Supply Chain Aanchal

7/23/2019 Supply Chain Aanchal

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Supply Chain ManagementSupply Chain Management

OPIM 310-Lecture #6OPIM 310-Lecture #6

Instructor: Jose CruzInstructor: Jose Cruz


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Lecture OutlineLecture Outline

Supply Chain Management

Information Technology: A Supply Chain Enabler

Supply Chain Integration Suppliers

E-Procurement

Distribution

Supply Chain Management Software Measuring Supply Chain Performance

Global Supply Chain


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Supply ChainSupply Chain

All facilities, functions, activities,All facilities, functions, activities,

associated with flow and transformationassociated with flow and transformationof goods and services from raw materialsof goods and services from raw materials

to customer, as well as the associatedto customer, as well as the associated

information flowsinformation flows

An integrated group of processes toAn integrated group of processes tosource, make, and deliver productssource, make, and deliver products


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Supply Chain IllustrationSupply Chain Illustration


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Supply Chain ProcessesSupply Chain Processes


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Supply Chain for Service ProvidersSupply Chain for Service Providers

More difficult than manufacturingMore difficult than manufacturing

Does not focus on the flow of physical goodsDoes not focus on the flow of physical goods

Focuses on human resources and supportFocuses on human resources and support

servicesservices

More compact and less extendedMore compact and less extended


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Value vs. Supply ChainValue vs. Supply Chain

Value chain every step from raw materials to the eventual end

user ultimate goal is delivery of maximum value to theend user

Supply chain activities that get raw materials and subassembliesinto manufacturing operation

Terms are used interchangeably


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Supply Chain Management (SCM)

Managing flow of information through supplychain in order to attain the level of

synchronization that will make it moreresponsive to customer needs while loweringcosts

Keys to effective SCM

information communication cooperation trust


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Supply Chain ncertaintySupply Chain ncertainty

One goal in SCM: respond to uncertainty in

customer demandwithout creating costlyexcess inventory

Negative effects ofuncertainty lateness incomplete orders

Inventory insurance against supplychain uncertainty

Factors that contribute touncertainty

inaccurate demandforecasting long variable lead times late deliveries incomplete shipments product changes batch

ordering price fluctuations anddiscounts

inflated orders


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!ull"hip #ffect!ull"hip #ffect

Occurs when slight demand variability is magnified as informationmoves back upstream


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Information $echnology% & Supply

Chain #na'ler Information links all aspectsof supply chain

E-business replacement of physicalbusiness processes withelectronic ones

Electronic data interchange(EDI) a computer-to-computer

exchange of businessdocuments

Bar code and point-of-sale data creates aninstantaneous computer

record of a sale Radio frequency identification(RFID) technology can send productdata from an item to a readervia radio waves

Internet allows companies tocommunicate with suppliers,customers, shippers andother businesses around theworld, instantaneously


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#'usiness and Supply Chain

Cost savings and price reductions Reduction or elimination of the role of

intermediaries Shortening supply chain response andtransaction times

Gaining a wider presence and increased

visibility for companies Greater choices and more information forcustomers


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#'usiness and Supply Chain

(cont.)

Improved service as a result of instantaccessibility to services

Collection and analysis of voluminous amountsof customer data and preferences

Creation of virtual companies

Leveling playing field for small companies Gaining global access to markets, suppliers,and distribution channels


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*I+ Capa'ilities*I+ Capa'ilities


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*I+ Capa'ilities (cont.)*I+ Capa'ilities (cont.)


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Supply Chain IntegrationSupply Chain Integration

Information sharing among supply chainmembers Reduced bullwhip effect Early problem detection Faster response Builds trust and confidence

Collaborative planning, forecasting,replenishment, and design Reduced bullwhip effect Lower Costs (material, logistics, operating, etc.) Higher capacity utilization Improved customer service levels


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Coordinated workflow, production andoperations, procurement Production efficiencies Fast response Improved service Quicker to market

Adopt new business models andtechnologies Penetration of new markets Creation of new products Improved efficiency Mass customization

Supply Chain Integration (cont.)Supply Chain Integration (cont.)


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Colla'orative Planning,Colla'orative Planning,

*orecasting, and eplenishment*orecasting, and eplenishment

Process for two or more companies in asupply chain to synchronize their

demand forecasts into a single plan tomeet customer demand Parties electronically exchange

past sales trends

point-of-sale data on-hand inventory scheduled promotions forecasts


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SuppliersSuppliers

Procurement purchase of goods and services from suppliers

On-demand (direct response) delivery requires supplier to deliver goods whendemanded by customer

Continuous replenishment supplying orders in a short period of time

according to a predetermined schedule Cross-enterprise teams coordinateprocesses between company and supplier


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OutsourcingOutsourcing

Sourcing selection of suppliers

Outsourcing purchase of goods and services from anoutside supplier

Core competencies

what a company does best Single sourcing

a company purchases goods and servicesfrom only a few (or one) suppliers


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#Procurement#Procurement

Direct purchase from suppliers over theInternet

Direct products go directly into productionprocess a product, indirect products not

E-marketplaces web sites where companies and suppliers conduct

business-to-business activities Reverse auction

a company posts orders on the Internet forsuppliers to bid on


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Online Sourcing- Procurement

Process


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Process (cont.)


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Process (cont.)


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Source:Adapted from Garrison Wieland for Wal-MartsSuppl !hain, Harvard Business Review "#$%& March'April

())%*, pp+ #'"(+

Relationship between Facilities and Functionsalong the Wal-Mart Supply Chain


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+istri'ution+istri'ution

ncompasses all channels, processes, andncompasses all channels, processes, and

functions, including warehousing andfunctions, including warehousing andtransportation, that a product passes on itstransportation, that a product passes on itswa to final customerwa to final customer

.ften called logistics.ften called logistics

/ogistics/ogistics

transportation and distri0ution of goodstransportation and distri0ution of goodsand servicesand services

1riving force toda is speed1riving force toda is speed 2articularl important for 3nternet dot-coms2articularl important for 3nternet dot-coms


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Amazon.com


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+istri'ution Centers (+C)+istri'ution Centers (+C)

and arehousingand arehousing

1!s are some of the largest 0usiness1!s are some of the largest 0usiness

facilities in the 4nited Statesfacilities in the 4nited States

5rend is for more fre6uent orders in5rend is for more fre6uent orders insmaller 6uantitiessmaller 6uantities

7low-through facilities and automated7low-through facilities and automated

material handlingmaterial handling 2ostponement2ostponement final assem0l and product configurationfinal assem0l and product configuration

ma 0e done at the 1!ma 0e done at the 1!


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arehouse Managementarehouse Management

SystemsSystems 8ighl automated sstem that runs da-to-da8ighl automated sstem that runs da-to-da

operations of a 1!operations of a 1!

!ontrols item putawa, picking, packing, and!ontrols item putawa, picking, packing, andshippingshipping

7eatures7eatures transportation managementtransportation management order managementorder management ard managementard management la0or managementla0or management warehouse optimi9ationwarehouse optimi9ation


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VendorManaged InventoryVendorManaged Inventory

Manufacturers generate orders, not distri0utors orManufacturers generate orders, not distri0utors or

retailersretailers Stocking information is accessed using 13Stocking information is accessed using 13 A first step towards suppl chain colla0orationA first step towards suppl chain colla0oration 3ncreased speed, reduced errors, and improved3ncreased speed, reduced errors, and improved

serviceservice


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Colla'orative Logistics andColla'orative Logistics and

+istri'ution Outsourcing+istri'ution Outsourcing

!olla0orative planning, forecasting, and!olla0orative planning, forecasting, and

replenishment create greater economies ofreplenishment create greater economies ofscalescale

3nternet-0ased e:change of data and3nternet-0ased e:change of data and

informationinformation Significant decrease in inventor levels andSignificant decrease in inventor levels and

more efficient logisticsmore efficient logistics !ompanies focus on core competencies!ompanies focus on core competencies


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$ransportation$ransportation

Rail low-value, high-density, bulkproducts, raw materials,

intermodal containers not as economical for smallloads, slower, less flexiblethan trucking

Trucking main mode of freighttransport in U.S.

small loads, point-to-pointservice, flexible

More reliable, less damagethan rails; more expensivethan rails for long distance


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$ransportation (cont.)$ransportation (cont.)

Airmost expensive and fastest, mode offreight transport

lightweight, small packages


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$ransportation (cont.)$ransportation (cont.)

Waterlow-cost shipping modeprimary means of international shippingU.S. waterwaysslowest shipping mode

Intermodalcombines several modes of shipping-truck,water and rail

key component is containers

Pipelinetransport oil and products in liquid formhigh capital cost, economical uselong life and low operating cost


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Internet $ransportation #/changesInternet $ransportation #/changes

;ring together shippers and;ring together shippers and

carrierscarriers 3nitial contact, negotiations,3nitial contact, negotiations,

auctionsauctions :amples:amples

www+nte+comwww+nte+comwww+freight6uote+comwww+freight6uote+com
http://www.nte.com/http://www.nte.com/http://www.freightquote.com/http://www.freightquote.com/http://www.freightquote.com/http://www.nte.com/


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SCM Soft"areSCM Soft"are

Enterprise Resource Planning (ERP) software that integrates components of acompany by sharing and organizinginformation and data

SAP was first ERP software

mySAP.comweb enabled modules that allow collaborationbetween companies along the supply chain
http://www.mysap.com/http://www.mysap.com/


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Linking Supply Chain with SAP


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Measuring Supply Chain

Performance Key performance indicators

inventory turnovercost of annual sales per inventory unit

inventory days of supplytotal value of all items being held in inventory

fill ratefraction of orders filled by a distribution center withina specific time period


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3nventor turns


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0ey Performance Indicators%

#/ample

3nventor turns $?@*

?B,B(,###?B,B(,###

< (%+?< (%+?

< %)+< %)+

(+ !ost of goods soldC B%@ million

%+ 2roduction materials and partsC B,%),###

?+ Work-in-processC (",B@,###

B+ 7inished goodsC (%,?%%,###

@+ 5otal average aggregate value of inventor $%D?DB*C ?B,B(,###


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Other Measures of Supply ChainOther Measures of Supply Chain

PerformancePerformance

Process ControlProcess Control

used to monitor and control any process inused to monitor and control any process in

supply chainsupply chain

Supply Chain Operations ReferenceSupply Chain Operations Reference

(SCOR)(SCOR) establish targets to achieve best in classestablish targets to achieve best in class

performanceperformance


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1lo'al Supply Chain1lo'al Supply Chain

5o compete glo0all re6uires an5o compete glo0all re6uires an

effective suppl chaineffective suppl chain 3nformation technolog is an3nformation technolog is an

ena0ler of glo0al tradeena0ler of glo0al trade

Eations form trading groupsEations form trading groups Eo tariffs or dutiesEo tariffs or duties


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O'stacles to 1lo'al ChainO'stacles to 1lo'al Chain

$ransactions$ransactions Increased documentation for invoices, cargoinsurance, letters of credit, ocean bills of lading

or air waybills, and inspections Ever changing regulations that vary fromcountry to country that govern the import andexport of goods

Trade groups, tariffs, duties, and landing costs Limited shipping modes Differences in communication technology andavailability


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O'stacles to 1lo'al ChainO'stacles to 1lo'al Chain

$ransactions (cont.)$ransactions (cont.) Different business practices as well as languagebarriers

Government codes and reporting requirements thatvary from country to country

Numerous players, including forwarding agents,custom house brokers, financial institutions, insuranceproviders, multiple transportation carriers, and

government agencies Since 9/11, numerous security regulations andrequirements


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+uties and $ariffs+uties and $ariffs

2roliferation of trade agreements2roliferation of trade agreements Group mem0ers charge uniform tariffsGroup mem0ers charge uniform tariffs

Mem0er nations have a competitiveMem0er nations have a competitiveadvantage within the groupadvantage within the group

5rade specialists

include freight forwarders, customs

house 0rokers, e:port packers, ande:port management and tradingcompanies


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+uties and $ariffs (cont.)+uties and $ariffs (cont.)

APECAPEC

ASEANASEAN

ANZCERTAANZCERTA

FTAAFTAA

NAFTANAFTA

CALMCALM

ATPAATPA

MERCOSURMERCOSUR

TAFTATAFTA


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Landed CostLanded Cost

Total cost of producing, storing, and transportingTotal cost of producing, storing, and transportinga product to the site of consumption or anothera product to the site of consumption or another

portport Value added tax (VAT) an indirect tax assessed on the increase in value of agood at any stage of production process from rawmaterial to final product

Clicker shock Occurs when an ordered is placed with a companythat does not have the capability to calculate landedcost


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e''ased International $radee''ased International $rade

Logistic SystemsLogistic Systems International trade logistics web-based softwaresystems reduce obstacles to global trade convert language and currency provide information on tariffs, duties, and customs processes attach appropriate weights, measurements, and unit prices toindividual products ordered over the Web

incorporate transportation costs and conversion rates calculate shipping costs online while a company enters anorder

track global shipments


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ecent $rends in 1lo'ali2ation forecent $rends in 1lo'ali2ation for

.S. Companies.S. CompaniesTwo significant changesTwo significant changes

passage of NAFTApassage of NAFTA

admission of China in WTOadmission of China in WTO

Electronic IndustryElectronic Industry

70% of cost is in components70% of cost is in components

major supply chains have moved to Chinamajor supply chains have moved to China

Proliferation of counterfeit partsProliferation of counterfeit parts


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#ffects of 3-44 on 1lo'al Chains#ffects of 3-44 on 1lo'al Chains

Increase security measuresIncrease security measures added time to supply chain schedulesadded time to supply chain schedules Increased supply chain costsIncreased supply chain costs

24 hours rules for risk screening24 hours rules for risk screening extended documentationextended documentation extend time by 3-4 daysextend time by 3-4 days

Inventory levels have increased 5%Inventory levels have increased 5%

Other costsOther costs include: new people, technologies, equipment, surveillance,communication, and security systems, and training necessaryfor screening at airports and seaports around the world

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Supply Chain Aanchal