MD254: E-Service Operations Management

1
MD254 E-Service Operations Management

• Order Fulfillment and Forward Supply Chain
  Processes

2
Agenda

• Background
• Challenges of Order Fulfillment in e-Services
• Order Fulfillment Best Practices
• Supply Chains
• Supply Chain Components
• Supply Chain Problems
• e-Service Supply Chain Best Practices
• Supply Chain Metrics
• Supply Chain Design
• Extending SCM Concepts to E-Service Operations
• Supply Chain Modeling Evaluation
• Supply Chain Technology

3
Background
4
Background

• Supply Chains
• Concept of a supply chain is relatively new
• Prior to 1996, very few management or engineering
  schools had courses on supply chain management
  (SCM)

5
Background

• Bad Organizational Performance can be Caused by
  Supply Chain Uncertainties
• Supplier delivery performance
• Manufacturing reliability
• Customer demand variability

6
Background
Supply Chain for Physical Goods
Material Transfer Information Transfer
Recycling/ Remanufacturing
Suppliers
Process and Product Design
Manu-facturing
Distri-bution
Retailing
Customer
Customer Service
7
Background

• Common Strategies for Managing Supply Chains
• Holding buffer inventories
• Postponement of product customization/final
  manufacturing steps
• Better quality control (TQM)
• Use Information Technology to track supply chain
  activities

8
Background

• Supply Chain History
• Previous stumbling blocks that impeded Supply
  Chain integration
• high transaction costs between partners
• poor information availability
• challenges of managing complex interfaces between
  functional organizations

9
Background
Supply Chain for Mobile Services
Material Transfer Information Transfer
Suppliers
Administrative Headquarters Service Design
RegionalOffices
MobileWorkers
Customer
Customer Service
10
Background

• Challenges in Person-to-Person Service Supply
  Chains
• Value creation usually occurs at customers site
• Service worker travels to customer lost/reduced
  productivity
• Service worker may be expected to use discretion
  to customize service
• Service is perishable if it is not consumed

11
Background

• Scope of Supply Chain Topics
• Customer Facing Internal
• Customer Value and SCM
• Web-centric product design
• Forecasting and inventory management in B2C
• Order fulfillment and returns management in B2C

12
Background

• Scope of Supply Chain Topics
• Supplier Facing
• Coordinated product design and supply chain
  design
• Integration of supply chain planning and
  procurement
• Logistics network configuration
• Order fulfillment and returns management in B2B
• Distribution strategies
• Strategic alliances
• Models for B2B exchanges
• Auctions analysis of auction properties

13
Background

• Scope of Supply Chain Topics
• IT Related
• Information technology for SCM
• Decision Support Systems (DSS) for SCM
• Web services frameworks and technologies
• Microsofts .NET technology
• Suns J2EE technology
• Open Source technologies

14
Supply Chains
15
Supply ChainsWhat is a Supply Chain?
Porters Value Chain
Firm Infrastructure
Human Resources Management
Technology Development
Procurement
Profit Margin
Inbound Logistics
Outbound Logistics
Marketing Sales
Operations
Service
16
Supply ChainsWhat is a Supply Chain?
Value Chain of Supplier
Value Chain of Buyer
17
Supply ChainsWhat is a Supply Chain?
Suppliers Virtual Value Chain
Buyers Virtual Value Chain
Profit Margin
Profit Margin
Information Flow
Information Flow
Value Chain of Buyer
Value Chain of Supplier
Profit Margin
Profit Margin
18
Supply Chain Components
19
Supply Chain ComponentsComponents of a Supply
Chain?
Buyers Virtual Value Chain
Suppliers Virtual Value Chain
Digital Content Networks
Digital Content Networks
Value Chain of Buyer
Value Chain of Supplier
Networks of Physical Objects Networks of Service
Providers
Networks of Physical Objects Networks of Service
Providers
20
Supply Chain ComponentsComponents of a Supply
Chain?

• Supply chain is a network of organizations that
  are involved, through upstream and downstream
  linkages, in the different processes and
  activities that produce value in the form of
  products and services in the hands of the
  ultimate customer. (Christopher, 1998)
• Supply chain components
• Two or more legally separated organizations
• Material, information, and financial flows
• Firms producing objects
• Logistics service providers
• Ultimate customer

21
Supply Chain Problems
22
Supply Chain Problems

• Supply Chain Problems
• Inventory
• Work of the devil
• Holding costs
• Risk of obsolescense
• Quality problems hidden
• The Bullwhip Effect

23
Supply Chain ProblemsThe Bullwhip Effect
Huge Variation in Orders and Inventories
A Small Demand Shift
Leads To
Retailer
Distributor
Wholesaler
Huge Variation in On-Hand Inventory and
Manufacturing
The Bullwhip Effect
Manufacturer
24
Supply Chain ProblemsCauses of the Bullwhip
Effect

• Causes of Bullwhip Effect
• Demand Signal Processing
• Messed up information about stock in pipeline,
  changes in safety stocks, lead times between
  ordering and production
• Rationing Game
• Organizations may ration their inventory to best
  customers
• This may result in customers placing multiple
  orders, to ensure that they get something
• This distorts total system-wide demand
• Order Batching
• Customers order in larger quantities (to save
  ordering costs) than they consume in a period
• Price Variations
• Promotional pricing affects forward buying,
  causing retailers to buy far before customers
  actually consume

25
Supply Chain ProblemsHistorical Inventory
Management

• Inventories
• Independent demand
• Multiple Period Demands
• Assume demand pattern. Forecast when you will
  stock out. At the appropriate time, order some
  order quantity (or up to some quantity), so that
  with the amount you receive at a future date --
  plus the buffer inventory (safety stock) -- you
  will have a small probability of stocking out
• Single Period Demand -- paperboy problem
  fashion goods
• Order to balance costs of overage against costs
  of underage -- giving maximum profit
• A/B/C -- some inventories more important or
  costly than others
• Monitor costly inventories closely
• Dont monitor cheap inventories, just hold lots
  of buffer stock
• Dependent demands
• MRP/MRP II
• ERP/Extended ERP

26
Supply Chain ProblemsDrawbacks of Inventory
Methods

• Inventories
• Independent demand
• Multiple Period Demands, Single Period Demand,
  A/B/C
• Paper orders
• Misplaced products
• Inaccurate inventories
• Human errors
• Cycle Counting -- strategies to count everything
  in warehouse (e.g., 1/N of warehouse at a time,
  over N periods) facilitates balancing the
  objectives of different inventory methods
• Dependent demands
• MRP/MRP II/ERP/Extended ERP
• Stacks of paper production schedules
• Paper order releases
• Change reports -- to previous schedules
• System nervousness -- when allowing updating of
  schedules

27
Challenges of Order Fulfillment in e-Services
28
Challenges of Order Fulfillment in e-Services

• Vision true supply chain management through the
  transparent, real-time connection of all supply
  chain links
• Order Procurement and Order Fulfillment processes
  are evolving and being integrated and coordinated
• Competition is changing
• Old Firm vs. Firm
• New Supply Chain vs. Supply Chain

Source Fitzgerald, K., e-Procurement at 100
mph, Supply Chain Management Review, May/June
2000
29
Challenges of Order Fulfillment in e-Services
e-Commerce
e-Procurement
Supplier
Customer
e-Enabled Firm
Customer
Supplier
e-Collaboration
30
Challenges of Order Fulfillment in e-Services
e-Commerce e-Fulfillment
e-Procurement
Supplier
Customer
e-Enabled Firm
B2B Exchange
Drop Shipper
Customer
Supplier
e-Collaboration
31
Challenges of Order Fulfillment in e-Services
Four Ways to Play in B2B Exchanges
LaunchEnterprisePortal
Build Private Exchange
High
SupplyChainPower
JoinCustomersExchange
ChooseIntermediary
Low
High
Low
Capabilities for Online Interaction
Source Hoffman, et al., The unexpected return
of B2B, The McKinsey Quarterly, 3, 2002
32
Challenges of Order Fulfillment in e-Services

• Processes in an e-Service Supply Chain
• Order Procurement
• Website takes the order want to design a
  website that will do so efficiently and
  effectively
• Order Fulfillment
• Digital Service website delivers the service
  experience
• Goods or Offline Services physical processes
  fulfill on the promises made during order
  procurement

33
Challenges of Order Fulfillment in e-Services

• Processes in an e-Service Supply Chain
• Collaboration
• Design of products collaboratively between
  customers, suppliers, and our company
• Service Recovery
• Fulfillment processes sometimes fail
• Want to design a website that will satisfy and
  recover the customer quickly and effectively

34
Challenges of Order Fulfillment in e-Services
junk
Reverse Supply Chain
Recycle/Remanufacturing
reorder
Service Recovery
e-Enabled Firm
replace
return
e-Procurement
e-Fulfillment
Customer
Supplier
e-Collaboration
35
Challenges of Order Fulfillment in e-Services
Source Kokkinaki, et al., An Exploratory Study
on Electronic Commerce for Reverse Logistics,
Supply Chain Forum, 2000
36
Challenges of Order Fulfillment in e-Services
Source Kokkinaki, et al., An Exploratory Study
on Electronic Commerce for Reverse Logistics,
Supply Chain Forum, 2000
37
Challenges of Order Fulfillment in e-Services

• What Fulfillment is Promised by the e-Service?
• Good
• Package To Order
• Dans Chocolates
• Make To Order
• Levis customized jeans, Nike customized shoes
• Assemble to Order
• Dell Computers
• Sell inventory on-hand/on-order
• Offline Service
• Where, how, who?

38
Challenges of Order Fulfillment in e-Services

• Geographic Proximity
• short/long physical distance
• Organizational Proximity
• high/low vested interests in the success of ones
  trading partners
• Cultural Proximity
• similar/dissimilar language, laws, business
  standards, ethics
• Electronic Proximity
• high/low ability to exchange information
  electronically

Source Fine 1998, Rosenthal 1992 (ECOM 2002)
39
Challenges of Order Fulfillment in e-Services

• Last Mile Problem
• How to deliver digital services across the last
  mile of telecommunications wire
• Analog Last Mile Problem
• How to deliver products (atoms) to the
  home/office
• How to deliver services performed by people to
  the home/office

Source M. Sawhney, The Battle for the Analog
Last Mile, mohansawhney.com
40
Challenges of Order Fulfillment in e-Services

• Strategies for Product Last Mile Problem
• Caching aggregating bulk across households at
  local collection centers
• Analog Set-Top Box aggregating bulk across
  categories for a home to achieve scope economies
• POTS use existing fulfillment infrastructure
• High Bandwidth speedy delivery of products
  within a short time window
• Overbuild build state of the art capacity, and
  hope the costs dont drag you under

Source M. Sawhney, The Battle for the Analog
Last Mile, mohansawhney.com
41
Challenges of Order Fulfillment in e-Services

• Problems of Service Last Mile
• Certification mom and pops dont have national
  reputation or brand equity difficult to assure
  quality and convince people to buy
• Scale most services are traditionally delivered
  to a small geographical area of customers low
  scale
• Fragmentation service specialists lead to many
  transaction costs for customers, leading to
  possibility of competitors with one-stop shop
  services that aggregate many services together

Source M. Sawhney, The Battle for the Analog
Last Mile, mohansawhney.com
42
Challenges of Order Fulfillment in e-Services

• Priority of Customers
• Some customers are worth more to us than others
• Higher customer value to us over the length of
  relationship with the customer
• Higher per-transaction value
• Customers needing next-day delivery (and willing
  to pay a premium) vs. standard delivery
• Fulfillment process may need to be made
  conditional upon whether the individual customer
  is a High Priority or a Low Priority customer

43
Challenges of Order Fulfillment in e-Services

• Trust
• Buyers and sellers in B2C and B2B e-service
  transactions want to be able to deal with trading
  partners that are honest
• Trust is hurt by opportunistic behavior lies,
  overcharges, fraudulent use of information, etc.
• To build trust, an e-Service needs to implement
  trust-enhancing mechanisms (e.g., encryption),
  service attributes (e.g., privacy policy), and
  traditional person-to-person relationships
• Difficult to ensure honesty and good intentions
  via electronic transactions

44
Challenges of Order Fulfillment in e-Services

• Drivers of Trust
• Pre-Interaction Filters
• Customer brings reputation with them about their
  reliability to pay
• Seller brings brand reputation, ratings from
  third parties, etc.
• e-Service Interface Properties
• Graphic design, layout, usability of service
  system
• Information Content
• Information about products and services offered
• Information about privacy, security, etc.
• Relationship Management
• Frequent, personalized vendor-buyer interactions
  over time

Source ECOM, 2002, p. 79, Sheppard and Sherman
(1998)
45
Order Fulfillment Best Practices
46
Order Fulfillment Best Practices

• Goals of order procurement and order fulfillment
  are simple
• What do online shoppers want? (BCG)
• Free delivery 95
• Free returns if I am unhappy with product 91
• Guaranteed delivery time 75
• Quicker delivery 69
• Site has a store located near me 46
• Proper fulfillment is whatever serves the
  customer best while preserving adequate profit
  margins to continue in business at a high level
  of customer satisfaction

47
Order Fulfillment Best Practices

• Designing and implementing e-service applications
  for successful order fulfillment can be another
  matter
• Central problems
• Enterprise information and customer information
  must be integrated into a unified whole
• New kinds of customer behavioral information must
  be captured and processed
• Customers and employees must share a common
  knowledge base
• All organizational functions must have access to
  a consistent picture of the customer relationship

48
Order Fulfillment Best Practices

• e-Service Order Fulfillment Processes
• Notification Process
• Acknowledgement and confirmation
• Instantaneous after purchase
• Information fulfillment of digital
  service-product attributes
• Low cost delivery of information
• Instant gratification for customer
• Picking and Packing
• Delivery
• Reconciliation/settlement of credit card payment
  request
• Post-delivery activities that ensure customer
  satisfaction
• Returns
• Exchanges

Source Bayles, 2001
49
Order Fulfillment Best Practices

• Order Fulfillment Recommendations
• Build an order confirmation system into your
  service process to ease customer worries
• Grant customers online access to production order
  process and shipping data
• Build (or outsource) warehouse, fulfillment, and
  product delivery chains that create as much
  customer contentment on the back end of your
  service process as on the front end
• Focus on fast, efficient fulfillment
• Shipping charges
• Probably dont want to make them free
• Perhaps free for
• Large purchase size above some dollar amount
• Loyal, high-value customers
• In-store pickup

Source e-Service, Chap. 8
50
Order Fulfillment Best Practices

• Order Fulfillment Recommendations
• Integrate online bill payment into the
  fulfillment process
• Return policies make the return process as easy
  as the process for buying
• Synchronize returns between digital and physical
  storefronts
• Supply on-the-spot return authorization numbers
• Be careful with using purchase information for
  permission marketing
• Where possible, employ online post-sale self-help
• Use post-transaction web surveys to gather
  customer feedback and continually improve service
  performance

Source e-Service, Chap. 8
51
Order Fulfillment Best Practices

• Fulfillment Tasks for e-Businesses
• GOAL Achieve total end-to-end visibility
  throughout the supply chain
• Must deal with international pricing/taxation and
  shipping issues
• Pricing customized to location of customer
• Shipping agents to deal with tax issues
• Local fulfillment center
• Provide online shipping tools
• Link web site to package carriers host systems
• FedEx, UPS online tracking tools with APIs
• USPS eventually will have tracking tools
• Integrate shipping, tracking and distribution
  systems with ERP systems
• FedEx, UPS systems with APIs for doing so

52
Order Fulfillment Best Practices

• Fulfillment Outsourcing
• Potential benefits
• Speed to market
• Deploy e-Service quickly
• No capital investment in fulfillment
• Level of service provided by outsourcer may be
  better than a start-ups fulfillment service
• Scalability
• Higher when using an large fulfillment service
• Focus
• On business competencies, not on shipping
• Lower costs
• No need to hire shipping staff
• Focus on the customer
• Capitalize on efficiencies

53
Order Fulfillment Best Practices

• Drop Shipping
• A type of fulfillment outsourcing
• Many retailers together use a single drop shipper
  that holds all of their similar inventories
• Cost savings on holding inventories
• Hedge against stock-outs
• Inventory Rationing Strategies
• High Priority Customer try to fulfill from
  internal inventory if possible
• Low Priority Customer fulfill from drop
  shipper

54
e-Service Supply Chain Best Practices
55
e-Service Supply Chain Best Practices

• Workflow Support
• Plan out steps that are required to accomplish
  each required activity at each stage of the
  supply chain
• Security and Disaster Recovery
• Plan for operational failures
• Document procedures that will be followed to keep
  the supply chain working during disasters
• Change Management
• Need processes in place to promulgate changes to
  e-service throughout the supply chain wherever
  the changes affect some aspect of the e-service
  operations

Source Janenko, P., e-Operations The View from
the Inside, Chapter 5, e-Operations Management,
2002
56
e-Service Supply Chain Best Practices

• Rocket Science Retailing
• Retailer objective right product, right place,
  right time, right price
• Historically, the opposite has happened
• most inventory planning is for long life-cycle
  products
• online and offline stockouts
• increasing markdowns
• supply chain lead times often are so long, that
  forecasts of demand only confirm that the product
  will tank, and nothing can be done about it
• Rocket Science Retailing
• create a high-tech forecasting system supported
  by a flexible supply chain

Source Fisher et al., Harvard Business Review,
July/Aug 2000)
57
e-Service Supply Chain Best Practices

• Rocket Science Retailing
• Forecasting
• Update forecasts based on early sales data
• Track and predict forecasting accuracy
• Get product testing right -- make it scientific
• Use a variety of forecasting approaches
• Supply Chain Speed
• Work with supply chain partners
• Reserve production capacity hold generic
  raw-material inventories that can later be
  developed into finished product
• Troubleshoot production problems, design for easy
  manufacturability
• Make decision making flexible empower employees

Source Fisher et al., Harvard Business Review,
July/Aug 2000)
58
e-Service Supply Chain Best Practices

• Rocket Science Retailing
• Inventories
• Need to track stockouts
• UNFORTUNATELY, no commercial software available
  to track stockouts
• Accurate, Available Data
• Most retailing data inaccurate and inaccessible
  to employees
• Store-level sales data usually incorrect
• Why (1) clerk scanning one item multiple times
  to ring up multiple slightly different items, (2)
  like-for-like returns, without scanning in return
  and exchange
• Inventory counts usually off warehouse ships
  wrong item, supplier shorts, case-pack dimensions
  change without changing in inventory system
• Most companies dont keep enough data
• kills their ability to forecast time-series of
  demand accurately
• aggregation of data kills knowledge at SKU level
• lack of SKU kills ability to customize supply
  chain and shipments

Source Fisher et al., Harvard Business Review,
July/Aug 2000)
59
e-Service Supply Chain Best Practices

• Manufacturing for Lean Retailing (Abernathy et
  al., HBR, Nov/Dec 2000)
• Historical
• large order at beginning of period
• manufacturers treated SKUs within a product line
  all the same
• Lean Retailing
• Manufacturers must replenish retailers stocks on
  an ongoing basis tend to accomplish by holding
  extra inventory get stuck with inventory if
  styles change risk of getting stuck increases
  with product proliferation
• Solution
• Need to differentiate between SKUs -- think of
  product lines as portfolios of distinct goods
• Need to rethink sourcing strategies, reallocating
  manufacturing across
• off-shore sources (high volume, low-variance
  demands)
• close-to-market sources (low volume,
  high-variance demand)

60
e-Service Supply Chain Best Practices

• The Wearable Warehouse, Business 2.0
• VISION
• Turn the supply chain into the warehouse
• reliable inventory numbers
• better order fulfillment
• security reducing in-transit theft (in turn,
  improving on-hand data)
• accurate tracking of goods
• Humans (networked objects) provide services to
  the system
• Essentially automated Cycle Counting
• Wireless IS implements strategy for what item
  should be counted when
• Distributed, heterogeneous objects inventory
  containers report what they contain and where
  they are, to update system information

61
Supply Chain Metrics
62
Supply Chain Metrics

• Customer Service Metrics
• Quoted customer response time
• Percent on-time completion
• Delivery process on-time
• Cost of late orders
• Number of late orders
• Asset Metrics
• Monetary value
• Inventory turnover
• Speed Metrics
• Quoted customer response
• Cycle time reduction
• Supply chain cycle time

63
Supply Chain Design
64
Supply Chain Design

• Research in Supply Chain Design and Management
• Stretches back to 1940s/1950s
• Prior to 1990s, most SCM research was for
  simple material flows and transportation
• Most complex optimal policy for a
  single-product, single-stage, capacitated SC with
  a stationary demand process
• Simple multi-stage and/or multi-product supply
  chain models were computationally intractable
• First mathematical modeling papers with
  computational results were published in 1991
• Start of modern supply chain management research

65
Supply Chain Design

• Research in Supply Chain Design and Management
• Conceptual SCM Research
• Porters Value Chain Model (1985)
• Fines Clockspeed (1998) Approach

66
Supply Chain Design

• Clockspeed (Charles Fine, MIT)
• Biologists study fruit flies because their fast
  rates of evolution permit rapid learning that can
  then be applied to understanding the genetics of
  slower-clockspeed species -- like humans.
• Managers should study industrial equivalents of
  fruit flies
• Fast clockspeed industries
• Internet services
• personal computers
• multimedia entertainment

67
Supply Chain Design

• Clockspeed (Charles Fine, MIT)
• The ultimate core competency of an organization
  is supply chain design, which I define as
  choosing what capabilities along the value chain
  to invest in and develop internally, and which to
  allocate for development by suppliers.
• Fast-clockspeed supply chain characteristics
• rapidly evolving world
• designing and redesigning firms chain of
  capabilities
• objective is a series of competitive advantages
  -- often quite temporary

68
Supply Chain Design

• Clockspeed (Charles Fine, MIT)
• Computer-industry motivated principles about the
  design and evolution of supply chains
• Beware of Intel Inside
• IBM employed modular supply chain design (Intel,
  MS DOS)
• power in the chain, and financial rewards, had
  shifted upstream
• since most modern products are largely computer
  components and electronics, they potentially fall
  prey to same forces
• Supply Chain Double Helix
• oscillation of supply chain structure
• Three-Dimensional Concurrent Engineering
• concurrent design of capabilities (product,
  process, supply chain)

69
Supply Chain Design
Modular Product, Horizontal Industry
Integral Product, Vertical Industry
Niche Competitors
Technical Advances
High-Dimensional Complexity
Supplier Market Power
Pressure to Dis-Integrate
Pressure to Integrate
Proprietary System Profitability
Organizational Rigities
Supply Chain Double Helix
(Charles Fine, Clockspeed, 1998)
70
Supply Chain Design
Recipe, Unit Process
PRODUCT
PROCESS
Technology, Process Planning
Performance Specifications
Details, Strategy
Product Architecture, Make/Buy
Time, Space, Availability
Manufacturing System, Make/Buy
3-D C. E. Supply Chain Overlapping Responsibiliti
es
SUPPLY CHAIN
(Charles Fine, Clockspeed, 1998)
71
Supply Chain Design
3-D C. E. Supply Chain Concurrency Model
PRODUCT
PROCESS
SUPPLY CHAIN
Design Detailed Performance Specifics and
Functions
Manufact. System Functional Cellular
Architecture Modular vs. Integral
Unit Processes Technology Equipment
Supply Chain Architect. Set of Organizations and
Allocation of Tasks
Logistics Coord. System Autonomous vs. Integrate
d
Focus
Technology
(Charles Fine, Clockspeed, 1998)
Architecture
72
Supply Chain Design

• Clockspeed (Charles Fine, MIT)
• Prediction
• supply chain design as a strategic precursor to
  supply chain management will only increase in the
  decade to come as industry clockspeeds continue
  to accelerate, and the half-lives of many
  capabilities in our existing supply chains need
  replacement and/or upgrading

73
Supply Chain DesignGuiding Principles

• Align (a la 3-D Concurrent Engineering)
• Product
• Process
• Supply Chain

74
Extending Supply Chain Concepts to e-Service
Operations
75
e-Service Supply ChainsConceptual Frameworks
Process Control
Service-Product
Static Mechanization
Dynamic Intelligence
Static
Dynamic
Unique Items
Niche Need
Common Items
Broad Need
(Heim and Sinha, 2001)
(Jaikumar, 1994)
?
76
e-Service Supply ChainsConceptual Frameworks
Evolution
Coming Stable, selective supply chain
relationships Few suppliers/customer
flows (Reliable suppliers, Loyal customers)
Large, steady flow volumes Geographic proximity
Past Many suppliers/customer flows Flow volumes
small and sporadic
(Schonberger, World Class Manufacturing The Next
Decade, 1996)
77
e-Service Supply ChainsConceptual Frameworks
Relationship Speedy e-Service Communication
Network Design, Control Management
Supply Chain Control
Static
Dynamic
Unique Items
Li Fung
Common Items
Covisint
Relationship
Relationship Speedy e-Service Communication
78
e-Service Supply ChainsConceptual Frameworks

• Business 2.0, Kalakota Robinson, 2001
• First Generation Communities, Storefronts, and
  RFP/RFQ Facilitators
• Second Generation Virtual Distributors and
  Auction Hubs
• Third Generation Collaborative Trading Hubs
• end-to-end management of their supply chains
• Industry Consortiums Joint-Venture Procurement
  Hubs
• Covisint -- automotives
• Orbitz.com -- airlines

79
e-Service Supply ChainsConceptual Frameworks
Process Control
Service-Product
Static Mechanization
Dynamic Intelligence
Static
Dynamic
Niche Need
Unique Items
Common Items
Broad Need
Supply Chain Control
Static
Dynamic
Unique Items
Common Items
80
Services
Goods
e-Service
49 262,144 possible design positions
Digital Content
81
Supply Chain Modeling and Evaluation
82
Supply ChainsSupply Chain Structures

• e-Fulfillment
• Step 1 Model Supply Chain Process
• Example Furniture Industry

Traditional Furniture Supply Chain
Manufacturing
Ship to Retail
Inventory at Retail
Repair Damage
Local Shipping
Assembly at Home
83
Supply ChainsSupply Chain Structures
Pure e-Tailer Furniture Supply Chain
Manufacturing
Long Distance Shipping
Local Shipping
Assembly at Home
Repair Damage
Pure e-Tailers with Warehouses Furniture Supply
Chain
Manufacturing
Ship to Warehouse
Inventory at Warehouse
Repair Damage
Local Shipping
Assembly in Home
84
Supply ChainsSupply Chain Structures
Manufacturer Direct Furniture Supply Chain
Manufacturing
Long Distance Shipping
Local Shipping
Assembly at Home
Repair Damage
Retailers On The Web Furniture Supply Chain
Manufacturing
Ship to Retail
Inventory at Retail
Repair Damage
Local Shipping
Assembly at Home
85
Supply ChainsSupply Chain Evaluation

• e-Fulfillment
• Step 2 Back to the Basics Evaluate Cost,
  Quality, Flexibility, Delivery
• Analyze supply chain characteristics -- basic
  operations strategies -- based on knowledge of
  product and process characteristics in that
  industry
• Determine if there exists a dominant strategic
  position compared to existing position(s) of
  incumbents
• (Cdom, Qdom, Fdom, Ddom) better than (Cx, Qx,
  Fx, Dx) for all design positions X

86
Supply ChainsSupply Chain Evaluation
Possibly Better
Possibly Worse

• e-Fulfillment
• Furniture Industry

Relative Cost of Returns
Cost of Inventory
Cost of Repair
Cost of Shipping
Cost of Order Capture
Cost of Quality
Traditional Retailer
L M L L
H L
Pure e-Tailer
H L H H
M H
e-Tailer w/ Warehouse
H M M M
M M
Retailer on the Web
L M L L
H M
87
Supply Chain Technology
88
Supply Chain TechnologyAdvanced Planning Systems
Procurement
Production
Distribution
Sales
Strategic Network Planning
long-term
Advanced Planning System (APS) Software Modules
Master Planning
mid-term
Demand Planning
Production Planning
Distribution Planning
Material Requirements Planning
Demand Fulfillment Available-to-Promise
Transport Planning
Scheduling
short-term
89
Supply Chain Technology Advanced Planning Systems
Procurement
Production
Distribution
Sales
Strategic Network Planning
Configuration
Simulation Results
Master Planning
Forecast
Purchasing Quantities
Capacity Booking Distn Quant./Alloc.
Capacity Booking Stock Levels
Coordination and Data Flows of APS Modules
Demand Planning
Lot Sizes
Forecast
Distribution Planning
Production Planning
Material Requirements Planning
Tranportation Quantity/Modes
Demand Fulfillment ATP
Lot-Sizes
Scheduling
Transport Planning
Current Orders
Due Dates
Due Dates
Supply
90
Supply Chain Technology

• Example of Early Proprietary SCM Technologies
• OpenAdaptor.org
• open source supply chain integration system, made
  open-source on 1/30/2001
• originally developed for financial services
• developed by investment bank Dresdner Kleinwort
  Wasserstein (DrKW)
• already used in global integration 40 projects by
  DrKW
• allows the rapid, simple and often code-free
  integration of any system to any other system,
  enabling the complete supply chain, plus internal
  systems, to be integrated while allowing access
  to the web

91
Supply Chain Technology

• XML and Web Services
• XML
• alternative standard to EDI
• provides ability to transmit standard messages to
  medium and small-sized companies
• Web Services
• means to provide access for trading partners to
  SCM software components that they need to use

92
Supply Chain Technology

• SCM Technologies
• J2EE Technologies
• SAP re-tooled all of its applications to support
  the J2EE protocol, in addition to its own ABAP
  technology standards
• Many examples of using Java for enhanced SCM
• .NET Technology
• Doesnt support multiple platforms, which will be
  difficult for integration of supply chain
• Supply chain vendors have been trying to convince
  Microsoft to support J2EE, so they could easily
  integrate enterprise SCM to the desktop, but
  Microsoft has refused

93
Summary
94
Summary

• Conceptual supply chain frameworks
• Fine Two supply chain periods within an
  industry
• Fine 3-D engineering of product, process,
  supply-chain
• Guiding principle link up service-product,
  service-process, service supply chain
• Very complex task
• 3 product components, 3 process components, 3
  supply chain types all must work together
• Many different supply chain models

95
Summary

• Evaluation can initially (subjectively) be done
  based on standard operations strategies/metrics
• Cost
• Quality
• Flexibility
• Delivery
• Thorough analysis and management of supply chains
  will involve hefty mathematics/OR models