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Supply Chain Management

Supply Chain Management. IST 421 Spring 2003 Lecture 5. Supply Chain Management. Supply chains support the flow of goods and services from their origin to their endpoint – the customer. Supply Chain Management. Supply Chain Management.

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Supply Chain Management

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  1. Supply Chain Management IST 421 Spring 2003 Lecture 5

  2. Supply Chain Management • Supply chains support the flow of goods and services from their origin to their endpoint – the customer.

  3. Supply Chain Management

  4. Supply Chain Management • Supply Chain Management (SCM) comprises business-management applications that provide guidance on which products to manufacture, when, and where they should be distributed. • The category includes software that manages plant scheduling, demand forecasting, ordering raw materials and related functions.

  5. Supply Chain Management • Plant automation applications are involved in the actual manufacturing processes, such as machining, material movement, blending, heating, cooling, etc. • These applications are generally hosted on small, independent controllers, on Supervisory Control and Data Acquisition systems running on PCs, or on complex and elaborate distributed control systems.

  6. Supply Chain Management • Prior to 1999, most companies were looking at the supply chain from an internal perspective. • The emphasis was on bringing together the operations of manufacturing, planning and scheduling with sales and marketing. • Many companies turned to Enterprise Resource Planning (ERP) and advance planning and scheduling systems to bring together the procurement process internally.

  7. Supply Chain Management • Performance measurements – • Cash-to-cash cycle time: the time from paying for raw materials to collecting cash from the customer. Efficient SCM processes do this in 30 days vs. 100 days. • Total SCM cost: cost of buying and handling inventory, processing orders, and information systems support. Efficient SCM incur costs equal to 5% of sales vs. costs equal to 12% of sales.

  8. Supply Chain Management • Other Performance measurements – • Initial fill rate: % of the order that the supplier provided in the first shipment • Initial-order lead-time: time needed for the supplier to fill the order • On-time performance: how often the supplier meets agreed to requested delivery dates

  9. Packaged Applications • Market leaders • SAP • PeopleSoft • Oracle • Baan • State-of-the-art client/server or Internet/intranet architectures

  10. Integrated Supply Chain • Supply chain or value chain is the flow of goods and services from their points of origin to the ultimate consumer. • Fully integrated supply chain can react to consumer demand in minutes • High-value opportunity for most businesses

  11. Integrated Supply Chain • Step 1: automate and optimize major business processes within each member organization. • Step 2: Extend the enterprise to all members in the supply chain

  12. Exercise • A company is considering investing in hardware and software that will improve linkages with suppliers. Management expects to save 5% of sales by tightening up the supply chain in the first year, 3% in the second year, and 1% in the third year. The company’s annual sales are $1 billion. The company’s CFO insists that the investment must pay for itself in cost savings in three years. To meet this requirement, how much should the CIO be allowed to spend on developing an improved SCM system?

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