CHAPTER 10 : EXTENDING THE ORGANIZATION - SUPPLY CHAIN MANAGEMENT

BASICS OF SUPPLY CHAIN

> SCM ~ the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability.

> The supply chain has three main links:

1.       Materials flows from suppliers and their upstream suppliers at all levels.

2.       Transformation of materials into semi-finished products, or the organization’s own production processes.

3.       Distribution of products to customers and their downstream customers at all levels.

INFORMATION TECHNOLOGY’S ROLE IN THE SUPPLY CHAIN

 Information technology’s primary role in SCM is creating the integrations or tight process and information linkages between functions within a firm such as marketing, sales, finance, manufacturing, and distribution – and between firms, which allow the smooth, synchronized flow of both information and product between customers, suppliers and transportation providers across the supply chain.

VISIBILITY

~  Supply Chain Visibility is the ability to view all areas up and down the supply chain. Changing supply chains requires a comprehensive strategy buoyed by information technology. Organizations can use technology tools that help them integrate upstream and downstream, with both customers and suppliers.

~ The bullwhip effect occurs when distorted product demand information passes from one entity to the next throughout the supply chain.

CUSTOMER BEHAVIOR

      > The behavior of customers has changed the way businesses complete. Customers will leave if a company does not continually meet their expectations. They are more demanding because they have information readily available, they know exactly what they want, and they know when and how they want it.

      > Demand planning software generates demand forecasts using statistical tools and forecasting techniques. Companies can respond faster and more effectively to consumer demands through supply chain enhancements such as demand planning software.

      > Once an organization understands customer demand and its effect on the supply chain it can begin to estimate the impact that its supply chain will have on its customers and ultimately the organization’s performance.

COMPETITION

    Ø  Supply Chain Planning (SCP) software uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain while reducing inventory. SCP depends entirely on information for its accuracy.

    Ø  Supply Chain Execution (SCE) software automates the different steps and stages of the supply chain. This could be as simple as electronically routing orders from a manufacturer to a supplier.

SPEED

    *  These systems raise the accuracy, frequency and speed of communication between suppliers and customers, as well as between internal users.

    *  Another aspect of speed is the company’s ability to satisfy continually changing customer requirements efficiently, accurately and quickly.

SUPPLY CHAIN MANAGEMENT SUCCESS FACTORS

    §  To succeed in today’s competitive markets, companies must align their supply chain with the demands of the markets they serve.

    §  Supply chain performance is now a distinct competitive advantage for companies proficient in the SCM area.

MAKE THE SALE TO SUPPLIERS

The hardest part of any SCM system is its complexity because a large part of the system extends beyond the company’s walls. Not only will the people in the organization need to change the way they work, but also the people from each supplier that is added to the network must change. Be sure suppliers are on board with the benefits that the SCM system will provide.

WE AN EMPLOYEES OFF TRADITIONAL BUSINESS PRACTICES

Operations people typically deal with phone calls, faxes and orders scrawled on paper and will most likely want to keep it that way. Unfortunately, an organization cannot disconnect the telephones and fax machines just because it is implementing a supply chain management system. If the organization cannot convince people that using the software will be worth their time, they will easily find ways to work around it, which will quickly decrease the changes of success for the SCM system.

ENSURE THE SCM SYSTEM SUPPORTS THE ORGANIZATION GOALS

It is important to select SCM software that gives organizations an advantage in the areas most crucial to their business success. If the organizational goals support highly efficient strategies, be sure the supply chain design has the same goals.

DEPLOY IN INCREMENTAL PHASE AND MEASURE AND COMMUNICATE SUCCESS

Design the development of the SCM system in incremental phases. For instance, instead of installing a complete supply chain management system across the company and all suppliers at once, start by getting it working with a few key suppliers, and then move on to the other suppliers. Along the way, make sure each step is adding value through improvements in the supply chain’s performance. While a big-picture perspective is vital to SCM success, the incremental approach means the SCM system should be implemented in digestible bites and also measured for success one step at a time.

BE FUTURE ORIENTED

The supply chain design must anticipate the future state of the business. Because the SCM system likely will last for many more years than originally planned, managers need to explore how flexible the systems will be when (not if) changes are required in the future. The key is to be certain that the software will meet future needs, not only current needs. 

CHAPTER 9: ENABLING THE ORGANIZATIONS - DECISION MAKING

ORGANIZATIONAL INFORMATION

ü Employees must be able to obtain and analyze to many different levels, formats and granularity of organizational information to make decision.

ü Successfully collecting, compiling, sorting and analyzing information can provide tremendous insight into how an organization is performing.

THE VALUE OF TIMELY INFORMATION

ü Timeliness is an aspect of information that depends on the situation:

-         Real-time information – immediate up-to-date information.

-         Real-time system – provides real-time information in response to query requests.

THE VALUE OF QUALITY INFORMATION

ü Business decisions are only as good as the quality of the information used to make the decisions.

ü You never want to find yourself using technology to help you make a bad decision faster.

ü Characteristic of high-quality information include:

-         Accuracy

-         Completeness

-         Consistency

-         Uniqueness

-         Timeliness

UNDERSTANDING THE COST OF POOR INFORMATION

ü The four primary sources of low quality information include:

I.            Online customers intentionally enter inaccurate information to protect their privacy.

II.            Information from different systems have different entry standards and formats.

III.            Call center operators enter abbreviated or erroneous by accident or to save time.

IV.            Third party and external information contains inconsistencies, inaccuracies and errors.

ü Potential business effects resulting from low quality information include:

-         Inability to accurately track customers.

-         Difficulty identifying valuable customers.

-         Inability to identify selling opportunities.

-         Marketing to nonexistent customers.

-         Difficulty tracking revenue due to inaccurate invoices.

-         Inability to build strong customer relationship.

ü  Understanding the benefits of good information:

­s High quality information can significantly improve the chances of making a good decision.

s Good decision can directly impact an organization’s bottom line.

DECISION MAKING

> Reasons for the growth of decision making information systems:

- People need to analyze large amounts of information.

- People must take decision quickly.

- People must apply sophisticated analysis techniques, such as modeling and foresting, to make good decisions.

- People must protect the corporate asset of organizational information.

MODEL

> A simplified representation or abstraction of reality.

INFORMATION TECHNOLOGY SYSTEMS IN AN ENTERPRISE

> EXECUTIVES - EXECUTIVE INFORMATION SYSTEM (EIS).

> MANAGERS - DECISION SUPPORT SYSTEMS (DSS).

> ANALYSIS – TRANSACTION PROCESSING SYSTEMS (TPS).

EXECUTIVE INFORMATION SYSTEMS

> Executive information system (EIS) – a specialized DSS that supports senior level executives within the organization.

> Most EIS offering the following capabilities:

1. Consolidation– involves the aggregation of intelligent system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem.

2. Drill-down – enables, users to get details and details of details, of information.

3. Slice-and-dice – looks at information from different perspectives.

DECISION SUPPORT SYSTEMS

> Decision support systems (DSS) – models information to support managers and business professionals during the decision-making process.

> Three quantitative models used by DSS include:

1. Sensitively analysis – the study of the impact that changes in one (or more) parts of the model have on other parts of the model.

2. What-if analysis – checks the impact of a change in an assumption on the proposed solution.

3. Goal-seeking analysis – finds the inputs necessary to achieve a goal such as a desired level of output.

TRANSACTION PROCESSING SYSTEMS

>Moving up through the organizational pyramid users move from requiring transactional information to analytical information:

~ Transaction Processing System – the basic business system that serves the operational level (analysts) in an organization.

~ Online Transaction Processing (OLTP) – the capturing of transaction and event information using technology to (1) process the information according to defined business rules, (2) store the information, (3) update existing information to reflect the new information.

~ Online Analytical Processing (OLAP) – the manipulation of information to create business intelligence in support of strategic decision making.

ARTIFICIAL INTELLIGENCE

> INTELLIGENT SYSTEM – Various commercial applications of artificial intelligence.

> ARTIFICIAL INTELLIGENCE (AI) – Simulates human intelligence such as the ability to reason and learn.

~ Advantages: can check info on competitor.

~ The ultimate goal of AI is the ability to build a system that can mimic human intelligence

~ Four most common categories of AI include:

1. Expert System – computerized advisory programs that imitate the reasoning processes of expert in solving difficult problems.

2. Neural Network – attempts to emulate the way the human brain works -fuzzy logic – a mathematical method of handling imprecise or subjective information.

3. Genetic Algorithm – an AI system that mimics the evolutionary, survival-if-the-fittest process to generate increasingly better solutions to a problem.

4. Intelligent Agent – special-purposed-knowledge-based information system that accomplishes specific tasks on behalf of its users.

DATA-MINING

> Data-mining software includes many forms of AI such as neural networks and expert system.

> Common forms of data-mining analysis capabilities include:

1. Cluster Analysis.

2. Association Detection.

3. Statistical Analysis.

CLUSTER ANALYSIS

> CLUSTER ANALYSIS – To divide an information set into mutually exclusive groups such that the members of each group are as possible to one another and the different groups are as far apart as possible.

> CRM systems depend on cluster analysis to segment customer information and identify behavioral traits.

ASSOCIATION DETECTION

> Association detection reveals the degree to which variables are related and the nature and frequency of these relationships in the information.

> Market basket analysis such items as Web sites and checkout scanner information to detect customers’ buying behavior and predict future behavior by identifying affinities among customers’ choices of products and services.

STATISTICAL ANALYSIS

> STATISTICAL ANALYSIS performs such functions as information correlations, distributions, calculations and variance analysis.

> Forecast– predictions made on the basis of time-series information.

> Time-Series Information – time-stamped information collected at a particular frequency.

CHAPTER 7: STORING ORGANIZATIONAL INFORMATION

ReLaTiOnAL DaTaBaSe FuNdAmEnTaLs:-

vInformation is everywhere in an organization.

vInformation is stored in databases.

  §Database – maintains information about various types of objects (inventory), events (transactions), people (employees), and places (warehouses).

vDatabase models include: 

  §Hierarchical database model – information is organized into a tree-like structure (using parent/child relationships) in such a way that it cannot have too many relationships. 

  §Network database model – a flexible way of representing objects and their relationships. 

  §Relational database model – stores information in the form of logically related two-dimensional tables.

EnTiTiEs aNd AttRiBuTeS:- 

vEntity – a person, place, thing, transaction, or event about which information is stored. 

     §The rows in each table contain the entities. 

     §In Figure 7.1 CUSTOMER includes Dave’s Sub Shop and Pizza Palace entities. 

vAttributes (fields, columns) – characteristics or properties of an entity class. 

     §The columns in each table contain the attributes. 

     §In Figure 7.1 attributes for CUSTOMER include Customer ID, Customer Name, Contact Name.

KeYs aNd ReLaTiOnShiPs:- 

vPrimary keys and foreign keys identify the various entity classes (tables) in the database. 

   §Primary key – a field (or group of fields) that uniquely identifies a given entity in a table. 

   §Foreign key – a primary key of one table that appears an attribute in another table and acts to provide a logical relationship among the two tables. 

vPotential relational database for Coca-Cola:

Walk your students through the relational database model in Figure 7.1

To ensure your students are grasping the concepts, ask them to answer the following:

How many orders have been placed for T’s Fun Zone? 

Answer: 1 Order IT 34563.

How many orders have been placed for Pizza Palace? 

Answer:  None.

How many items are included in Dave’s Sub Shop’s two orders? 

Answer:  Order 34561 has 3 items and order 34562 has one item for a total of 4 items in both orders.

Who is responsible for distributing Dave’s Sub Shop’s orders? 

Answer:  Hawkins Shipping.

Which products are included in Order 34562? 

Answer:  300 Vanilla Coke. 

ReLaTiOnAL DaTaBaSe AdVaNtaGeS:- 

vDatabase advantages from a business perspective include: 

   §Increased flexibility. 

   §Increased scalability and performance. 

   §Reduced information redundancy. 

   §Increased information integrity (quality). 

   §Increased information security. 

InCrEaSeD FLeXiBiLiTy:- 

vA well-designed database should: 

  §Handle changes quickly and easily. 

  §Provide users with different views. 

  §Have only one physical view. 

                •Physical view – deals with the physical storage of information on a storage device. 

  §Have multiple logical views. 

                •Logical view – focuses on how users logically access information. 

InCreAsEd ScALaBiLiTy aNd PeRfOrMaNcE:- 

vA database must scale to meet increased demand,  while maintaining acceptable performance levels. 

   §Scalability – refers to how well a system can adapt to increased demands. 

   §Performance – measures how quickly a system performs a certain process or transaction.

ReDuCed InFoRmAtiOn ReDuNdAnCy:- 

vDatabases reduce information redundancy. 

    §Redundancy – the duplication of information or storing the same information in multiple places. 

vInconsistency is one of the primary problems with redundant information.

InCrEaSe InFoRmAtiOn InTeGriTy (QuAliTy):- 

vInformation integrity – measures the quality of information. 

vIntegrity constraint – rules that help ensure the quality of information. 

   

   §Relational integrity constraint - rule that enforces basic and fundamental information-based constraints.

   

   §Business-critical integrity constraint - rule that enforce business rules vital to an organization’s success and often require more insight and knowledge than relational integrity constraints.

InCreAsEd InFoRmAtiOn SeCuRiTy:- 

vInformation is an organizational asset and must be protected. 

vDatabases offer several security features including: 

   §Password – provides authentication of the user. 

   §Access level – determines who has access to the different types of information. 

   §Access control – determines types of user access, such as read-only access.

Database Management Systems:- 

vDatabase management systems (DBMS) – software through which users and application programs interact with a database.

Direct interaction :

>The user interacts directly with the DBMS.

>The DBMS obtains the information from the database.

Indirect interaction:

>User interacts with an application (i.e., payroll application, manufacturing application, sales application).

>The application interacts with the DBMS.

>The DBMS obtains the information from the database.

DaTa-DrIvEn WeB SiTeS:-

>A data-driven Web site is an interactive Web Site kept constantly updated and relevant to the needs of its customers through the use of a database. Data-driven Web sites are especially useful when the site offers a great deal of information, products, or services. Web site visitors are frequently angered if they are buried under an avalanche of information when searching a Web site. A data-driven Web site invites visitors to select and view what they are interested in by inserting a query, which the Web site then analyzes and custom builds a Web page in real-time that satisfies the query. The figure displays a Wikipedia user querying business intelligence and the database sending back the appropriate Web page that satisfies the user’s request.

>What would happen to a Web site that is not data-driven? 

    Answer:The users would need to continually update the Web site data manually as the business data is updated.  This would be a redundant effort and most likely result in errors and the Web site could quickly become out of sync with the business data.

DaTa DriVeN WeB SiTe AdVaNtaGeS:-

1. Development: Allows the Web site owner to make changes any time—all without having to rely on a developer or knowing HTML programming. A well-structured, data-driven Web site enables updating with little or no training.

2. Content management: A static Web site requires a programmer to make updates. This adds an unnecessary layer between the business and its Web content, which can lead to misunderstandings and slow turnarounds for desired changes.

3. Future expandability: Having a data-driven Web site enables the site to grow faster than would be possible with a static site.  Changing the layout, displays, and functionality of the site (adding more features and sections) is easier with a data-driven solution.

4. Minimizing human error: Even the most competent programmer charged with the task of maintaining many pages will overlook things and make mistakes. This will lead to bugs and inconsistencies that can be time consuming and expensive to track down and fix. Unfortunately, users who come across these bugs will likely become irritated and may leave the site. A well-designed, data-driven Web site will have ”error trapping” mechanisms to ensure that required information is filled out correctly and that content is entered and displayed in its correct format.

5.Cutting production and update costs: A data-driven Web site can be updated and ”published” by any competent data entry or administrative person. In addition to being convenient and more affordable, changes and updates will take a fraction of the time that they would with a static site. While training a competent programmer can take months or even years, training a data entry person can be done in 30 to 60 minutes.

6.More efficient: By their very nature, computers are excellent at keeping volumes of information intact. With a data-driven solution, the system keeps track of the templates, so users do not have to. Global changes to layout, navigation, or site structure would need to be programmed only once, in one place, and the site itself will take care of propagating those changes to the appropriate pages and areas. A data-driven infrastructure will improve the reliability and stability of a Web site, while greatly reducing the chance of ”breaking” some part of the site when adding new areas.

7. Improved Stability: Any programmer who has to update a Web site from ”static” templates must be very organized to keep track of all the source files. If a programmer leaves unexpectedly, it could involve re-creating existing work if those source files cannot be found. Plus, if there were any changes to the templates, the new programmer must be careful to use only the latest version. With a data-driven Web site, there is peace of mind, knowing the content is never lost—even if your programmer is.

DaTa-DriVeN BuSinEsS InTelliGeNcE:-

vBusiness Intelligence in a data-driven Web site:

>Companies can gain business intelligence by viewing the data accessed and analyzed from their Web site.  The figure displays how running queries or using analytical tools, such as a Pivot Table, on the database that is attached to the Web site can offer insight into the business, such as items browsed, frequent requests, items bought together, etc.

InTeGraTiNg InFoRmAtiOn
AmOnG MuLtiPlE DaTabAsEs:- 

vIntegration – allows separate systems to communicate directly with each other. 

  §Forward integration – takes information entered into a given system and sends it automatically to all downstream systems and processes. 
  
  §Backward integration – takes information entered into a given system and sends it automatically to all upstream systems and processes.

Forward Integration:

>Basically, all information flows forward along the business process. Sales enters the information when it is negotiating the sale (looking for opportunities). The information is then passed to the order entry system when the order is actually placed. The order fulfillment system picks the products from the warehouse, packs the products, labels boxes, etc. Once the order is filled and shipped, the customer is billed.

What would happen if users could enter order information directly into the billing system?

The systems would quickly become out-of-sync.  There might be bills for nonexistent orders, or orders that do not have any bills (if someone deleted a bill). For this reason organizations typically place a business-critical integrity constraint on integrated systems:  With a forward integration the information must be entered in the sales system, you could not enter information directly into the billing system.

>Integrations are expensive to build and maintain and difficult to implement. For these reasons many organizations only build forward integrations and use business-critical integrity constraints to ensure all information is always entered only at the start of the integration (one source of record).

Backward Integration:

>Basically, all information flows backward along the business process. Billing enters information and this information is passed back to the order system. The order fulfillment system passes the information back to the order entry system. The order entry system passes the information back to the sales system.

Why would an organization want to build both forward and backward integrations?

This allows users to enter information at any point in the business process and the information is automatically sent upstream and downstream to all other systems. For example, if order fulfillment determined that they could not fulfill an order (the product had been discontinued), they could simply enter this information into the database and it would be sent automatically upstream to the sales representative who could contact the customer and downstream to billing to remove the item from the bill.

Building a central repository specifically for integrated information:-

The above figure displays an example of customer information integrated using this method. Users can create, read, update, and delete in the main customer repository, and it is automatically sent to all of the other databases. This method does not follow the business process when building the integrations. Business-critical integrity constraints still need to be built to ensure information is only ever entered into the customer repository, otherwise the information will become out-of-sync.