CHAPTER 10 - Extending the Organization – Supply Chain Management

Supply Chain Management
  The average company spends nearly half of every dollar that it earns on production
  In the past, companies focused primarily on manufacturing and quality improvements to influence their supply chains

Basics of Supply Chain
  The supply chain has three main links:
  Materials flow from suppliers and their “upstream” suppliers at all levels
  Transformation of materials into semi-finished and finished products through the organization’s own production process
  Distribution of products to customers and their “downstream” customers at all levels
  Organizations must embrace technologies that can effectively manage supply chains

 

Plan

  A company must have a plan for managing all the resources that go toward meeting customer demand for products or services.

Source

  Companies must carefully choose reliable suppliers that will deliver goods and services required for making products.

 Make

  This is the step where companies manufacture their products or services. This can include scheduling the activities necessary for production, testing, packaging, and preparing for delivery.

Deliver (Logistic)

  Companies must be able to receive orders from customers, fulfill the orders via a network of warehouses, pick transportation companies to deliver the products, and implement a billing and invoicing system to facilitate payments.

Return

  This is typically the most problematic step in the supply chain. Companies must create a network for receiving defective and excess products and support customers who have problems with delivered products.

Information Technology’s Role in the Supply Chain

Factors Driving SCM

 

 Visibility

  Visibility – more visible models of different ways to do things in the supply chain have emerged.  High visibility in the supply chain is changing industries, as Wal-Mart demonstrated

  Supply chain visibility – the ability to view all areas up and down the supply chain

  Bullwhip effect – occurs when distorted product demand information passes from one entity to the next throughout the supply chain

• Supply chain visibility allows organizations to eliminate the bullwhip effect
•  To explain the bullwhip effect to your students discuss a product that demand does not change, such as diapers.  The need for diapers is constant, it does not increase at Christmas or in the summer, diapers are in demand all year long.  The number of newborn babies determines diaper demand, and that number is constant.
• Retailers order diapers from distributors when their inventory level falls below a certain level, they might order a few extra just to be safe
•   Distributors order diapers from manufacturers when their inventory level falls below a certain level, they might order a few extra just to be safe
•  Manufacturers order diapers from suppliers when their inventory level falls below a certain level, they might order a few extra just to be safe
•  Eventually the one or two extra boxes ordered from a few retailers become several thousand boxes for the manufacturer.  This is the bullwhip effect, a small ripple at one end makes a large wave at the other end of the whip.

Consumer Behavior

  Companies can respond faster and more effectively to consumer demands through supply chain enhances

  Once an organization understands customer demand and its effect on the supply chain it can begin to estimate the impact that its supply chain will have on its customers and ultimately the organizations performance

  Demand planning software – generates demand forecasts using statistical tools and forecasting techniques

Competition

  Supply chain planning (SCP) software– uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain

  Supply chain execution (SCE) software – automates the different steps and stages of the supply chain

  SCP and SCE both increase a company’s ability to compete

  SCP depends entirely on information for its accuracy

  SCE can be as simple as electronically routing orders from a manufacturer to a supplier

  Competition

  SCP and SCE in the supply chain

Speed

  Three factors fostering speed

  Supply Chain Management

Success Factors

  SCM industry best practices include:

  Make the sale to suppliers

  Wean employees off traditional business practices

  Ensure the SCM system supports the organizational goals

  Deploy in incremental phases and measure and communicate success

  Be future oriented

-  SCM Success Stories

-  Top reasons why more and more executives are turning to SCM to manage their extended enterprises

  Numerous decision support systems (DSSs) are being built to assist decision makers in the design and operation of integrated supply chains

  DSSs allow managers to examine performance and relationships over the supply chain and among:

  Suppliers

  Manufacturers

  Distributors

  Other factors that optimize supply chain performance

SUPPLY CHAIN MANAGEMENT

 Success Stories

CHAPTER 9 : ENABLING THE ORGANIZATION -                                           DECISION MAKING

Decision Making

•Reasons for growth of decision-making information systems

         i.            . People need to analyze large amounts of information—Improvements in technology itself, innovations in communication, and globalization have resulted in a dramatic increase in the alternatives and dimensions people need to consider when making a decision or appraising an opportunity.

       ii.            . People must make decisions quickly—Time is of the essence and people simply do not have time to sift through all the information manually.

      iii.            . People must apply sophisticated analysis techniques, such as modeling and forecasting, to make good decisions—Information systems substantially reduce the time required to perform these sophisticated analysis techniques.

Six - Step Decision Making

      i.            Problem identification: Define the problem as clearly and precisely as possible.

     ii.            Data collection: Gather problem-related data, including who,what,where,when,why, and how. Be sure to gather facts, not rumors or opinions about the problem.

   iii.            Solution generation: Detail every solution possible, including ideas that seem farfetched.

   iv.            Solution test: Evaluate solutions in terms of feasibility (can it be completed?), suitability (is it a permanent or a temporary fix?), and acceptability (can all participants form a consensus?).

    v.            Solution selection: Select the solution that best solves the problem and meets the needs of the business.

   vi.            Solution Implementation: If the solution solves the problem, then the decisions made were correct. If not, then the decision were incorrect and the process begins again.

OPERATING

• At the operational level, employees develop, control, and maintain core business activities required to run the day-to-day operations.
• Operational decisions are considered structured decisions, which arise in situations where established processes offer potential solutions.

MANAGERIAL

•  At the managerial level, employees are continuously  evaluating company operations to hone the firm's abilities to identify, adapt to, and leverage change.
• these types of decision are considered semistructured decisions-occur in situations in which a few established processes help to evaluate potential solutions, but not enough to lead to a definite recommended decision.

STRATEGIC

• Managers develop overall business strategies, goals, and objectives as part of the company's strategic plan.
• strategic decisions are highly unstructured decisions- occuring in situations which no procedures or rules exist to guide decision makers toward the correct choices.

Enhancing Decision Making with MIS

-          Model  is a simplified representation or abstraction of reality.

Operational Support Systems

• Transactional information encompasses all the information contained within a single business process or unit of work.
• Its primary purpose is to support the performance of daily operational or structured decisions.

Online transaction processing (OLTP) – the capturing of transaction and event information using technology to (1) process the information according to defined business rules, (2) store the information, (3) update existing information to reflect the new information

Online analytical processing (OLAP) – the manipulation of information to create business intelligence in support of strategic decision making

Decision support systems ( DSS )

- Decision support system (DSS) – models information to support managers and business professionals during the decision-making process

- Three quantitative models used by DSSs include:

         i.            Sensitivity analysis – the study of the impact that changes in one (or more) parts of the model have on other parts of the model

       ii.            What-if analysis – checks the impact of a change in an assumption on the proposed solution

      iii.            Goal-seeking analysis – finds the inputs necessary to achieve a goal such as a desired level of output

Executive information system ( EIS )

•Executive information system (EIS) – a specialized DSS that supports senior level executives within the organization

•Most EISs offering the following capabilities:

–Consolidation – involves the aggregation of information and features simple roll-ups to complex groupings of interrelated information

–Drill-down – enables users to get details, and details of details, of information

–Slice-and-dice – looks at information from different perspectives

  

 Interaction between a TPS and an EIS

·         Digital dashboard - integrates information from multiple component and present it in a unified display.

ARTIFICIAL INTELLIGENCE

Artificial intelligence (AI) stimulates human thinking and behavior, such as the ability to reason and learn.

Intelligence systems are various commercial applications of artificial intelligence. 

CATEGORIES OF AI SYSTEMS :

1. Expert systems - Computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems.

2. Neural network - Also called an artificial neural network, is a category of AI that attempts to emulate the way the human brain works.  Fuzzy logic is a mathematical method of handling imprecise or subjective information.

3. Genetic algorithms - Is an artificial intelligence system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem.

4. Intelligent agents - Is a special-purpose knowledge-based information system that accomplishes specific tasks on behalf of its users. Shopping boat is software that will search several retailer websites and provide a comparison of each retailer's offerings including price and availability.

5. Virtual reality - Is a computer-simulated environment that can be a simulation of the real world or an imaginary world.

6. DATA MINING 

·         Data-mining software includes many forms of AI such as neural networks and expert systems.

·         Common forms of data-mining analysis capabilities include;

-          Cluster Analysis.

-          Association Detection.

-          Statistical Analysis.

7. CLUSTER ANALYSIS.

·         Cluster Analysis – A technique used to divide an information set into mutually exclusive groups such that the members of each group are as close together as possible to one another and the different groups are as far apart as possible.

·         CRM systems depend on cluster analysis to segment customer information and identify behavioral traits.

Eg: Consumer goods by content, brand loyalty or similarity.

8. ASSOCIATION DETECTION

·         Detection – Reveals the degree to which variables are related and the nature Association and frequency of these relationships in the information.

·         Market Basket Analysis – Analyzes such items as Web sites and checkout scanner information to detect customers’ buying behavior and predict future behavior by identifying affinities among customers’ choices of products and services

Eg: Maytag uses association detection to ensure that each generation of appliances is better than the previous generation.

9. STATISTICAL ANLYSIS

·         Statistical Analysis – Performs such functions as information correlations, distributions, calculations, and variance analysis.

·                     Forecast – Predictions made on the basis of time-series information.

·                     Time-series Information – Time-stamped information collected at a particular frequency.

Eg: Kraft uses statistical analysis to assure consistent flavor, color, aroma, texture, and appearance for all of its lines of foods.

CHAPTER 8: ACCESSING ORGANIZATIONAL INFORMATION –DATA WAREHOUSE

HISTORY OF DATA  WAREHOUSING

·         Data warehouse extend the transformation of data into information

·         In the 1990’s executives became less concerned with the day-to-day business operations and more concerned with business functions

·         The data warehouse provided the ability to support decision making without disrupting the day-to-day operations

DATA WAREHOUSE FUNDAMENTALS

• ·         Data warehouse – a logical collection of information – gathered from many different operational databases – that supports business analysis activities and decision- making tasks
• ·         The primary purpose of a data warehouse is to aggregate information throughout an organization into a single repository for decision making purposes
• ·         Extraction, transformation, and loading (ETL) – a process that extract information from internal and external databases, transforms the information using a common set of enterprise definitions, and loads the information into a data warehouse
• ·         Data mart – contains a subset of data warehouse information

MULTIDIMENSIONAL ANALYSIS AND DATA MINING

• ·         Databases contain information in a series of two- dimensional tables
• ·         In a data warehouse and data mart information is multidimensional, it contains layers of columns and rows

-          Dimension – a particular attribute of information

• ·             Cube – common term for the representation of multidimensional information

·         Data mining – the process of analyzing data to extract information not offered by the raw data alone

·         To perform data mining users need data-mining tools

-          Data- mining tool – uses a variety of techniques to find patterns and relationships in large volumes of behavior and guide decision making

INFORMATION CLEANSING OR SCRUBBING

• ·         An organization must maintain high- quality data in the data warehouse
• ·         Information cleansing or scrubbing – a process that weeds out and fixes or discards incorrect, or incomplete information
• ·         Contact information in an operational system

• ·         Standardizing customer name from Operational Systems

• ·         Information cleansing activities

• ·         Accurate and complete information

BUSINESS INTELLIGENCE

·         Information that people use to support their decision making efforts

·         Principle BI enabler:

1.       Technology

-          Even the smallest company with BI software can do sophisticated analysis today that were unavailable to largest organizations a generation ago

-          The largest companies today can create enterprise wide BI systems that can compute and monitor metrics on virtually every variable important for managing the company.

-          Technology is the most significant enabler of business intelligence.

2.       People

-          Understanding the role of people, BI allows organizations to systematically create insight and turn these insight into actions

-          Organizations can improve their decision making by having the right people making the decisions.

-          This usually means a manager who is in the field and close to the customer rather than an analysis rich in data but poor experience.

3.       Culture

-          A key responsibility of executive is to shape and manage corporate culture.

-          The extent to which the BI attitude flourishes in an organization depends in large part on the organization’s culture.

-          Perhaps the most important step an organization can take to encourage BI is to measure the performance of the organization against a set of key indicators.

CHAPTER 7: STORING ORGANIZATION INFORMATION – DATABASES

·         DATABASE – maintains information about various types objects (inventory), events (transactions), people (employees), and places (warehouses).

·         Database models:

-          Hierarchical database model – information is organized into a tree-likes structure (using parent/child relationships) in such a way that it cannot have too many relationships.

-          Network database model – a flexible way of representing objects and their relationships.

-          Relational database model – stores information in the form of logically related two-dimensional tables.

·          ENTITY – a person, place, thing, transaction, or event about which is stored.

-          The rows in each table contain the entities.

·         ATTRIBUTES (FIELDS, COLUMNS) – characteristics or properties of an entity class.

-          The columns in each table contain the attributes.

KEYS AND RELATIONSHIPS

·         Primary key and foreign keys identify the various entity classes (tables) in the database.

-          Primary key – a field (or group of fields) that uniquely identifies a given entity in a table.

-          Foreign key – a primary key of one table that appears an attribute in another table and acts to provide a logical relationship among the two tables.

Relational Database Advantages

1.       Increased flexibility

·         A well designed database should:

-          Handle changes quickly and easily

-          Provide users with different views

-          Have only one physical view

o   Physical view – deals with the physical storage of information on a storage devise. Eg: hard disk.

-          Have multiple logical views

o   Logical view – focuses on how users logically access information.

-          Eg: a mail-order buss-2 people view diff format (logical views) but same physical view.

2.       Increased Scalability and performance

·         A database must scale to meet increased demand, while maintain acceptable performance levels

-          Scalability – refers to how well a system can adapt to increase demands.

-          Performance – measures how quickly a system performs a certain process or transaction.

3.       Reduced Information Redundancy

·         Database reduce information redundancy

-          Redundancy – the duplication of information or storing the information or storing the same information in multiple places

·         Inconsistency is one of the primary problem with redundant information-difficult to decide which is most current and most accurate.

4.       Increase Information Integrity (Quality)

·         Information integrity –measure the quality of information

·         Integrity constraint – rules that help ensure the quality of information

-          Relational integrity constraint – rule that enforces basic and fundamental information-based constrains

-          Eg: Users cannot create an order for nonexistent customer; An order cannot be shipped without an address

-          Business-critical integrity constrain – rule that enforce business rules vital to and organization’s success and often require more insight and knowledge that relational integrity constraint.

-          Eg: product returns are not accepted for fresh product 15 days after purchase; A discount maximum of 20 percent.

5.       Increased Information Security  

·         Information is an organizational asset and must be protected

·         Databases an offer several security features including:

-          Password – provides authentication of the user

-          Access level – determines who has access to the different types of information

-          Access control – determines types of user access, such as read-only access

DATABASE MANAGEMENT SYSTEM

·         Database management system (DBMS) – software through which users and application programs interact with a database.

DATA-DRIVEN WEB SITES

·         An internet web site kept constantly updated and relevant to the needs of its customers through the use of a database.

Data-driven website advantages:

§  Easy to manage content: website owners can make changes without relying on MIS professional; user can update a data-driven website with little or no training.

§  Easy to store large amount of data: Data-driven websites can keep large volumes of information organized. Website owners can use templates to implement changes for layouts, navigation, or website stricter. This improves website reliability, scalability, and performance.

§  Easy to eliminate human errors: Data- driven websites trap data-entry errors, eliminating inconsistencies while ensuring all information is entered correctly.

DATA-DRIVEN BUSINESS INTELLIGENCE

·         BI in a data Web site

Integrating Information among Multiple Databases

·        Integration – allows separate systems to communication directly with each other

-         Forward integration – takes information entered into a given system and send it automatically to all downstream systems and processes

-         Backward integration – take information entered into a given system and sends it automatically to all upstream systems and processes

·         Building a central repository specifically for integrated information

·         Without integration, an organization will:

-          Spend considerable time entering the same info in multiple system

-          Suffer from the low quality and inconsistency typically embedded in redundant info

-          Poor information can produced poor decision