Managing e-Business & High Technology (6)

1. Managing e-Business & High Technology (6) • Last Week – e-Business Strategy (Chaffey Chapter 5) • Putting together the pieces of a strategy • This Week • Review of module • Introduction to Supply chain management (Chaffey Ch.6) • What are main elements of SCM? • How do they relate to value chain and value network? • What is rôle of IS in managing SCM to enhance value? • Assignment workshop

2. Already covered What’s special about managing high-tech companies? Case-study: IBM e-Business Brain-storming assignment ideas Challenges of introducing e-business to an organization e-Environment analysis – SLEPT e-Business Strategy (Chaffey Chapter 5) This week Supply-Chain Management Assignment Workshop To be done Building a (e)business-case Assignment workshop Integrating the supply-chain e‑procurement Planning to implement e‑commerce The Future of Work What’s missing? What should we do differently? Review of Module

3. The Supply Chain • Most companies create value by processing inputs to produce outputs • Fairly obvious in case of manufacturing • Also applies to trade; even to pure services • Inputs arrive via an upstream supply chain • We manage this via “Inbound logistics” • Outputs leave through a downstream supply chain • Which we manage with “Outbound logistics” • Logistics companies are intermediaries who support outsourcing of some of the logistics activity

4. Elements of Supply Chain Simplified View Chaffey (2007) Fig 6.1

5. Material and Information Flows • Every time you arrange the flow of goods and services along the supply chain, Data must flow too • For example: • Our warehouse stock falls below order threshold • We send order to supplier • Supplier sends goods • Supplier invoices us • We send payment transfer request to BACS • This data-intensive nature of supply chain makes it amenable to e-Business enhancement

6. Our Warehouse Supplier Warehouse B2C Suppliers Wholesaler Wholesaler Our Manuf. Company Customer B2B Retailer or Exchange B2B retailer or Exchange B2B Distributor Distributor B2C Our Company Agent Supplier Agent Supply Chain can be a Network Upstream Downstream Heavily adapted from Chaffey fig 6.2 (2001)

7. Push or Pull? • “You can have it any color, so long as it’s black”(reputed to have been said of Model T Ford, by Ford) • Push involves • Innovation by manufacturer (e.g. new product development) • Identifying a target market • Recruiting channels to push product into that market • Pull is an approach that’s growing fast • Find out what the market wants • Respond with rapid, targeted development • Supply at rate determined by market (e.g. Print on Demand)

8. Push to customer Supplier Manufacturer Distributor Retailer Customer Push Approach to SCM • Typical Aim: Optimize production for cost & efficiency • Characteristics: Manufacturer-led product development Poor data integration Long cycle and response times, Large inventories needed • Use of IS: Independent data mgt by chain members Limited use of EDI Based on Chaffey (2007) Fig 6.3

9. Pull from customer Supplier Manufacturer Distributor Retailer Customer Pull approach to SCM • Typical Aim: Enhance product/service quality • Characteristics: Driven by Market Research; Technology used for research and data integration; Short cycle & response times; Low inventory levels through JIT • Use of IS: Integrated internal systems Information sharing across supply-chain Extensive use of B2B technologies Based on Chaffey (2007) Fig 6.3

10. The Value Chain • Analysis used to focus on “Direct” and “Indirect” • Primary activities that get goods/services to the consumer, versus • Support activities that provide infrastructure • Companies could sink into chaos by reducing investment in internal support (or become fat investing too much) • Chaffey (p.277*) offers a different model, where both elements add value over a wide range of activities • Recognizes value of each activity within a purpose • This analysis opens up opportunities to specialize • Or for integration along the supply chain * p.223 in 2nd edn

11. Traditional and Revised Models Not so much a revision as a different view of the way activities are integrated Chaffey (2007) Fig 6.4

12. Value Network • Term recognizes that value isn’t added by a constant chain, but varies between products, and with time • We should always consider a variety of suppliers • Potentially with variants of inbound logistics • Chaffey’s Fig 6.5 shows how this can support outsourcing • Driven by strategy (e.g. “core business,” “core capabilities”) • May want to use partners to integrate activities,not only as suppliers or distributors • Clearly, stock-holding does not contribute much value, as we only need what’s required immediately

13. Value Network of an Organization • Give examples of • Internet Service Provider • Wide Area Network • Application Service Provider Chaffey (2007) Fig 6.5

14. Restructuring the Supply Chain • Trend in mid-C20 was towards Vertical Integration • BMC bought Pressed Steel and other component suppliers • General Motors bought AC-Delco • Most oil companies remain vertically-integrated • Outsourcing boom of late C20 disaggregated companies • Motor manufacturers now mainly assembly plants • Most computers are built from bought-in components • Focus is on hanging on to unique technologies • Alternative approach is “Virtual Integration” • Rely totally on third-party suppliers, but • Integrate them into your SCM

15. Integration and Disintegration Chaffey (2007) Fig 6.7

16. What is “ordering online”? • If you already have a supplier/purchaser relationship • Orders can be pretty informal (e.g. e-mail), or • Use web-based form-filling, still by humans • Invoices can follow by conventional routes • Relationship can be automated • Purchaser’s system orders from suppliers’ systems • Requires secure systems to ensure transactions cannot be repudiated and that supplier will be paid • Or we can build relationships on the fly • Using B2B exchanges • Or, given standards, we can shop around directly

17. e-business applications in Europe Chaffey (2007) Fig 6.8

18. Integrating with Suppliers Chaffey (2007) Fig 6.9 Source: DTI (2004), Fig. 7.5b

19. How Online Ordering Develops Figure from last week from Chaffey (2001)

20. Barriers to implementing integrated SCM Chaffey (2007) Fig 6.10 Source: DTI (2004), Fig. 5.2f

21. BACS makes this possible from Chaffey (2001)

22. Information Systems for SCM • JIT won’t work unless you have shared planning • Example: if Tesco does a BOGOF on Baxter’s soup,can Baxter’s crank up production fast enough? • Supply planning needs to consider aspects of demand planning • ERP (Enterprise Resource Planning) systems like SAP handle all operational activities • Supported by operational database and • Data warehouse (tactical support for the planning process)

23. Typical IS Infrastructure for SCM Chaffey (2007) Fig 6.11

24. Tesco Case Study (Chaffey p.292) Based on Nairn’s Financial Times article 3 May 2000 • Goal was to enhance collaboration across supply chain • Network linked 1300 of 2000 suppliers (96% by volume) • 350 receive EDI messages: demand, stock, forecasts • Goal is to shift product mgt responsibility to supplier • Funding from suppliers (£100 to £100K, depending on size) • Suppliers now often see problems before Tesco • Promotions management added in 1999 • St Ivel saved 30% on annual promotion costs • “Seamless planning” with input shared between Tesco and the supplier

25. Tesco Information Exchange Chaffey study site slide 6.23

26. SCM Strategy Process Based on Chaffey (2007) Table 6.2

27. Timescale Extent Alternative Strategies for Changing SCM Chaffey (2007) Fig 6.12

28. Summary • SCM Coordinates all supply activities of a company • Upstream/Inbound – getting the inputs needed to create added value • Downstream/Outbound – routing the outputs to customers, directly or indirectly • “Chain” is usually a network • Inputs include: • Items incorporated in our products (steel, screws, circuits) • Things we need to run our business (paper, toner, desks) • Ideally, we optimize every element of the supply network