e-Supply

Chain
Management

BMO2203
WWW.VU.EDU.AU
Lesson 1 Outline

1. Supply Chains
- Definitions

2. Value Generation
- Information
- Products
- Services
- Financial
- Knowledge

3. Emergence of supply chain arrangements

- Integrative Management
- Responsiveness
- Financial Sophistication
- Globalization
- Digital Business Transformation (DBT)

4. Supply Chains of the Future

1-2
e-Supply Chain
Management
BMO2203

Supply Chains
Value
Generation
Emergence of
supply chain
arrangements

Supply Chains of
the Future
1-3
Cheese Supply Chain

From cow to customer

Source: Slack et al., 1997

1-5
Generic Supply Network
Supply Chain Example: Breakfast Cereal
 C H R Y S L E R

Customers 5 ,000,000

Distributors 50,000

Production Facilities 40

1st-Tier Suppliers 1,500

2nd-Tier Suppliers 50,000

3rd-Tier Suppliers 250,000

1-8
Supply Chain Scope: Boeing 787

The 787 “Dreamliner” is a mid-sized,

wide- body, twin-engine jet airliner under
development by Boeing.
1-9
 . -
11ll COMPANIES .
:U.S. C'ANADA : JA!PAN :KOREA
Boeing •AUstRALIA
Bo&ing : EUR.OPE
l. :• KAL·ASD . . ·
· ·· ·· ·- ·· ·· · _sptnlt · ···: · ··• Boe(ng
Messrer:-rJowty ··· ···: · · · · Mltsubtstli
(awasaki · · ·· : · ·· · · ··
• Messier-)lowty· · ·· : · · ·Rons:.,Royce ·· · ·· · · ··
Vought · · Latecoer ·
· ···· ·u]i
···: · · · ···
GE e Alenia
Goodrich · : Saab
FJ)JED . . . . . . : . . . . : .JENGINE . . . . . .CENTER . . : . . . . - .fQ:RWARD .FUSB.AGE . . . - . . . . .
-.... . :: . NACELLES : .- ..
: Chula Vista, CA
: lRAJLING EDGE
_ Nagoya.Japan :
FUSElAGE :
Grottag11e·,l l a
.
Nagoya. Japan .
lf:ORWARO
FUSELAGE
Wlcitl.Kansas
· ·· · · ·· · ·
·· : ·M'OVA8l£TAAU.;ING,toGE·===..-....:..l:
: Australia

: . . . JMAIN LANO[NG.
:...
HOR!IZONlAl - !""!"'l"'
GEAR,WHEEl
SJABIUZER Nagoya,Japa
WEll a ENGINES .
fovgia. n G!-EYenda1e, Ohio :
Italy
RQ IIs-Royte-De
. .• , . , • , , ,, : , • , , , • , • , AJ=i .
lFEIAXEDDiNAGNPEDMGQI:U·
IP:OSE.l.ArG£ , Oharle:sloo. T11,A.by.
DOk'lIaK
"A
(.. ,.homa
. .. .
. :
- . . . •· . . . . . . .
. S.C.
COI W I C HT O : ! D THE:I O
C O UJAHY
Supply Chain Scope: Boeing 787

Scheduled: 2008
First delivery: 1-11
Does a supply chain always
have a physical product at
the end of it?

1-12
Service Supply Chain: Apple iPhone

Carriers

Handset

Customer

Services
1-12
Apple iPhone: Physical Supply Chain

End
customers

Chip PCB
Manuf. Manuf.

Silica
Glass
Company
Soda

1-13
Supply Chains & e-Business

During the last decade of the 20th century traditional supply

arrangements moved toward a more collaborative practise that
began with the rapid advancement of computers and
information technology.

The connectivity potential of the Internet served to facilitate a

new vision.

Companies have realised that working closely with other

businesses is essential for continued success.

Supply chain management consists of firms collaborating to

leverage strategic positioning and to improve operating
efficiency

1-14
Definitions

Supply chain management

(SCM) is the management of
a network of interconnected
businesses involved in the
ultimate provision of
product and service
packages required by end
customers. (Harland, 1996)

1-15
Definitions

Logistics is the physical work

required to move and position
inventory throughout the Supply
chain. It is a combination of
order management, inventory,
transportation, warehousing,
material handling and packaging,
integrated throughout a facility
network (Bowersox et al, 2007).

1-16
Definitions

Supply Chain Management includes logistics, in addition to

such disciplines as:
Purchasing,
 Sourcing,
 Manufacturing operations,
 Production scheduling
 Inventory control & materials management,
 Facilities location planning,
The information technology required to coordinate the whole process
(between suppliers, the focal company, and the customer).

1-17
Supply & Value
NetworksBMO2203

Supply Chains
Value
Generation
Emergence of
supply chain
arrangements

Supply Chains of
the Future
1-18
Value Chain: Definition

A Value Chain (or Value System/Network) is a connected series

of organisations, resources, and knowledge streams involved in
the creation and delivery of value to end customers.

Value occurs when needs are met by the provision of products,

resources, or services – usually via some form of transaction
or exchange.

The objective of Value Networks is to position the organisations,

within a supply chain, in such a way as to achieve the highest
levels of customer satisfaction and value while effectively
exploiting the competencies of all organisations in that supply
chain.

1-19
Products are not valuable to
customers if they are not
available precisely when they
are needed.
(Stock & Lambert, 2001)

1-20
Apple iPhone Service Value Network
Value represented
$$$ by flow of revenue:
must start with the
$$$
customer

e.g.
$50/mnth for
24 months

$$ $$$$$
$
$$
$

1-21
Apple iPhone Service Value Network

$ $
Chip PCB
Manuf. Manuf.
$
Silica $
Glass
Company
Soda
$

Source: After Slack et al., 1997

1-22
Value Statement

The key difference between a value chain and a

supply chain is – they flow in opposite directions.

1-23
e-Supply Chain
Management
BMO2203

Supply Chains
Value
Generation
Emergence of
supply chain
arrangements

Supply Chains of
the Future
1-24
The Integrated Supply Chain Framework

The context of an integrated supply chain is multi-firm collaboration

within a framework of key resource flows. Businesses are integrated from
initial material purchase to delivery of products and services to
customers.

Value results from the synergy amongst the supply chain partners,
with respect to five critical flows:

• Information
• Products
• Services
• Financial
• Knowledge

The message conveyed by this figure is that the integrated value-

creation
process must be aligned and managed from material procurement to
1-25
end-to-end customer product/service delivery.
Supply Chains & e-Business

The overarching enabler of supply chain management is information

technology. The application of Internet technologies has propelled
the SCM concept to a new dimension.

However, in addition to this, the rapid emergence of supply

chain arrangements is being driven by 5 related forces:

1. Integrative Management
2. Responsiveness
3. Financial Sophistication
4. Globalization
5. Digital Business Transformation (DBT)

These forces will continue to drive supply chain structure and

strategic initiatives across most industries
1-26
Supply Chains & e-Business

Integrative Management

The focus of integrative management is achieving the lowest total

process cost, which is not necessarily the achievement of the lowest
cost for each function included in the process.

Three important facets of supply chain logic, resulting from

increased attention to integrated management, are:

i. Collaboration

ii. Enterprise Extension (managerial influence beyond the boundaries

of
a single enterprise, e.g. joint planning with customers &
suppliers)

iii. Integrated Service Providers (3rd party businesses providing

regular services, e.g. transportation) 1-27
Supply Chains & e-Business

Responsiveness

Information connectivity creates the potential for developing responsive

Business models.

It is useful to contrast traditional (anticipatory) business practice to

the emerging time-based responsive business model.

1-28
Anticipatory Business Model

Historically, because information concerning purchase behaviour was

not readily available, and firms loosely linked together in a channel of
distribution did not feel compelled to share their plans, business
operations were driven by forecasts.

1-29
Anticipatory Business Model
 Forecast are estimates of future demand and in some cases costs

 Companies use forecasts when making decisions about purchasing,

production, logistics, and capacity planning.

 Forecasts can be:

 Quantitative – mathematically derived
 Qualitative – derived from surveys, test markets, panel of experts,
etc.

1-30
Responsive Business Model

With a responsive approach the fundamental difference is timing – the

responsive business model seeks to reduce or eliminate forecast reliance
by joint planning and rapid exchange of information between supply chain
participants.

This is possible because today’s managers have the technology to

rapidly obtain accurate sales information and respond accordingly.

1-31
 Spanish company ZARA is the world’s largest clothing
retailer.
 They understand that it is extremely difficult to accurately
forecast demand for fashion clothes using historical data.

 Rely on their store managers to recognise what they can

sell
“immediately”

 Twice a week each store completes a digital order form

 Rapid response/delivery

 IT supports decentralised decision making.

1-33
http://www.youtube.com/watch?v=q
Supply Chains & e-Business

Financial Sophistication

The financial benefits of timely response

are straightforward:

• Fast delivery translates to less

inventory and reduced need for
distribution facilities
• Faster to customers means less
working capital is required to
support
operations

1-34
Supply Chains & e-Business

Globalisation

The decision to engage in global operations to achieve market

growth follows a natural path of business expansion. Typically firms
enter the global marketplace by conducting import and export
operations.

The next stage of internationalization involves a firm’s establishment of a

local presence in foreign nations and trading areas.

The most advanced stage, the fully-fledged conduct

of business operations within and across
international boundaries, is typically referred to as
globalisation.

1-35
Supply Chains & e-Business

Example of Globalisation

Singer Sewing Machine Company:

• Buys sewing machine shells from sub-contractor in US

• Buys Motors from Brazil
• Buys drive shafts from Italy
• Assembles finished product in Taiwan
• Markets, and sells, the machines in most countries in the world

1-36
Supply Chains & e-Business

Digital Business Transformation

DBT involves a complete assessment and reinvention of a firm’s overall

Operation to assure that the benefits of modern information technology are
being fully deployed

DBT is about reinventing and

positioning business operations,
processes, and relationships to fully
exploit information technology and to
facilitate supply chain collaboration to
achieve unprecedented levels of
operational excellence.

1-36
Supply Chains & e-Business

Digital Business Transformation

Six paradigms seem to frame the challenge of digitally

transforming business. We call these paradigms the “Six Fs
of going Digital.” This is the mindset that leaders must adopt
as they begin to reconfigure every aspect of their organisation
to contribute to economic value.

1-37
The six Fs of going digital

1. Fact Based Management

Commitment to developing precise information on every facet of what the
organisation does and needs to do. Facts deal with specific
performance results in terms of specific customers

2. Flexibilit
y
Driven by Facts, successful firms demonstrate the ability to rapidly adapt
their operations to pursue new courses of action – agile enough to adjust
quickly and capitalise on new opportunities.

3. Focus on Cash
Businesses exist to generate cash. When making the digital transformation
companies must remember that cash pays bills, cash pays wages and
salaries, and cash pays shareholder dividends.

1-38
Supply Chains & e-Business

4. Fast Return on Investment (ROI)

Payback periods need to be short and rapidly yield positive returns –
businesses need the money to invest in new products, services, people,
technology, and facilities.

5. Fungible

Means that businesses processes are modular in design with

maximum interchangeability. Modularity allows flexibility in process
design.

6. Frugal

Frugal enterprises are lean in every way – capital investment, cash velocity
and a flat organisational structure. In frugal enterprises the real benefits are
cash and dividends, not fringe benefits and luxury environments

1-39
e-Supply Chain
Management
BMO2203

Supply Chains
Value
Generation
Emergence of
supply chain
arrangements

Supply Chains of
the Future
1-40
Supply Chains of The Future
We are moving from a business environment where the supplier holds
the power – through ownership of resources, technology and brands – to
a situation where the customer, or consumer, is now in the driving seat.

Market Driven

Tomorrow’s Model:
• Virtual Networks
• Information based
• Customer value
Orientated
Mass Mass
Production/ Customization/ one-
Mass Marketing 2-one Marketing
Yesterday’s
Model:
• Independent Entities
• Inventory Based
• Low-cost Production
Supplier Driven
1-42
 SUMMARY
WEEK 1 –
 Supply Chains
- Definitions

 Value Generation
- Value Chain examples, value statement

 Emergence of supply chain arrangements

- The integrated Supply Chain Framework, Integrative
Management, Responsiveness, Financial Sophistication,
Globalization, Digital Business Transformation (DBT), the Six
Fs of Going Digital.

 Supply Chains of the Future

- Virtual Networks, information based, mass customisation,
market driven.

1-43
1-44
TUTORIAL 1

Question 1

Design a Supply Network for a McCain Frozen foods’

“Pizza Perfection: Hawaiian Flavour”

McCain, the focal firm, purchase all their

ingredients, and packaging, from
external suppliers and assemble the
pizzas on site, before distribution. Include
at least three first and second tier
suppliers (preferably more), and two first
and second tier customers.

Remember to include all flows.

1-44
TUTORIAL 1

Question 2

In addition to Information Technology the rapid emergence of

supply chain arrangements is being driven by 5 other related
forces:

Integrative Management
Responsiveness
Financial Sophistication
Globalization
Digital Business
Transformation (DBT)

Describe the meaning of each of these terms and how they relate to
the supply chain.

1-45
TUTORIAL 1

Question 3

Describe the difference between Anticipatory and

Responsive business models.

Why is Responsive better?

1-46
TUTORIAL 1

Question 4

Make a list of a number of service supply chains (i.e. ones with no

physical product at the end) and prepare to discuss them with the
class.

1-47