SCM – some definitions
Supply chain management (SCM) The coordination of all supply activities of an organization from its suppliers and partners to its customers. •
Upstream supply chain Transactions between an organization and its suppliers and intermediaries, equivalent to buy-side e-commerce. •
Downstream supply chain Transactions between an organization and its customers and intermediaries, equivalent to sell-side e-commerce.
Members of the supply chain
(a) simplified view (b) including intermediaries
A typical supply chain
(an example from the B2B company)
A history of SCM at BHP Steel
. Early implementation 1989-1993. This was a PC-based EDI purchasing system.
(1) reduce data errors to 0,
(2) reduce administration costs,
(3) improve management control,
(4) reduce order lead time.
rationalization of suppliers to 12 major partnerships (accounting for 60% of invoices). –
80% of invoices placed electronically by 1990.
Seven thousand items were eliminated from the warehouse, to be sourced directly from suppliers, on demand. –
Shorter lead times in the day to day – from 10 days to 26 hours for items supplied through a standard contract and from 42 days to 10 days for direct purchase items. •
2. Electronic trading gateway 1990-1994.
Also EDI-based, but involved a wider range of parties both externally (from suppliers through to customers) and internally (from marketing, sales, finance, purchasing and legal). •
Provide a combined upstream and downstream supply chain solution to bring benefits to all parties. •
the difficulty of getting customers involved – only 4 were involved after 4 years, although an industry standard method for data exchange was used. This was surprising since suppliers had been enthusiastic adopters. From 1994, there was no further uptake of this system.
3. The move towards Internet commerce 1996 onwards.
The Internet was thought to provide a lower cost alternative to traditional EDI for smaller suppliers and customers, through using a lower cost value-added network. •
Extend the reach of electronic communications with supply chain partners. –
Broaden the type of communications to include catalogue ordering, freight forwarding and customer ordering. •
Strategy divided transactions into 3 types:
(1) Strategic (high volume, high value, high risk) – a dedicated EDI line was considered most appropriate. –
(2) Tactical (medium volume, value and risk) – EDI or Internet EDI was used. –
(3) Consumer transactions (low volume, value and risk) – a range of lower cost Internet-based technologies could be used. •
One example of the benefits has been reducing test certificates for products from $3 to 30 cents. •
The main barriers to implementation at this stage have been business issues, i.e. convincing third parties of the benefits of integration and managing the integration process.
Push and pull approaches to supply chain management
Figure 6.3 Push and pull approaches to supply chain management
Two alternative models of the value chain.
Figure 6.4 Two alternative models of the value chain: (a) traditional value chain model, (b) revised value chain model
Porter and Millar (1985) propose the following five-step value chain process. •
Step 1. Assess the information intensity of the value chain •
Step 2. Determine the role of IS in the industry structure (for example banking will be very different from mining) •
Step 3. Identify and rank the ways in which IS might create competitive advantage (by impacting one of the value chain activities or improving linkages between them) •
Step 4. Investigate how IS might spawn new businesses
Step 5. Develop a plan for taking advantage of IS. A plan must be developed...
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