Chapter 11 : Building a Customer-Centric Organization – Customer Relationship Management

Chapter 10 : Extending the Organization – Supply Chain Management

Basics of Supply Chain

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.

Factors Driving SCM

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

Visibility

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 

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 becomes

several thousand boxes for the

manufacturer.  This is the bullwhip

effect, a small ripple at one end makes 

large wave at the other end of the whip.

Consumer Behaviour

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.

.

SCM Success Stories

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

SCM Success Stories

Chapter 9 : Enabling the Organization – Decision Making

 

Decision Support Systems

Models information to support managers and business professionals

during the decision making process

1.Sensitivity analysis – the study of the impact that changes 

in one (or more) parts of the model have on other parts of the 

model. Eg: What will happen to the supply chain if a tsunami 

in Sabah reduces holding inventory from 30% to 10%?

2.What-if analysis – checks the impact of a change 

in an assumption on the proposed solution. Eg: 

Repeatedly changing revenue in small increments to 

determine it effects on other variables.

3.Goal-seeking analysis – finds the inputs necessary to achieve

a goal such as a desired level of output. Eg: Determine how

many customers must purchase a new product to increase gross

profits to $5 million.

Executive Information Systems

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. Eg: Data for different sales representatives can

be rolled up to an office level. Then state level, then a

regional sales level.

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

of information. Eg: From regional sales data then drill down to 

each sales representatives at each office.

Slice-and-dice – looks at information from different

perspectives Eg: One slice of information could display all product

sales during a given promotion, another slice could display a 

single product’s sales for all promotions.

Artificial Intelligence (AI)

Intelligent system – various commercial applications of artificial

intelligence

Artificial intelligence (AI) – simulates human intelligence such as

the ability to reason and learn

Advantages: can check info on competitor

Eg: Business executives use genetic algorithm to help them decide

which combination of projects a firm should invest.

CRM systems depend on cluster analysis to segment customer

information and identify behavioral traits.

Eg: Consumer goods by content, brand loyalty or similarity 

Eg: Maytag uses association detection to ensure that each

generation of appliances is better than the previous

generation.

Eg: Kraft uses statistical analysis to assure consistent

flavor, color, aroma, texture, and appearance for all of it

lines of foods.