Transformation of Operations Management through Information ...

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Transformation of Operations Management through Information ...

The 4 th Asian eBusiness Workshop, August 5-7, Chengdu

Transformation of Operations

Management through Information

Technology and Information System

in Suning

SHEN Houcai Yan Xiaojun

Nanjing University


Outline

• Introduction

• Business system in Suning

• Business Reengineering in Suning by

adopting Advanced Information System

• A Quantitative Model for Suning’s

Operations Transformation

• Summary and Conclusion


1. Introduction

• Who is Suning?

• Why study Suning?


Who is Suning?

• Suning is a successful company in Nanjing of

China

• Suning is a retailer chain company

• Suning’s business in mainly on the Electronic

Appliance selling, as Best Buy in USA


Who is Suning?

• Suning was founded In 1990, and did her business

of selling Air-conditioner by using about 10

working staff and around 100 thousand capitals in

Nanjing, China.

• Now, one of the largest chain retailers in

electronic appliances in China: the number of her

suppliers now grow up to over 300 manufactures;

her business region expands to almost all the

country with more than 200 chain stores, and with

RMB 10 billion annual sales, etc.


Why study Suning?

• Why Suning can achieve such remarkable

success?

• What is the main role of Electronics in

Suning’s Success?


2. Business System in Suning

• 2 kinds of Business decisions:

– Doing what kind of Business, ie Business

Definition

– How to do the defined business and gain

competitive advantage


Business Definition in Suning

• At the beginning, sell air-conditioner from

factory to consumer in Nanjing

• Now, building a bridge between Electronic

Appliance manufacturers and consumer in

China


Competitive Advantages for

Suning

• Making Quality E-appliances for consumers

when and where they need through its

business system, especially its Service

Delivery Sub-System,

– Quality product is its order-Qualifier

– Varieties is its order-Qualifier

– Service is its Order-winner:

至 真 至 诚 , 苏 宁 服 务


How to Achieve Competitive

Advantage

• M Porter’s value chain model

• Japanese Scholar’s Business System Model

(by 小 野 桂 之 界 、 根 来 龙 之 )


M Porter’s value chain model

Suppo

rting

Value-

Added

Activit

ies

Inbound

Logistics

Infrastructure

Human Resource Management

Research and Development

Mfg

Purchasing

Outbound

Logistics

Sales

Service

Value

Primary Value-added Activities


Business System Model

(by 小 野 桂 之 界 、 根 来 龙 之 )

资 本

市 场

采 购

财 务

资 金

输 入

等 价 回 收

营 销

原 材 料

零 部 件

生 产

制 造

输 出

产 品

服 务



目 标

市 场






设 备

工 具

劳 动 力

企 业 家

工 程

设 计

人 力

资 源

设 备

保 全

污 染

产 品

设 计

信 息 管 理


企 业

相 关 活 动

人 财 物 流

R & D 生 产 技 术 活 动 信 息 流


Operation system in Suning

Dpt of Operations Planning

Dpt of

Marketing

Customer

Complain

Suppliers

Distribution

Centers

Stores

Customers

Transportation Department;

Information Department

Customer

Service

Fig.2 Operations process in

suning


Suning’s Operation System

• The primary components:

– Chain Stores

– Distribution Centers

– After-sale Service Department,

– Transportation Department,

• The supporting components

– Customer Complaint Department,

– Operation Planning Department

Information System Department, etc.


3. Operation Reengineering in

Suning by Information System

• Investment in Information Technology and

System

• The Structure of Information System

• The effect of IT/IS on the Operation System


3.1 Investment in Information

Technology and System

• In the middle 1990s, Suning began to invest

money in the information technology and

information system.

• In 2000, an advanced enterprise system

which costs almost RMB 20 million is

applied successfully to support her

operation system.


3.2 The Structure of Information

System

• Eight sub-systems in Suning’s enterprise

system

– Distribution management information system

– Delivery management information system

– After service management information system

– On-line order management information system


– Office automation system

– Customer relation management system,

– Supplier management information system

– Video conference system.


3.3 The effect of IT/IS on the

Operation System

• Real Time Business Information

Sharing

• Operation System Reengineering


The Operation System in

Suning Before IS Innovation

D C

Physical

Chain

Store

Physical

Customer

Information

Information


The Operation System in

Suning after IS Innovation

Physical

D C

Customer

Information

Rertail

Store

Information


Benefits

• Less investment on the inventory and

higher fill rate

• Better product availability

• Shorter customer response time

• More effective management of the

inventory in the total operation system


• More effective scheduling

• Lower costs due to economies of scale

• Less transportation costs


4. A Quantitative Model for the

Business Innovation in Suning

• Based Professor Fangruo Chen(of Columbia

Business School)’s work on stochastic

Multi-echelon inventory model, which is

used to study the Information System on the

supply chain performance. However, what

is different is Chen focus on the leadtime

reduction by adopting the information

system, we on the operation reegneering.


• The model is used to estimate the inventory

related cost reduction, in the model,

– In traditional pattern, the echelon inventory

policy is (R2,nQ)in distribution centers, and

the one in retail store is (R1,nQ), the total

average cost C2 which is given in equation (1)

in page 197


– After operations innovation by information

system, suppose the echelon inventory in

distribution is (R, nQ), its total average cost C1

in long term is Eq.(2), in page 197

– The cost improvement of the reegineering by

using the Advanced IS can be written as

deltaC = C1 –C2 > 0 (4)


5. Summary

Information system can changed the

business, especially the operation system,

which will help company build capability to

support competitive advantage.

• The benefits of the operation innovation

through Information System can be

estimated by mathematical model, which

can be help for the Reengineering decision


6. Future works

• The validation and analysis of our model for

Suning’s Reengineering works

• Other benefit such as Transportation cost

reduction estimation, etc


Thanks!

Q&A!

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