1 Supply Chain Management

8/6/2019 1 Supply Chain Management

1/156

LOGISTICS & SUPPLY CHAIN MANAGEMENT


2/156

Logistics and SCM Course Outline

SCM Introduction

Purchasing Management

Supplier Relationship

Globalization andInternational Trade

Logistics Service Providers

Inventory Management

Warehousing and MaterialManagement

Transport in Supply Chains

Information Flows and

Technology

Logistics and Financial

Management Measuring and Managing

Logistics Performance

Integration and

Collaboration Sustainable Logistics and

Supply Chain Systems

New Supply Chain Design


3/156

SCM Introduction


4/156

SCM1-4

What is a Supply Chain?

Objectives of a Supply Chain.

The Importance of Supply Chain Flows Trends in Supply Chain

Decision Phases in a Supply Chain

Process View of a Supply Chain

Examples of Supply Chains


5/156

What is Supply Chain Management?

The planning and management of all activities

involved in sourcing and procurement, conversion,

and all logistics management activities also

includes coordination with channel partners, which

can be suppliers, intermediaries, third party service

providers, and customers.

Council of Supply Chain Management Professionals


6/156


A supply chain consists of the flow of products andservices from:Raw materials manufacturers, to

Component and intermediate manufacturers, to Final product manufacturers, toWholesalers and distributors and then toRetailers

Connected by transportation and storage activities, andIntegrated through information, planning, and process sharing

activities

Many large firms are moving away from in-house VerticallyIntegrated structures to Supply Chain Management


7/156

Product and Services flow

Recycling and Returns

Information/planning/activity integration

and Funds

Transportation &

storage activities

End-product

manufacturer

(or focal firm)

Raw

material

suppliers Wholesalers,

distributors

Intermediate

components

manufacturers

Retailers

EndCustomer


8/156

Develop Detergent Supply Chain Model


9/156

1-9


Customer wants

detergent and goes

to Jewel

Jewel

Supermarket

Jewel or third

party DC

P&G or other

manufacturer


10/156

1-10


Customer wants

detergent and goes

to Jewel

Jewel

Supermarket

Jewel or third

party DC

P&G or other

manufacturer

Plastic

Producer

Tenneco

Packaging

Chemical

manufacturer

(e.g. Oil Company)


11/156

1-11


Customer wants

detergent and goes

to Jewel

Jewel

Supermarket

Jewel or third

party DC

P&G or other

manufacturer

Plastic

Producer

Chemical

manufacturer

(e.g. Oil Company)

Tenneco

Packaging

Paper

Manufacturer

Timber

Industry

Chemical

manufacturer

(e.g. Oil Company)


12/156


Information

Money

Managing Flows

DistributorManufacturerSupplier Retailer Customer


13/156

Supply chain management is

the management of flows

between and among supplychain stages to maximize total

supply chain profitability


14/156

Channels of Distribution

ConsumerChannel 1Channel 1

ConsumerConsumerChannelsChannels

ProducerProducer Agent/BrokerAgent/Broker WholesalerWholesaler RetailerRetailer UsersUsers

Channel 2Channel 2 Consumer



Channel 5Channel 5Consumer/Business

Channel 6Channel 6 Business



Consumer/Consumer/BusinessBusinessChannelChannel

BusinessBusinessChannelsChannels


15/156

Customer in Supply Chain


16/156

What is a Supply Chain? (cont.)

Customer is an integral

part of the supply chain

Potential stages in a Supply Chain

DistributorManufacturerSupplier Retailer Customer


17/156

Successful Supply Chain


18/156




Transportation &

storage activities

End-product

manufacturer

(or focal firm)

Raw

material


distributors

Intermediate

components

manufacturers

Retailers

EndCustomer


19/156


(Group Work and Presentation)

Focal Organization (Laptop Manufacturer)

Management Vision

Management and Staff Attitude

Competency Level of Management and Staff in business areas

Ethical Values of Management and Employees

Upstream and Downstream Partners

Management Vision





20/156

Supply Chain Objective


21/156

Supply Chain Objectives

Reduce CostMaintain/Improve Quality

Enhance Customer Service Level

Optimize the profitability of all of the supply chain partners through customersatisfaction


22/156

The Objective of a Supply Chain

Example: Dell receives $2000 from a customer for a computer

(revenue)

Supply chain incurs costs (information, storage, transportation,

components, assembly, etc.)

Difference between $2000 and the sum of all of these costs is

the supply chain profit

Supply chain profitability is total profit to be shared across all stages

of the supply chain

Supply chain success should be measured by total supply

chain profitability, not profits at an individual stage


23/156




Transportation &

storage activities

End-product

manufacturer

(or focal firm)

Raw

material


distributors

Intermediate

components

manufacturers

Retailers

EndCustomer


24/156

Cost Factors in Supply Chain ?


25/156

Organizational Scope of Supply Chain Management

Demand Forecasting

Purchasing & Supplier Management

Production / Manufacturing Inventory Management

Warehouse Management

Logistics / Distribution New Product Development


26/156

Cost Factor in Supply Chain

Raw Material cost for Manufacturer

Logistics and Warehousing

Conversion of raw material into component /finished

product

Finished Inventory Holding Cost

Information Management Cost

R & D ( New product Development)

Channel Members Markup

Marketing & Customer Services

Others ( Financial, Administrative etc)


27/156

Cost in the Value Chain

Manufacturer

Procurement

Manufacturing & R&D


Marketing

Inbound and

Outbound Logistics

Warehousing

Administrative

Others

Distribution

Procurement


Marketing

Inbound and

Outbound Logistics

Warehousing

Administrative

Others


28/156

Cost in Supply Chain

Raw Material Supplier

Component Manufacturer

Finished Product Manufacturer

Distributer / Wholesaler

Retailer

Customer


29/156

Theimage cannotbe displayed.Your computer may nothaveenough memory toopen theimage, or theimagemay havebeen corrupted.Restartyour computer,and then open thefileagain.I fthe red x stillappears,you may havetodeletethe imageandthen insertitagain.

Typical Series of Markups

1414 -- 2929

Manufacturers Cost $25.00

Manufacturers Markup $3.75 (15%)

Wholesalers Markup $5.75 (20%)

RetailersMarkup $25.88 (75%)

Customers Price $60.38


30/156















31/156


32/156

Cost reduction achieved through: Reducing Supplier Base (Reduced purchasing costs)

Sharing Information within and Channel Partners and Suppliers

Reducing waste ( Manufacturing, Storage, Transportation etc) Achieving Economies of scale in Purchasing, Manufacturing and

Transportation

Usage of Technology

Reducing excess inventory (through collaboration)

Reducing non-value added activities (Process Improvement) Process Automation ( Warehouse, Production, etc)

Information Management through ERP , CRM others

Outsourcing the non core activity (to achieve cost effectiveness andquality)

Creating win-win scenario- ( Proper Negotiation)

Continuous Improvement through Benchmarking- copy competitors

Trial & error

Increased knowledge of supply chain processes (experience)


33/156

Supply Chain vs Supply Chain


34/156

90 + + =

ProductManufacturer

Distributor Retailer Customer

100 + + =

100 + + =

95 + + =

Reducing Cost

A

B

C

D


35/156

90 30+ + =

ProductManufacturer


100 20+ + =

100 30+ + =

95 25+ + =

Reducing Cost

A

B

C

D


36/156

90 30 20+ + =

ProductManufacturer


100 20 20+ + =

100 30 10+ + =

95 25 15+ + =

Reducing Cost

A

B

C

D


37/156

90 30 20+ + = 140

ProductManufacturer


100 20 20+ + = 140

100 30 10+ + = 140

95 25 15+ + = 135

Reducing Cost

A

B

C

D


38/156


Knowledge and Ethical Values

Focal Organization

Management Vision





Management Vision





39/156

SCM and Competitive Advantage


40/156

Responsiveness

Quality

AffordabilityService

ProductFeatures

What the Customer Wants ?


41/156

The Value Chain

( Competitive Advantage?)

Supportactivities

Primary activities

Inbound logistics Materials receiving, storing, and distribution to manufacturing premises

Operations Transforming inputs into finished products.Outbound logistics Storing and distributing productsMarketing and Sales Promotions and sales forceService Service to maintain or enhance product valueCorporate infrastructure Support of entire value chain, e.g. general management planning,

financing, accounting, legal services, government affairs, and QMHuman resources management Recruiting, hiring, training, and developmentTechnology Development Improving product and manufacturing process

Procurement Purchasing input


42/156

Responsiveness

Quality

AffordabilityService

ProductFeatures

What the Customer Wants ?

Information Sharing among supply chain partners

Quick Manufacturing

Agile Logistics

Quality ProcurementQuality Manufacturing

Proper Storage and Delivery

Customer Needs and Want

R & D

Supplier Involvement

Saving Cost at

Each Stage of Supply Chain

Sales & Marketing

Quick Manufacturing

Agile Logistics

Customer Services


43/156



Focal Organization

Management Vision





Management Vision





44/156




Transportation &

storage activities

End-product

manufacturer

(or focal firm)

Raw

material


distributors

Intermediate

components

manufacturers

Retailers

EndCustomer


45/156

Old and New Paradigm


46/156

Supply Chain Management

Old paradigm - Vertically integrated firm withemphasis on short-term, company focused performance.

Newparadigm - Focused activities in areas ofspecialization; voluntary, trust-based relationships withsuppliers and customers.

All participants in the supply chain benefit.

Boundaries extend from the firms suppliers suppliers to itscustomers customers (i.e., second tier suppliers and

customers).

Supply chains use reverse logistics to handle returned

products, warranty repairs, and recycling.

Th V l Ch i


47/156

The Value Chain


Supportactivities

Primary activities






48/156




Transportation &

storage activities

End-product

manufacturer

(or focal firm)

Raw

material


distributors

Intermediate

components

manufacturers

Retailers

EndCustomer


49/156

Issues in Supply Chain


50/156


51/156




Transportation &

storage activities

End-product

manufacturer

(or focal firm)

Raw

material


distributors

Intermediate

components

manufacturers

Retailers

EndCustomer


52/156

Issues in Supply Chain

No collaboration between Supply Chain partners

Poor Communication/ information flow

Higher operational cost

Frequent Inventory Stock out or large Inventory build ups Very Long Lead Times

Poor Funds Flows

Poor Information Flowamong supply chain partners Poor Material flowamong supply chain partners

Poor Demand Forecasting

Result is Increased operational cost and poor

Th V l Ch i


53/156

The Value Chain


Supportactivities

Primary activities






54/156

Typical Issues in Organization

Poor Quality of the Finished Products

Poor Supplier Management

Excess Inventory

Inventory Stockout Poor Production Scheduling

Poor warehouse Management

Lack of departmental Coordination Poor Demand Forecasting

Poor Purchasing Management

Poor Logistics Management

S f l S l Ch i


55/156



Focal Organization

Management Vision


Competency Level of Management and Staff in business areas Ethical Values of Management and Employees


Management Vision





56/156

Why Supply Chain Management?

Helps in the Integration of all the departments of anorganization (improve coordination and communication)

Helps in the optimization of Demand Forecasting


Production



Logistics New Product Development

SCM helps in fulfilling the Customers Needs and WantsSCM helps in reducing cost and increasing efficiency


57/156

SCM provides Solutions for Problems

Poor Quality of the Finished Products ( TQM and Six Sigma)

Poor Supplier Management (Supplier evaluation & Certification)

Excess Inventory (JIT, ERP Procurement and Visibility, CPFR)

Inventory Stockout (ERP Inventory Management , CPFR)

Poor Production Scheduling ( MRP Planning and Production)

Poor warehouse Management (ERP Warehouse Management)

Lack of Partner Coordination (Supplier Management andChannel management ERP to ERP)

Poor Demand Forecasting (CPFR and ERP)

Poor Purchasing Management ( ERP Procurement and Smaller

Supply base)


58/156


59/156


60/156


61/156




Transportation &

storage activities

End-product

manufacturer

(or focal firm)

Raw

material


distributors

Intermediate

components

manufacturers

Retailers

EndCustomer


62/156


Wal-Mart and Procter & Gamble (P&G) SCM


63/156


64/156

1. Supply Chain Model2. Information Flow Model

Models in Supply Chain


65/156

Supply Chain Model


66/156




and Funds

Transportation &

storage activities

End-product

manufacturer

(or focal firm)

Raw

material


distributors

Intermediate

components

manufacturers

Retailers

EndCustomer


67/156















68/156

Information Model


69/156


70/156

Process view of a supply chain

P d t d S i fl


71/156




and Funds

Transportation &

storage activities

End-product

manufacturer

(or focal firm)

Rawmaterial


distributors

Intermediate

components

manufacturers

Retailers

EndCustomer


72/156


Cycle view: processes in a supply chain are divided

into a series of cycles, each performed at the

interfaces between two successive supply chain

stages Push/pull view: processes in a supply chain are

divided into two categories:

Executed in response to a customer order(pull)

Executed in anticipation of a customer order

(push)


73/156

Cycle View of Supply Chains

Customer Order Cycle

Replenishment Cycle

Manufacturing Cycle

Procurement Cycle

Customer

Retailer

Distributor

Manufacturer

Supplier


74/156

Cycle View of a Supply Chain

Each cycle occurs at the interface between two

successive stages

Customer order cycle (customer-retailer)

Replenishment cycle (retailer-distributor)Manufacturing cycle (distributor-manufacturer)

Procurement cycle (manufacturer-supplier)


75/156

Subprocesses in each SC Process

Supplier Stage

Market Products

Buyer returns reverse

flow to suppliers orthird party

Buyer Stage

Receive Supplies

Supplier Stage

Supplies Order

Buyer Stage

Places Order

Supplier Stage

Receive Order


76/156


77/156

Within each Cycle

The Goal of the buyer

Ensure Product availability

Achieve economies of scale

Reduce the cost of receiving the order

The Goal of the Supplier

Accurate Customer order forecast

Reduce the cost of receiving the order Fill the order on time

Improve efficiency and accuracy of the order fulfillment


78/156

Cycle View of Supply Chains


Replenishment Cycle

Manufacturing Cycle

Procurement Cycle

Customer

Retailer

Distributor

Manufacturer

Supplier


79/156


Involves all processes directly involved in receiving

and filling the customers order

Customer arrival

Customer order entry

Customer order fulfillment

Customer order receiving


80/156

Replenishment Cycle

All processes involved in replenishing retailer

inventories (retailer is now the customer)

Retail order trigger

Retail order entry

Retail order fulfillment

Retail order receiving


81/156


82/156

Procurement Cycle

All processes necessary to ensure that materials areavailable for manufacturing to occur according toschedule

Manufacturer orders components from suppliers to

replenish component inventories However, component orders can be determined

precisely from production schedules (different fromretailer/distributor orders that are based on uncertain

customer demand) Important that suppliers be linked to the

manufacturers production schedule


83/156


Wal-Mart and Procter & Gamble (P&G) SCM


84/156

Cycle View of a Supply Chain

Key PointA cycle view of the supply chain clearly defines the

process involved and the owners of each process. Thisview is very useful when considering operational

decision because it specifies the responsibilities of

each member of the supply chain and the desired

outcome for each process.


85/156

Push and Pull View of the

Supply Chain


86/156


Cycle view: processes in a supply chain are divided

into a series of cycles, each performed at the

interfaces between two successive supply chain

stages Push/pull view: processes in a supply chain are

divided into two categories:

Executed in response to a customer order

(pull)

Executed in anticipation of a customer order

(push)

Push/Pull View of


87/156

Push/Pull View of

Supply Chain Processes

Supply chain processes fall into one of twocategories depending on the timing of theirexecution relative to customer demand

Pull: execution is initiated in response to a customer

order (reactive) Push: execution is initiated in anticipation of

customer orders (speculative)

Push/pull boundary separates push processes from

pull processes Strategic supply chain decisions may lead toStrategic supply chain decisions may lead to

changing the push/pull boundarychanging the push/pull boundary


88/156

Push/Pull View of L.L Beans Supply Chains

Procurement,Manufacturing andReplenishment cycles

Customer OrderCycle

CustomerOrder Arrives

PUSH PROCESSES PULL PROCESSES

/


89/156

Push/Pull View of DELL Supply Chain

Procurement Cycle Customer OrderAnd Manufacturing cycle

Customer Order ArrivesPUSH PROCESSES

PULL PROCESSES


90/156


91/156

Push and Pull View

Key Point

A push and pull view of the supply chain categoriesprocesses based on whether they are initiated in

response to a customer order(pull) or in the

anticipation of a customer order (push) . This view is

very useful when considering strategic decisionsrelating to Supply Chain Design.

/ f S C


92/156

Push/Pull View of Supply Chains

Develop Push / Pull View for the following

Buying Dell computer from the net.

Buying a PC from a Retail store.


93/156

Push and Pull View of the

Supply Chain

B P


94/156

Business Processes

Make to Stock ?

Assemble to Order?

Make to Order ?

Design to Order ( Engineer to order)?

Where to Take the Customer Order?

Order fulfillment Lead Time ?

Design to Order


95/156

Make to Order

Assemble to Order

Make to Stock

SCM P b ildi bl k


96/156

Pack

and Ship

Stock as

Inventory

Test

Sub

Assemble

Design

Procure

Fabricate

Final

Assemble

Stock

Standard

Module as

Inventory

Stock

Component

Design &

Standard

Part

(Custom

Design if

required)

Design

(Unique Engg.

Design or

Significant

Customization

Procure

(RM,

Standard

Component ,

ETC

SCM Process building blocks

D i P

Design to Order


97/156

Pack and

Ship

Stock as

InventoryTest

Sub

AssembleDesign Procure Fabricate

Final

Assemble

Pack and

Ship

Test

Final

Assemble

The

CustomerSelected

Module

Sub

Assemble

Design Procure Fabricate

Stock

Standard

Module asInventory

Pack and

ShipTest

Final

Assemble

Sub


Stock

Component

Design &

Standard

Part

(Custom

Design if

required)

Pack and

ShipTest

Final

Assemble

Sub

Assemble

Design

(Unique Engg.

Design or

Significant

Customization

Procure

(RM,

Standard

Component ,

ETC

Fabricate

Make to Order

Assemble to Order

Make to Stock

M k k


98/156

Pack

and Ship

Stock as

InventoryTest

Sub


Final

Assemble

Make to stock

M k k


99/156

Pack

and Ship

Stock as

InventoryTest

Sub


Final

Assemble

Make to stock

MAKE TO STOCK. Refers to a product environment

where products can be and usually finished before

receipt of a customer order. Customer orders are

typically filled from existing stock, and productionorders are used to replenish those stocks. This is

mass manufacturing with pushing the sales

philosophy.

M k t t k


100/156

Pack

and Ship

Stock as

InventoryTest

Sub


Final

Assemble

Customer

Order

Make to stock

L.T

A bl t O d


101/156

Pack

and ShipTest

Final

AssembleThe

CustomerSelected

Module

Sub


Stock

StandardModule

as

Inventory

Assemble to Order

A bl t O d


102/156

Pack

and ShipTest

Final

Assemble

The

Customer

Selected

Module

Sub


Stock

Standard

Module

asInventory

Assemble to Order

Denotes a production environment where goods or service can be

assembled after receipt of a customers order. The key components (

bulk, semi-finished , intermediate, subassembly, fabricated,

purchased, packaging, etc.) used in the assembly or finishing process

are planned and possibly stocked in anticipation of a customerorder. Receipt of an order initiates assembly of the customized

product. This strategy is useful where a large number of end

products ( based on the selection of options and accessories) can be

assembled from common components.

A bl t O d


103/156

Pack

and ShipTest

Final

AssembleThe

CustomerSelected

Module

Sub


Stock

StandardModule

as

Inventory

Customer

Order

Assemble to Order

L.T

M k t O d


104/156

Pack and

ShipTest

Final

Assemble

Sub


Stock

ComponentDesign &

Standard

Part

(CustomDesign if

required)

Make to Order

M k t O d


105/156

Pack and

ShipTest

Final

Assemble

Sub


Stock

Component

Design &

Standard

Part

(Custom

Design if

required)

Make to Order

MAKE TO ORDER. In this environment, goods or service

can be manufactured / offered after receipt of a

customers order. The final product is usually a

combination of standard items custom- designed to meetthe special needs of the customer. This gives more

option( as compared to assemble-to-order) to the

customer in design, aesthetics, utility, accessories, etc.

Make to Order


106/156

Pack and

ShipTest

Final

Assemble

Sub


Stock

ComponentDesign &

Standard

Part

(CustomDesign if

required)

Customer

Order

Make to Order

L.T

Design to Order


107/156

Pack and

ShipTest

Final

Assemble

Sub

Assemble

Design

(Unique Engg.Design or

Significant

Customization

Procure

(RM,Standard

Component ,

ETC

Fabricate

Design to Order

Design to Order


108/156

Pack and

ShipTest

Final

Assemble

Sub

Assemble

Design

(Unique Engg.

Design or

Significant

Customization

Procure

(RM,

Standard

Component ,

ETC

Fabricate

Design to Order

DESIGN TO ORDER. (ENGINEERING-TO-ORDER). This is

a highly focused environment where the individual

customer gives product specifications that require unique

engineering design, significant customization inmanufacturing, or even new purchased materials. Each

customer order result in unique set of part numbers, bills

of material, and routings.

Design to Order


109/156

Pack and

ShipTest

Final

Assemble

Sub

Assemble

Design

(Unique Engg.Design or

Significant

Customization

Procure

(RM,Standard

Component ,

ETC

Fabricate

Customer

Order

Design to Order

L.T

CustomerOrder


110/156

Pack

and Ship

Stock as

InventoryTest

Sub


Final

Assemble

Customer

Order

Pack and

ShipTest

Final

Assemble

The

Customer

Selected

Module

Sub


Stock

Standard

Module as

Inventory

CustomerOrder

Pack and

ShipTest

Final

Assemble

Sub


Stock

Component

Design &Standard

Part

(Custom

Design ifrequired)

Design to Order


111/156

Make to Order

Assemble to Order

Make to Stock



112/156


Integrated

System

PushPush

PullPull

DemandDemand

ForecastingForecasting

SourcingSourcing

andand

PurchasingPurchasing

PackagingPackaging

MaterialMaterial

HandlingHandling

RawRaw

MaterialsMaterials

InventoryInventory

InboundInboundTransportationTransportation

ManufacturingManufacturing

CustomerCustomer

OrderOrder

ProcessingProcessingPackaging/Packaging/

MaterialMaterial

HandlingHandling

FinishedFinished

GoodsGoodsInventoryInventory

DeploymentDeployment

OutboundOutbound

TransportationTransportation

CustomersCustomers

CustomerCustomer


113/156

Proper SCM


114/156

Role of Information in SCM



115/156


Information replaces inventorythroughout the supply chain

The further the information transfers up and down thesupply chain

the more efficient the response

the more timely the supply of goods

resultant costs reduced

Supply Chain Management:


116/156

The True Magnitude1-116

Compaq estimates it lost $.5 billion to $1 billion in

sales in 1995 because laptops were not available

when and where needed

When the 1 gig processor was introduced by AMD,the price of the 800 mb processor dropped by

30%

P&G estimates it saved retail customers $65 million

by collaboration resulting in a better match ofsupply and demand



117/156


Information replaces inventory

throughout the supply chain if:

Relationships allow the trust to share

Accuracy assures information is useful

Responsiveness builds the relationships

Proper SCM


118/156

Proper SCM

Ensure that goodsmove smoothly andon time from suppliersto customers

Keep inventories low Keep costs down

Proper SCMand inventorymanagement

requirescoordinationof all

activities and

links in thesupply chain

to:

The Value Chain


119/156

V C

Supportactivities

Primary activities

Inbound logistics Materials receiving, storing, and distribution to manufacturing premisesOperations Transforming inputs into finished products.

Outbound logistics Storing and distributing productsMarketing and Sales Promotions and sales forceService Service to maintain or enhance product valueCorporate infrastructure Support of entire value chain, e.g. general management planning,

financing, accounting, legal services, government affairs, and QMHuman resources management Recruiting, hiring, training, and developmentTechnology Development Improving product and manufacturing processProcurement Purchasing input



120/156



Transportation &

storage activities

End-product

manufacturer

(or focal firm)

Rawmaterial


distributors

Intermediate

components

manufacturers

Retailers

End

Customer

Proper SCM (cont.)


121/156

Supply chain partnersdepend on each other

Partners dont always worktogether toward the samegoal

Coordinationis neededbecause:

Proper SCM (cont.)


122/156

p ( )

Information flow is akey: communications

between businesspartners should be:

Effective Efficient

Support is neededto ensure this

communication andis enabled by:

IT support EC support

Benefits of Proper SCM


123/156

Benefits of Proper SCM

Reduce uncertainty along the chain

Proper inventory levels in the chain

Minimize delays

Eliminate rush (unplanned) activities

Provide superb customer service

Major contributor of success (ever survival)


124/156

Supply Chain Importance

Importance of Supply Chain Management


125/156

p pp y M g

Firms have discovered value-enhancing and long term

benefits by employing SCM principles and techniques

Who benefits most? Firms with?

Large inventories

Large number of suppliers

Complex products

Customers with large purchasing budgets

Importance of Supply Chain Management (Cont.)


126/156

p pp y g ( )

Lower costs, better quality, and better customer service are reasons

to employ Supply Chain Management. Also:

Reduced Bullwhip Effect- the magnified reduction of

safety stock costs based on coordinated planning andsharing of information (Information replaces inventory

throughout the supply chain)

Collaborative planning, forecasting, and replenishment

activities reduce the Bullwhip Effect and lead to bettercustomer service, lower inventory costs, improved quality,

reduced cycle time, better production methods, and other

benefits.


127/156

Decision Phase in Supply Chain

Decision Phases of a Supply Chain


128/156

Decision Phases of a Supply Chain

Supply chain strategy or design

Supply chain planning

Supply chain operation

Decisions Strategic Planning Operational

Generate pick list at the warehouse


129/156

Timing and size of market promotions

Allocate an order to a particular shipping mode and

shipment

Planned buildup of inventories

Subcontracting, backup locations

Set a date that an order is to be filled

Allocate inventory or production to individual order

Selection of Modes of transportation

Set delivery schedules of trucks

Inventory policies

Products to be made or stored at various locations

Outsourcing decisions

Which markets will be supplied from which locations

Locations and capacities of facilities (warehouse and

Production)

Information systems

Place replenishment order

Supply Chain Strategy or Design


130/156

Supply Chain Strategy or Design

Decisions about the structure of the supply chain andwhat processes each stage will perform

What are some strategic supply chain decisions? Locations and capacities of facilities (warehouse and

Production)Products to be made or stored at various locationsModes of transportation Information systems

Outsourcing decisions Supply chain design must support strategic objectives

Supply chain design decisions are long-term andexpensive to reverse must take into account market

uncertainty

Supply Chain Planning


131/156

S pp y C g

Definition of a set of policies that govern short-term

operations

Fixed by the supply configuration from previous

phase Starts with a forecast of demand in the coming year



132/156

pp y g

What are some planning decisions?

Which markets will be supplied from which locations

Planned buildup of inventories

Subcontracting, backup locations Inventory policies

Timing and size of market promotions

Must consider in planning decisions demand

uncertainty, exchange rates, competition over the

time horizon

Supply Chain Operations


133/156

pp y p

What are some Operation decisions? Allocate inventory or production to individual order

Set a date that an order is to be filled

Generate pick list at the warehouse Allocate an order to a particular shipping mode

and shipment

Set delivery schedules of trucks

Place replenishment order The goal of the Supply Chain Operations is to handle the

customer order in the best possible manner.

SCM Tools levels


134/156


services configure operations

to best meet projected

demand levels

The planning horizon rangesfrom developing a long term

strategic outlook to

developing a short term

tactical production schedule

Event Management

Order Management



Production Planning

Supply Planning

Demand Planning

Network Design

SCM Service Offering

OperationalPlanning

TacticalPlanning

StrategicPlanning

Real time /

Minutes

Hours /

Days

Weeks /

MonthsQuarters Years

Supply Chain Planning Tools Supply Chain Execution Tools

Supply Chain Execution

services monitor and

control production

operations

They provide real time

tracking and alert

notification

Supply Chain Elements

Transportation Management

Source: BAH

Supply Chain Planning Process


135/156

pp y g

Supply Planning

Balancesunconstraineddemand against highlevel supply chain

constraints Reflect order priority

and due dates

Network Design

Design where to placeproduction facilitiesand optimize the endto end chain

Construct alternateflow scenarios thatincorporateassociated constraints

Production Planning

Decompose thesupply plan into subassembly / productionneeds by site

Balance productioncapacity across sites

Production Scheduling

Optimize processingflows, sequence, andtiming

Produce a finitecapacity productionschedule

Demand Planning

Anticipate demandbased on historicaltrends and currentconditions

Perform what ifanalysis - highlight theimpact of changing

demand drivers

Hours /

Days

Weeks /

MonthsQuartersYears

Planning

Horizon

Supply Chain Execution Process


136/156

136

Supply Chain Execution Process

Order Management

Record customerorders and trackstatus from receipt

to final delivery Direct efficient

response to orderswith dynamic cost /benefit analysis ofoptions

InventoryManagement

Streamlineinformationmovement and

provide tightinventory control Inventories

replenished usingkanban, min-max, orreorder point

Event Management

Monitor and manage critical planning and event information Broadcast alert notification and present response alternatives based on pre determined

business rules

Transportation

Management

Optimize and

track outbound

and inbound

shipping

Warehouse

Management

Optimization

and

management

of warehouse

processes



137/156



Transportation &storage activities

End-product

manufacturer

(or focal firm)

Rawmaterial


distributors

Intermediate

components

manufacturers

Retailers

End

Customer


138/156

Best Practices & Trends

Current Trends in Supply Chain Management


139/156

139

Firms using Supply Chain Management:

1. Start working with key suppliers

2. Move on to other suppliers, customers, and

shippers3. Integrate second tier suppliers and customers

(second tier refers to the customers customers

and the suppliers suppliers)



140/156

Expanding the Supply Chain

Firms are expanding partnerships and building

facilities in foreign markets

The expansion involves: breadth- foreign manufacturing, office & retail sites,

foreign suppliers & customers

depth- second and third tier suppliers & customers

Current Trends in Supply Chain Management-

Cont


141/156

Cont.

Reducing Supply Chain Costs

Cost reduction achieved through:

Reduced purchasing costs

Reducing waste Reducing excess inventory, and

Reducing non-value added activities

Continuous Improvement through

Benchmarking- copy competitors Trial & error

Increased knowledge of supply chain processes (experience)


(Cont )


142/156

(Cont.)

Increasing Supply Chain Responsiveness

Firms will increasingly need to be more flexible and

responsive to customer needs

Supply chains will need to benchmark industry

performance and meet and improve on a continuous

basis

Responsiveness improvement will come from more

effective and faster product & service delivery systems


(C t )


143/156

143

(Cont.)

The Greening of Supply Chains

- Producing, packaging, moving, storing, delivering and

other supply chain activities can be harmful to the

environment

Supply chains will work harder to reduce

environmental degradation

Large majority (75%) of U.S. consumers influenced by

a firms environmental friendliness reputation

Recycling and conservation are a growing alternative

in response to high cost of natural resources

What is Supply Chain


144/156

Organizational Scope of Supply Chain Management

Demand Forecasting


Production / Manufacturing



Logistics / Distribution

New Product Development


145/156

SCM provides Solutions for Problems


146/156

Poor Quality of the Finished Products ( TQM and Six Sigma)

Poor Supplier Management (Supplier evaluation & Certification)

Excess Inventory (JIT, ERP Procurement and Visibility)

Inventory Stockout (ERP Inventory Management) Poor Production Scheduling ( MRP Planning and Production)

Poor warehouse Management ( ERP Warehouse Management)

Lack of Partner Coordination (Supplier Management and

Channel management ERP to ERP)

Poor Demand Forecasting (CPFR and ERP)

Poor Purchasing Management ( ERP Procurement and Smaller

Supply base)



147/156

pp y g

Old paradigm - Vertically integrated firm withemphasis on short-term, company focused performance.

Newparadigm - Focused activities in areas ofspecialization; voluntary, trust-based relationships withsuppliers and customers.

All participants in the supply chain benefit.

Boundaries extend from the firms suppliers suppliers to its

customers customers (i.e., second tier suppliers and

customers).

Supply chains use reverse logistics to handle returned

products, warranty repairs, and recycling.

Push/Pull View of DELL Supply Chain


148/156

Procurement Cycle Customer OrderAnd Manufacturing cycle

Customer Order Arrives

PUSH PROCESSES

PULL PROCESSES

Push/Pull View of L.L Beans Supply Chains


149/156

Procurement,Manufacturing andReplenishment cycles

Customer OrderCycle

CustomerOrder Arrives

PUSH PROCESSES PULL PROCESSES

Pack andT t

FinalSub

Design

(Unique Engg.

D i

Procure

(RM,

St d d F b i t

Design to Order


150/156

Pack and

Ship

Stock as

InventoryTest

Sub


Final

Assemble

Pack and

ShipTest

Final

Assemble

The

Customer

SelectedModule

Sub


Stock

Standard

Module as

Inventory

Pack and

ShipTest

Final

Assemble

Sub


Stock

Component

Design &

Standard

Part

(Custom

Design if

required)

ShipTest

AssembleAssembleDesign or

Significant

Customization

Standard

Component ,

ETC

Fabricate

Make to Order

Assemble to Order

Make to Stock


151/156

Supply Chain Trends



152/156



Transportation &storage activities

End-product

manufacturer

(or focal firm)

Rawmaterial


distributors

Intermediate

components

manufacturers

Retailers

End

Customer

Important Supply Chain Elements


153/156

153

Operations Trends:

Demand management- match demand to

available capacity Linking buyers & suppliers viaMRP and ERP

systems

Use JIT to improve the pullof materials to

reduce inventory levels Employ TQM to improve quality compliance

among suppliers

Important Supply Chain Elements


154/156

154

Distribution Trends: Transportation management- tradeoff decisions

between cost & timing of delivery/customer service

via trucks, rail, water & air

Customer relationship management- strategies to

ensure deliveries, resolve complaints, improve

communications, & determine service requirements

Network design- creating distribution networks based

on tradeoff decisions between cost & sophistication ofdistribution system

Important Elements of Supply Chain

Management (Cont.)


155/156

g ( )

Integration Trends:

Supply Chain Process Integration- when supply chain

participants work for common goals. Requires intrafirm

functional integration. Based on efforts to change

attitudes & adversarial relationships

INTEGRATING SCM, CRM, AND

ERP


156/156

ERP

Data points where SCM, CRM, and ERP integrate

Date post:	07-Apr-2018
Category:	Documents
Upload:	sarmadfaqir
View:	217 times
Download:	0 times

1 Supply Chain Management

Documents