Extending the Organization Supply Chain Management

1. Chapter 10 Extending the Organization � Supply Chain Management CLASSROOM OPENER GREAT BUSINESS DECISIONS � Michael Dell Decides to Sell PCs Directly to Consumers and Built-to-Order Michael Dell decided that to be successful in the PC business and to gain a significant competitive advantage he would bypass the dealer channel through which personal computers were being sold. Dell developed and deployed their own channel for manufacturing and selling PCs. This personal channel eliminated the reseller markups and large inventory expenses and allowed Dell to operate with lower costs than anyone in the industry, which led to higher profit margins. Michael Dell understood that consumers were getting smarter and that customer service abilities were becoming more sophisticated. Beginning with telephone sales, and then moving to Internet sales, Dell bypassed retailers and targeted corporate accounts. Dell understood that tailoring products to meet specific requirements of large accounts could be accomplished not only more cheaply, but also more effectively without an intermediary. Dell boasts sales of $12.3 billion and is the world�s number one direct-sales computer vendor. The company�s Web site currently generates over half of its orders. Everybody in the industry is trying to imitate Dell�s strategy.CLASSROOM OPENER GREAT BUSINESS DECISIONS � Michael Dell Decides to Sell PCs Directly to Consumers and Built-to-Order Michael Dell decided that to be successful in the PC business and to gain a significant competitive advantage he would bypass the dealer channel through which personal computers were being sold. Dell developed and deployed their own channel for manufacturing and selling PCs. This personal channel eliminated the reseller markups and large inventory expenses and allowed Dell to operate with lower costs than anyone in the industry, which led to higher profit margins. Michael Dell understood that consumers were getting smarter and that customer service abilities were becoming more sophisticated. Beginning with telephone sales, and then moving to Internet sales, Dell bypassed retailers and targeted corporate accounts. Dell understood that tailoring products to meet specific requirements of large accounts could be accomplished not only more cheaply, but also more effectively without an intermediary. Dell boasts sales of $12.3 billion and is the world�s number one direct-sales computer vendor. The company�s Web site currently generates over half of its orders. Everybody in the industry is trying to imitate Dell�s strategy.

2. Learning Outcomes 10.1 List and describe the components of a typical supply chain 10.2 Define the relationship between decision making and supply chain management 10.3 Describe the four changes resulting from advances in IT that are driving supply chains 10.4 Summarize the best practices for implementing a successful supply chain management system 10.1 List and describe the components of a typical supply chain The components of a typical supply chain include: Supplier�s supplier, Supplier, Manufacturer, Distributor, Retailer, Customer, Customer�s Customer 10.2 Define the relationship between decision making and supply chain management SCM enhances decision making. Collecting, analyzing, and distributing transactional information to all relevant parties, SCM systems help all the different entities in the supply chain work together more effectively. SCM systems provide dynamic holistic views of organizations. Users can �drill down� into detailed analyses of supply chain activities in a process analogous to DSS. Without SCM systems, organizations would be unable to make accurate and timely decisions regarding their supply chain. 10.3 Describe the four changes resulting from advances in IT that are driving supply chains Although people have been talking about the integrated supply chain for a long time, it has only been recently that advances in information technology have made it possible to bring the idea to life and truly integrate the supply chain. Visibility, consumer behavior, competition, and speed are a few of the changes resulting from advances in information technology that are driving supply chains 10.4 Summarize the best practices for implementing a successful supply chain management system The following are the SCM industry best practices: Make the sale to suppliers - A large part of any SCM system extends beyond the organization to the suppliers. Since the organization has very little control over anything external to itself, these pieces are typically the most complicated. Be sure suppliers are on board with the benefits that the SCM system will provide to ease SCM implementation difficulties. Wean employees off traditional business practices - If the organization cannot convince people that using the SCM software is worthwhile, the employees will probably find a way around using the software. Ensure the SCM system supports the organizational goals - Be sure to select SCM software that supports organizational goals and strategies Deploy in Incremental phases and measure and communicate success - Designing the deployment of the SCM system in incremental phases is the most successful deployment method. The BIG BANG approach � implementing everything at once � fails 90 percent of the time. Be future oriented - An SCM system, like all systems, must scale to meet future demands. 10.1 List and describe the components of a typical supply chain The components of a typical supply chain include: Supplier�s supplier, Supplier, Manufacturer, Distributor, Retailer, Customer, Customer�s Customer 10.2 Define the relationship between decision making and supply chain management SCM enhances decision making. Collecting, analyzing, and distributing transactional information to all relevant parties, SCM systems help all the different entities in the supply chain work together more effectively. SCM systems provide dynamic holistic views of organizations. Users can �drill down� into detailed analyses of supply chain activities in a process analogous to DSS. Without SCM systems, organizations would be unable to make accurate and timely decisions regarding their supply chain. 10.3 Describe the four changes resulting from advances in IT that are driving supply chains Although people have been talking about the integrated supply chain for a long time, it has only been recently that advances in information technology have made it possible to bring the idea to life and truly integrate the supply chain. Visibility, consumer behavior, competition, and speed are a few of the changes resulting from advances in information technology that are driving supply chains 10.4 Summarize the best practices for implementing a successful supply chain management system The following are the SCM industry best practices: Make the sale to suppliers - A large part of any SCM system extends beyond the organization to the suppliers. Since the organization has very little control over anything external to itself, these pieces are typically the most complicated. Be sure suppliers are on board with the benefits that the SCM system will provide to ease SCM implementation difficulties. Wean employees off traditional business practices - If the organization cannot convince people that using the SCM software is worthwhile, the employees will probably find a way around using the software. Ensure the SCM system supports the organizational goals - Be sure to select SCM software that supports organizational goals and strategies Deploy in Incremental phases and measure and communicate success - Designing the deployment of the SCM system in incremental phases is the most successful deployment method. The BIG BANG approach � implementing everything at once � fails 90 percent of the time. Be future oriented - An SCM system, like all systems, must scale to meet future demands.

3. Slide 3 What Is a Supply Chain? Network of organizations and facilities Transforms raw materials into products delivered to customers Works with companies and consumers up and down the chain Customers order from retailers Retailers order from distributors Distributors order from manufacturers Manufacturers get raw materials from suppliers Transportation companies, warehouses, and inventories also involved

4. Slide 4 SCM Chain is a misleading word. Supply chain is a network. Dell computer directly sells to customer and therefore, both retailer and distributors are omitted from supply chain.

5. Basics of Supply Chain Organizations must embrace technologies that can effectively manage supply chains