Lesson 6 - Questions Flashcards
(10 cards)
What is supply chain management? Why is it important?
Supply chain management (SCM) deals with managing the flow of goods, services, and information among suppliers, manufacturers, wholesalers, distributors, stores, and consumers. The complexity and cost of supply chains have increased significantly in the past two decades. Companies also realize that customer satisfaction (or dissatisfaction) is linked to supply chain performance. In addition, just-in-time, zero-stock, total quality, and category management offer a number of benefits. SCM is a source of competitive advantage and potential increased profit margin.
Explain the main issues associated with supply chain management.
The term e-supply chain refers to the use of e-commerce technologies and infrastructure to support supply chain operations and activities. The six major processes of e-supply chains are
supply chain replenishment
e-procurement
collaborative planning
collaborative design and product development
e-logistics
use of B2B exchanges and supply webs.
Most supply chain problems are the result of poor information flow, inaccurate data, and lack of timely information about demand forecasts. Through industry exchanges, a company can collaborate with its business partners to reduce inventories and transaction costs, optimize resource utilization, and eliminate any waste from the value chain.
Describe the differences between SCM and ERP systems.
Enterprise resource planning (ERP) systems, with their focus on cost control, downsizing, and reengineering initiatives, were the first to come into existence. ERP links front-end and back-end operations, making information accessible across the entire enterprise. ERP systems attempt to integrate all the major functions of an organization.
SCM systems have emerged as a complement to ERP, bringing suppliers into the network in order to manage the supply chain and make the channels more efficient and effective. SCM helps
prevent stock-outs
reduce inventory carrying costs
optimize quantities to be ordered
take advantage of trade and quantity discounts.
Therefore, SCM is integrated as a part of most ERP solutions.
What is the difference between a push orientation to the value chain and pull orientation?
Push supply chain management represents the traditional supply chain management model where the manufacturer (business) develops the innovative products and then identities the suitable target market. Likely, the distribution channel is then created to push the product to the market. This model is illustrated through the example presented in Figure 6.8 (a) and is characterized by statements such as “This is a great product, now who shall we sell it to?” The quip about the original Ford Model T that “you can have any colour you want as long as it’s black” also illustrates a push orientation. The typical motivation for a push approach is to optimize the production process for cost and efficiency. However, with the advancement of technologies, global markets, and innovative products, this model could be risky—new products might not fit with customers’ expectations and needs.
The pull supply chain management model is designed to overcome the limitations of the push model. It involves customers’ insights and research into what is missing from the market or what could be improved in order to offer value to customers. The pull model offers new innovative products that fit demand.
How can information systems support the supply chain?
Information systems are used to increase the efficiency of information flow by
delivering more information (e.g., sales data in Tesco’s TIE system) analyzing information (e.g., alerts about a large order) delivering information more rapidly (e.g., reduced lead times in e-procurement).
How has the increase in electronic communications contributed to the development of value networks?
Value network refers to the links between the organization and its strategic and non-strategic partners that form its external value chain. Electronic communications make it easier to form and reform links with partners, for example, to create a virtual company to deliver a project or to select new suppliers or channel partners.
What are the characteristics of a virtual organization? Using examples, explain how e-commerce can support the virtual organization.
virtual organization is one which uses information and communications technology to allow it to operate without clearly defined physical boundaries between different functions. It provides customized services by outsourcing production and other functions to third parties.
e-Commerce can support the delivery of services since it allows the virtual organization to form rapidly and then conduct the transactions necessary for its function. An example is a team of global companies forming to deliver an engineering contract. Communications can be used to prepare the bid and then deliver the services through exchanging technical designs and project management material
Lesson Note 1
Note 1: Radio Frequency Identification (RFID)
Radio Frequency Identification (RFID) is a key technological innovation that supports supply chain management by enabling fast and accurate identification and tracking of objects. It is part of a family of automatic identification technologies, and solves the limitations of bar codes which have been the primary form of automatic identification since 1970s.
RFID is considered one of the most useful technologies utilized with or for e-commerce in sectors such as retailing, transport, health, finance, and manufacturing. This note focuses on RFID application, benefits, and limitations in supply chain management.
The greatest interest in RFID technology involves tracking individual products or items to improve inventory and supply chain management. RFID uses radio frequency communication to exchange data between the RFID reader and an electronic tag attached to an object. The RFID tag is a microchip attached to the package—it is passive and ready for scanning. A tag is activated when its antenna receives wireless (radio frequency) energy from the RFID reader’s antenna with instructions to read the tag’s information. This information is then sent back via radio waves to the reader. Once the reader picks up the tag’s radio waves and interprets the frequencies, the information is passed to the host computer for processing and interpretation. Employees need not be close by to read the tag—everything is done at distance and with real-time information, leading to improved supply chain management. Companies that have adopted RFID technologies include Coca-Cola, Bombardier, Whirlpool, Dominion Stores, Ford Motors, and so on.
The main benefits of RFID in supply chain management include
facilitating inventory visibility and accuracy
increasing speed and efficiency as well as minimizing human intervention and errors throughout the process
improving efficiencies for work-in-process (WIP) reporting and control costs
reducing stock levels by improving inventory management
automating reporting of all material moves both inbound/outbound and within a facility
taking inventory and performing picking operations to update inventory levels in real time quickly and at reduced cost.
However, there are some limitations associated with RFID, including high costs for the system, and the need for integration with existing business systems. A major limitation of RFID is the restriction of the environments in which RFID tags can be easily read. For example, RFID tags do not work well in harsh environments, or where readings are required in or around liquids and metals or around corners (e.g., metal-lined freezers or metal shelving). Also, RFID may not provide the same level of readings accuracy at different points along the supply chain. Finally, RFID also poses some privacy concerns when used to identify people and sensitive data. However, this issue does not represent a big concern for supply chain management.
Lesson Note 2
Note 2: Bullwhip Effect
Recall that supply chain management should be aligned with the overall strategy for the organization. However, the speed with which markets emerge and customer demand changes means that companies are challenged to stream supply chain management with their partners and ensure good forecasting. This challenge is referred to as bullwhip effect, as companies face uncertainty in forecasting demand for their products. For example, if a retail company estimates high demand for their products during the Christmas season, they will place large orders with manufacturers and suppliers. However, if actual customer demand does not fit their forecast, there will be exaggerated fluctuations in their orders. The result may be excessive inventories in various places along the supply chain, leading to lost revenue, increased unjustified expenses such as ineffective shipments, poor customer service, and missed production schedules.
There are many factors cited in the literature. The major ones include poor demand forecasts, lack of communication, disorganization, price fluctuations, free return policy, order batching, and rationing within the supply chain. To solve these issues, companies need to define better communication and collaboration strategies with their partners, such as those facilitated by EDI, extranets, and collaborative technologies. As explained in your chapter readings, the efficient consumer response (ECR) helps create and satisfy customer demand by optimizing product assortment strategies, promotions, and new product instructions.
Lesson Note 3
Note 3: Infrastructure and Systems Supporting SCM
Supply chain management tools and infrastructure enable a business to coordinate planning and execution of operations with their partners in industry supply chains of which they are members. These tools and infrastructure include EDI, EDI XM, Machine-to-Machine applications (M2M), Radio Frequency identification (RFID), outbound logistics management, and IoT. These are described in your textbook. The following are other important technologies that support SCM.
ERP Systems
ERP systems are large, integrated software applications that automate business activities across their full range. ERP is considered the main backbone supporting efficiency, quality, profitability, and decision making in digital businesses. ERP systems allow for effective monitoring of the entire organization’s activities, processes, and units. ERP systems enable integration of business data and offer the ability to share data across the entire enterprise. ERP plays an important role in supply chain management by giving managers immediate and accurate access to the latest information about the organization’s activities and performance. ERP integrates data into one source, and coordinates and synchronizes business data to ensure inventory levels, purchasing requirements, and production plans as well as predict customer demand.
Extranets (XML EDI) play an important role in managing the supply chain, and especially in communicating, coordinating, and sharing information with business partners in a timely fashion. Extranets also help companies with their demand forecasting. For example, by providing suppliers access to an extranet, the company can let them know in advance about material required and the need to replenish inventory, communicate notices, and therefore support efficient production planning.
Middleware or integration software translates requests from external systems in real time in order that they can be understood by internal systems, and so follow-up events can be triggered.
Business intelligence software enables the business to analyze their data and identify critical operating information that can be used to support decision making.
Internet of Things (covered in Lesson 2) is the latest technological development that plays an important role in ensuring a smooth and efficient supply chain, and quality service to customers.
Outbound logistics management deals with resources applied from the business to its customers and intermediaries, such as retailers and distributors.
Machine-to-machine (M2M) applications are an example of uniquely identifying and tagging objects with technologies such as RFID and making them accessible through Internet-like addresses.
