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Introduction to Information Technology

2nd Edition Turban, Rainer & Potter 2003 John Wiley & Sons, Inc.

Chapter 10: Computer-based Supply Chain Management and Information Systems Integration
Prepared by: Roberta M. Roth, Ph.D. University of Northern Iowa
Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter 2003 John Wiley & Sons, Inc.

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Chapter Preview
 In this chapter, we will study: The concept of a supply chain Four ways of implementing a supply chain Problems that can occur within a supply chain leading to poor business performance Use of IT to resolve supply chain problems How supply chain management should be integrated with other business functions Effect of e-Commerce on supply chains
Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter 2003 John Wiley & Sons, Inc. 10-2

Supply Chain Definitions


 Flow of materials, information, payments,

and services, from suppliers through factories and warehouses, to end customers  Includes all organizations and processes that create and deliver products, information, and services to the end customers  Supply chain management - planning, organizing, coordinating, and controlling all activities in the supply chain
Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter 2003 John Wiley & Sons, Inc.

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Simplified Supply Chain


Upstream Internal
Organizations production processes, including materials handling, inventory management, manufacturing, quality control

Downstream Distributors

material Suppliers information money

Retailers

Customers

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter 2003 John Wiley & Sons, Inc.

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Types of Supply Chains


 Integrated Make-to-Stock  Real-time demand tracking triggers production to restock finished goods  Continuous Replenishment  Constant inventory replenishment based on expected stable demand  Build-to-Order  Customer order triggers production of specific item(s) requested  Channel Assembly  Build-to-order with some assembly performed within the distribution channel
Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter 2003 John Wiley & Sons, Inc. 10-5

Global Supply Chains


 Many economic factors promote extending

the supply chain globally  E-commerce enables global supply chains  Global supply chains are longer and more complex  Use of information technology essential

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter 2003 John Wiley & Sons, Inc.

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Problems in the Supply Chain


 How much are we going to sell? (demand

forecasts)  How long will it take? (for supplies to arrive; shipments to be received)  What if the supplies are defective? (quality control)  What if my order gets lost or miscommunicated?

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter 2003 John Wiley & Sons, Inc.

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More Problems in the Supply Chain


 Bullwhip Effect  Wild swings in orders due to lack of coordination and trust among supply chain members  Information sharing is essential  Phantom Stockouts  Inventory is reportedly not available, when in fact it is on hand

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter 2003 John Wiley & Sons, Inc.

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Overcoming Supply Chain Problems


 Vertical Integration  Own everything upstream and downstream  Stockpile Inventory  Eliminate risk and uncertainty by hoarding massive inventories; very expensive  Improve Supply Chain Management  Build trust and coordination through IT enabled supply chain support

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter 2003 John Wiley & Sons, Inc.

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How IT Supports the Supply Chain


 Material Requirements Planning (MRP)  Early model that integrated production, purchasing, and inventory management  Manufacturing Resource Planning (MRP II)  MRP plus financial and labor planning  Enterprise Resource Planning (ERP)  Extension to entire enterprise, plus external business partners  In short, Integration is the key

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter 2003 John Wiley & Sons, Inc.

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How IT Supports the Supply Chain


 Integrated Value Chain  Multiple enterprises within a shared market channel collaborate throughout the entire shared chain to enhance perceived customer value  Chain members act as an extended enterprise  Benefits to each chain member occur as entire chain is optimised  Idealized goal only achieved in a few cases at present

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter 2003 John Wiley & Sons, Inc.

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How IT Supports the Supply Chain


 Enterprise Resource Planning (ERP)

Systems

 Initially focused on integrating all departments and functions within an organization  Recently have extended to suppliers and customers  Focus was on transaction processing, not decision support and continuous planning

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter 2003 John Wiley & Sons, Inc.

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How IT Supports the Supply Chain


 Supply Chain Management (SCM)

Software

 Standalone software targeting the planning and decision making needed for supply chain management

 Integrated ERP and SCM  Build linkages between ERP package and SCM package  Extend ERP to incorporate needed SCM functions  Addition of business intelligence (analysis)
Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter 2003 John Wiley & Sons, Inc. 10-13

Extending Supply Chain through e-Commerce

 Upstream  Change procurement methods  Internal  Use of intranet to enhance internal processes  Downstream  Alter (streamline) selling practices through direct Web selling, auctions, or exchanges

Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter 2003 John Wiley & Sons, Inc.

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e-Commerce Supply Chain Issues


 EC has generated problems in the order

fulfilment part of the supply chain

 Delivering what the customer ordered in a timely way  Providing customer support

 EC must continue to improve through  More efficient order processing  Better fulfilment processes, such as automated warehouses  Provide simple mechanism for customers to return products
Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter 2003 John Wiley & Sons, Inc. 10-15

Chapter Summary
 Understanding and managing the supply

chain is critical to success  Many supply chain problems can be resolved through improving information flows  IT can supply needed support to supply chain management  Electronic commerce may reshape the supply chain
Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter 2003 John Wiley & Sons, Inc. 10-16

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Introduction to Information Technology, 2nd Edition Turban, Rainer & Potter 2003 John Wiley & Sons, Inc.

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