Chapter

Electronic Business Systems

7&8
By: Mr. Rashid Ali

What is Inventory ?

The word inventory simply means the goods and services that businesses hold in stock

Types of inventory

Raw material Work-in-progress Finished goods Stores and Spares

Types of inventory
Raw material
o

Such as gears for a bicycle, microchips for a computer, or screens and tubes for a television set.

Types of inventory
Work-in-progress

The second type of inventory is called WIP, or work in progress inventory .

This refers to items that are partially completed, but are not the entire finished product

Types of inventory
Finished goods The third and most common form of inventory is called finished goods . These are the final products that are ready to be purchased by customers and consumers.

The Inventory Flow Cycle

The Inventory Flow Cycle

1

Run time: Job is at machine and being worked on Setup time: Job is at the work station, and the work station is being "setup." Queue time: Job is where it should be, but is not being processed because other work precedes it.

The Inventory Flow Cycle

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Move time: The time a job spends in transit

Wait time: When one process is finished, but the job is waiting to be moved to the next work area.

Other: "Just-in-case" inventory.

Inventory Costs

Holding costs - associated with holding or carrying inventory over time Ordering costs - associated with costs of placing order and receiving goods Setup costs - cost to prepare a machine or process for manufacturing an order

Holding (Carrying) Costs

Interest Damage Warehousing Etc.

Ordering Costs

Supplies Forms Order processing Clerical support Etc.

Setup Costs

Clean-up costs Re-tooling costs Adjustment costs Etc

Carrying Cost Of Inventory

The cost of maintaining inventory in a
company's warehouse.

OR
This includes things like rent, utilities, insurance, taxes, employee costs and the opportunity cost of having your capital tied up in

Definitions

Inventory-A physical resource that a firm holds in stock with the intent of selling it or transforming it into a more valuable state.

Inventory System- A set of policies and controls that monitors levels of inventory and determines what levels should be maintained.

Zero Inventory?

Reducing amounts of raw materials and purchased parts and subassemblies by having suppliers deliver them directly. Reducing the amount of works-in process by using just-in-time production. Reducing the amount of finished goods by shipping to markets as soon as possible.

Inventory Positions in the Supply Chain

Raw Materials

Works in Process

Finished Goods

Finished Goods in Field

Reasons for Inventories

Improve customer service Economies of purchasing Economies of production Transportation savings Unplanned shocks (labor strikes, natural disasters, surges in demand, etc.)

Enterprise Business Systems

E-business means using the Internet, other networks, and IT to support

Electronic commerce

Enterprise communications and collaboration

Web-enabled business processes

E-commerce is the buying, selling, and marketing of products, services, and information over the Internet and other 7-19 networks

Essentials of the Supply Chains

Supply Chain

The flow of material, information, and services from raw material suppliers through factories and warehouses to the end customers

Supply Chain Management (SCM)

to plan, organize, and coordinate all the supply chains activities

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What is Supply Chain Management?

A management concept that integrates the management of supply chain processes with an objective to:
Develop value-added services Improve performance Cut costs Increase profits

Basic Business Objectives

Get the right product to the right place at the least cost. Keep inventory as low as possible and still offer superior customer service. Reduce cycle times.

Supply-Chain Management Focus

Suppliers Procurement Manufacturing Warehousing Customer Order Fulfillment Distribution

Essentials of the Supply Chains

Benefits reduce uncertainty and risks in the supply chain

positively affecting inventory levels, cycle time, business processes, and customer service increase profitability and competitiveness 4-24

Essentials of the Supply Chains

The Components of Supply Chain

Upstream supply chain includes the organizations suppliers and their suppliers Internal supply chain includes all the processes used by an organization in transforming the inputs of the suppliers to outputs Downstream supply chain includes all the processes involved in delivering the products to final customers
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Some Solutions to the Supply Chain Problems

Coordination of all different activities Use outsourcing rather than do-it-yourself during demand peaks Buy rather than make production inputs whenever appropriate Configure optimal shipping plans Create strategic partnerships with suppliers Use just-in-time approach to purchasing Use fewer suppliers Use IT to support the above

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Why Integration?

Tangible benefits

Inventory reduction, personnel reduction, productivity improvement, order management improvement, financial-close cycle improvements, IT cost reduction, procurement cost reduction, cash management improvements, revenue/profit increases, transportation logistics cost reduction maintenance reduction, and ontime delivery improvement
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Integrating the Supply Chain

After the introduction of computer-based information, companies started to integrate the links of the supply chain New forms of organizational relationships and the information revolution, especially the Internet and electronic commerce, have brought SCM to the forefront of management attention
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Enterprise Resources Planning (ERP)

Objective

to integrate all departments and functions across a company onto a single computer system that can serve all of the enterprises needs

Results
productivity improvement increases customer satisfaction

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Why Integration?

Tangible benefits

Inventory reduction, personnel reduction, productivity improvement, order management improvement, financial-close cycle improvements, IT cost reduction, procurement cost reduction, cash management improvements, revenue/profit increases, transportation logistics cost reduction maintenance reduction, and ontime delivery improvement
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Enterprise Resources Planning (ERP)

Objective

to integrate all departments and functions across a company onto a single computer system that can serve all of the enterprises needs

Results
productivity improvement increases customer satisfaction

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Enterprise Resource Planning (ERP) Systems

ERP systems are software packages that can be used for the core systems necessary to support enterprise systems

32

Major ERP Modules

Sales and Distribution Based on SAP (best selling ERP) Materials Management Financial Accounting Controlling and Profitability Analysis Human Resources

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ERP Brings Integration

Manf. Mkt. & Sales H/R

Shared Shared System & Data data

Purchasing

Inventory

Fin. & Acct.

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Business Process Reengineering (BPR)

Fundamentally rethinking and radically redesigning business processes, in order to achieve dramatic improvements in quality, cost, speed and service
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The Need for BPR

Three Cs

Customers today know what they want, what they are willing to pay, and how to get products and services on their own terms. Competition is continuously increasing with respect to price, quality, selection, service, and promptness of delivery. Change continues to occur. Markets, products, services, technology, the business environment, and people keep changing, frequently in an unpredictable and significant manner. 4-36

Cycle Time Reduction

IT allows the combination or elimination of steps, and the expedition of various activities in the process Telecommunications and especially the Internet and intranets cut communications time through the use of e-mail and EDI and allows collaboration in design and operations of products and services
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Reengineering Organizations

An Example - Bank

Customer deals with a single point of contact, the account manager Account manager is responsible for all bank services, and provides all services to the customer, who receives a single statement for all accounts IT provides account manager with expert advice on specialized topics, such as loans By allowing easy access to the different databases, the account manager can answer queries, plan, and organize the work with customers 4-38

Intranet Communications & Collaboration

Electronic Mail

Groupware

Intranet Communication and Collaboration within an Enterprise

Voice Mail

Faxes

Paging

Enterprise Collaboration Tools

Data Conferencing Discussion Forums

Voice Conferencing

Groupware Enterprise Collaboration Tools

Chat Systems

Videoconferencing

Electronic Meeting Systems

Electronic Communications Tools

E-Mail

Voice Mail

Groupware Electronic Communications Tools

Web Publishing

Faxing

Bulletin Board Systems

Customer Relationship Management

Customer Relationship Management (CRM) software is geared to address the consolidation and integration of all forms of communication with a customer to enable a company to better serve its key customers.

Extranet
Extranet = Business to Business Commerce using Internet technology. The successor of Electronic Data Interchange (EDI) which was and in some cases still is based on private networks or leased communications lines.