Chapter 10

1. Chapter 10 Enterprise Systems and Supply Chain Management

2. The Schedule • For Today • Skipping a few chapters • Current Events • The Supply Chain & Problems • Efforts to Integrate the Supply Chain • For Next Time • BPR & Supply Chain Mgmt • Supply Chain Mgmt Examples

3. Supply Chain Components • What is Supply Chain Management? • Supply Chain Components: • Upstream Supply Chain • Internal Supply Chain • Downstream Supply Chain • “Cradle to Grave” responsibility (Budweiser, auto makers) • What might be included in a supply chain for a typical company (who are the players)? • Some items might not be so obvious

4. Goals and Purpose of SCM • Goals of Supply Chain Management • Reduce uncertainty & risks, inventory, cycle time • Improve business processes, customer service (Road Work) • Increased profits & competitiveness (RFID proof)

5. A Few Questions • What prevents supply chain software from returning value to all organizations? (Calif IT Crisis, Nestle) • What changes need to take place within an organization in order for supply chain management software to be more effective? • SC and VC both study connections with suppliers, customers, business partners • What is the difference between them? • How can Extranets improve SCM? (new case of pampers)

6. Problems in the Supply Chain • Occur within complex / long supply chains • GM $85B, Ford $80B with its suppliers • 30,000 suppliers in auto industry • Average car has > 10,000 parts • How do you recognize supply chain problems? • What are some examples of problems? (cordless phone) • Why do they happen? • How do you fix them? (RFID box video)

7. Example of Supply Chain Probs. • Toys ‘R’ Us • Online toy retail site unable to meet customer demands for 1999 holiday season • Some History… • Demand was very high for several reasons… • What factors contributed to this overall situation? • Performance measures & customer loyalty

8. Traditional (Poor!) SC Solutions • Vertical Integration • Ford purchased a rubber plant in South America • Ryder Trucking purchased refineries in 1970’s • Accumulating large inventories • What is the benefit? • Why did/do companies do this? • Why are these such poor solutions today?

9. What to do with large inventory?

10. Early Supply Chain Systems • Late 1950’s and 1960’s • First industrial use of IS • Automate separatepieces of the supply chain, Why? • What was automated first? Second? • Goals: reduce cost, expedite processing, reduce errors; sounds good, right? • Resulted in “Stovepiping” • What are symptoms of stovepiping, both within the organization and from customer’s point of view? • How can IS and BPR fix stovepiping? • Why is IS alone not a sufficient solution?

11. Today’s Supply Chain Systems • Works with existing IS to gather data from all parts of the supply chain • Provides a clear picture of where the organization is heading • Integrates additional functionality • Decision Support Systems, Customer Relationship Management, Electronic Commerce, Data warehousing • BPR trend has now ‘desrever’: watch out! • Before: Discover problems, find technology solution to fix it • Now: Create technology solutions, look for probs it fixes

12. Retooling IT for BPR • Make sure that IT fits the business process!! (again…) • “Held Hostage” Often organizations discover a problem only to find there IS will not support the solution (legacy systems) • Important to understand existing infrastructure, benchmark technology use against best competitors • Don’t get left behind the rest of the field!

13. Restructuring Processes & Orgs • Major BPR activities include, but are not limited to: • Redesign of Processes • Mass Production to Mass Customization • Cycle Time Reduction • Restructuring Organizations • The following are examples…

14. Redesigning the Process • Ford Motor Company Accounts Payable • Old Process • Write Purchase Orders • Invoice mismatches between purchasing, material control, accounts payable, vendor • Had to manually match 14 items on every invoice • New Process • Invoiceless processing (EDI): no mismatches • Now automatically match only 4 items on PO • System pays vendor directly • 75% reduction in headcount, more accurate info

15. Mass Production to Customization • Bally Engineered Structures: sales & ordering • Custom made insulated products • Old: 12 options, 86 sequential tasks, takes 5 to 7 weeks • Redesigned system to provide salespeople with cust requirements, prices, specifications, and increased communication • New: 10,000 options, 20 sequential tasks, takes 1-2 weeks • Possible through IT & flexible manuf systems (robotics)

16. Cycle Time Reduction • Time to complete a process beginning to end • More than just saving time: First to market! • Chrysler’s technology center reduced cycle time by 30% • Boeing 777 design, no physical prototype • Fundamental change • Computer becomes a platform for total design rather than “just a tool” • Cultural change involving engineers and role of the computer - can be significant!

17. Restructuring Organizations • Structure should: • Support critical activities and strategy • Support the link between strategy & IS • Problems with hierarchy: • All it takes is one person to say “No” • Restructure for customer focus • Single contact point for customer • Leverage competitive intelligence!

18. Organizational Structures • Hierarchical (greater authority) • Manager makes decision, job is to “sell” decision to others, may invite questions • Flattened • Manager presents problem, solicits input to make decision, or group makes decision • Networked (greater freedom) • Subordinates have more power, use of “situational leadership” • Empowerment: give permission to the workforce to develop & utilize their skills & knowledge for the good of themselves & the organization • No single best structure for all organizations

19. Important Concepts to Know • The Supply Chain • Early problems in SC • Vertical Integration: its benefits & problems • Supply Chain Management • Restructuring the process & organization

20. For Next Time… • Minicase for Monday • Reading on Knowledge Management will be sent to you