Chapter 13: Order Fulfillment, Logistics, Supply Chain Management ppsx

Chapter 13Order Fulfillment, Logistics, Supply Chain Management... Major Concepts Order fulfillment: Deliver right order on time  Front office operations: Order taking, advertisement,

Chapter 13

Order Fulfillment, Logistics, Supply Chain Management

Learning Objectives

1 Understand the role of order fulfillment and back-office operations

in EC

2 Describe the process of order fulfillment

3 Understand the concept of the supply chain, its importance and

management

4 Describe the problems of managing the supply chain and the use of innovative solutions there

5 Describe the need for integrating information systems of front

office and back office

6 Trace the evolution of software that support activities along the

supply chain and their management

The Y2K Order Fulfillment

Problem

 In Dec 1999 Competition among E-Tailers

increases

 Special area: Toys; Big promotions, coupons

 Demand: very high, not anticipated

 Retailers: were unable to meet demand

 Customers: very unhappy

 Similar problems in gifts, book, etc.

 Also: online retailers has warehousing and logistics

Order Fulfillment

Taking orders may be the easiest part

 Difficulties in groceries and fresh food

 One reason: Customized products

 Second: Pull type manufacturing

The Pull vs Push Model

Major Concepts

 Order fulfillment: Deliver right order on time

 Front office operations: Order taking,

advertisement, CRM

 Back office operations: Accounting, finance, inventor, packaging, logistics

 Logistics: Managing the flow of goods,

information and money along the supply

The Process of Order

Fulfillment

The Steps of Order

8 Demand forecast

9 Accounting, billing

10 Customer contacts

11 Returns (Reverse logistics)

Shipping a Tropical Fish

1 Placing order, payment

2 Transfer order to petstore.com, check stock

3 Use an wholesaler to get the fish

4 Supplier finds fish, ships to wholesalers

5 Wholesalers rushes to Petstore

6 Petstore uses FedEx to ship to customer with copy of credit card payment

Discussion: What is the contribution of EC?

3 Can a virtual store replace a retailer?

4 Direct sales for large items

5 Example: The Lego Co case

Channel Conflict

conflict

retail? (Microsoft)

direct sale

Supply Chain Management

 Definition: Flow of material, information, money, etc from raw material suppliers through factories

to customers

 It includes: organizations, procedures, people

 SCM: Integration of the business processes along the chain, Planning, Organizing, control of many activities

 Activities: Purchasing, delivery, packaging,

checking, warehousing, etc.

Components of the Supply

Chain

 Upstream: Suppliers, their suppliers

(several tiers) From Raw material to the company

 Internal: All internal process that add

value, conversion to find products

 Downstream: All activities in distribution and delivery to end customers

Complex-nonlinear Supply

Chain

Benefits of SCM

 Reduce uncertainty along the chain

 Proper inventory levels in the chain

 Minimize delays

 Eliminate rush (unplanned) activities

 Provide superb customer service

 Major contributor of success (ever

survival)

Global Supply Chain

 Can be very long

 Possible cross-broader problems

 Need information technology support of:

 communication and collaboration

 Possible delays due to: customs, tax,

translations, politics

Problems along the Supply

 Poor demand forecast

 Interference with production

 Conventional warehouses are too expensive

 Need automatic warehouses with robots as pickers

Preliminary Activities

 Understand the supply chain (flow charts)

 Study internal and external parts

 Performance measurement are a must

 Inbound and outbound transportation

 Reverse logistics (return)

 In-plant material handling

 Vendor management program

 Customer order processing

Areas of Opportunities

(cont’d)

 Invoicing, auditing and other accounting activities

 Collaboration procedures with partners

 Employee training and deployments

 Labor scheduling

 Use of teams and empowerment of employees

 Automation of processes

 Use of software for facilitating all the above

 Inventory management and control

Using Inventories

 An insurance against stock out

 Can be in several places

 Can be excessive

 Can be insufficient

 Example: Littlewoods stores; UK

Proper SCN

 Coordination is needed

 Understanding of the causes/problems

 Information flow is a key

 Communication is important

 IT is needed

Information Technology for SCM

 Links that enable

communication/collaboration

 Links the partners

 Provide effective and efficient solutions

 Extremely important

 Need for information sharing

IT as problem solver

Supply Chain

Problem IT solution

Linear sequence of

processing – too slow Parallel processing, using workflow s/w

Waiting times between

chain segments –

excessive

Identify reason (DSS s/w) and expedite communication and collaboration (Intranets, GroupWare)

Existence of non-valued

added activities Value analysis (SCM s/w), simulation s/wSlow delivery of paper Electronic documents and communication

The bullwhip effect

 Slight changes in actual demand create

problems

 Partners build “just in case” inventories

 Lack of trust among partners

 Stockpilling result in huge cost

 The manufacturers can not plan production

 Cannot order material from suppliers

Avoiding the sting of the

bullwhip

Information sharing is a must

 Trust and agreements

 How to do it?

 $30 billion/year just in the grocery

industry

 Supplier monitor and manage inventories

 Information from POS to suppliers

 Electronic trading markets and exchanges

Electronic trading

markets/exchanges

 One company with many suppliers

(catalogs, auctions)

 One company with many buyers (RFQ)

 Exchanges controlled by few large

companies (e.g ANX)

 3rd party managed exchanges

 Vertical vs Horizontal portals

Non-supply Chain

Partnerships

 Starbucks: Coffee to retailers, customers

 Needed fast service; less expensive

 Kozmo delivers in cities 30-60 minutes

 Kozmo.com: Had a problem with drop boxes for returns

 Partnership: Place Kozmo’s drop boxes inside

starbuck coffee houses (open long hours) solve

both problems

 Amazon uses Kozmo for fast deliveries

The Role of 7-Eleven &

Convenience Stores

 Can be used as a collection point for

returns

 Can be used as a pick up place

 Can be used as a place for order placing

 Can pay in cash/card to the store

 Returns are a problem: up to 30%

The role of FedEx & Similar

Shippers

 From a delivery to all-logistics

 Many services (see Box 13.4)

 Complete inventory control

 Packaging, warehousing, reordering etc

 Tracking services to customers

Software Support

SCM activities Type of software

Upstream activities Suppliers’ management,

ordering systems, order tracking systems

Internal supply chain

activities - Inventory management- Purchasing and order

management

- Budgeting, cost control

- Human resources information

 Automation of segments useful, but…

 Tangible benefits

 Inventory reduction, personnel reduction,

productivity improvement, order management

improvement, financial cycle improvements.

 Intangible benefits

 Information visibility, new / improved processes,

customer responsiveness, standardization, flexibility,

globalization, and business performance.

Integration along the Supply

Chain

 Need to streamline operations

 New business models

 New organizational relationships (virtual companies)

 Examples Warner Lamber and Wal*Mart (Box 13.5)

Areas of Integration

needed resources & their availability

their suppliers

Tracking systems - available to customers

Evolution of Software

Integration

 Completely Independent of each other

 MRP = Material Requirements Planning:

 MRPII=Manufacturing Requirements Planning

 ERP =Enterprise Resources Planning

 Extended ERP =Include suppliers, customers

From SAP to mySAP.com

transactions

 Workplace - a personalized, role-based interface

 Marketplace - one stop destination for business

professional to collaborate

 Business Scenarios - products for the Internet and intranet

 Application-hosing - hosting Web applications for SMEs

Enterprise Resource Planning

(ERP)

ERP = Integrating business processes and

activities in real time

 Solves many supply chain problems

 Necessary for medium to large corporations

 Helpful also for some SMEs

 Need to interface with EC order taking system

 Manages all routine transactions in the Enterprise

 Recently extended to suppliers and customers

Developing ERP Systems

Do it yourself, from scratch (only few will)

 Use Integrated packages such as R/3

Post ERP (2nd Generation)

 1st generation - transaction processing orientation

 2nd generation

 including decision making capabilities

 EC requires decision support

 EC requires business intelligence

 SCM software: Production Planning, Manpower utilization, Profitability models, market analysis.

 Integration of SCM capabilities

 Other added functionalities: CRM, KM

 Leasing information systems application

 Back to the days of “time sharing”

 A risk prevention strategy

 Very popular with ERP (expensive,

cumbersome)