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SupplyChainManagementAcceleratingCostEffectivenessSupplyChainManagementThesupplychainusedtobeasimpleserialprocesswithrawmaterialsslowlymovinginonedirectionthroughmanufacturingproductionandonwardviaadistributionsystemtoretailersandcustomers.Today,thetalkisof"supplynetworks","parallelchains","enhancedconcurrentactivities",and“customercentric”withnewinformationplatformsandtechnologysettocutbothinventoryandlead-timesthroughoutthedeliverypipelinefurther.TopIssuesFacingSCMProfessionalsInarecentquantitativesurvey,SCMprofessionalswereaskedaopen-endedsubjectivequestion,“Whatarethethreebiggestissuesfacingyoupersonallyindevelopingyourlogisticsstrategy?”Source:AMRResearch2000Thetopthreeresponseswere;Cost(21%),SystemsApplications(20%)andIntegration(19%)MoveFromPushToPullManufacturersDistributors/WholesalersCustomerSuppliersRetailersManufacturersDistributors/WholesalersCustomerSuppliersRetailersMakewhatwesell,notsellwhatwemake!MovetoCross-FunctionalBusinessProcessesPurchasingManufacturingDistributionInstall/MaintenanceSalesSourceMakeDeliverInstallSellOrderFulfillmentAvailable-to-PromiseSales&OperationsPlanningDepartmentPerformanceSupplyChainOptimizationSynchronized,SequentialPlanningForecastingDistributionPlanningManufacturingPlanningProcurementPlanningSupplyChainOptimizationSynchronized,ConcurrentPlanningDemandPlanningDistributionPlanningManufacturingPlanningProcurementPlanningSharingandCollaborationManufacturerDistributors/WholesalersSuppliersRetailersSynchronizedProductionSchedulingCollaborativeProductDevelopmentCollaborativeDemandPlanningCollaborativeLogisticsPlanningTransportationservicesDistributioncenterservicesFullValueProcurementObjectiveLowesttotalcostofownershipQualitymeetingcustomerneedsOn-timedeliveryAcceptablesupplyriskProcessefficiencyDemandreductionUnderpinnedbyprocurementinfrastructureexcellencePurchasePriceAcquisitionInstallationMaintenanceDisposalPriceisoftenjustthetipoftheiceberg!StrategicSouringTraditionalProgressiveTacticalEmphasisAcquisitionCostFocusStaffFunctionCostCenterReactiveStrategicEmphasisTotalCostFocusProfitCenterProactiveTacticalStrategicTacticalStrategicEvolvingModelofProcurementManufacturingMaterial.....BOMPRTCustomerorderDocumentWorkcenterRoutingetc.ManufacturingmanagersviewefficiencyandflexibilityastwoobjectiveswhichmustbebalancedinordertoarrivethelowesttotalcostWorld-classcompaniesadoptstrategiesandtacticssuchaspullsystem,JITreplenishment,andcycletimereductionsthatenablesacompanytohavelowerlevelsofinventorywhilestilldrivingreductionsinproductionunitcostCompaniesfrequentlyunderestimatethecommitmentrequiredtoachieveaneffectivequalityimprovementwhichresultinoperationcostincreases.StrategicBusinessPlanningForecastingandPlanninghoursdaysweeksmonthsyear+OperationalTacticalStrategicSchedulingRollingForecastDemandPlanningManufacturingPlanningSchedulingDistributionPlanningTransportationOrderPromiseSourceMakeMoveStoreSellTopIssuesFacingSCMProfessionalse-Businessisarelativelylowpriority,cominginsixthofthetopissuesfacingSCMprofessionals.However,thisdoesnotreflecttheimpactthate-BusinesswillhaveonSupplyChainManagementSource:AMRResearch2000e-BusinesswillfundamentallychangeSCMTheImpactofe-BusinessonSCMe-Businessaffectsfourbroadcategoriesthatdeterminetheproductionandtransactioncostsofafirm:ThecostofexecutingasaleThecostsassociatedwithprocuringproductioninputsThecostsassociatedwithmakinganddeliveringaproductorserviceThecostassociatedwithlogisticsTheCostofe-BusinessSales
AccessibilityAn
e-Businesswebsiteisopen24hoursperday,7daysperweek.
Abusinessnolongerhastobuildseparatephysicalestablishmentstoattractalargercustomerbase.Avirtualstorefrontalsoallowsane-businesstomanageonestoreinsteadofmultiplestores,thuseliminatingduplicateinventorycosts.TheCostofe-BusinessSales
OrderReworkAnotheraspectofe-Businessisthatitenablesmoreefficientorderconfiguration.Forexample,bothGeneralElectric(GE)andCiscoSystemsreportednearlyone-quarteroftheirpre-Web-siteordershadtobereworkedbecauseoferrors--atotalofmorethan1millionorders,inthecaseofGE.SinceadoptingaWeb-enabledcustomerinterface,Ciscoreportsanerrorrateofonly2percent.ProduceorServiceOutputCriticalCustomerRequirementDefects:ServiceunacceptabletocustomerBATheCostsAssociatedWithProcuringProductionInputsWeb-basedprocurementofmaintenance,repair,andoperations(MRO)suppliesisexpectedtoreachmorethan$100billionworldwidebytheyear2000.MROcomprisesthosegoodsrequiredtorunacompanythatarenotrawmaterialsusedinthedirectmanufactureofaproductortheprovisionofaservice.SuppliersSuppliersConnectedtoMarketPlaceviaWeborERPBuyersBuyersconnectedtomarketplaceviaE-ProcurementAppB2BMarketPlaceProfitOther
CostsPurchases10010045504547.557.5-5%A5%reductioninpurchasecostcanresultina50%increaseinprofitmargin.+50%TheCostsAssociatedWithProcuringProductionInputsLowertransactioncostscoupledwiththeabilitytoenforcepurchasingpolicyacrosstheenterprisehavebeeninstrumentalindrivingWeb-basedMROprocurement.Twoadditionalfactorshaveacceleratedthetrend.Thefirstfactorisadefensivereactionbyfirmsthatnotethecostsavingsbeingenjoyedbyrivalsswitchingtoane-businessprocurementmode.Thesecond,andpossiblymoreimportantfactoristheinsistencebylargefirmssuchasFord,thattheirsupplierslinkintotheirWeb-basedprocurementsystemsasaconditionofdoingbusinesswiththem.Source:RBWeberCOST
PERPOPOTENTIALCOST
PERPOCURRENTCOST
PERPOTheCostofe-BusinessSupplyChainManagementEventhescopeofMROprocurementpalesbesidethepossibilitiesforreorganizingsupplychainsarounde-business.Ratherthanincreasingproductionandinventoryinadvanceofactualcustomerdemand,e-businessesarelookingtomakeboththeirownsupplychainsandthoseoftheircustomersandsuppliersrespondinrealtimetoactualsales.SupplierManufacturerDistributionRetailerConsumerInformationTheTransformationofLogisticse-Businesstransformslogisticsfromsimplypackagingandmovinggoodsandturnsitintoaninformationbusiness.Introducingonlineparcelorderandtrackingviaaproprietarynetworkin1983,FederalExpresstooknearly12yearstosignup50,000custom
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