Management Information Systems PDF

ADM 2372 Management Information Systems Mayur Joshi, PhD Assistant Professor of Information Systems [email protected] © Copyright. Mayur Joshi. 2024. and © 2024 John Wiley &...

ADM 2372 Management Information Systems Mayur Joshi, PhD Assistant Professor of Information Systems [email protected] © Copyright. Mayur Joshi. 2024. and © 2024 John Wiley & Sons Canada, Ltd. or the authors All Rights Reserved. No part of this document may be reproduced, stored in a retrieval system or transmitted in any form or b y any means, electronic, mechanical, photocopying, recording or otherwise without prior written permission from the professor. Shar ing course materials without permission or uploading course materials to a content sharing website may be treated as an instance of acad emic fraud as well as copyright infringement. 1  Week 9 Supply Chain Management (Chapter 11) 2 Agenda 1. Value Chain 2. Supply Chain 3. Value vs Supply Chain 4. Supply Chain Management (SCM) 5. Information Technology Support for Supply Chain Management 3 Value Chain Value chain: “a sequence of activities through which the organization’s inputs, whatever they are, are transformed into more valuable outputs, whatever they are.” Input: Car Parts Output: Car Transformation (value creation) 4 Value Chain Porter’s Value Chain Model divides those activities into Primary activities: “relate to the production and distribution of the firm’s products and services. These activities create value for which customers are willing to pay.” Secondary activities: “do not add value directly to the firm’s products and services”; they support primary activities (P. 56) https://kfknowledgebank.kaplan.co.uk/business- strategy/strategic-analysis/porter%27s-value-chain 5 Value Chain Example in manufacturing Primary activities: purchasing materials, processing materials into products, and delivering products to customers 1. Inbound logistics (inputs) 2. Operations (manufacturing and testing) 3. Outbound logistics (storage and distribution) 4. Marketing and sales 5. Services “As work progresses in this sequence, value is added to the product in each activity” (P. 57) 6 Value Chain Example in manufacturing Secondary activities: they support primary activities 1. Firm’s infrastructure 2. Human Resources 3. Accounting, finance, etc. (P. 57) 7  Supply Chain From Topic 2: SCM (an inter-organizational process) Supply chain: “flow of materials, information, money, and services from 1 raw material suppliers, 2 through factories and 3 warehouses, to 4 the end customers” (P. 341) 1 2 3 4 Raw material Factories Warehouses Customers suppliers 8 Supply Chain Structure o Upstream o Internal o Downstream Tiers o Layered approach 9 Supply Chain The flows in the supply chain: o Materials flows o Information flows o Financial flows Money Accounting 10 Supply Chain Producers of Producers of Producers of Auto (P. 342) glass, rubber, windshields, dashboards, manufacturer plastic, etc. tires, etc. seats, etc. flow of materials transformation flow of finished products of materials 11 Supply Chain Supply chain visibility: “the ability for all organizations within a supply chain to access or view relevant data on purchased materials as these materials move through their suppliers’ production processes and transportation networks to their receiving docks.” (P. 341- 342) Visibility is enhanced by technologies such as RFID tags (more on this later) and GPS, which provide real time information on products moving through the supply chain Shipping containers, trucks, and products report on their own status without human intervention 12  Supply Chain vs Value Chain Firm’s Value Chain: integrated internal processes combined to deliver value to customers by transforming raw materials into finished products The firm creates value for itself and its customers Inbound Outbound Sales and Operations Services Logistics Logistics Marketing Information flow Information System (e.g., ERP system) Upstream Downstream [Source: e-Commerce basics, Davis & Benamati, Addison Wesley 2002] ERP: Enterprise Resource Planning 13  Supply Chain vs Value Chain Supply Chain (SC): set of business processes that allow suppliers, manufacturers, distributors, and retailers to function as “one virtual organization” to deliver products to consumers The SC partners create value for themselves and for their customers Suppliers Customers Firm 1, 2, 3, … a, b, c, … Information flow Information System (e.g., SCM system) Upstream Downstream [Source: e-Commerce basics, Davis & Benamati, Addison Wesley 2002] SCM: Supply Chain management 14 Supply Chain Management (SCM) The function of Supply Chain Management (SCM) is – to improve the processes a company uses to acquire the raw materials it needs to produce a product or service and then deliver that product or service to its customers – Includes the process of planning, organizing, and optimizing the various activities performed along the supply chain (Page 343) 15 Basic Components of SCM Plan Source Make Deliver Return 16 Basic Components of SCM Plan (strategic) design a strategy for managing the resources that go into a product or service develop metrics (measurable deliverables) to monitor SC efficiency & effectiveness Source (create contracts & info links) choose suppliers that will deliver the goods and services required for making products develop pricing, delivery, and payment processes with suppliers and develop metrics for monitoring and improving the relationships Make (manufacture) schedule the activities necessary for production, testing, packaging, and preparing for delivery develop metrics for measuring quality levels, production output, and worker productivity (P. 343-344) 17 Basic Components of SCM Deliver receive orders, fulfill orders via a network of warehouses, pick transportation companies to deliver the products, and implement a billing and invoicing system to facilitate payments Return create a network for receiving defective and excess products and support customers who have problems with delivered products (P. 343-344) 18 Interorganizational Information Systems (IOS) Enable the partners to perform the following: o Reduce the costs of routine business transactions o Improve the quality of information flow by reducing or eliminating errors o Compress the cycle time involved in fulfilling business transactions o Eliminate paper processing and its associated inefficiencies and costs o Make the transfer and processing of information easier for users 19 SCM Module SCM Module: management of information flows within a supply chain to maximize total supply chain effectiveness and profitability Information flows are handled by SCM All supply chain partners should systems which are a type of Inter- be involved; all should benefit organizational Information Systems (IOS) 20 SCM Module A supply chain is a complex web of suppliers, assemblers, logistic firms, sales and marketing channels, and other business partners linked primarily through information networks and contractual relationships SCM systems enhance and manage such relationships 21 M2 B2 e n y o u c e f SCM Software examples from BlueYonder | A D M 2 3 7 2 | u O t t a w a. c a 22 M2 B3 e n y o u c e f SCM Software examples from BlueYonder | A D M 2 3 7 2 | u O t t a w a. c a 23 M2 B4 e n y o u c e f SCM Software examples from BlueYonder | A D M 2 3 7 2 | u O t t a w a. c a 24 M2 B5 e n y o u c e f SCM Software examples from BlueYonder | A D M 2 3 7 2 | u O t t a w a. c a 25 The Push Model vs the Pull Model Push model o Make-to-stock Pull model o Make-to-order 26 The Push Model vs the Pull Model push model (make-to-stock) Production begins with a forecast which is an educated guess of demand (what products do customers want? In what quantities?) Suppliers produce goods based on their efficiencies and push them to consumers Requires inventory (raw The push model was effective in the materials and finished goods) to early days of manufacturing, to drive be held at various stages of the unit costs down (technique used by supply chain Henry Ford) Works best for standardized products in markets where there is high demand 27 The Push Model vs the Pull Model pull model (make-to-order) Production begins with a customer order, so companies make only what customers want, a process closely aligned with mass Dell uses the pull model; no product is customization made until customer order is known The customer drives the process, and information flows mainly upstream Production determined by the needs of customers Some manufacturers of expensive cars (e.g., Bentley) also use the Pull Model 28 The Push Model vs the Pull Model Push based SC Supplier Manufacturer Distributor Retailer Customer Supply to Production Inventory Stock Purchase forecast based on based on based on what is on forecasts forecasts forecasts shelves Pull based SC Supplier Manufacturer Distributor Retailer Customer Supply to Produce to Automatically Automatically Customer order order replenish replenish stock orders warehouse The difference between the 2 models is summarized by the slogan in a pull-based SC “we make what we sell, not sell what we make” 29 The Push Model vs the Pull Model 30  Example 1: Dell’s SCM Dell uses the Pull Model to sell to individuals (B2C) and to businesses (B2B) 1 The customer (individual or business) logs in, configures the computing product by selecting all the components (processor power, memory size, color, etc.), places the order, and pays 2 As soon as the order enters Dell’s e-commerce system, all the necessary components are ordered automatically from Dell’s suppliers 3 Dell’s suppliers ship the components to Dell 4 Dell assembles the product, and ships it to the customer 5 31 Example 1: Dell’s SCM Keyboard supplier 3 2 1 Internet 1 3 Monitor Dell supplier 2 4 3 5 Processor 2 supplier Upstream Downstream Flow of information Flow of parts and finished products 32 Example 1: Dell’s SCM Advantages of the Pull Model for Dell No product is made until it is ordered and paid for No inventory of parts (components) or finished products Computer components become obsolete very quickly as smaller and faster components are introduced Prices of components go down regularly Customers feel empowered by being able to customize their products 33 Example 1: Dell’s SCM Dell is linked to its suppliers through Dell shares information (e.g., sales forecasts, contracts and information links product defects, trends) with its suppliers and requires them to share with their own suppliers Supplier Supplier Supplier Supplier B2C and B2B Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Dell Customer Supplier Supplier Supplier Supplier flow of transformation flow of finished materials (assembly) products Upstream Downstream 34 Problems along the Supply Chain Two main sources of problems: o Uncertainties o The need to coordinate multiple activities, internal units, and business partners The consequence> The bullwhip effect 35 The bullwhip effect 36 The bullwhip effect Supply chain uncertainties can be due to incorrect demand forecast for a product If an incorrect forecast is passed along the supply chain, then it can create a bullwhip effect An incorrect demand forecast leads a supply chain partner to carry a “safety stock” As we move upstream, the “safety stock” gets bigger, magnifying the issue, hence the “Bullwhip Effect” This results in an inefficient supply chain manufacturer distributor retailer Upstream 37 Solutions to Supply Chain Problems Information sharing Information sharing (using EDI or Extranets) between supply chain partner can improve demand forecast Example: Walmart (a retailer) provides P&G (a manufacturer) access to daily sales information for every store for every P&G item sold by Walmart By monitoring inventory levels, P&G knows when inventories fall below the threshold for each product at each Walmart store, in which case an immediate shipment is triggered This called Vendor Managed inventory (VMI) - supplier (rather than retailer) manages the inventory VMI minimizes the bullwhip effect 38 Solutions to Supply Chain Problems Vendor-managed inventory (VMI) o the supplier, rather than the retailer, manages the entire inventory process for a particular product or group of products. 39 Role of IT in Supporting SCM Electronic Data Interchange (EDI) Extranets RFIDs Blockchains 40 Electronic Data Interchange (EDI) EDI is a communication standard that enables business partners to exchange routine documents (e.g., purchase orders) electronically The benefits include: Minimizes data entry errors Shorter messages Messages are secured Reduces cycle time Increases productivity Enhances customer service Minimizes paper usage and storage 41 Electronic Data Interchange (EDI) 42 Example: Purchase Order Fulfilment 43 Example: Purchase Order Fulfilment 44 Extranets what is an intranet? Corporate network that uses Internet technology & provides Internet capabilities Browser, search engines, communication tools, etc. For internal sharing of info (organization policies, announcements, etc.) Secured behind a firewall May be within a single location (e.g., headquarters) or may Firewall: hardware/software that connect multiple locations filters information (e.g., stops adult material) and keeps outsiders from accessing your network 45 Extranets what is an extranet When you extend your company's intranet to your suppliers, customers, and partners, you create an extranet 46 Extranets Structure 47 Extranets Virtual Private Network (VPN) Internet Point B A VPN creates a virtual tunnel through the Internet between Point A and Point B using encryption Point A 48 RFID The emergence of cost-effective RFID (radiofrequency identification) chips is an opportunity for SCM RFID readers detect and decode info contained in RFID tags using radiofrequencies Advantages of RFID Unlike barcode technology, RFID tags need not be directly in contact with RFID readers RFID tags are embedded in the products they are to identify RFID tags can contain significant amounts of info (when the product was manufactured, where, expiration date, etc.) all machine readable 49 RFID RFID tags promise efficiency improvements in the SC, from speeding the process of receiving and warehousing products, to improving the control of inventories By Jan 2005, Walmart’s 100 top suppliers were forced to embed RFID tags in pallets and cases of shipped goods As their prices and sizes continue to fall, RFID tags will be embedded in consumer products 50 Example 2: Chrysler’s SCM Fact Auto industry is known for its fierce competition Auto industry is known for its demanding and unpredictable customers To survive Bring new models to the market faster than the competition Do it in the most economical way 51  Example 2: Chrysler’s SCM Part Chrysler Car dealers suppliers Supplier Manufacturer Distributor Retailer Customer GOODS INFORMATION Let’s zoom in 52 Example 2: Chrysler’s SCM Part suppliers Chrysler Car dealers Volume Sales data Planning Sales data System Able to adjust Sales delivery of data parts Production Planning System Make the right amount of vehicle models that are selling 53  Example 2: Chrysler’s SCM Part suppliers Chrysler Car dealers Global Supplier Portal Thousands of suppliers use the portal to interact with Portal used internally to Chrysler share info among divisions and business units 54  Example 2: Chrysler’s SCM Part suppliers Chrysler Car dealers Part Powerway Quality Designers System Specialists The web based Powerway system is used to track the quality of car parts before they are certified for use in the production lines Blockchain 56 Why do we need Blockchain? 57 Blockchain in Supply Chains 58 Blockchain in Supply Chains Overview Walmart Canda Use Case 59 Blockchain in Supply Chains Case Studies: o Home Depot: https://www.ibm.com/case- studies/the-home-depot o Farm Produce: https://www.ibm.com/products/supply-chain- intelligence-suite/food-trust o Sustainable sourcing: https://www.youtube.com/watch?v=Lh_9N7p4IEM& list=TLGGqhBpCaXu1G4wOTExMjAyNA 60 SCM Best Practices cooperation Contrary to other information systems (ERP, CRM), the success of SCM depends on the cooperation of partner companies “a SC is only as strong as its weakest link” Big firms can insist on cooperation as a condition of doing business with them (e.g., Walmart and its suppliers) 61 SCM Best Practices what SCM partners must do Realignment Show commitment to the partnership by adjusting your processes Performance measurements Define responsibilities and goals in the partnership & establish performance measurements (clear and agreed upon metrics) Dispute resolution Clarify and document all aspects of the partnership to avoid conflicts Security Establish policies to ensure security and confidentiality of the data exchanged between the partners 62 SCM Best Practices SCM metrics SCM metrics should cover all areas of the SC All SC partners need to use SCM metrics to monitor their performance Examples Back order (unsatisfied order): demand against an item whose current stock level is insufficient to satisfy demand Inventory replenishment cycle time: manufacturing cycle time plus time to deploy the product to the appropriate distribution channel 63