Information Systems and Common Business Processes
Objectives
In this session, you will learn to:
Identify the supply chain framework
Identify planning strategies for a supply chain
Implement Information Technology in Supply Chain
management
Ver. 1.0 Slide 1 of 26
Information Systems and Common Business Processes
Building a Supply Chain
A supply chain is a linked set of resources and processes
that begins with the sourcing of raw material till the delivery
of end product to the final customer.
A strong supply chain framework synchronizes the product
and service supply with the demand at every stage.
A supply chain transaction occurs when the customer
demands travels back to the supplier in one full cycle.
The core processes of a supply chain are:
Production
Logistics
Sales and Marketing
Ver. 1.0 Slide 2 of 26
Information Systems and Common Business Processes
Building a Supply Chain (Contd.)
The support processes of a supply chain are:
Finance
Human Resource
Supply Chain stages:
A typical supply chain can be depicted in the following four
stages:
Stage1: The product is passed on to the manufacturer from the
supplier in the form of raw materials.
Stage2: The raw materials are processed and converted into
finished products.
Stage3: The finished products are sent to the distributors who
distribute the finished product to the retailer.
Stage4: The retailer sells it to the customer.
Ver. 1.0 Slide 3 of 26
Information Systems and Common Business Processes
Building a Supply Chain (Contd.)
The following data flow diagram depicts the stages in a
supply chain.
Microsoft Word
Document
Ver. 1.0 Slide 4 of 26
Information Systems and Common Business Processes
Supply Chain Decisions
Supply Chain Decisions:
Supply chain decisions are made across the following three
levels or phases:
Strategic phase: In this phase, organizations plan the supply chain
processes for the next several years.
Tactical Phase: In this phase, the basic design constraints
established in the strategic phase contribute to the decision-
making process like market, inventory policies, and promotional
marketing strategies.
Operational Phase: In this phase, the time under consideration is
weekly or daily, and the decisions are specific to the immediate
next step in the process.
Ver. 1.0 Slide 5 of 26
Information Systems and Common Business Processes
Supply Chain Decisions (Contd.)
The following figure depicts the mapping of decisions made
at various levels to maintain an effective and efficient supply
chain.
Ver. 1.0 Slide 6 of 26
Information Systems and Common Business Processes
Supply Chain Flow
Supply Chain Flow:
There are three types of flows across a supply chain:
Products or materials
Information
Money or finance
The following figure illustrates the supply chain flow.
Ver. 1.0 Slide 7 of 26
Information Systems and Common Business Processes
Supply Chain Flow (Contd.)
The successful management of supply chain flow depends on
the following factors:
Facility location
Inventory
Transportation
Information
Ver. 1.0 Slide 8 of 26
Information Systems and Common Business Processes
Challenges in Supply Chain Performance
Challenges in Supply Chain Performance: An organization
has to manage both internal and external challenges to
maximize its productivity.
Some typical internal challenges that organizations face in the
smooth functioning of a supply chain are:
Bullwhip Effect: Combination of variability and time delays in flow
of information up the supply chain leads to delay in flow of goods
and services down the supply chain creating a bullwhip effect.
Push and pull factors:
Pull: In this the consumer demand determines what finished goods,
work in process, and raw materials need to be supplied through the
supply chain and in what quantity.
Push: In this actions are speculative because they respond to
forecasted demand rather than actual demand.
Ver. 1.0 Slide 9 of 26
Information Systems and Common Business Processes
Challenges in Supply Chain Performance (Contd.)
The following figure depicts the Push and Pull factors.
Ver. 1.0 Slide 10 of 26
Information Systems and Common Business Processes
Challenges in Supply Chain Performance (Contd.)
Business trade-offs: The trade-off situations arise when targets or
goals that seem equally important cannot be achieved fully, at the
same time.
Organizational silos: The smooth functioning of the supply chain
depends on the smooth interaction of the division.
The external challenges encountered by an organization are:
Increasing product variety
Increasing customer demand
Globalization demands
Ver. 1.0 Slide 11 of 26
Information Systems and Common Business Processes
Forecasting Demand and Planning for Supply
Forecasting demand and planning for supply:
Demand forecasts form the basis for all strategic, tactical, and
operational decisions in a supply chain.
The components that affect forecasting include:
Past demand of the product
Lead time of the product
Plans for marketing and promotional activities
Economic situation
Competition
The different methods of demand forecast are:
Judgmental or qualitative forecasting: Where human subjectivity or
judgment drives the final forecasts
Causal forecasting: Where human subjectivity or judgment drives
the final forecasts
Ver. 1.0 Slide 12 of 26
Information Systems and Common Business Processes
Forecasting Demand and Planning for supply (Contd.)
Projective forecasting: Where historical information is used as a
reference to predict future demands
Simulative forecasting: Where customer choices are imitated to
arrive at the forecast results
Ver. 1.0 Slide 13 of 26
Information Systems and Common Business Processes
Aligning Strategies with Needs
Activities performed for maintaining the changing needs:
The following activities in a supply chain are performed to
accommodate changing needs in economic situations or
customer demands:
Managing demand and supply uncertainty
Maintaining safety or reserve inventory
Designing alternative distribution networks
Ver. 1.0 Slide 14 of 26
Information Systems and Common Business Processes
Efficiency and Cost Savings
Efficiency and Cost Savings:
Some key factors that contribute to organizational efficiency
and cost savings include:
Selecting the right source for product and service acquisition:
Evaluating the supplier performances to select the best-suited
supplier to buy materials and services.
Selecting the appropriate transportation method for product
deliveries: Choosing the appropriate transportation method to
move product. The costs that are incurred on transportation
include:
Vehicle-related costs incurred whether the vehicle is purchased or
leased
Depreciation costs incurred whether vehicles are in operation or not
Operating costs incurred on the amount of fuel used
Ver. 1.0 Slide 15 of 26
Information Systems and Common Business Processes
Efficiency and Cost Savings (Contd.)
Quantity-related costs incurred on the loading and the unloading of
goods
Overhead costs incurred on maintenance of the vehicle
The following figure depicts the method of balancing costs and
responsiveness.
Ver. 1.0 Slide 16 of 26
Information Systems and Common Business Processes
Efficiency and Cost Savings (Contd.)
Appropriate pricing of products: Some factors to be considered for
revenue management include:
Product values differ in different market segments
Demands vary with seasons and situations
Products sold vary in quantities from one customer to another
Products may perish or be wasted
Ver. 1.0 Slide 17 of 26
Information Systems and Common Business Processes
Efficiency and Cost Savings (Contd.)
Problem Statement 11.1:
Dreamwheels launched Xentra, the mini-luxury sedan. Owing
to the overwhelming initial response to the model, showrooms
from all over the world began doubling their orders every week.
However, three months after the launch, the manufacturing
units found it difficult to fulfill the sudden increase in demand.
Complaints about this poured from their distribution centers. A
closer examination at this problem revealed that the gap
between the required number of cars and the number
produced has been steadily increasing since the first month
itself. The outlets, which sold out the cars faster, had been
placing their orders on time but due to the lack of timely
delivery of the cars, they often lost out on potential customers.
Ver. 1.0 Slide 18 of 26
Information Systems and Common Business Processes
Efficiency and Cost Savings (Contd.)
Task:
Identify any five possible reasons related to inconsistency in
the supply chain management.
Ver. 1.0 Slide 19 of 26
Information Systems and Common Business Processes
Warehouse Management Systems
Warehouse Management Systems:
Some factors contributing to the complexity of automation of
SCM include:
Using the warehouses of different outsourced companies for
storage purposes
Purchasing raw materials from multiple suppliers
Managing several outlets manned by different franchisee
organizations
WMS perform the following tasks:
Inventory control
Shipping
Facility location management
Quality control
Order selection
Report generation
Ver. 1.0 Slide 20 of 26
Information Systems and Common Business Processes
Warehouse Management Systems (Contd.)
Problem Statement 11.2:
Trendshop Inc., a furniture manufacturing and retail chain with
an online storefront has recently expanded its business to
include the far-east segment.
A central database is installed to streamline its logistics and
distribution processes. However, the company sees the need
to use integrated IS support for warehouse management as
most of the catalogue items are large and bulky and involve
planned transportation activities. For this, a WMS was adopted
for managing the shop floor and storage space utilization. An
optimized inventory system will also facilitate speedy delivery
to the online customers.
Ver. 1.0 Slide 21 of 26
Information Systems and Common Business Processes
Warehouse Management Systems (Contd.)
Task
Create a supply chain flow diagram to indicate an efficient
goods flow for the following tasks:
Goods supplied from the Italian manufacturing unit to a retail outlet
in Italy.
Request fulfillment for an item from the [Link] website to
an online customer routed through a warehouse.
Optimize item storage capacity in one of Trendshop warehouses
where trucks carry the goods from the warehouse to the retail
outlets and also bring in materials from the various supplier units
into the warehouse. In this case, show how the IS support is being
utilized for determining the inventory levels to be stocked out and
then levels to be stocked in, after which the necessary action is
taken.
Ver. 1.0 Slide 22 of 26
Information Systems and Common Business Processes
Summary
In this session, you learned that:
A typical supply chain consists of supply chain stages where
the product travels from the initial supplier to the customer, and
on the way passes through the manufacturer, distributor, and
the retailer.
Three constants that flow through the supply chain include:
Products or materials
Information
Finance
The factors that influence the supply chain are:
Facility location
Inventory
Transportation
Information
Ver. 1.0 Slide 23 of 26
Information Systems and Common Business Processes
Summary (Contd.)
The challenges to a supply chain are:
The bullwhip effect
Push and pull factors
Organizational silos
The organizational pressures that are a challenge to a supply
chain are:
Increasing product variety
Increasing customer demands
Globalization demands
The first supply chain strategy is forecasting demand and
planning the supply where the following factors are studied:
Past demand of the product
Lead time of the product
Plans for marketing and promotional activities
Economic situation
Competition
Ver. 1.0 Slide 24 of 26
Information Systems and Common Business Processes
Summary (Contd.)
Forecasting techniques include:
Judgmental or qualitative forecasting
Causal forecasting
Projective forecasting
Simulative forecasting
In aligning supply chain strategies with changing needs, the
activities are:
Managing demand and supply uncertainty
Maintaining safety or reserve inventory
Designing alternative distribution networks
In preserving efficiency and cost savings, the contributing
factors are:
Selecting the right source for product and service acquisition
Selecting the appropriate transportation method for product
deliveries
Appropriate pricing of products
Ver. 1.0 Slide 25 of 26
Information Systems and Common Business Processes
Summary (Contd.)
For warehouse management, IT supports in the following
areas:
Inventory control
Shipping
Facility location management
Quality control
Order selection
Report generation
Ver. 1.0 Slide 26 of 26
