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11-1
Supply Chain ManagementSupply Chain Management
Supply Chain: the sequence of organizations - their facilities, functions, and activities - that are involved in producing and delivering a product or service.
Sometimes referred to as Sometimes referred to as value chainsvalue chains
11-2
Supply-Chain Management Supply-Chain Management DefinedDefined
Supply-chain is a term that describes how organizations (suppliers, manufacturers, distributors, and customers) are linked together.
Supply-chain management is a total system approach to managing the entire flow of information, materials, and services from raw-material suppliers through factories and warehouses to the end customer.
11-3
Supply Chain Management Supply Chain Management (SCM)(SCM)
Definition: Philosophy that describes how organizations should manage their various supply chains to achieve strategic advantage
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Supply Chain Management Supply Chain Management (SCM)(SCM)
Objective: Synchronize requirements of the final customer with flow of materials and information along the supply chain to reach a balance between high customer satisfaction/service and cost.
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The Supply ChainThe Supply Chain
ExternalSuppliers
ExternalSuppliers
ExternalSuppliers
InternalSuppliers
InternalSuppliers
Information
Supplier Network Manufacturing Unit
Distribution Center
RetailerTransformation Processes
Raw Material& Component Inventories
Work-in- ProcessInventories
Finished GoodsInventories
Customer Network
Distribution Center
Retailer
Retailer
U l t i m
a t eC
u s t o m e r s
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Warehouses Factories Processing centers Distribution centers Retail outlets Offices
FacilitiesFacilities
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Functions and ActivitiesFunctions and Activities
Forecasting Purchasing Inventory management Information management Quality assurance Scheduling Production and delivery Customer service
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Typical Supply ChainsTypical Supply Chains
Purchasing Receiving Storage Operations Storage
Production Distribution
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Typical Supply Chain for a Typical Supply Chain for a ManufacturerManufacturer
Supplier
Supplier
Supplier
Storage} Mfg. Storage Dist. Retailer Customer
Figure 11.1a
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Supplier
Supplier
} Storage Service Customer
Typical Supply Chain for a Typical Supply Chain for a ServiceServiceFigure 11.1b
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1.Improve operations
2.Increasing levels of outsourcing
3.Increasing transportation costs
4.Competitive pressures
5.Increasing globalization
6.Increasing importance of e-commerce
7.Complexity of supply chains
8.Manage inventories
Need for Supply Chain Need for Supply Chain ManagementManagement
11-12
Bullwhip EffectBullwhip EffectFigure 16.3
Final CustomerInitialSupplier
Demand
Inventory oscillations become progressivelylarger looking backward through the supply chain
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Benefits of Supply Chain Benefits of Supply Chain ManagementManagement
Organization Benefit
Campbell Soup Doubled inventory turnover rate
Hewlett-Packard Cut supply costs 75%
Sport Obermeyer Doubled profits and increased sales 60%
National Bicycle Increased market share from 5% to 29%
Wal-Mart Largest and most profitable retailer in the world
11-14
Benefits of Supply Chain ManagementBenefits of Supply Chain Management
Lower inventories Higher productivity Greater agility Shorter lead times Higher profits Greater customer loyalty Integrates separate organizations into a
cohesive operating system
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Global Supply ChainsGlobal Supply Chains
Increasing more complex Language Culture Currency fluctuations Political Transportation costs Local capabilities Finance and economics Environmental
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Elements of Supply Chain Elements of Supply Chain ManagementManagement
Deciding how to best move and store materialsLogistics
Determining location of facilitiesLocation
Monitoring supplier quality, delivery, and relationsSuppliers
Evaluating suppliers and supporting operationsPurchasing
Meeting demand while managing inventory costsInventory
Controlling quality, scheduling workProcessing
Incorporating customer wants, mfg., and timeDesign
Predicting quantity and timing of demandForecasting
Determining what customers wantCustomers
Typical IssuesElement
Table 11.1
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Strategic or OperationalStrategic or Operational
Two types of decisions in supply chain management Strategic – design and policy Operational – day-today activities
Major decisions areas Location Production Inventory Distribution
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Logistics Refers to the movement of materials and
information within a facility and to incoming and outgoing shipments of goods and materials in a supply chain
LogisticsLogistics
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LogisticsLogistics
• Movement within the facility
• Incoming and outgoing shipments
• Bar coding
• EDI
• Distribution
• JIT Deliveries
0
214800 232087768
11-20
Materials MovementMaterials MovementFigure 11.4
RE
CE
IVIN
G
Storage
Workcenter
Work centerWork center
Storage
Workcenter
Storage
Shipping
11-21
Distribution requirements planning (DRP) is a system for inventory management and distribution planning
Extends the concepts of MRPII
Distribution Requirements Distribution Requirements PlanningPlanning
11-22
Management uses DRP to plan and coordinate: Transportation Warehousing Workers Equipment Financial flows
Uses of DRPUses of DRP
11-23
E-Business: the use of electronic technology to facilitate business transactions
Applications include Internet buying and selling E-mail Order and shipment tracking Electronic data interchange
E-BusinessE-Business
11-24
Companies can: Have a global presence Improve competitiveness and quality Analyze customer interests Collect detailed information Shorten supply chain response times Realize substantial cost savings Create virtual companies Level the playing field for small companies
Advantages E-BusinessAdvantages E-Business
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Customer expectations
Order quickly -> fast delivery
Order fulfillment
Order rate often exceeds ability to fulfill it
Inventory holding
Outsourcing loss of control
Internal holding costs
Disadvantages of E-BusinessDisadvantages of E-Business
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Reverse LogisticsReverse Logistics
Reverse logistics – the backward flow of goods returned to the supply chain
Processing returned goods Sorting, examining/testing, restocking, repairing Reconditioning, recycling, disposing
Gatekeeping – screening goods to prevent incorrect acceptance of goods
Avoidance – finding ways to minimize the number of items that are returned
11-27
Effective Supply ChainEffective Supply Chain
Requires linking the market, distribution channels processes, and suppliers
Supply chain should enable members to: Share forecasts Determine the status of orders in real time Access inventory data of partners
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Successful Supply ChainSuccessful Supply Chain
Trust among trading partners
Effective communications
Supply chain visibility
Event-management capability
The ability to detect and respond to unplanned events
Performance metrics
11-29
SCOR MetricsSCOR Metrics
Perspective Metrics
Reliability On-time deliveryOrder fulfillment lead timeFill rate (fraction of demand met from stock)Perfect order fulfillment
Flexibility Supply chain response timeUpside production flexibility
Expenses Supply chain management costsWarranty cost as a percent of revenueValue added per employee
Assets/utilization Total inventory days of supplyCash-to-cash cycle timeNet asset turns
Table 11.4
11-30
RFID TechnologyRFID Technology
Used to track goods in supply chain RFID tag attached to object Similar to bar codes but uses radio frequency
to transmit product information to receiver RFID eliminates need for manual counting
and bar code scanning
11-31
1.Develop strategic objectives and tactics
2.Integrate and coordinate activities in the internal supply chain
3.Coordinate activities with suppliers with customers
4.Coordinate planning and execution across the supply chain
5.Form strategic partnerships
Creating an Effective Supply Creating an Effective Supply ChainChain
11-32
Supply Chain Performance DriversSupply Chain Performance Drivers
1.Quality
2.Cost
3.Flexibility
4.Velocity
5.Customer service
11-33
VelocityVelocity
Inventory velocity
The rate at which inventory(material) goes through the supply chain
Information velocity
The rate at which information is communicated in a supply chain
11-34
Barriers to integration of organizations
Getting top management on board
Dealing with trade-offs
Small businesses
Variability and uncertainty
Long lead times
ChallengesChallenges
11-35
1.Lot-size-inventory Bullwhip effect
2. Inventory-transportation costs Cross-docking
3.Lead time-transportation costs
4.Product variety-inventory Delayed differentiation
5.Cost-customer service Disintermediation
Trade-offsTrade-offs
11-36
Trade-offsTrade-offs
Bullwhip effect
Inventories are progressively larger moving backward through the supply chain
Cross-docking
Goods arriving at a warehouse from a supplier are unloaded from the supplier’s truck and loaded onto outbound trucks
Avoids warehouse storage
11-37
Trade-offsTrade-offs
Delayed differentiation
Production of standard components and subassemblies, which are held until late in the process to add differentiating features
Disintermediation
Reducing one or more steps in a supply chain by cutting out one or more intermediaries
11-38
Supply Chain IssuesSupply Chain Issues
Quality controlProduction planning and control
Inventory policiesPurchasing policiesProduction policiesTransportation policiesQuality policies
Design of the supply chain, partnering
Operating IssuesTactical IssuesStrategic Issues
11-39
Supply Chain Benefits and Supply Chain Benefits and DrawbacksDrawbacks
Problem PotentialImprovement
Benefits PossibleDrawbacks
Large inventories
Smaller, more frequent deliveries
Reduced holding costs
Traffic congestionIncreased costs
Long lead times
Delayed differentiationDisintermediation
Quick response May not be feasibleMay need absorb functions
Large number of parts
Modular Fewer partsSimpler ordering
Less variety
CostQuality
Outsourcing Reduced cost, higher quality
Loss of control
Variability Shorter lead times, better forecasts
Able to match supply and demand
Less variety
Table 11.5
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