Lesson_1_Introduction_to_Supply_Chain_Management.pdf

7/28/2019 Lesson_1_Introduction_to_Supply_Chain_Management.pdf

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INTRODUCTION TO SUPPLY

CHAIN MANAGEMENT

R. A. K. Ranawaka B. SC., MIM (SL), ADCP, MBA

Visiting Senior Lecturer


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2009 South-Western, a division of Cengage Learning 2

Learning Objectives

You should be able to:Describe a supply chain and define supplychain management.

Describe the objectives and elements of

supply chain management.

Describe local, regional, and global supply

chain management activities among services

and manufacturing companies.

Describe a brief history and some of thetrends of supply chain management.

Understand how the bullwhip effect impacts

supply chain members.


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What is a Supply Chain?

A supply chain consists of the flow ofproducts and services from: Raw materials manufacturers

Component and intermediate manufacturers

Final product manufacturers

Wholesalers and distributors and

Retailers

Connected by transportation and storageactivities, and

Integrated through information, planning, and

integration activitiesMany large firms are moving away from in-house Vertically Integrated structures toSupply Chain Management


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What is a Supply Chain? (Cont.)


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What is Supply Chain Management?

The design and management of seamless, value-added

processes across organizational boundaries to meet the

real needs of the end customer

Institute for Supply Management

Managing supply and demand, sourcing raw materials

and parts, manufacturing and assembly, warehousing

and inventory tracking, order entry and ordermanagement, distribution across all channels, and

delivery to the customer

The Supply Chain Council

The planning and management of all activities involved

in sourcing and procurement, conversion, and alllogistics 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


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What is Supply Chain Management?

(Cont.) Old paradigm- Firm gained synergy as a vertically

integrated firm encompassing the ownership andcoordination of several supply chain activities.

Organizational cultures emphasized short-term, company

focused performance.

New paradigm- Firm in a supply chain focuses activities inits area of specialization and enters into voluntary and

trust-based relationships with supplier and customer firms.

All participants in the supply chain benefit.

Boundaries are dynamic and extend from the firms

suppliers suppliers to its customers customers (i.e.,second tier suppliers and customers).

Supply chains now deal with reverse logistics to handle

returned products, warranty repairs, and recycling.


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Importance of Supply Chain

Management

Firms have discovered value-enhancing

and long term benefits

Who benefits most? Firms with: Large inventories

Large number of suppliers

Complex products Customers with large purchasing budgets


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Management (Cont.)

Firms using Supply Chain

Management:

1. Start with key suppliers

2. Move on to other suppliers,customers, and shippers

3. Integrate second tier suppliers

and customers (second tier refersto the customers customers and

the suppliers suppliers)


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Management (Cont.)

Cost savings and better coordination of resources

are reasons to employ Supply Chain Management

Reduced Bullwhip Effect- the magnified

reduction of safety stock costs based on

coordinated planning and sharing of

information

Collaborative planning, forecasting, and

replenishment activities reduce the Bullwhip

Effect and lead to better customer service,lower inventory costs, improved quality,

reduced cycle time, better production

methods, and other benefits.


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Origins of Supply Chain

Management

1950s & 1960sU.S. manufacturers focused on mass

production techniques as their principal cost

reduction and productivity improvement

strategies

1960s-1970s

Introduction of new computer technology

lead to development ofMaterialsRequirements Planning (MRP) and

Manufacturing Resource Planning (MRPII)

to coordinate inventory management and

improve internal communication


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Management (Cont.)

1980s & 1990s

Intense global competition led U.S.manufacturers to adopt

Supply Chain Management alongwith

Just-In-Time (JIT),

Total Quality Management (TQM),

andBusiness Process Reengineering

(BPR) practices


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Management Cont.

2000s and Beyond

Industrial buyers will rely more onth i rd-party serv ice pro viders (3PLs )

to improve purchasing and supplymanagement

Wholesalers/retailers will focus on

transportation and logistics more &refer to these as quick response,serv ice response log ist ics,andintegrated logist ics


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Management Cont.


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The Foundations of Supply

Chain Management

Supply

Management

Supplier management, supplierevaluation, supplier certification,

strategic partnerships

Operations

Demand management, MRP, ERP,

inventory visibility, JIT (AKA lean

production & Toyota Production

System), TQM (AKA Six Sigma)

Distribution

Transportation management, customer

relationship management, distribution

network, perfect order fulfillment, globalsupply chains, service response

logistics

IntegrationProcess integration, performance

measurement


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The Foundations of Supply

Chain Management (Cont.)

Purchasing Trends:

Long term relat ionships

Suppl ier management-improve

performance through Supplier evaluation (determining supplier

capabilities)

Supplier certification (third party or internal

certification to assure product quality and service

requirements)

Strategic partnersh ips -successful and

trusting relationships with top-performing

suppliers


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Important Elements of Supply


Operations Trends:

Demand management- match

demand to available capacity Linking buyers & suppliers via MRP

andERPsystems

Use J ITto improve the pul l of

materials to reduce inventory levels Employ TQMto improve quality

compliance among suppliers


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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 dist r ibut ion

networks based on tradeoff decisions

between cost & sophistication of

distribution system


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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

Supply Chain Performance

Measurement- Crucial for firms to know

if procedures are working


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Current Trends in Supply Chain

Management

Expanding the Supply Chain

U.S. 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


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Management (Cont.)

Increasing Supply ChainResponsiveness

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 comefrom more effective and faster product &

service delivery systems


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Management (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


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Management- 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-improve over competitorsperformance

Trial & error

Increased knowledge of supply chain

processes

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