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Supply Chain Management

Chapter 119th Edition

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Supply 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

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Warehouses Factories Processing centers Distribution centers Retail outlets Offices

Facilities

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Functions and Activities

Forecasting Purchasing Inventory management Information management Quality assurance Scheduling Production and delivery Customer service

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Typical Supply Chain

MANUFACTURING

Supplier

Supplier

Supplier

Storage} Mfg. Storage Dist. Retailer Customer

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Supplier

Supplier

} Storage Service Customer

Typical Supply Chain Service

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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 Management

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Bullwhip Effect

Final CustomerInitialSupplier

Demand

Inventory oscillations become progressivelylarger looking backward through the supply chain

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Benefits 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

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Benefits 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 Chains

Increasing more complex Language Culture Currency fluctuations Political Transportation costs Local capabilities Finance and economics Environmental

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Strategic 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

Logistics

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Materials MovementFigure 11.4

RE

CE

IVIN

G

Storage

Workcenter

Work centerWork center

Storage

Workcenter

Storage

Shipping

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Management uses DRP (Distribution requirements planning) to plan and coordinate: Transportation Warehousing Workers Equipment Financial flows

Uses of DRP

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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-Business

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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-Business

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Reverse 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

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Effective 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 Chain

Trust among trading partners

Effective communications

Supply chain visibility

Event-management capability

The ability to detect and respond to unplanned events

Performance metrics

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RFID 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

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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 Chain

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Supply Chain Performance Drivers

1. Quality

2. Cost

3. Flexibility

4. Velocity

5. Customer service

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Velocity

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

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Purchasing is responsible for obtaining the materials, parts, and supplies and services needed to produce a product or provide a service.

Purchasing cycle: Series of steps that begin with a request for purchase and end with notification of shipment received in satisfactory condition.

Purchasing

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Identifying sources of supply

Negotiating contracts

Maintaining a database of suppliers

Obtaining goods and services

Managing supplies

Duties of Purchasing

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Purchasing Cycle

1. Requisition received

2. Supplier selected

3. Order is placed

4. Monitor orders

5. Receive orders

PurchasingPurchasing

LegalLegal

AccountingAccountingOperationsOperations

DataDataprocess-process-inging

DesignDesign

ReceivingReceiving

SuppliersSuppliers

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Quality and quality assurance Flexibility Location Price Product or service changes Reputation and financial stability Lead times and on-time delivery Other accounts

Factors in Choosing a Supplier