Facultat d’Economia i Empresa

Information Systems
2. Management Information Systems – SCM– MW
(Supply Chain Management & Middleware)
Corporate Information Systems

SUPPLY CHAIN MANAGEMENT

Supply Chain Management (SCM)

Supply Chain
• Network of organizations and processes for:
Procuring materials, transforming these into products, and
distributing these products
• Upstream supply chain:
Firm’s suppliers, suppliers’ suppliers, processes for managing
relationships with them
• Downstream supply chain:
Organizations and processes responsible for delivering products to
customers
• Internal supply chain

SCM: Supply Chain Management. Planning the flow of materials,

information and finances throughout the entire supply chain: from
retailer, wholesaler, manufacturer and supplier. The goal of SCM is
to maximize operational efficiency, reducing costs and delivering
better service to the end customer.
Supply Chain Management (SCM)

Consumers

Products and
materials
Retailers
Information

Wholesaler

Manufacturer

Level 1 provider Level 1 Provider

Level 2 Provider Level 2 Provider Level 2 Provider

 Supply Chain Management (SCM)

Supply chain management considerations

- Inefficiencies cut into a company’s operating costs

- Can waste up to 25 percent of operating expenses
- Just-in-time strategy:
- Components arrive as they are needed
- Finished goods shipped after leaving assembly line
- Safety stock: Buffer for lack of flexibility in supply chain

* Laudon and Laudon. “Management Information Systems”, Ed. Pearson Education, 2013
SCM historical view (1/2)

Supply chain B2B

Chrysler case

MRP

1950 1960 1980 2000 2010

 SCM historical view (2/2)
The Chrysler case (80s)
Trigger: Chrysler Corporation was going through a deep financial crisis from the mid 70s.

Objective: Thomas Stallkamp, purchasing manager at Chrysler, turns the crisis into an
opportunity.

Actions: Without knowing it, invents what is Today known as SCM software:
• Product design and development based on long lasting relationships with
providers.
• Exchange of information throughout the supply chain (from provider to
customer)

Consequence: Chrysler designs and develops a completely new supply chain management
model, called Viper, hugely successful. Amongst other things, it was possible to
reduce R&D costs drastically, by involving the suppliers from the early stages of
product design. Deepening the relationships with the providers and reducing the
number of companies involved led to greater efficiency, as more information
was being exchanged and the suppliers’ success depended on the Chryslers'’
sales performance.
 SCM Bullwhip effect (1/2)

Bullwhip Effect: Inaccurate information can cause minor fluctuations in demand for a
product to be amplified as one moves further back in the supply chain. Minor
fluctuations in retail sales for a product can create excess inventory for distributors,
manufacturers, and suppliers.

* Laudon and Laudon. “Management Information Systems”, Ed. Pearson Education, 2013
SCM Bullwhip effect - Causes

Lead time: Longer lead times force every step of the supply chain to keep larger security
stocks.

Demand alteration due to non-direct reasons:

- Price fluctuation: Low prices favour larger stocks.
- Scarcity effect. Belief that a product might be unavailable brings an increase in short-
term demand.
- Commercial policy: offers / advantages based on quantity purchased. Grater lots have
a negative effect on response time.
- Fluctuation on product quality: leads to seasonal demand increase.
SCM Bullwhip effect - palliative measures

Reducing uncertainty: By better availability of accurate information throughout the

entire Supply Chain

Reduction of response time: Time between the order receipt and delivery reduces
security stocks.

Reduction of variability: More stable prices are achieved with optimal supply chain
management: Less price reduction provoked by overstock, and less price increases
because of product shortages.

Lot reduction: Smaller lot sizes help improve the response time.
 Supply Chain Management Systems

Supply chain management software

- Supply chain planning systems
- Model existing supply chain
- Enable demand planning
- Optimize sourcing, manufacturing plans
- Establish inventory levels
- Identify transportation modes
- Supply chain execution systems
- Manage flow of products through distribution centers and
warehouses

* Laudon and Laudon. “Management Information Systems”, Ed. Pearson Education, 2013
 Supply Chain Management Systems

Global supply chain issues

- Greater geographical distances
- Greater time differences
- Participants from different countries
- Different performance standards
- Different legal requirements
Internet helps manage global complexities
- Warehouse management
- Transportation management
- Logistics
- Outsourcing

* Laudon and Laudon. “Management Information Systems”, Ed. Pearson Education, 2013
 Supply Chain Management Systems

Supply chain management

- Push-based model (build-to-stock)
- Earlier SCM systems
- Schedules based on best guesses of demand
- Pull-based model (demand-driven)
- Web-based
- Customer orders trigger events in supply chain
- Internet enables move from sequential supply chains to
concurrent supply chains
- Complex networks of suppliers can adjust immediately

* Laudon and Laudon. “Management Information Systems”, Ed. Pearson Education, 2013
 Supply Chain Management Systems
Push- Versus Pull-Based Supply Chain Models

Figure 9-4 The difference between push- and pull-based models is summarized by the slogan “Make what we sell, not
sell what we make.”

* Laudon and Laudon. “Management Information Systems”, Ed. Pearson Education, 2013
SCM Control Towers

Control level: What is happening? Strategic level: What may happen?

• Dashboards • Cause analysis
• Automated alerts • Simulations
• Execution monitoring • Risk analysis and response
• Compliance management

Execution level: Make it happen

• Disseminate reliable information:
Orders, frecasts, plans required
capacity, …
• Addapt the supply chain to addapt
to demand peaks
• Continuous improvement

15
SCM: Some examples

Oracle SCM

mySAP SCM

I2

Aqua eBS SCM

Microsoft Dynamics for SCM

Information Systems

MIDDLEWARE: INFORMATION SYSTEMS

INTEGRATION
 Information Systems Integration

Corporate Information
KM SCM MRP Systems are not isolated
components

ERM DWH CRM

Communication between
information systems is
neccessary to allow holistic
PPS CIM ERP management of businesses

KM: Knowledge Management CRM: Customer Relationship Management SCM: Supply Chain Management
ERP: Enterprise Resource Planning MRP: Material Requirements Planning PPS: Production Planning and Scheduling
ERM: Employee Relationship Management CIM: Computer Integrated Manufacturing DWH: DataWare House
Middleware: Systems Integration

ERP SCM Multiple software platforms need

multiple independent interfaces.
Different technologies for integration
Escalation is difficult and expensive
Costly maintenance
CRM KM

Number of interfaces is reduced. ERP SCM

Driver Driver
Usage of drivers unifies the integration
technology.
Escalability: It is less complex to add,
Middleware
remove or replace applications.
Driver Driver
Reduced maintenance costs.
CRM KM
Middleware: Challenges

Impact of changes: Middleware has to minimize the efforts

derived from changes on the information systems

Automation: One of the objectives of Middleware software has to

be to reduce dependence on the technologies used.

Cost reduction: Costs related with changes in interfaces have to be

minimized.
Middleware: Response to challenges

Impact of changes: Using drivers helps companies become more

independent of the software components used.

Automation: Messages use communication standards (ex.: XML)

and programming standards (ex.: JavaScript).

Cost reduction is achieved by using pre-configured drivers,

available for the most usual systems (such as SAP ERP) and by
building connectors that can be used by several components.
Middleware: Examples

WebSphere de IBM (antes MQ-Series)

Tuxedo de BEA Systems

Tibco

Vitria BusinessWare de Vitria

Fusion Middleware de Oracle