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Value Chain and IS/IT

Learn the concept of Value Chain, its activities, linkages, and examples in IS/IT class. Explore topics like inbound logistics, operations, procurement, and more. Understand the importance of supply-chain management and the bullwhip effect.

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Value Chain and IS/IT

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  1. Value Chain and IS/IT V.T. Raja, Ph.D., Information Management Oregon State University

  2. Value Chain • Discussion questions: • What is the Value Chain (VC)? • Identify the activities of the VC • How is the “service” activity different from “marketing and sales”? (Don’t “sales” people provide “service”?) • Differentiate between “procurement” activity and “inbound logistics” • Why study about Value Chain in an IS/IT class? • Explain value chain linkages (internal and external) with the help of examples.

  3. Value Chain Activities • Inbound Logistics • Involve relationships with suppliers and include all activities required to receive, store, and disseminate inputs • Operations • All activities required to transform inputs into outputs • Outbound Logistics • All activities required to collect, store, and distribute output

  4. Value Chain Activities (Continued) • Marketing and Sales • Inform buyers about products/services • Induce buyers to purchase products/services and facilitate their purchase (Stimulate demand for products/services) • Collect and pass customer feed back to various units in firm • Estimate expected sales volume • Service • Activities required to keep the product/service working effectively for the buyer after it is sold and delivered

  5. Value Chain Activities (Continued) • Procurement • Acquisition (actual purchase) of inputs, or resources, for the firm • Human Resource Management • Activities involved in recruiting, training, developing, compensating, laying off personnel

  6. Value Chain Activities (Continued) • Technological Development • Technology purchased/adopted/developed to bear in the firm’s transformation of inputs into outputs • Infrastructure (General Administration) • Activities include accounting, legal, finance, planning , public affairs, government relations, quality assurance and general management

  7. Value Chain and IS/IT: Examples • Inbound Logistics • Automated Warehousing System; • JIT inventory systems • Operations • Computer-Controlled Machining Systems • Outbound Logistics • Automated Shipment Scheduling Systems • Tracking Systems

  8. Value Chain and IS/IT Examples (Continued) • Sales and Marketing • On-line Ordering Systems for customer • Sales forecasting • Service • Equipment maintenance systems • Procurement • Computerized Ordering Systems and EDI

  9. Value Chain and IS/IT Examples (Continued) • Technology Development • Computer-Aided Design Systems • Human Resource Management • Multi-media database systems • On-line recruiting • Intranet for employee benefits (retirement benefits, medical benefits etc.) • Infrastructure • Electronic scheduling; financial systems, accounting systems, decision support systems etc.

  10. Value Chain and IT Source: Laudon and Laudon (2007) Management Information Systems (10th edition)

  11. Value Chain LinkagesInternal and External • Internal Linkage: Efficiency and/or competitive advantage gains due to links between two or more VC activities of a firm • Example: (Operations and Outbound Logistics; Information exchanged – Completed order status) • External Linkage: Efficiency, partnership and/or competitive advantage gains due to link between one VC activity of firm and external entity (e.g., customer, supplier etc.) • Example: Ford ‘s Supplier and Accounts Payable (Infrastructure); Information exchanged – Payment Information)

  12. Supply-Chain Management • Planning, organizing, directing, and controlling flows of materials and purchased parts or services • Begins with raw materials • Continues through internal operations • Ends with distribution of finished goods • Involves everyone in supply-chain • Example: Your supplier’s supplier • Objective: Maximize product value and decrease waste incurred in providing it.

  13. Nike’s (Simplified) Supply Chain Source: Laudon and Laudon (2007) Management Information Systems (10th edition)

  14. All industry Automobile Food Lumber Paper Petroleum Transportation 52% 67% 60% 61% 55% 79% 62% Supply-Chain Costs as a Percent of SalesSource: Heizer/Render (2004) – Operations Management, 7e Industry Percent of Sales

  15. Successful Supply-Chain Management Requires: • A mutual agreement with suppliers on goals • Trust among all elements of the supply chain • Compatible organizational cultures

  16. The Bullwhip Effect Source: Laudon and Laudon (2007) Management Information Systems (10th edition)

  17. Supply Chain Management

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