19. Drivers of New SCM Systems • Internal and external strategic integration • Globalization and communication • Data information management • New business processes • Replacement of legacy systems • Strategic cost management Purchasing & Supply Chain Management, 4e

  20. Strategic Integration • Internal • Use of common information between various sites and functional areas • Enterprise resource planning systems • External • Need to link suppliers, distributors, and customers • Forecast demand • Balance supply and demand Purchasing & Supply Chain Management, 4e

  21. Globalization and Communication • Differing cultures and geographies • Need to: • Manage global customers and suppliers • Calculate total global logistics costs • Increase leverage and component standardization • Improve communication of global strategies Purchasing & Supply Chain Management, 4e

  22. Data Information Management • New IS technologies (servers, wireless applications, and telecommunication) • Need to effectively filter, analyze, and mine huge amounts of data to support managerial decision making • Data warehouse systems • Decision support systems Purchasing & Supply Chain Management, 4e

  23. New Business Processes • Constantly evolving and changing technologies • Reduce redundancies, delays, and waste • Need to create a rapid response capability to adapt to changing customer needs and controlling costs Purchasing & Supply Chain Management, 4e

  24. Replacement of Legacy Systems • Need to replace existing piecemeal chains of unlinked data systems • Eliminate hardware and software incompatibilities and allow real time, fluid communication • Computer networking • Telecommunications • Web-based applications Purchasing & Supply Chain Management, 4e

  25. Strategic Cost Management • High volume of transactions to deal with • Need to automate data capture in a single enterprise-wide data warehouse accessible to all users • Timely and accurate information replaces inventory investments Purchasing & Supply Chain Management, 4e

  26. ERP Systems • Integrated transaction processing and reporting system • Tracks organizational resources, including people, processes, and technology • Creates a process logic for functional interaction Purchasing & Supply Chain Management, 4e

  27. An ERP System Example Financial and Resource Controlling Logistics Controlling – Warehouse, Transportation Purchasing & Supply Chain Management, 4e

  28. Basic Business Processes Purchasing & Supply Chain Management, 4e

  29. ERP and Basic Business Processes • Adopting a single customer, product, and supplier database • One master record with multiple views • Common database • Information is captured only once in real time • Highly visible transactions • Linked with the work flow Purchasing & Supply Chain Management, 4e

  30. Implementing ERP Systems • Create a process map for every major process • May need to reengineer processes prior to ERP to remove non-value-adding steps • Could result in major organizational and culture change • Need for well-defined processes before implementing Purchasing & Supply Chain Management, 4e

  31. Implementation Steps • Define the current process as is • Define what the best-in-class business process should be • Develop the system • Work through all final bugs and then flip the switch Purchasing & Supply Chain Management, 4e

  32. ERP Implementation Cycle Source: Premier International, Chicago Purchasing & Supply Chain Management, 4e

  33. Purchasing Databases • An integrated collection of computer files capable of storing operational data essential for managing a department • Minimal overlapping of information between files • Allows different systems to use data contained in the database • Efficient cross-referencing of data Purchasing & Supply Chain Management, 4e

  34. Purchasing Data Warehouses • Type of decision support tool for collecting data from different resources and making it available to end users in a consolidated, consistent manner • Combines data all in one place • Maintained separately from the production system database • Organized around informational subjects rather than by process Purchasing & Supply Chain Management, 4e

  35. Purchasing Data Warehouses • Data is fed from multiple production databases • Time-dependent, historical data • Oftentimes aggregated Purchasing & Supply Chain Management, 4e

  36. Purchasing Database Examples • Part files • Supplier name and address files • Historical usage files • Open-order and past-due files • Bill-of-material files • Engineering requirements files • Forecasted demand files Purchasing & Supply Chain Management, 4e

  37. Communication Technology • Electronic data interchange (EDI) • Standard form (EDI standards) • Translation capability (EDI software) • Mail service (EDI network) • EDI and the Internet Purchasing & Supply Chain Management, 4e

  38. An Ideal EDI Transaction • Buyer’s computer monitors real-time inventory status • If replenishment needed, application program notifies translation software • EDI P.O. is created and released against pre-negotiated blanket order • Supplier’s computer receives order and translates into local format Purchasing & Supply Chain Management, 4e

  39. An Ideal EDI Transaction • Functional acknowledgement is automatically generated and sent to buyer • EDI P.O. creates additional electronic transactions • Buyer’s accounts payable application • Buyer’s receiving file • Supplier’s warehouse or factory file • Supplier’s invoice file Purchasing & Supply Chain Management, 4e

  40. An Ideal EDI Transaction • When order is filled at supplier, advance shipping notice is created and transmitted to buyer • Upon receipt of goods, actual shipping notice is entered into receipt file Purchasing & Supply Chain Management, 4e

  41. An Ideal EDI Transaction • Receipt notice is transmitted to buyer’s accounts payable application and to supplier’s invoicing system • Invoice received by buyer is translated into buyer’s format and invoice, receiving notice, and P.O. are reconciledin a three-way match Purchasing & Supply Chain Management, 4e

  42. An Ideal EDI Transaction • Payment authorization is generated and transmitted to accounts payable, and payment is sent to supplier electronically • Electronic remittance notice is sent to supplier, and buyer is credited for payment Purchasing & Supply Chain Management, 4e

  43. EDI and the Internet • Traditional EDI: • Often requires a major investment due to application-specific technology • Also requires payment of fees to VAN providers • Different EDI standards • Different customers have different EDI systems • Not considered interactive Purchasing & Supply Chain Management, 4e

  44. Virtual Private Network • Similar to a VAN but at much lower cost • Hosted on a third party’s website and server • Involves tunneling protocols for security • May require a T1 line for large volumes of data • Typically requires a common ERP platform at each end Purchasing & Supply Chain Management, 4e

  45. Internet-Based EDI Internet Virtual Private Network Local ISP Router at HQ Remote Client Corporate HQ – Local LAN Purchasing & Supply Chain Management, 4e

  46. E-Sourcing Basics • Sell-side systems • Contain products or services from one or more suppliers • Buy-side systems • Controlled by buyers and tied into their intranets and extranets • Third-party marketplaces • Facilitate electronic purchasing process without buying or selling Purchasing & Supply Chain Management, 4e

  47. Sell-Side Systems • Typically free registration to users • Supplier guarantees site security • No investment by buyer • Ease of access to many suppliers • Inability to track expenditures or to control expenditures • Offer varying degrees of security Purchasing & Supply Chain Management, 4e

  48. Buy-Side Systems • May be either self-designed or provided by e-sourcing suite suppliers • Allow supply manager to manage the sourcing cycle, track spend, and exert control of contract management • Requires initial investment and periodic updates Purchasing & Supply Chain Management, 4e

  49. Third-Party Marketplaces • Independent firms who neither buy nor sell goods and services • Vertical portals • Narrow range of commodities • Horizontal portals • Broader range goods or services Purchasing & Supply Chain Management, 4e

  50. SRM Systems • Focused on decision support around a broad group of transactions • Using both data and structured mathematical modeling • Interactive system to assist in: • Supplier selection • Contract management • Contract compliance Purchasing & Supply Chain Management, 4e

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