SCM Systems: HP Example HP: largest supply chain among IT manufacturers 9 steps in HP s web-based order-driven SCM:

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1 SCM Systems: HP Example HP: largest supply chain among IT manufacturers 9 steps in HP s web-based order-driven SCM: 1. Customer or dealer places order 2. Order goes from order entry system to HP s production and delivery system 3. Then routed to one of several HP contractor supplier firms 4. Supplier s system verifies HP s order and ensures the PC can be manufactured Why is this verification step so important? 5. Order is then forwarded to production control system Copyright 2017 Pearson Education Ltd. Slide 12-43

2 SCM Systems: HP Example (cont.) 6. PCS issues bar-coded production ticket to factory workers 7. Simultaneously, a parts order is forwarded to the supplier s warehouse and inventory management system 8. Worker assembles the PC, then it is boxed, tagged, and shipped to customer or dealer 9. Delivery is monitored and tracked; elapsed time from order entry to shipping is 48 hours Copyright 2017 Pearson Education Ltd. Slide 12-44

3 Collaborative Commerce Use of digital technologies for organizations to collaboratively design, produce, and manage products through life cycles Moves focus from transactions to relationships among supply chain participants Unlike EDI, more like an interactive teleconference among members of supply chain Use of Internet technologies for rich communications environment Sharing designs, documents, messages, network meetings, videoconferencing Copyright 2017 Pearson Education Ltd. Slide 12-45

4 Example: Procter & Gamble In the past: P&G designs bottle or product package in-house, then turns to over 100 packaging suppliers to find the cheapest Now: P&G asks its suppliers to come up with innovative ideas for packaging and pricing New product ideas (ca. 50%) Copyright 2017 Pearson Education Ltd. Slide 12-46

5 Example: Procter & Gamble (cont.) Who is P&G s biggest online customer? P&G sets aside warehouse space for P&G products purchased by Amazon customers Amazon ships products directly from P&G warehouses (instead of P&G Amazon Customer) Copyright 2017 Pearson Education Ltd. Slide 12-47

6 Example: Procter & Gamble (cont.) Win-win Amazon Reducing costs of shipping and storing goods Better price competition Reduced delivery time P&G Savings on transportation costs as goods remain at P&G warehouses Amazon helps boost online sales of P&G goods Copyright 2017 Pearson Education Ltd. Slide 12-48

Elements of a Collaborative Commerce System Figure 12.

8 Social Networks and B2B Social networks can provide personal connections that can help decision making in supply chain Example: Dell s Facebook page, engaging suppliers and customers in conversations about existing products, and ideas for new products Copyright 2017 Pearson Education Ltd. Slide 12-50

9 Net Marketplaces Ways to classify Net marketplaces: Pricing mechanism, nature of market served, ownership By business functionality What businesses buy (direct vs. indirect goods) How businesses buy (spot purchasing vs. long-term sourcing) Four main types E-distributors E-procurement Exchanges Industry consortia Copyright 2017 Pearson Education Ltd. Slide 12-51

10 Bias Ownership Characteristics of Net Marketplaces: A B2B Vocabulary Pricing mechanism Scope/Focus Value creation Access to market Sell-side vs. buy-side vs. neutral. Whose interests are advantaged: buyers, sellers, or no bias? Industry vs. third party. Who owns the marketplace? Fixed-price catalogs, auctions, bid/ask, and RFPs/RFQs. Horizontal vs. vertical markets. What benefits do they offer customers or suppliers? In public markets, any firm can enter, but in private markets, entry is by invitation only. Table 12.3, p. 823 Copyright 2017 Pearson Education Ltd. Slide 12-52

Pure Types of Net Marketplaces Figure 12.

12 E-distributors Most common type of Net marketplace Electronic catalogs representing products of thousands of direct manufacturers Typically, independently owned intermediaries Offer industrial customers single source to purchase indirect goods (MRO) on spot basis Typically, horizontal Usually, fixed price discounts for large customers Example: Würth, AmazonBusiness Copyright 2017 Pearson Education Ltd. Slide 12-54

14 E-procurement Net Marketplaces Independently owned intermediaries Connect hundreds of suppliers of indirect goods Firms pay fees to join market Long-term contractual purchasing of indirect goods Revenues from transaction fees, licensing consultation services and software, network fees Offer value chain management (VCM) services Many-to-many market Example: SAP Ariba Copyright 2017 Pearson Education Ltd. Slide 12-56

15 E-procurement (cont.) VCM: automation of entire procurement process on the buyer side and the selling business processes on the seller side For buyers: e.g., automated purchase orders, sourcing, invoicing, or payment For suppliers: e.g., catalog creation, order management, invoicing, or shipment Copyright 2017 Pearson Education Ltd. Slide 12-57

E-procurement Net Marketplaces Figure 12.

17 Exchanges Independently owned online marketplaces Connect hundreds to thousands of suppliers and buyers in dynamic, real-time environment Vertical markets, spot purchasing in single industry Charge commission fees on transaction Variety of pricing models Supplier benefits: access to global purchasing environment and unloading of production overruns Tend to be buyer-biased, suppliers disadvantaged by competition Many have failed due to low liquidity and trust Copyright 2017 Pearson Education Ltd. Slide 12-59

19 Industry Consortia Industry-owned vertical markets Purchase of direct inputs from set of invited participants Emphasize long-term contractual purchasing, stable relationships, creation of data standards Ultimate objective: Unification of supply chains within entire industries through common network and computing platform Revenue from transaction and subscription fees Many different pricing mechanisms Can force suppliers to use consortia s networks Copyright 2017 Pearson Education Ltd. Slide 12-61

21 Private Industrial Networks Private trading exchanges (PTXs) Web-enabled networks for coordination of transorganizational business processes (collaborative commerce) Direct descendant of EDI; closely tied to ERP systems Manufacturing and support industries Single, large manufacturing firm sponsors network Range in scope from single firm to entire industry Example: Procter & Gamble Copyright 2017 Pearson Education Ltd. Slide 12-63

P&G s Private Industrial Network Figure 12.

23 Private Industrial Networks (cont.) Objectives include: Efficient purchasing and selling industry-wide Increasing supply chain visibility Closer buyer supplier relationships Global scale operations Focus on continuous business process coordination Typically, focus on single sponsoring company that owns the network Copyright 2017 Pearson Education Ltd. Slide 12-65

24 Private Industrial Networks and Collaborative Commerce Forms of collaboration: Collaborative resource planning, forecasting, and replenishment (CPFR) Demand chain visibility Where exists excess stock? Excess inventories raise costs for entire industry Marketing coordination and product design Can ensure products fulfill claims of marketing Customer feedback enables closed loop marketing Copyright 2017 Pearson Education Ltd. Slide 12-66

Pieces of the Collaborative Commerce Puzzle Figure 12.

26 Implementation Barriers Concerns about sharing of proprietary, sensitive data Integration of private industrial networks into existing ERP systems and EDI networks difficult, expensive Requires change in mindset and behavior of employees and suppliers All participants lose some independence, except the large network owner Copyright 2017 Pearson Education Ltd. Slide 12-68