Logistics Management/Supply Chain Management

Judith Molka-Danielsenj.molka-danielsen@himolde.nohttp://home.himolde.no/~molka

Overview

Global value model for B2B systems (all) Logistics management/supply chain (ch10) Human Resource/support services (+ch10) Customer Relations Management (ch11) Manufacturing and process management

(ch12) Financial management/EDI (+ch12)

B2B Inputs

Manufacturing Process Management

Logistics

Management

Customer Management

SupportServices

Financial Management

Logistics ManagementSupply Chain Management Supply Chain Management (SCM) is an outgrowth of

“traditional” logistics management and Enterprise Resource Planning (ERP)

It extends the management function outside the organization to both the supplier organizations and the distribution channels

Good ERP/SCM can increase net revenues 4-6% SCM has become an expectation for industry

LM-SCM

Firms are moving from an process-efficiency driven focus

to a customer value-benefit focus. This involves understanding Customer Needs. Costs are coorelated to uncertainty in the Supply

Chain (enterprise integration SCM software is to address this).

SCM modules address: logistics, manufacturing, finance, etc.

LM-SCMApproaches The best-in-practice approaches have been

incorporated in various systems Major vendors include

– SAP– PeopleSoft– Baan

Often, organizations find adoption of full blown ERP/SCM systems require significant organizational change

LM-SCMComponents

PurchasingManagement

DistributionManagement

RequisitionManagement

SupplierManagement

InvoiceManagement

InventoryManagement

WarehouseManagement

LM-SCMPurchasing/Supplier Management The goal is to simplify routine transactions

and reduce paperwork Trend is to reduce supplier steering and

partner with the selected suppliers so that both organizations win

Purchase orders can be issued by DBMS triggers on inventory

Suppliers can be allowed to replenish inventory based on agreed upon parameters

LM-SCMDistribution Management The distribution or demand chain is

concerned with:– Speeding data acquisition– Controlling inventory, warehousing and

shipping– Reducing paperwork

It also includes invoice auditing and order tracking

LM-SCM Fundamentals What is a Supply Chain? Steps to meet customer

needs. Global competition makes the customer in control of production, not the manufacturer.

What is SC-management? Coordination of tasks (order generate, taking, filling, distribution of products, services and information). Key players create an extended enterprise.

Is SCM a new concept? No, 25 years. Focus progresses: efficiency, integration of enterprise, product made to customer expectations. The last means more information integration between organizations.

LM-SCM Fundamentals Pull (build to order) versus Push (build to stock)

models. Pull model requires: support product varients, reduced

lead times, improved quality, lower unit cost, operational excellence, performance measures.

Pull implementation requires: gather customer demands, make right choices to meet demand, make informed decisions on materials, deliver goods, collect payments.

Managers need: unified plan, communication, coordination to all involved.

LM-SCMElements of SCM Planning System for Purchasing Management: right

product, right place, right time. Consumer demand triggers order up the supply chain. Begin with POS terminal. Then use information to determine inventory investment, saftey stock, inventory turns, replenishment frequency.

System: 1. Order generation and forecast planning, 2. Order taking and entry for replenishment.

LM-SCMElements of SCM Execution System for Distribution

Management: facilitate the physical movement of goods and services. Focus on operational efficiency.

Ensure order fulfillment, procurement, manufacturing, and distribution management are integrated. .

LM-SCMElements of SCM Performance Measurement Systems to study the

health of the approach: accounting and financial management systems are focus. Electronic commerce tools such as datawarehousing used to analyse data without impacting performance of operational systems.

Use of software agents to let different users set different criteria for sifting through data. ( ie. Salespersons, accountants, material planners, purchasing agents).

LM-SCMIntegrating Functions Customer Asset Management: manage proactively,

better understand market and needs. Integrated Logistics: production planning,

procurement, inventory management. Financial Management: manage flows through

financial intermediaries. Supply Chain coordination is also know as Integrated

Workflow Management.

LM-SCMMerchandise management 1 Million stockkeeping units (SKUs), every

product style, size, color. On-trend, in-stock execution strategies

(optimize selection, minimize inventory) best price per unit, minimize markdowns.

LM-SCMOrder Management Cycle (OMC) 1. order planning and generation - make sure the

inventory is there. 2. online cost estimation and pricing - find prices,

understand price elasticity of market, yield management

3. order receipt and entry - how to interact with customers, receive requests, what to do with soldouts.

LM-SCMOrder Management Cycle (OMC)

4. order selection and prioritization - which customers get served first, better, which orders filled.

5. order scheduling - coordination between departments needed.

6. order fulfillment and distribution - bringing parts together, ie. FedEx ships parts to assembly place, not warehouse. Retailing is not just selling but order fulfillment.

7. order billing and payment management - can the customer understand the bill.

LM-SCMSoftware Interfaces

1. CRI - Store operations and customer service. UPC - mark, track, exchange product information.

2. RSI - where to keep stock. Partnerships with few key suppliers– purchasing - from suppliers– inventory mgmt - how much in stock, where– stock control - track movement– stock movement - receiving, checking, storing, pick-ups,

dispatching– distribution operations - ops of warehouse, transport fleet

3. RMI - – merchandise planning (profitability analysis, markdowns), – mircomarketing (advertising, targeting customers), – brand management (package and design).

LM-SCMApplication Software Horizontal: common functions across industries, ie.

financial and manufacturing. See applications in Table 10.1

Vertical: automate tasks that are specific to a market segment.

Dominate players: SAP, Oracle, PeopleSoft, Baan. Three-tier software and Intranets become technology

to support enterprise business processes and philosophy. Use of ubiquitous Web interface.

LM-SCMApplication Software Packages are good: they include the best practises of

many businesses. They include distilled knowledge. Important Characteristics of Software for SCM:

– total costs– access to expanded distribution channels– ability to integrate new technology– security is addressed– tailor to customer from the pre-packaged software with

selective options.

LM-SCMUltimate Goals When a sophisticated SCM system is coupled

with agile manufacturing system, customer driven manufacturing is possible

A first experiment in this direction is the Levi-Strauss custom jeans

Most of the computer vendors offer similar capabilities

Human Resource and Other Support Services Any other support service in the organization

can also be enhanced by distributed electronic processing

Human resources management is frequently addressed as a part of the effort because of the complexity of modern benefits packages

HRM Functions Recruiting, training, salary administration Payroll functions including time reporting,

payroll calculation and tax computation Benefits administration including flexible

spending accounts, pension programs and defined benefits

Health care benefits management

HRM Information Dissemination A big part of the human resources function

involves making information available to employees

Policies, procedures, options can be maintained and updated efficiently using intranet technology

Employee queries related to options and enrollments can be distributed by intranet

HRM Workflow Benefits claims and queries can be submitted

electronically and processed using workflow systems

Standard queries can be processed and returned securely by email to the appropriate person

Relationships with external agencies can be facilitated by email and EDI processing