MELJUN CORTES - Operations Management 16th Lecture (SUPPLY CHAIN MANAGEMENT)

8/9/2019 MELJUN CORTES - Operations Management 16th Lecture (SUPPLY CHAIN MANAGEMENT)

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MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,

MBA,MPA,BSCS,ACS

Operations Management

MELJUNELJUN

MELJUN CORTES,BSCS,ACS

Department of ICT

Faculty of Information

Technology




MBA,MPA,BSCS,ACS

H

APTER

16

Supply Chain Management

MELJUNELJUN




MBA,MPA,BSCS,ACS

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 asSometimes referred to as value chainsvalue chains




MBA,MPA,BSCS,ACS

•

Warehouses• Factories

• Processing centers

• Distribution centers

• Retail outlets

• Offices

FacilitiesFacilities




MBA,MPA,BSCS,ACS

Functions and ActivitiesFunctions and Activities

•

Forecasting• Purchasing

• Inventory management

•

Information management• Quality assurance

• Scheduling

•

Production and delivery• Customer service




MBA,MPA,BSCS,ACS

Typical Supply Chains Typical Supply Chains

Purchasing

Receiving Storage Operations Storage

Production Distribution



MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,MBA,MPA,BSCS,ACS

Typical Supply Chain for a Manufacturer Typical Supply Chain for a Manufacturer

Supplier

Supplier

Supplier

Storage

}Mfg. Storage Dist. Retailer Customer

Figure 16.1a




Supplier

Supplier}Storage Service Customer

Typical Supply Chain for a Service Typical Supply Chain for a ServiceFigure 16.1b




1. Improve operations2. 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 ManagementNeed for Supply Chain Management




Bullwhip EffectBullwhip Effect

Tier 2Suppliers

Tier 1Suppliers

ProducerDistributorRetailerFinalFinal

Customer Customer

Amount of Amount of

inventoryinventory=

Figure 16.3




Benefits of Supply Chain ManagementBenefits of Supply Chain Management

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




Benefits of Supply Chain ManagementBenefits of Supply Chain Management

•

Lower inventories• Higher productivity

• Greater agility

• Shorter lead times• Higher profits

• Greater customer loyalty




Elements of Supply Chain ManagementElements of Supply Chain Management

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 work ProcessingIncorporating customer wants, mfg., and timeDesign

Predicting quantity and timing of demandForecasting

Determining what customers wantCustomers

Typical IssuesElement

Table 16.1

MELJUN CORTES

MBA MPA BSCS ACS




•

Logistics• Refers to the movement of materials and

information within a facility and to incoming

and outgoing shipments of goods andmaterials in a supply chain

LogisticsLogistics

MELJUN CORTES MBA MPA BSCS ACSMELJUN CORTES

MBA MPA BSCS ACS




LogisticsLogistics

• Movement within the facility

• Incoming and outgoing shipments

• Bar coding• EDI

• Distribution

• JIT Deliveries

0

214800 232087768


MBA MPA BSCS ACS




Materials MovementMaterials MovementFigure 16.4

R E C E I V

I N G

Storage

Work

center

Work center Work center

Storage

Work

center

Storage

Shipping


MBA MPA BSCS ACS




•

Distribution requirements planning (DRP) isa system for inventory management and

distribution planning

• Extends the concepts of MRPII

Distribution Requirements PlanningDistribution Requirements Planning


MBA MPA BSCS ACS




•

Management uses DRP to plan and coordinate:• Transportation

• Warehousing

•

Workers• Equipment

• Financial flows

Uses of DRPUses of DRP




MBA MPA BSCS ACS




•

Increased productivity• Reduction of paperwork

• Lead time and inventory reduction

• Facilitation of just-in-time systems• Electronic transfer of funds

• Improved control of operations

• Reduction in clerical labor

• Increased accuracy

Electronic Data InterchangeElectronic Data Interchange


MBA MPA BSCS ACS




•

Efficient consumer response (ECR) is asupply chain management initiative specific

to the food industry

•

Reflects companies’ efforts to achieve quick response using EDI and bar codes

Efficient Consumer ResponseEfficient Consumer Response


MBA MPA BSCS ACS




•

E-Commerce: the use of electronictechnology to facilitate business transactions

• Applications include

•

Internet buying and selling• E-mail

• Order and shipment tracking

• Electronic data interchange

E-CommerceE-Commerce


MBA MPA BSCS ACS




•

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-CommerceAdvantages E-Commerce


MBA MPA BSCS ACS




•

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-CommerceDisadvantages of E-Commerce


MBA MPA BSCS ACS




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


MBA MPA BSCS ACS




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 revenue

Value added per employeeAssets/utilization Total inventory days of supply

Cash-to-cash cycle time Net asset turns

Table 16.4


MBA MPA BSCS ACS




CPFRCPFR

•

Collaborative Planning, Forecasting, andReplenishment

• Focuses on information sharing among

trading partners

• Forecasts can be frozen and then converted

into a shipping plan

• Eliminates typical order processing


MBA MPA BSCS ACS




CPFR ProcessCPFR Process

Step 1 – Front-end agreement

Step 2 – Joint business plan

Steps 3-5 – Sales forecastSteps 6-8 – Order forecast collaboration

Step 9 – Order generation/delivery execution

MELJUN CORTES MBA MPA BSCS ACSMELJUN CORTES,

MBA,MPA,BSCS,ACS




CPFR ResultsCPFR Results

•

Nabisco and Wegmans• 50% increase in category sales

• Wal-mart and Sara Lee

• 14% reduction in store-level inventory

• 32% increase in sales

• Kimberly-Clark and Kmart

• Increased category sales that exceeded market

growth


MBA,MPA,BSCS,ACS




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 acrossthe supply chain

5. Form strategic partnerships

Creating an Effective Supply ChainCreating an Effective Supply Chain


MBA,MPA,BSCS,ACS




Supply Chain Performance DriversSupply Chain Performance Drivers

1. Quality2. Cost

3. Flexibility

4. Velocity

5. Customer service


MBA,MPA,BSCS,ACS




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


MBA,MPA,BSCS,ACS



MELJUN CORTES,MBA,MPA,BSCS,ACS, , , ,

•

Barriers to integration of organizations• Getting top management on board

• Dealing with trade-offs

• Small businesses

• Variability and uncertainty

• Long lead times

ChallengesChallenges


MBA,MPA,BSCS,ACS



, , , ,, , , ,

1.

Lot-size-inventory• Bullwhip effect

1. Inventory-transportation costs

• Cross-docking

1. Lead time-transportation costs

2. Product variety-inventory

•

Delayed differentiation1. Cost-customer service

• Disintermediation

Trade-offs Trade-offs


MBA,MPA,BSCS,ACS



, , , ,, , , ,


•

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


MBA,MPA,BSCS,ACS



, , , ,, , , ,


•

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


MBA,MPA,BSCS,ACS



, , , ,

Supply Chain IssuesSupply Chain Issues

Quality control

Production planning and

control

Inventory policies

Purchasing policies

Production policiesTransportation

policies

Quality policies

Design of the

supply chain,

partnering

Operating IssuesTactical IssuesStrategicIssues


MBA,MPA,BSCS,ACS



Supply Chain Benefits and DrawbacksSupply Chain Benefits and Drawbacks

Problem PotentialImprovement

Benefits PossibleDrawbacks

Largeinventories

Smaller, more frequentdeliveries

Reduced holdingcosts

Traffic congestionIncreased costs

Long lead times Delayed differentiationDisintermediation

Quick response May not be feasibleMay need absorbfunctions

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 supplyand demand

Less variety

Table 16.5


MBA,MPA,BSCS,ACS



•

Purchasing is responsible for obtaining thematerials, parts, and supplies and services

needed to produce a product or provide a

service.

PurchasingPurchasing


MBA,MPA,BSCS,ACS



•

Develop and implement purchasing plans for products and services that support operations

strategies

Goal of PurchasingGoal of Purchasing


MBA,MPA,BSCS,ACS



•

Identifying sources of supply• Negotiating contracts

• Maintaining a database of suppliers

• Obtaining goods and services

• Managing supplies

Duties of PurchasingDuties of Purchasing


MBA,MPA,BSCS,ACS



Purchasing InterfacesPurchasing Interfaces

Purchasing

Legal

AccountingOperations

Data

processing

Design

ReceivingSuppliers

Figure 16.5


MBA,MPA,BSCS,ACS

h i l



Purchasing CyclePurchasing Cycle

1. Requisition received2. Supplier selected

3. Order is placed

4. Monitor orders

5. Receive orders

PurchasingPurchasing

LegalLegal

AccountingAccountingOperationsOperations

DataData

process-process-inging

DesignDesign

ReceivingReceiving

SuppliersSuppliers


MBA,MPA,BSCS,ACS

l l i O i



•

Value analysis• Examination of the function of purchased

parts and materials in an effort to reduce cost

and/or improve performance

Value Analysis vs. OutsourcingValue Analysis vs. Outsourcing


MBA,MPA,BSCS,ACS



•

Centralized purchasing• Purchasing is handled by one special

department

• Decentralized purchasing• Individual departments or separate locations

handle their own purchasing requirements

Centralized vs Decentralized PurchasingCentralized vs Decentralized Purchasing


MBA,MPA,BSCS,ACS

S liS li



•

Choosing suppliers• Evaluating sources of supply

• Supplier audits

• Supplier certification

• Supplier relationships

• Supplier partnerships

SuppliersSuppliers


MBA,MPA,BSCS,ACS

i Ch i S liF t i Ch i S li



•

Quality and quality assurance• Flexibility

• Location

•

Price

Factors in Choosing a SupplierFactors in Choosing a Supplier


MBA,MPA,BSCS,ACS

F t i Ch i S li ( t’d)F t i Ch i S li ( t’d)



•

Product or service changes• Reputation and financial stability

• Lead times and on-time delivery

• Other accounts

Factors in Choosing a Supplier (cont’d)Factors in Choosing a Supplier (cont’d)


MBA,MPA,BSCS,ACS

E l ti S f S lE l ti S f S l



Evaluating Sources of SupplyEvaluating Sources of Supply

•

Vendor analysis: Evaluating the sources of supply in terms of price, quality, reputation,

and service


MBA,MPA,BSCS,ACS

E l ti S f S lE l ti S f S l



•

Vendor analysis - evaluating the sources of supply in terms of • Price• Quality• Services• Location• Inventory policy• Flexibility

Evaluating Sources of SupplyEvaluating Sources of Supply


MBA,MPA,BSCS,ACS

S li P tS li P t



Supplier as a PartnerSupplier as a Partner

Aspect Adversary Partner Number of suppliers Many One or a few

Length of relationship May be brief Long-term

Low price Major consideration Moderately important

Reliability May not be high High

Openness Low High

Quality May be unreliable; buyer inspects

At the source; vendor certified

Volume of business May be low High

Flexibility Relatively low Relatively high

Location Widely dispersed Nearness is important

Table 16.9


MBA,MPA,BSCS,ACS

S li P t hiS li P t hi



•

Ideas from suppliers could lead to improvedcompetitiveness

1. Reduce cost of making the purchase

2. Reduce transportation costs

3. Reduce production costs4. Improve product quality

5. Improve product design

6. Reduce time to market

7. Improve customer satisfaction

8. Reduce inventory costs

9. Introduce new products or services

Supplier PartnershipsSupplier Partnerships


MBA,MPA,BSCS,ACS

C iti l ICritical Issues



Critical IssuesCritical Issues

•

Strategic importance• Cost

• Quality

•

Agility• Customer service

• Competitive advantage

•

Technology management• Benefits

• Risks


MBA,MPA,BSCS,ACS

C iti l ICritical Issues



Critical IssuesCritical Issues

•

Purchasing function• Increased outsourcing

• Increased conversion to lean production

•

Just-in-time deliveries• Globalization

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MELJUN CORTES - Operations Management 16th Lecture (SUPPLY CHAIN MANAGEMENT)