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Chapter 10: Extending the Organization — Supply Chain Management

I. Information Technology’s Role in the Supply Chain

a. SCM systems can increase profitability across an organization  3 main business processes
i. Materials flow from suppliers and
their upstream suppliers at all
ii. Material are transformed into
semi-finished and finished
products  organization’s own
production process
iii. Products are distributed to
customers and their downstream
customers at all levels
b. SCM is only as strong as its weakest
link  use to measure the performance of supply chains to identify weak links quickly
c. Back order: an unfilled customer order for a product
that is out of stock
d. Inventory cycle time: the time it takes to
manufacture a product and deliver it to the retailer
e. Customer order cycle time: The agreed-upon time
between the purchases of a product and the delivery of the
f. Inventory turnover: the frequency of inventory
g. Companies evolve into extended organizations 
roles of supply chain participants are changing
i. Common for suppliers to be involved in product
development and distributors to act as consultants in brand
h. IT primary role: creating the integrations or tight
process and info linkage between functions within a firm and
between functions
i. Allow smooth, synchronized flow of both info and product between customers, suppliers,
and transportation providers across the supply chain
i. Supply chain design: determines how to structure a supply chain including the product,
selection of partners, the location and capacity of warehouses, transportation methods, and
supporting MIS
i. Results in superior supply chain capabilities and profits
j. Supply chain visibility: ability to view all areas up and down the supply chain in real time
i. Improve visibility across the supply chain  use planning systems and supply chain
execution systems
ii. Supply chain planning systems: use advanced mathematic algorithms to improve the
flow and efficiency of the supply
chain while reducing inventory
iii. Supply chain execution systems:
ensure supply chain cohesion by
automating the different activities of
the supply chain
k. Electronic data interchange (EDI):
standard format for the electronic
exchange of info between supply chain
l. Bullwhip effect: occurs when distorted product-demand info ripples from one partner to the next
throughout the supply chain
II. Technologies Reinventing the Supply Chain
a. Procurement: purchasing of goods and services to meet the needs of the supply chain
i. Key supply chain strategy because the capability to purchase input prices at the right
price is directly correlated with the company’s ability to operate
b. Logistics: processes that control the distribution, maintenance, and replacement of materials
and personnel to support the supply chain
i. Inbound logistics: acquires raw materials and resources and distributes them to
manufacturing as required
ii. Outbound logistics: distributes goods and services to customers
iii. Cradle-to-grave: provides logistics support throughout the entire system of life or prod.
c. Materials Management: activities the govern the flow of tangible, physical materials through the
supply chain such as shipping, transport, distribution, and warehousing.
i. Focuses on handling all materials safely, efficiently, and in compliance with regulatory
requirements and disposal requirements.
d. 3-D Printing: (additive manufacturing) builds, layer by layer in an additive process, a three
dimensional solid object from a digital model  potential to be more disruptive than the internet
i. Brings production closer to users  eliminates steps in the supply chain
ii. Promotes mass customization, small
production batches, & reduction in
e. Computer-aided design/computer aided
manufacturing (CAD/CAM): systems are
used to create the digital designs and then
manufacture the products
i. Have a major impact on how
businesses operate and interact on a
global scale
f. Maker movement: cultural trend that places
value on an individual’s ability to be a creator
of things as well as a consumer of things
i. Make own products instead of getting
brand name products from stores

1. Makerspaces: community center that provides

technology, manufacturing equipment, and educational
opportunities to the public that would otherwise be
inaccessible or unaffordable
g. Radio-frequency identification (RFID): uses
electronic tags and labels to identify objects wirelessly
over short distances  replaces existing id tech such
as bar code
i. RFID’s electronic product code (RFID EPC):
promotes serialization or the ability to track individual
items by using unique serial number associated with
RFID tag
h. Drone: an unmanned aircraft that can fly
autonomously, or without a human
i. Robotics: focuses on creating AI devices that can
move and react to sensory input
i. 3 Laws of Robotics:
1. A robot may not injure human being, or through inaction, allow a human being to
come to harm
2. A robot must obey orders
given to it by human beings
except where such orders
would conflict with the First
3. A robot must protect its own
existence as long as such
protection does not conflict
j. SCM market matures  becomes more
sophisticated and incorporate additional