IS 340

Management Information Systems

Chapter 8 – Notes

Improving Supply Chains and Strengthening Customer Relationships

 

I.  Case Study – Managing in the Digital World:  Supply Chain Havoc – what can disrupt your supply chain? (a lot more than you might think!)  What happens to your firm if your supply chain is disrupted?  Then what happens to your customers who depend on you for their materials?  Extremely well-designed supply chain networks also tend to be very fragile!

 

II.  Supply Chain Management (SCM)  - getting the raw materials and components a firm uses in its daily operations – an important key to success in business

NOTE:  The Goal of SCM is to optimize flows, rather than to minimize costs or maximize revenues (from 4th edition of this text).

          A.  What Is a Supply Chain?  better called Supply Network; obtaining raw materials and components for producing finished products; focus on improving Upstream Information Flows, improve coordination with suppliers; 2 main objectives (see p. 322):

                   1.  Accelerate product development

                   2.  Reduce costs associated with obtaining raw materials, components, and services from suppliers

          B.  Benefits of Effectively Managing Supply Chains – when a supply chain is managed properly (passing information through the organization) it can create various opportunites for competitive advantage

                   1.  Just-in Time (JIT) Production – keeping costly inventory on the shelf does not add value; JIT helps minimize inventory by delivering parts or raw materials just as they are needed for production (not placed in inventory)

                   2.  Vendor-Managed Inventory (VMI) – a business model where the supplier is responsible for maintaining the inventory levels of a customer at a pre-established level

                   3.  The Bullwhip Effect – a ripple effect where a small forecasting error at one end of the supply chain can cause a large error at the other end of that chain (like cracking a whip); integrated business processes (free flow of information when/where it is needed) can help eliminate this problem

                   4.  Corporate Social Responsibility – effective supply chain management can help a firm create a good public image and save costs through transparency and accountability

                             a.  Product Recalls – mistakes can be caught along the supply chain before a product reaches the consumer, and the problem area can be identified and corrected

                             b.  Sustainable Business Practices – identifying and locating problems along the value chain, such as working conditions and environmental concerns (areas of corporate responsibility – the question being a cultural issue of which is more important to the firm:  profits or corporate responsibility)

          C.  Optimizing the Supply Chain Through Supply Chain Management

1.  2 main objectives:

                             a.  Accelerate product development

                             b.  Reduce costs associated with obtaining raw materials, components, and services from suppliers

                   2.  Challenges in SCM

                             a.  Getting good data into the system – an SCM is only as good as the data entered into it

                             b.  Overcoming distrust among partners in the SCM – various partners in the SCM do not want others to know what they are doing (competition along the chain)

                             c.  Getting all the partners in the supply chain to adopt an SCM system – not all partners necessarily have such a system

          D.  SCM Architecture – an SCM integrates business processes and supply chain partners

                   1.  Supply Chain Planning – 4 types of plans:

                             a.  Demand Planning and Forecasting – requires accurate historical data

                             b.  Distribution Planning – for deliveries to distributors and customers; leads to the overall Transportation Schedule

                             c.  Production Scheduling – coordination of all activities needed to create the product or service

                             d.  Procurement Planning – focuses on development of Inventory Estimates (inventory of raw materials needed to produce the firm’s product)

                   2.  Supply Chain Execution

                             a.  The Product Flow – movement of goods from supplier to production

                             b.  The Information Flow – movement of information along the supply chain

                             c.  The Financial Flow – movement of financial assets along the supply chain

                   3.  Supply Chain Visibility and Analytics

                             a.  Supply Chain Visibility – the ability to track products as they move through the supply chain, and to foresee external events that may affect the movement of those goods

                             b.  Supply Chain Analytics – the use of key performance indicators to monitor performance of the entire supply chain (network)

          E.  Developing an SCM Strategy – must consider Supply Chain Effectiveness and Efficiency; is the supply chain doing its job, and how well is it doing that job?

(NOTE:  the text’s definitions of the following two terms assume that the ultimate goal of supply chain is customer service – that may not be the best assumption! particularly if you are in the purchasing department and your job is procurement, not customer service!!!)

                   1.  Supply Chain Efficiency – the extent to which a firm’s supply chain is minimizing procurement, production, and transposition costs (sometimes by sacrificing customer service!!); how well is the supply chain working?

                   2.  Supply Chain Effectiveness – the extent to which a firm’s supply chain is maximizing customer service regardless of procurement, production, and transportation costs; is the supply chain doing its job?

          F.  Emerging SCM Trends

                   1.  Key Technologies for Enhancing SCM – SCM is evolving quickly

                             a.  Extensible Markup Language (XML) – enables transmission of data between applications between organizations over the WWW; may well replace EDI

                             b.  Radio Frequency Identification (RFID) – transmits signals from the product to the system, starting to replace bar codes

Note:  also See chapter 4 for portals:

                             c.  Enterprise Portals – a form of B2B marketplace; access points where a business partner can obtain secured proprietary information from a firm; 2 types:

                                       1.  Distribution Portals – automate business processes with Customers

                                       2.  Procurement Portals – automate business processes with Suppliers

                             d.  Trading Exchanges – enterprise portals provided by a third party to firms that cannot afford their own portals

 

III.  Customer Relationship Management (CRM) – corporate-level strategies to produce lasting relationships with customers by focusing on Downstream Information Flows

          2 Main Objectives:

                   1.  Attract potential customers

                   2.  Create customer loyalty – more difficult than you might think!

NOTE:  it’s not about you or the firm!  It’s ALL ABOUT THE CUSTOMER!!!!

Note:  see table on Benefits of CRM, p. 334

          A.  Developing a CRM Strategy – more than just purchasing and installing a CRM system; requires enterprise-wide changes in attitude , philosophy, and culture

                   1.  Policy and Business Process Changes – customer-focused policies, procedures, and culture

                   2.  Customer Service Changes – customer-focused measures for quality and satisfaction

                   3.  Employee Training Changes – ALL areas should be customer focused (similar to TQM)

                   4.  Data Collection, Analysis, and Sharing Changes – track, analyze, and share data from all aspects of the customer experience

          B.  Architecture of a CRM:  3 primary components

                   1.  Operational CRM – automate fundamental business processes for interacting with the customer; Front-Office System – enables direct interaction with customers

                             a.  Sales Force Automation – automates a broad range of sales-related activities

                             b.  Customer Service and Support – automates service requests, product returns, complaints (NOT just “Leave a message at the beep.”), information requests

                             c.  Enterprise Marketing Automation (EMA) – provides a comprehensive view of the competitive environment:  competitors, industry trends, environmental factors (what’s the ONLY thing we know about the business environment?)

                   2.  Analytical CRM – analyze customer Behavior and Perceptions (Important!); Back-Office System – provides analysis to manage other customer-related activities

                   3.  Collaborative CRM – effective/efficient communication with the customer from the entire organization

                             a.  Greater Customer Focus – understand customer history and needs

                             b.  Lower Communication Barriers – customer is more likely to communicate with you when you have complete information on their needs and preferences

                             c.  Increased Information Integration – all available information about the customer is provided to the entire organization to use with the customer

          C.  Ethical Concerns with CRM – critics feel that too much information on the customer invades customer privacy and can lead to profiling and coercive sales techniques