Bozarth ch15S

Supply Chain
Information Systems
Supplement Objectives
Be able to:
Explain why information flows are a
necessary part of any supply chain.
Describe in detail how supply chain
information needs vary according to the
organizational level and the direction of the
linkages (upstream or downstream).
Describe and differentiate among ERP, DSS,
CRM, SRM, and logistics applications.
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Supplement 15S, Slide 2
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Information Flows
What are some of the

key functions information flows
perform?
Key Functions of Information
Flows
• Plan or kick-off physical flows
– Customer order, production plan, etc.
• Record and retrieve status and plans
– Check inventory levels, shipping schedule, etc.
• Codify decision rules and planning values
– Standard costs and times, inventory reorder points,
etc.
• Record and report performance
– Quality levels, on-time delivery, actual costs, etc.
Supply Chain Information Flows
Customer Internal Supply Supplier
Relationship Chain Management Relationship
Management Management
Strategic decision making
Tactical planning
Routine decision making
Execution and transaction

processing
Supply Chain Information Needs
Supply Chain Activity Characteristics Performance Dimensions
purpose for Information Flows
Strategic decision making • Focus on long-term decisions • Flexibility

long-range plans to meet • Least structured of all
organization’s mission • Greatest user discretion
Tactical planning • Focus is on tactical decisions • Form

plans to coordinate actions • Plans physical flows • Flexibility
across supply chain • Greater user discretion
Routine decision making • Fairly short time frames • Accuracy

support rule-based decision • Limited user discretion • Timeliness
making • Limited flexibility
Execution and transaction • Very short time frames, very high volumes • Accuracy
processing • Highly automated • Timeliness
record / retrieve data & control • Standardized business practices
physical / monetary flows • Ideally no user intervention
Supply Chain Information
Systems
Strategic
decision
making DSS
Network
SRM CRM design
Tactical applications applications
planning
Warehouse &
Routine transportation
decision planning
making
ERP
applications Warehouse
management &
Execution and
transportation
transaction
execution
processing
Suppliers Internal supply Customers Logistics
chain
Supply Chain Information Systems
Enterprise Resource Planning (ERP) Systems
Large, integrated computer-based Strategic decision

making
SRM
DSS
CRM
Network
design
business transaction processing

applications applications
Tactical
planning
and reporting systems. ERP Routine

decision
making
Warehouse &
transportation
planning
ERP
systems pull together all of the Execution &
transaction
applications Warehouse
management &
classic business functions such

transportation
processing
execution

chain
as accounting, finance, sales, and

operations into a single, tightly  Traditional strengths in routine
integrated package that uses a decision making and in execution
common database. and transaction processing
 Captures data to support higher-
level decision support systems
(DSS)
Decision Support Systems (DSS)
Computer-based information
Strategic decision
making DSS
Network
SRM CRM design
systems that allow users to

Tactical
planning
analyze, manipulate, and

Routine Warehouse &
decision transportation
making planning
present data in a manner that Execution &

transaction
processing
Warehouse
management &
transportation
aids higher-level decision

execution

chain
making
Supplier Relationship Management (SRM)
Computer-based information systems Strategic decision

making
SRM
DSS
CRM
Network
design
designed to plan and manage the

Tactical
planning
firm’s external linkages with its Routine

decision
making
Warehouse &
transportation
planning
suppliers. Example applications: Execution &

transaction
Warehouse
management &
transportation
processing
execution
 Design collaboration Suppliers Internal supply

chain
Customers Logistics
 Sourcing decisions
 Negotiations
 Buy process
 Supply collaboration
Customer Relationship Management (CRM)
Computer-based information systems Strategic decision

making
SRM
DSS
CRM
Network
design
designed to plan and manage the

Tactical
planning
firm’s external linkages with its Routine

decision
making
Warehouse &
transportation
planning
customers. Execution &

transaction
Warehouse
management &
transportation
Example applications:
processing
execution

chain
 Market analysis
 Sell process
 Order management
 Call/service center management
Logistics Systems I
Network Design Applications: Strategic decision

making
SRM
DSS
CRM
Network
design
Tactical
planning
Logistics information systems that Routine

decision
making
Warehouse &
transportation
planning
address such long-term strategic Execution &

transaction
Warehouse
management &
transportation
questions as facility location and

processing
execution

chain
sizing, as well as transportation

networks.
Logistics Systems II
Warehouse and Transportation Strategic decision

making
SRM
DSS
CRM
Network
design
Planning Systems:
Tactical
planning
Routine Warehouse &

making planning
Logistics information systems that Execution &

transaction
Warehouse
management &
transportation
support tactical planning efforts by

processing
execution

chain
allocating “fixed” logistics capacity in

the best possible way, given business
requirements.
Logistics Systems III
Strategic decision
Warehouse Management and

making DSS
Network
SRM CRM design
Tactical
Transportation Execution Systems:

planning
Routine Warehouse &

making planning
Logistics information systems that

Execution & Warehouse
management &
transaction
transportation
processing
execution
initiate and control the movement of Suppliers Internal supply

chain
Customers Logistics
materials between supply chain

partners
Advanced Concepts –
Levels of Value Provided by Information
Visibility
Information displays the physical and monetary
flows in the supply chain
Mirroring
Information can replace physical processes with
virtual ones
Creation of new customer relationships
Information can create new sources of value /
new products and services
“How can we exploit these information flows?”

‘Perfect’ Information
Improving Information Flow

Processes
What is “perfect” Information?
• Perfect information is:

– Accurate
– Timely
– Correct in detail and form
– Shared
– Complete
– Other dimensions?
Costs of “imperfect” Information
• What are some of the costs associated

with information that is:
– Inaccurate? (e.g., inventory or order info.)
– Late? (e.g., forecast changes)
– Incomplete in detail / form? (e.g., quarterly
sales $ forecast)?
– Not shared? (e.g., engineering changes)
Diagnosing and Improving Supply Chain
Information Flows
1. Map the business process(es) containing the information

flows of interest
2. Develop an information flow profile that identifies
potential performance gaps in the information flows
3. Use continuous improvement techniques to identify the
causes of these gaps
4. Use the plan-do-check-act (PDCA) cycle to plan and
implement improvements aimed at closing these gaps
Diagnosing and Improving Supply Chain
Information Flows
1. Map the business process(es) and information flows
Dealer Paper Order Sits Order Sits Clerk
Order Internal Mail
Faxes In Fax In Clerk’s Processes
Created Delivers Fax
Order In Box In Box Order
4% of 0 to 4 hours 0 to 2 hours 5 minutes

orders lost 2 hours on average 0.5 to 1.5 hours 1 hour on average
1 hour on average
1% of orders lost
10 to 45 minutes
20 minutes on average
Dealer Inspector Worker YES

Transport Firm Is Item
Receives Checks Picks
Delivers Order In Stock?
Order Order Order
NO
2 minutes
1 to 3 hours 0.5% of orders incorrect
2 hours on average Clerk Notifies
No history of lost, Dealer and
damaged, or incorrect
deliveries
Passes Order
On to Plant
2. Identify potential performance gaps in the information flows

Accuracy
Timeliness
Reliability
Detail and form
Availability
3. Identify the causes of these gaps

Method Manpower
Drilling
too slow Overtime/
defects Do
Wood Lathe not
Material Steel
Machinery calibrated
Plan Check
4. Use the plan-do-check-act cycle to close the gaps

Act
Improving Information Flows
Process Mapping

Dealer Paper Order Sits Order Sits Clerk
Order Internal Mail
Faxes In Fax In Clerk’s Processes
Created Delivers Fax
Order In Box In Box Order
4% of 0 to 4 hours 0 to 2 hours 5 minutes

orders lost 2 hours on average 0.5 to 1.5 hours 1 hour on average
1 hour on average
1% of orders lost
10 to 45 minutes
20 minutes on average
Dealer Inspector Worker YES

Transport Firm Is Item
Receives Checks Picks
Delivers Order In Stock?
Order Order Order
NO
2 minutes
1 to 3 hours 0.5% of orders incorrect
2 hours on average Clerk Notifies
No history of lost, Dealer and
damaged, or incorrect
deliveries
Passes Order
On to Plant

Identify Gaps / Information Flow Profile
2. Identify potential performance gaps in the information

Poor Excellent
flows
Accuracy
Timeliness
Reliability
Detail and form
Availability
Other
Information Flow Profile - II

flows
Poor Excellent
Accuracy
Timeliness
Reliability
Detail and form
Availability
Gap Analysis

flows
 To what extent is the information flow less than
perfect?
 What are the benefits and costs associated with
closing this gap?
 Look for “low-hanging fruit”, not necessarily high-
tech solutions
Root Cause Analysis
3. Use continuous improvement techniques to identify the

causes of these gaps
Root cause analysis – A process by which organizations
brainstorm about possible causes of problems (referred to
as “effects”) and then, through structured analysis and
data-gathering efforts, gradually narrow the focus to a few
root causes Process Personnel
Poor Lack of training

dispatching
Late
deliveries
Truck breakdown
Material Equipment
PDCA to Close Gaps
Do
Plan Check
Act

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Supply Chain

What are some of the

Strategic decision making

Routine decision making

Execution and transaction

Strategic decision making • Focus on long-term decisions • Flexibility

Tactical planning • Focus is on tactical decisions • Form

Routine decision making • Fairly short time frames • Accuracy

Large, integrated computer-based Strategic decision

business transaction processing

and reporting systems. ERP Routine

classic business functions such

Suppliers Internal supply Customers Logistics

as accounting, finance, sales, and

systems that allow users to

analyze, manipulate, and

present data in a manner that Execution &

aids higher-level decision

Suppliers Internal supply Customers Logistics

Computer-based information systems Strategic decision

designed to plan and manage the

firm’s external linkages with its Routine

suppliers. Example applications: Execution &

 Design collaboration Suppliers Internal supply

Computer-based information systems Strategic decision

designed to plan and manage the

firm’s external linkages with its Routine

customers. Execution &

Suppliers Internal supply Customers Logistics

Network Design Applications: Strategic decision

Logistics information systems that Routine

address such long-term strategic Execution &

questions as facility location and

Suppliers Internal supply Customers Logistics

sizing, as well as transportation

Warehouse and Transportation Strategic decision

Routine Warehouse &

Logistics information systems that Execution &

support tactical planning efforts by

Suppliers Internal supply Customers Logistics

allocating “fixed” logistics capacity in

Warehouse Management and

Transportation Execution Systems:

Routine Warehouse &

Logistics information systems that

initiate and control the movement of Suppliers Internal supply

materials between supply chain

“How can we exploit these information flows?”

Improving Information Flow

• Perfect information is:

• What are some of the costs associated

1. Map the business process(es) containing the information

4% of 0 to 4 hours 0 to 2 hours 5 minutes

Dealer Inspector Worker YES

2. Identify potential performance gaps in the information flows

3. Identify the causes of these gaps

4. Use the plan-do-check-act cycle to close the gaps

1. Map the business process(es) and information flows

4% of 0 to 4 hours 0 to 2 hours 5 minutes