Virtual supply chain management

1. VIRTUAL
SUPPLY CHAIN
MANAGEMENT
The ultimate Supply Chain Management
Strategy
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2. I.
II.
III.
IV.
Outline
Introduction
What is a Supply Chain?
Supply Chain Management (SCM)
Virtual Supply Chain Management
1.
2.
3.
4.
5.
Terminology
Virtual Purchasing and Supply
Organization
Virtual Organization
Virtual Integration
Virtual Supply Chain
V. Supply-chain management across the
Internet
VI. Conclusion
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3.  What do you do well? Who could do it
better? Those are the questions
organizations must answer to analyze
core competencies and the best-suited
suppliers.
Introduction
 One of the most leading-edge topics for
purchasing and supply management
professionals, the virtual supply chain
allows organizations to connect, receive
mutual benefit, and align business
strategies for the prime amount of time.
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4. Introduction
 Now you see it, now you don't. At the
other extreme, far from the long-term
strategic alliance that focuses on
continuous improvement and
increasingly integrated relationships,
lies the virtual supply chain. Still directed
toward the same ultimate goals of
today's supply chains - satisfying the
customer, efficiency, and costeffectiveness - this virtual supply chain
has a different look. It relies on
relationships that can fill a need for a
given moment of time and is structured
in such a way that formation, practice,
and dissolution are conducted with ease.
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5. What is a
Supply
Chain?
 A Supply Chain consists of
organizations that successively
transform raw materials into
intermediate goods, then to final good,
and finally deliver them to customers.
 A Supply Chain consists of all stages
involved, directly or indirectly, in
fulfilling customer request .
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6. What is a
Supply
Chain?
 The global network used to deliver
products and services from raw
materials to the end customer through
engineered flows of information,
physical distribution and cash.
Information
SUPPLY
DEMAND
Product
Cash
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7. What is a
Supply
Chain?
Supply Chain Illustration
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8. Supply
Chain for
Denim
Jeans 1/2
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9. Supply
Chain for
Denim
Jeans 2/2
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10. Supply
Chain for
Beer
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11.  Developed in 1980s.
Supply Chain
Management
(SCM)
 Supply chain management (SCM) is the
process of planning, implementing, and
controlling the operations of the supply
chain as efficiently as possible .
 Express the need to integrate the key
business processes, from end user
through original suppliers.
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12. Supply Chain
Management
(SCM)
 The basic idea behind the SCM is that
companies and corporations involve
themselves in a supply chain by
exchanging information regarding
market fluctuations, production
capabilities.
 The primary objective of supply chain
management is to fulfill customer
demands through the most efficient use
of resources.
 Effective Supply Chain Mgt. is the next
logical step towards increased profits
and market share.
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13. Supply Chain
Management
(SCM)
 Managing flow of information through
supply chain in order to attain the level
of synchronization that will make it
more responsive to customer needs
while lowering costs.
 Supply chain management deals with
linking the organizations within the
supply chain in order to meet demand
across the chain as efficiently as
possible.
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14. 1) Terminology
Virtual
Supply Chain
Management
 The word "virtual" might conjure up
images of the latest high-tech
equipment, simulated strategy games,
or gadgets that alter reality with
surprising ease. However, contrary to
the concepts so prevalent in the
entertainment industry, virtual
organizations and virtual supply chains
have different interpretations in the
business and supply management world.
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15. 1) Terminology
Virtual
Supply Chain
Management
 Most are familiar with the concept of
virtual teaming, where several
individuals get together for a project or
discussion, although they're not
together in the physical sense. Thanks to
technology, people can meet via
computer hookups and telecommuting
phone lines. Taking this concept and
applying it to purchasing departments,
organizations, and supply chains can
lead to the following models.
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16. 2) Virtual Purchasing and Supply
Virtual
Supply Chain
Management
Organization
 A department takes on a virtual quality if
portions of its responsibilities are shifted
or assigned to other various business
units within the same organization.
Some organizations describe the
transformation as taking a fragmented
organization that had fragmented
purchasing processes, and aligning the
various departments so that all
purchasing processes flow through
common practices, but not a common
department. The virtual aspect results in
the actual purchasing procedures being
handled not by an isolated purchasing
department, but by a process steering
group comprised of members from the
various business functions.
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17. 3) Virtual Organization
Virtual
Supply Chain
Management
 Take this concept one step further and
imagine a virtual organization, one that
doesn't exist in a physical sense, but
functions nonetheless. In this instance, an
organization may be an umbrella for several
outsourcing operations, but not necessarily
a physical entity. The single organization is
virtual in the sense that it is not traditionally
"tangible." There may be figureheads and
individuals facilitating all of the third-party
relationships, but all core processes,
whether manufacturing, service,
administrative, or operational, are
performed outside the "virtual"
organization.
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18. 3) Virtual Organization
Virtual
Supply Chain
Management
 Virtual organizations are called
"imaginary organizations", held together
by trust, synergies of the partners,
contract and information technology
[Hedberg et al. 1994]. They operate
without long-term relationships, can be
enabled or dissolved easily on a realtime basis. Virtual corporation seems to
be the strategy for structuring and
improve the corporation for the coming
century [Davidov and Malone 1992].
Virtual companies are characterized by a
networks of internal and external
relations that constantly change.
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19. 4) Virtual Integration
 What Is Virtual Integration?
Virtual
Supply Chain
Management
 Virtual integration is a new form of
value chain management. Under such a
system, the links of the value chain are
brought together by informal
arrangements among suppliers and
customers. Shipments of the
components that your firm needs can be
easily arranged through the Internet or a
networked computer system. The same
type of arrangement allows you to fully
serve your customers in ordering,
services, or any other needs.
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20. Virtual
Supply Chain
Management
4) Virtual Integration
 Why Virtual Integration?
 Today the vision for many manufacturers is
to become virtual companies, owning only
the brand and the customer. The design,
system development, product sourcing,
logistics, and even final assembly can all be
outsourced to supply chain partners.
Increasingly the goal is to replace physical
assets with information in such a way that
every member of this extended supply chain
benefits. This forces the move from an
environment of ‘hard wired integration’,
where relationships are arms-length and
adversarial, even across functional
boundaries within the organization, to an
environment based on ‘negotiated sourcing’,
where non-core activities are outsourced and
collaborative partnerships are the norm.
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21. Virtual
Supply Chain
Management
4) Virtual Integration
 Integrating E-business
 Business processes must not only incorporate
timely company information – for improved
customer relationship management, supply
chain management, and beyond, they must
also be kept up-to-date with fast-changing
business needs. E-business facilitating these
processes is the way most business soon will be
transacted. Whether or not you ever plan to sell
products or services over the Web, your most
important customer or supplier may one day
insist upon using Web for all transaction.
 The fastest growing companies are moving
aggressively to bring e-business into all their
operations. They align their systems with their
fast-changing business priorities and use these
systems strategically, for growth. In addition,
successful businesses are employing
information technology to gather and interpret
data about their ultimate customers, including
demographics, trends, and buying behavior.
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22. 5) Virtual Supply Chain
Virtual
Supply Chain
Management
 Virtual supply chains are "production
and distribution systems utilizing a
formal physical network structure, and
operating through a network of separate
organizations" [Chandrashekar and
Schary 1999]. There are no permanent
members, they are called in for
particular projects and may not be
visible for other members. Virtual supply
chains are not serial chains but rather
flexible networks with fast, real-time
electronic communication.
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23. 5) Virtual Supply Chain
Virtual
Supply Chain
Management
 Virtual supply chain operates in changing
business environment. The virtual supply
chain often focuses on the solution to
concrete tasks and projects. After solving the
task and completing the project, virtual
supply chain is dissolved and new one is
formed with new combinations of partners.
The dominant organization in the chain,
called often as a "broker" uses temporary
partners for a specific task. The dominant firm
replaces fixed connections with flexible ones,
based on prior selection of alternatives that
require managers to communicate tasks to
members. This form of coordination has been
possible only with the extensive use of
advanced computer technologies and
telecommunication [Townsend et al. 1998].
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24. Developing supply-chain management on
the Web
Supply-chain
management
across the
Internet
 Good supply-chain management is essential for a
successful company. Supplychain management
can reach beyond the boundaries of a single
company to The current issue and full text archive
of this journal is available at share that
information between suppliers, manufacturers,
distributors, and retailers. This is where the
Internet plays a central role. The ability to focus
on one layer of the supply chain has enabled
organisations, such as AOL and lastminute.com
to be far more innovative. Shifts towards the
development of a virtual supply-chain
architecture focuses much more emphasis on the
importance of knowledge and intellect in creating
value. An adoption of an integrated approach
throughout the supply chain requires a trade-off
between autonomy and control to which the
balance is unique, between each supply partner
relationship.
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25. Web-based relationships in the supply
chain
Supply-chain
management
across the
Internet
 The growth of Web-based electronic commerce
has created a number of approaches to creating a
model of how it impacts on business.
 The Web enables all suppliers in a supply chain to
identify and co-ordinate data transfers with each
other. Research laboratories, pharmaceutical
distributors and end-users, for example, can all
swap information on new product developments,
specific diseases, and treatments within these
settings.
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26. Case in Point Dell Inc.
Supply-chain
management
across the
Internet
 When Dell Inc. first began using the Internet to expand
their business, the company had three basic
objectives:
 to make it easier to do business with Dell,
 to reduce the cost of doing business with Dell, and
 to enhance their customer relationships.
 Starting in 1996, by 1999 Dell was selling more than
$35 million per day over the Internet.
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27. Case in Point Dell Inc.
Supply-chain
management
across the
Internet
 "But for Dell, online commerce was only the
beginning," writes Michael Dell, the Founder & CEO of
Dell Computer Corporation . “ Because we viewed the
Internet as a central part of our IT strategy, we started
to view the ownership of information differently, too.
Rather than closely guarding our information
databases, which took us years to develop, we used
Internet browsers to essentially give that same
information to our customers and suppliers – bringing
them literally inside our business. This became the key
to what I call a virtually integrated organization – an
organization linked not by physical assets, but by
information. By using the Internet to speed
information from between companies, essentially
eliminating inter-company boundaries, it would be
possible to achieve precision and speed-to-market for
products and services in ways not dreamed possible
before. It would be the ultimate business system for a
digital economy."
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28.  Virtual supply chains may hold the key. These
systems are designed for flexibility, complexity
and speed in managing networks of suppliers,
manufacturers, distributors and warehousing
agents virtually. Common system protocols
which allow efficient communication,
collaboration and coordination amongst the
different vendors will let everyone work
together as if they were one large business.
Conclusion
 Apart from that, Internet-enabled infrastructure
allows ease of implementation of crosschecking of inventory levels, order status as well
as expected product delivery schedules. In fact,
problems can be spotted and addressed with
speed to minimize downtime or effects on
production schedule. Ultimately, customer
satisfaction is paramount and everyone is
working towards that one goal of ensuring that
their best is provided.
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29. Conclusion
 The Internet, as a means of virtual organizing,
has become a central part of a commercial drive
towards systemic innovation and the reevaluation by many of value creation. A major
shift in the communications between business
organisations is taking place, which is actually
redefining organisations and commercial
transactions. The Internet has become a key
element in molding and propelling business into
new directions in the traditional marketplace and
emerging marketspace.
 Finally, a virtual supply chain that networks all
parties together is something that is inevitable in
order to increase profitability and reduce costs.
Collaboration amongst different parties is
necessary in the virtual world as this is the only
way in which businesses can thrive. Failure to
adopt new and better management strategies
will only be detrimental to the business as
competitors take over and are able to do a much
better job than you. In fact, these practices will
be more of the norm in the near future.
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30.  en.wikipedia.org/wiki/Supply chain
 http://www.mba.tuck.dartmouth.edu/pages/faculty/d
ave.pyke/case_studies/supply_chain_or_ms.pdf
 www.e-lberta/pdf/efc_supply_chain_basics.pdf
 www.supplychainseminars.com/
 en.wikipedia.org/wiki/Supply_chain_management
References
 http://www.1000ventures.com/business_guide/im_val
ue_chain_virtual%20integration.html
 http://www.webpronews.com/the-virtual-supplychain-the-ultimate-supply-chain-managementstrategy-2005-07
 http://www.ism.ws/pubs/ By Roberta J. Duffy, writer
for Purchasing Today®. May 2000 Purchasing Today®,
page 47.
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