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Chapter 10 - Information Systems and Supply Chain Management
10-13
changes in customer demand.
• In a push supply chain, merchandise is
allocated to the store on the basis of
forecast demand. A forecast is developed
and specific quantities of merchandise
are shipped to distribution centers and
stores at predetermined time intervals.
D. Reverse Logistics
• Reverse logistics is the flow back of
merchandise through the channel, from the
customer to the store, distribution center,
and vendor, for customer returns.
small quantities.
Ask students what percentage of merchandise
they return to either catalog or Internet
retailers. Have them discuss both excellent
and poor return experiences.
C. Supply Chain for Fulfilling Catalog and
Internet Orders
• Fulfilling Internet orders from customers is
very different than distributing merchandise
to stores.
See PPT 10-29
Ask students, “If you were a bricks and
mortar retailer going into the Internet space,
would you integrate your logistics system, or
create a separate system for the Internet?”
Chapter 10 - Information Systems and Supply Chain Management
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information system. Yet they use different
DCs to service store and Internet and catalog
customers.
V. Collaboration Between Retailers and Vendors
in Supply Chain Management
• Retailers’ and vendors’ objectives for supply
chain management are to make sure that
merchandise is available in the stores when
customers want it and to accomplish this
task with the minimum investment in
inventory and costs.
• Excess inventory buildup, referred to as the
bullwhip effect, often takes place in
uncoordinated channels. This effect is
caused by: (1) delays in transmitting orders
and receiving merchandise, (2) overreacting
to shortages, and (3) ordering in batches.
Ask students to discuss the risks associated with
the bullwhip effect. Who is harmed most by its
occurrence? The retailer? The vendor? The
consumer?
PPT 10-31 illustrates the Bullwhip Effect.
A. Using EDI
• The use of EDI to transmit purchase order
information reduces the time it takes for
retailers to place orders and for vendors to
acknowledge the receipt of orders and
communicate delivery information about
those orders.
For an overview of the development of
retailer and vendor relationships, see PPT
10-33.
Chapter 10 - Information Systems and Supply Chain Management
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• EDI additionally facilitates the
implementation of the other collaborative
approaches discussed below.
B. Sharing Information
C. Vendor-Managed Inventory
• Vendor-managed inventory (VMI) is an
approach to improving supply chain
efficiency in which the vendor is responsible
for maintaining inventory levels at the
retailer’s individual stores and/or
distribution centers.
• VMI is not a new approach. Snack foods
and beverage vendors have managed the
stocks of their products on supermarket
shelves for a long time. However,
technological advances have increased the
sophistication of VMI.
• Although a more advanced level of
collaboration than simply using EDI and
For an overview of VMI, see PPT 10-34
Chapter 10 - Information Systems and Supply Chain Management
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sharing information, VMI has limitations,
such as limited awareness of actions the
retailer may be taking to increase sales of
specific products or categories.
D. Collaborative Planning, Forecasting and
Replenishment
• Collaborative planning, forecasting and
replenishment (CPFR) is a more advanced
See PPT 10-35, 10-36
VI. Radio Frequency Identification (RFID)
• Radio frequency identification (RFID) is a
technology that allows an object or person to
be identified at a distance using radio waves.
See PPT 10-37, 10-38
A. Benefits of RFID
• RFID has several demonstrated benefits
including: (1) reduced labor costs for
warehouse and distribution, (2) reduced
Discuss the advantages of RFID. Ask students if
they foresee any disadvantages. What are the risks
or downsides of these systems?
B. Impediments to the Adoption of RFID
• High costs are the major obstacle to the
adoption of RFID systems.
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• In addition, RFID generates more
information than can be efficiently
processed, making it even more difficult to
justify its costs.
VII. Summary
• Supply chain management and information
systems have become important tools for
Chapter 10 - Information Systems and Supply Chain Management
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ANSWERS TO “GET OUT AND DO ITS”
2. INTERNET EXERCISE Go to Barcoding Incorporated’s Web page at
company using technology to support retailers with information systems and supply chain
management?
Some of the information students will find on this homepage…
“If inefficiencies throughout the system could be eliminated, from the stockroom to the shelf to
search for supply chain in the current issue. Summarize one of the recent articles, and explain
how the key concept(s) described could make the shopping experience better for consumers and
improve efficiency in the supply chain.
4. INTERNET EXERCISE Go to the homepage for Vendor Managed Inventory at
is vendor managed inventory? What are the benefits and limitations of a vendor managed
inventory approach?
Definition of Vendor Managed Inventory – “A means of optimizing Supply Chain performance
Chapter 10 - Information Systems and Supply Chain Management
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The Benefits and Pitfalls. (Lists from the web site)
DUAL BENEFITS:
- Data entry errors are reduced due to computer to computer communications. Speed of
the processing is also improved.
DISTRIBUTOR BENEFITS:
- The goal is to have an improvement in Fill Rates from the manufacturer and to the
end customer. Also, a decrease in stock-outs and a decrease in inventory levels.
MANUFACTURERS BENEFITS:
- Visibility of the Distributor’s Point of Sale data makes forecasting easier.
- Promotions can be more easily incorporated into the inventory plan.
POTENTIAL PITFALLS - VENDOR MANAGED INVENTORY
EDI problems: Extensive EDI testing should be done to validate the data being sent. Is the
distributor sending all the data that should be sent? Is each field populated with the correct data?
Acceptance: Make sure that all employees involved in the process fully understand and accept
this new way of doing business. It's not enough to just sell the concept to senior management, all
employees who are involved must be willing participants.
Promotions/Events: Anything that adds or takes away from the normal ordering pattern must be
properly communicated to the manufacturer.
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ANSWERS TO DISCUSSION QUESTIONS AND PROBLEMS
1. Retail system acronyms include DSD, VMI, EDI, CPFR and RFID. How are these
terms related to one another?
Each of these terms describes a system designed to enhance the efficiency of supply chain
management. DSD, direct store delivery, bypasses the retailer’s distribution center and
2. Explain how an efficient supply chain management system can increase a retailer's level
of product availability and decrease its inventory investment.
By eliminating the need for paper transactions, an efficient supply chain management system
reduces lead-time. Shorter lead-time reduces the need for safety stock because the shorter
3. This chapter presents some trends in logistics and information systems that benefit
retailers. How do vendors benefit from these trends?
Vendors benefit from collaboration in supply chain management just as retailers do. As
Chapter 10 - Information Systems and Supply Chain Management
4. What type of merchandise is most likely to be crossdocked at retailers’ distribution
centers? Why is this the case?
Merchandise prepackaged by vendors for specific stores is crossdocked because it is ready
for sale. No further processing and no storage at the distribution center are required. This
5. Why haven't more fashion retailers adopted an integrated supply chain system similar
to Zara's?
Zara's integrated supply chain management system depends on two major factors for its
success. The first is the technological connections between the sales floor and the design
Chapter 10 - Information Systems and Supply Chain Management
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6. Explain the differences between pull and push supply chains.
A pull distribution strategy is when orders for merchandise are generated at the store level on
the basis of demand data captured by point of sale (POS) terminals. A push distribution
7. Consumers have five key reactions to stockouts: buy the item at another store,
substitute a different brand, substitute the same brand, delay purchase, or do not
purchase the item. Consider your own purchasing behavior and describe how various
categories of merchandise would result in different reactions to a stockout.
A stockout occurs when an SKU a consumer wants is not available. Student’s answers will
8. Abandoned purchases as a result of stockouts can mean millions of dollars a year in lost
sales. How are retailers and manufacturers using technology to reduce stockouts and
improve sales?
Retailers are turning to investments in information technology and supply chain management
9. What is a Universal Product (UPC) code? How does this code enable manufacturers,
distributors and retailers to track merchandise throughout the supply chain?
“Universal Product Codes (also known as GTIN-12) appear as lines (bars) of varying widths
Chapter 10 - Information Systems and Supply Chain Management
10. For what types of products is item-level RFID most beneficial for retailers?
RFID is especially beneficial to retailers in certain product categories. First, RFID is important
