Chapter 16 Information Technology in a Supply Chain

True/False 1. Information is crucial to the performance of a supply chain because it provides the basis upon which supply chain managers make decisions. Answer: True Difficulty: Easy Information is the supply chain driver that serves as the glue allowing the other three drivers to work together to create an integrated, coordinated supply chain. Answer: True Difficulty: Moderate Information makes the supply chain visible to a manager so that he can make decisions to improve the supply chains performance. Answer: True Difficulty: Moderate Information is not necessary for management to make decisions over a broad scope that crosses both functions and companies. Answer: True Difficulty: Easy Information must be 100 percent correct in order to make good decisions. Answer: False Difficulty: Moderate To make good decisions, a manager needs to have accurate information regardless of how long it takes to acquire it. Answer: False Difficulty: Hard Often companies will have large amounts of data that are not helpful with decision making. Answer: True Difficulty: Moderate Information is only a key ingredient at each stage of the supply chain, not within each phase of supply chain decision making. Answer: False Difficulty: Moderate The driver of IT in the supply chain has increasingly been the enterprise software developed to enable processes both within and across companies. Answer: True

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Difficulty: Moderate 10. The unsuccessful categories of software will be those focused on the supply chain macro processes. Answer: False Difficulty: Easy This broadening of scope across which companies make decisions emphasizes the importance of including processes all along the supply chain when making decisions. Answer: True Difficulty: Moderate To increase the supply chain surplus (and therefore their firms own profitability) most effectively, firms must focus primarily on improving internal processes. Answer: False Difficulty: Moderate Functional performance is important to customers because it provides them with capabilities to create a competitive advantage. Answer: True Difficulty: Moderate The ability to integrate is important to a customer because applications that are easy to integrate are generally harder to get implemented and producing value. Answer: False Difficulty: Moderate Firms that work well with implementation partners and build up large groups of customers trained on their solutions have built a highly defensible position. Answer: True Difficulty: Moderate The goal of the CRM macro process is to negotiate an effective contract that establishes parameters for a supplier in a way that best meets enterprise needs. Answer: False Difficulty: Hard Weakness in the CRM process results in demand being lost and a poor customer experience because orders are not processed and executed effectively. Answer: True Difficulty: Easy CRM processes are crucial to the supply chain because of the lack of interaction between an enterprise and its customers. Answer: False Difficulty: Moderate The customer must be the starting point when trying to increase the supply chain surplus because all demand, and therefore revenue, ultimately arises from them. Answer: True

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Difficulty: Moderate 20. When forecasting demand, ISCM interaction with SRM is essential as the SRM applications have the most data and insight on customer behavior. Answer: False Difficulty: Easy The ISCM processes should have strong integration with the SRM macro process, because supply planning, fulfillment, and field service are all dependent on suppliers and therefore the SRM processes. Answer: True Difficulty: Moderate Every industry has the same key success factors. Answer: False Difficulty: Easy Some of the worst IT disasters are due to the fact that companies try to implement IT systems in a wide variety of processes at the same time. Answer: True Difficulty: Easy Companies should use IT systems to make decisions, because the software available today can make many supply chain decisions for management. Answer: False Difficulty: Easy

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Multiple Choice 1. Information technology (IT) consists of the tools a. used to gain awareness of information. b. to analyze information. c. to act on information to improve the performance of the supply chain. d. all of the above e. b and c only Answer: e Difficulty: Easy Information is a. the supply chain driver that serves as the glue allowing the other three drivers to work together to create an integrated, coordinated supply chain. b. crucial to supply chain performance. c. the key to the success of a supply chain. d. all of the above e. a and c only

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Answer: d Difficulty: Easy 3. Information a. provides the foundation on which supply chain processes execute transactions and managers make decisions. b. makes the supply chain visible to a manager. c. enables management to make decisions over a broad scope that crosses both functions and companies. d. all of the above e. b and c only Answer: d Difficulty: Moderate Information Technology (IT) a. consists of the hardware and software throughout a supply chain that gather, analyze, and act on information. b. serves as the eyes and ears (and sometimes a portion of the brain) of management in a supply chain. c. can have a significant impact on a firms performance. d. all of the above e. a and b only Answer: d Difficulty: Moderate Which of the following is not a characteristic information must have to be useful when making supply chain decisions? a. Information must be accurate. b. Information must be accessible in a timely manner. c. Information must be interesting. d. Information must be of the right kind. e. All of the above are useful characteristics. Answer: c Difficulty: Moderate To be accurate, information must a. give the true picture of the state of the supply chain. b. be 100 percent correct. c. paint a picture of reality that is at least directionally correct. d. all of the above e. a and c only Answer: e Difficulty: Moderate To be accessible in a timely manner, information must be a. out of date. b. current. c. easily accessible. d. all of the above e. b and c only Answer: e

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Difficulty: Moderate 8. To be of the right kind, information needs to be a. useful. b. irrelevant. c. meaningless. d. all of the above e. b and c only Answer: a Difficulty: Moderate Information is a key ingredient a. at each stage of the supply chain. b. within each phase of supply chain decision making. c. only at each stage of the supply chain. d. none of the above e. a and b only Answer: e Difficulty: Moderate Enterprise software a. collects transaction data. b. analyzes transaction data to make decisions. c. executes decisions both within an enterprise and across its supply chain. d. all of the above e. a and b only Answer: b Difficulty: Moderate The successful categories of software in the evolution taking place in enterprise software will be a. those focused on the supply chain macro processes. b. those not focused on the supply chain macro processes. c. those focused on basic functions. d. none of the above e. both a and c Answer: b Difficulty: Moderate The emergence of supply chain management has broadened the scope across which companies make decisions to a. the supplier. b. the enterprise. c. the entire supply chain. d. the customer. e. none of the above Answer: c Difficulty: Easy Which of the following is not one of the supply chain macro processes? a. Customer Relationship Management (CRM)

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b. Internal Supply Chain Management (ISCM) c. Supplier Relationship Management (SRM) d. Transaction Management Foundation (TMF) e. All of the above are supply chain macro processes. Answer: c Difficulty: Easy 14. Processes that focus on downstream interactions between the enterprise and its customers are included in a. Customer Relationship Management (CRM). b. Internal Supply Chain Management (ISCM). c. Supplier Relationship Management (SRM). d. Transaction Management Foundation (TMF). e. none of the above Answer: a Difficulty: Easy Processes that focus on internal operations within the enterprise are considered a. Customer Relationship Management (CRM). b. Internal Supply Chain Management (ISCM). c. Supplier Relationship Management (SRM). d. Transaction Management Foundation (TMF). e. none of the above Answer: b Difficulty: Easy Processes that focus on upstream interactions between the enterprise and its suppliers are part of a. Customer Relationship Management (CRM). b. Internal Supply Chain Management (ISCM). c. Supplier Relationship Management (SRM). d. Transaction Management Foundation (TMF). e. none of the above Answer: c Difficulty: Easy Software that provides the foundation upon which the macro processes rest through basic ERP systems, infrastructure software, and integration software is a. Customer Relationship Management (CRM). b. Internal Supply Chain Management (ISCM). c. Supplier Relationship Management (SRM). d. Transaction Management Foundation (TMF). e. none of the above Answer: d Difficulty: Easy To increase the supply chain surplus (and therefore their firms own profitability) most effectively, firms must a. expand their scope beyond their enterprise. b. focus primarily on improving internal processes. c. think in terms of all three supply chain macro processes.

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d. all of the above e. a and c only Answer: d Difficulty: Moderate 19. Which of the following is not a factor determining the success of software firms focused on a macro process? a. functional performance b. color and images on working screens c. integration with other macro processes d. strength of the software firms ecosystem e. none of the above Answer: b Difficulty: Moderate Functional performance is important to customers because a. advanced functionality is rarely utilized. b. it provides them with capabilities to create a competitive advantage. c. the ease of use is crucial to successful use. d. all of the above e. b and c only Answer: e Difficulty: Moderate The ability to integrate is important to a customer because a. applications that are easy to integrate are generally easier to get implemented and producing value. b. applications that integrate across macro processes will be able to provide the benefits of making decisions for the extended supply chain. c. firms that do not have integrated solutions in all three macro processes have a competitive advantage. d. both a and b e. both a and c Answer: d Difficulty: Moderate A firms ecosystem a. is the network of software partners and, more importantly, systems integrators and installed base. b. provides assistance in selling and implementing software. c. will determine how strong the network will be that provides support to a customer both during implementation and down the road. d. all of the above e. a and c only Answer: d Difficulty: Moderate The goal of the CRM macro process is to a. negotiate an effective contract that best meets enterprise needs. b. improve the design of products. c. fulfill demand generated by ISCM processes.

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d. generate customer demand and facilitate transmission and tracking of orders. e. none of the above Answer: d Difficulty: Moderate 24. Weakness in the CRM process results in a. orders that are not processed and executed effectively. b. demand being lost. c. a poor customer experience. d. all of the above e. a and b only Answer: d Difficulty: Easy Which of the following is a key process under CRM? a. Strategic Planning b. Fulfillment c. Field Service d. Demand Planning e. Order Management Answer: e Difficulty: Moderate Which of the following is not a key process under CRM? a. Market b. Demand Planning c. Order Management d. Sell e. Call Center Answer: b Difficulty: Hard The CRM processes are crucial to the supply chain because a. all demand, and therefore revenue, ultimately arises from the customer. b. CRM processes (and also CRM software) must be integrated with internal operations to optimize performance. c. customer-focused units should be working independently from internal operations. d. all of the above e. a and b only Answer: c Difficulty: Moderate The customer must be the starting point when trying to increase the supply chain surplus because a. customer-focused units are more effective when working independently. b. all demand, and therefore revenue, ultimately arises from them. c. internal operations cannot optimize performance. d. all of the above e. a and c only Answer: b

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Difficulty: Hard 29. Which of the following is a key process under ISCM? a. Design Collaboration b. Negotiate c. Supply Collaboration d. Supply Planning e. Order Management Answer: d Difficulty: Moderate Which of the following is not a key process under ISCM? a. Strategic Planning b. Fulfillment c. Supply Collaboration d. Demand Planning e. Field Service Answer: c Difficulty: Moderate There needs to be strong integration between the ISCM and CRM macro processes because a. the ISCM macro process aims to fulfill demand that is generated by CRM processes. b. CRM applications have the most data and insight on customer behavior to be used in forecasting. c. fulfillment and field service are all dependent on suppliers. d. all of the above e. a and b only Answer: e Difficulty: Moderate The ISCM processes should have strong integration with the SRM macro process because a. SRM applications have the most data and insight on customer behavior to be used in forecasting. b. supply planning, fulfillment, and field service are all dependent on suppliers. c. order management must integrate closely with fulfillment and be an input for effective demand planning. d. all of the above e. a and b only Answer: b Difficulty: Moderate Which of the following is a major SRM process? a. Strategic Planning b. Order Management c. Design Collaboration d. Supply Planning e. Fulfillment Answer: c

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Which of the following is not a major SRM process? a. Supply Planning b. Buy c. Design Collaboration d. Source e. Negotiate Answer: a Difficulty: Hard ERP systems a. were focused on building transaction management and process automation systems. b. proved to be the foundation for future decision support applications. c. excelled at the automation of simple transactions and processes as well as the creation of an integrated way to store and view. d. all of the above e. b and c only Answer: d Difficulty: Moderate Select an IT system that addresses the companys key success factors because a. every industry has the same key success factors. b. IT systems need to give a company an advantage in the areas most crucial to the success of the business. c. these elements do not determine whether or not a company is going to be successful. d. all of the above e. a and b only Answer: b Difficulty: Moderate Take incremental steps and measure value because a. some of the worst IT disasters are due to the fact that companies try to implement IT systems in a wide variety of processes at the same time. b. companies should not take a big picture perspective. c. the big picture perspective should be implemented in digestible pieces. d. all of the above e. a and c only Answer: e Difficulty: Moderate Align the level of sophistication with the need for sophistication because a. there is a trade-off between the ease of implementing a system and the systems level of complexity. b. erring on the less sophisticated side leaves the firm with a competitive weakness. c. trying to be too sophisticated leads to a higher possibility of the entire system failing. d. all of the above

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e. a and b only Answer: d Difficulty: Moderate 39. Use IT systems to support decision making, not to make decisions because a. the software available today can make many supply chain decisions for management. b. companies need to maintain the amount of managerial effort they spend on supply chain issues. c. management needs to be able to make adjustments in the supply chain because the competitive and customer landscape changes. d. all of the above e. b and c only Answer: c Difficulty: Moderate Companies need to think about the future because a. trends in a companys industry regarding insignificant characteristics could become crucial in the future. b. managers need to explore how flexible the systems will be when changes are required in the future. c. IT systems often last for many more years than originally planned. d. all of the above e. b and c only Answer: d Difficulty: Moderate

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Essay/Problems 1. Explain the role of information in the supply chain. Answer: Information is crucial to the performance of a supply chain because it provides the basis upon which supply chain managers make decisions. Information is the supply chain driver that serves as the glue allowing the other three drivers to work together to create an integrated, coordinated supply chain. Information is crucial to supply chain performance because it provides the foundation on which supply chain processes execute transactions and managers make decisions. Therefore, information makes the supply chain visible to a manager. With this visibility, a manager can make decisions to improve the supply chains performance. In many ways, information is the most important of the four supply chain drivers because without it, none of the other drivers can be used to deliver a high level of performance. Information is the key to the success of a supply chain because it enables management to make decisions over a broad scope that crosses both functions and companies. Successful supply chain strategy results from viewing the supply chain as a whole, rather than looking only at the individual stages. By taking a global scope across the entire supply chain, a manager is able to craft strategies

that take into account all factors that affect the supply chain, rather than just those factors affecting a particular stage or function within the supply chain. Taking the entire chain into account maximizes the profit of the total supply chain, which then leads to higher profits for each individual company within the supply chain. Difficulty: Hard 2. Explain the role of information technology in the supply chain. Answer: Information is crucial to the performance of a supply chain because it provides the basis upon which supply chain managers make decisions. Information technology (IT) consists of the tools used to gain awareness of information, analyze this information, and act on it to improve the performance of the supply chain. Information is crucial to supply chain performance because it provides the foundation on which supply chain processes execute transactions and managers make decisions. Given the role of information in a supply chains success, managers must understand how information is gathered and analyzed. This is where IT comes into play. IT consists of the hardware and software throughout a supply chain that gather, analyze, and act on information. IT serves as the eyes and ears (and sometimes a portion of the brain) of management in a supply chain, capturing and analyzing the information necessary to make a good decision. Using IT systems to capture and analyze information can have a significant impact on a firms performance. Difficulty: Moderate 3. Explain the characteristics information must have to be useful for decision making in a supply chain. Answer: Information must have the following characteristics to be useful when making supply chain decisions: 1. Information must be accurate. Without information that gives the true picture of the state of the supply chain, it is very difficult to make good decisions. That is not to say all information must be 100 percent correct but rather that the data available paint a picture of reality that is at least directionally correct. 2. Information must be accessible in a timely manner. Often accurate information exists, but by the time it is available, it is either out of date or if it is current, it is not in an accessible form. To make good decisions, a manager needs to have up-to-date information that is easily accessible. 3. Information must be of the right kind. Decision makers need information that they can use. Often companies will have large amounts of data that are not helpful with decision making. Companies must think about what information should be recorded so that valuable resources are not wasted collecting meaningless data while important data goes unrecorded. When managers have good information, they have supply chain visibility, enabling them to take a global scope. With this global scope, they are able to make the best decisions for the supply chain. Therefore, information is a key to supply chain success. Difficulty: Moderate

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Describe the factors that determine the success of firms involved in the software industry. Answer: Among software firms focused on a macro process, the following three factors determine their success: 1. Functional performance 2. Integration with other macro processes 3. Strength of the software firms ecosystem Functional performance is important to customers because it provides them with capabilities to create a competitive advantage. In addition to raw functional performance (qualities such as the ability to optimize both price and supply in an integrated fashion), the ease of use is crucial to success in this category. Some software has very advanced functionality but is very difficult to use. As a result, the advanced functionality is rarely utilized. Software firms with lower levels of functionality but with high ease of use can, in essence, provide more usable functionality to their customers and therefore gain an edge. The ability to integrate is important to a customer for a variety of reasons. Applications that are easy to integrate are generally easier to get implemented and producing value. Integration is also crucial across different macro processes. Applications that integrate across macro processes will be able to provide the benefits of making decisions for the extended supply chain. This gives an edge to firms that offer a full line of integrated solutions in all three macro processes. Finally, a firms ecosystem - the network of software partners and, more importantly, systems integrators and installed base - provides assistance in selling and implementing software. Firms that work well with implementation partners and build up large groups of customers trained on their solutions have built a highly defensible position. For another firm to capture this business requires that they be so far superior that it is worth the retraining and reintegration effort, which is often quite significant. For a customer, a strong ecosystem means a strong network to provide support both during implementation and down the road. These criteria are also important for customers of supply chain software. These criteria are the key to success for software companies precisely because they improve supply chain performance for firms. Thus, companies should evaluate software providers along these lines to determine their choice of software vendor. Difficulty: Moderate

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Discuss how the three supply chain macro processes interface in order to be successful. Answer: The goal of the CRM macro process is to generate customer demand and facilitate transmission and tracking of orders. Weakness in this process results in demand being lost and a poor customer experience because orders are not processed and executed effectively. CRM processes are crucial to the supply chain as they cover a vast amount of interaction between an enterprise and its customers. The customer must be the starting point when trying to increase the supply chain surplus because all demand, and therefore revenue, ultimately arises from them. Thus, the CRM macro process is the starting point when improving supply chain performance. It is also important to note that CRM processes (and also CRM software) must be integrated with internal operations to optimize performance. Too often companies operate with their customer-

focused units working independently from their internal operations. The need for integration between CRM and internal operations emphasizes the importance of CRM to an effective supply chain. ISCM includes all processes involved in planning for and fulfilling a customer order. Given that the ISCM macro process aims to fulfill demand that is generated by CRM processes, there needs to be strong integration between the ISCM and CRM macro processes. When forecasting demand, interaction with CRM is essential, as the CRM applications are touching the customer and have the most data and insight on customer behavior. Similarly, the ISCM processes should have strong integration with the SRM macro process. Supply planning, fulfillment, and field service are all dependent on suppliers and therefore the SRM processes. It is of little use for your factory to have the production capacity to meet demand if your supplier cannot supply the parts to make your product. Order management, which we discussed in CRM, must integrate closely with fulfillment and be an input for effective demand planning. Again, good supply chain management requires that we integrate across the macro processes. Significant improvement in supply chain performance can be achieved if SRM processes are well integrated with appropriate CRM and ISCM processes. For instance, when designing a product, incorporating input from customers is a natural way to improve the design. This would require inputs from processes within CRM. Sourcing, negotiating, buying, and collaborating primarily tie into ISCM as supplier inputs are needed to produce and execute an optimal plan. But even these segments have the need to interface with CRM processes such as order management. Integrating the three macro processes is crucial for improved supply chain performance. Difficulty: Moderate