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SEEM 4610 Supply Chain Management 1
SEEM 4610 Supply Chain Management
Janny M.Y. Leung
SEEM 4610 Supply Chain Management 2
What is a Supply Chain?
A supply chain consists of all stages involved, directly and indirectly, in fulfilling a customer’s request.
SEEM 4610 Supply Chain Management 3
Who is in a supply chain? Suppliers transporters manufacturers warehouses distributors retailers customers
SEEM 4610 Supply Chain Management 4
What happens in a supply chain?
RetailerDistributorManufacturer
Supplier
Supplier
Transporter
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Flows in a supply chain Material flows Information flows Cash flows
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What happens in a supply chain?
On-line retailer
Manufacturer
Supplier
Supplier
Order assembler
Manufacturer
Transporter
Bank
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Traditional view of logistics Manufacturing cost 48% Marketing cost 27% Logistics cost 21% Profit 4 %
Logistics related activity account for 11% of GNP of USA
Savings in cost reduction: typical box of cereal spends 104 days from factory to sale US Grocery industry: 10% operating cost = $30 billion
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Supply Chain Management: The True Magnitude Compaq estimates it lost US$1 billion in sales in
1995 because laptops were not available when and where needed
When the new 1 gig processor was introduced by AMD, the price of 800 MB processor dropped by 30%
Proctor&Gamble estimated savings of US$65 million by collaboration resulting in better matching of supply and demand
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“Staple yourself to an order” Every time an order is handled, a customer
is handled Every time an order is neglected, a
customer is neglected Supply chain management:
focus on the systemic view focus on the customers’ interest
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The order management cycle
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Objective of a supply chainMaximiseMaximise the overall value generated
= (Worth of product to customer) –
(cost/effort expended in filling request)
The customer is the ONLY source of revenue!The customer is the ONLY source of revenue!
Supply chain management is the management of the flows in a supply chain to maximise total profitability
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Cycle view of a supply chain
Customer order cycle
Replenishment cycle
Manufacturing cycle
Procurement cycle
CustomerCustomer
RetailerRetailer
DistributorDistributor
ManufacturerManufacturer
SupplierSupplier
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Customer Order Cycle
Customer Arrival
Customer order entry
Customer order fulfilment
Customer order receiving
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Replenishment Cycle
Retail order trigger
Retail order entry
Retail order fulfilment
Retail order receiving
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Manufacturing Cycle Order Arrival
(from distributor, retailer or customer) Production Scheduling Manufacturing Shipping Receiving at distributor/retailer/customer
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Procurement Cycle Order trigger
Production/purchase planning
Shipping
Delivery/receipt of order
Component orders can be much better controlled Component orders can be much better controlled
once manufacturing schedule is set!once manufacturing schedule is set!
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Push/Pull Boundary in a Supply Chain Pull processes
initiated in response to a customer order e.g. Dell
Push processes initiated in anticipation of customer orders e.g. supermarket
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Drivers of Supply Chain Performance
Supply chain structure inventory transportation facilities information
Efficiency Responsiveness
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Considerations for Supply chain drivers
Driver Efficiency Responsiveness
Inventory Holding costs Availability
Transportation Consolidation Speed
Facilities Centralised/Dedicated
ProximityFlexibility
Information What information flowstructure is best suited?
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Decision Phases in a Supply Chain Supply chain strategy and design
configuration location/capacity transportation modes
Supply chain planning distribution flow planning inventory level/location outsourcing
Supply chain operation order fulfilment replenishment shipment
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Importance of Supply Chain -
Dell’s Success Story Dell since 1993, earnings growth > 65% Direct Sales
customers -> manufacturers -> suppliers Customer management
enormous database steers customers over phone to configurations in stock
Make-to-order; low inventory matching supply to demand; reduce obsolescence risk
Co-ordinates direct shipment from suppliers with service representatives sophisticated information exchange among suppliers and logistics
provider Few manufacturing centers (Austin, Brazil, China, Ireland, Malaysia)
Tight tracking and management of cash flow
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Dell.com
Voice-to-voice
Face-to-face
Inside Sales Reps-Take order-Review info-Enter in system
JIT Inventory-Mat’l immediately ready to use-Qty meeting order vol.
Custom-designed Computers
- The Traveler specifies unique configuration
-The Traveler travels throughout assembly to shipping
Kitting
- Traveler is pulled, all components required to make the system are picked into a tote
Build to Order
-Workers use the kit to assemble and initial test the entire system
test
Testing and Integration
Boxing & Shipping
Dell’s Direct Model
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Seven-Eleven Japan Phenomenal growth
1974: first store; 1999: 8097 stores In last decade: sales tripled, inventory
reduced by 1/3, profits quadrupled Company image
convenient, cheerful ready-made lunch and dinner
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Seven Eleven stores Key products (over 3000 SKUs):
processed foods 50 % fresh foods 30% non-food 20%
Small stores, no storage space
Supply chain objective:
Micro-matching of supply and demandMicro-matching of supply and demand(by location, time of day, day of week, season,etc.)
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7-11 Supply Chain strategy Facilities
dominant location strategy 844 in Tokyo, 5523 in 21 prefectures
Information high-speed data network linking stores, HQ, suppliers and DCs store computer linked to POS and scanner for sales and receiving sales analysis by SKU and product categories sales trend impacts store display
Distribution deliveries from over 200 plants cross-docking at distribution centres (hold no food inventory) combined delivery (fresh+chilled+frozen) reduce truck visit to stores no direct delivery
Approx. 60 inventory turns per year!!Approx. 60 inventory turns per year!!
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Other Supply Chain Examples Amazon.com
no retail stores purchase from book distributor instead of from
publisher “assemble”-to-order books and music
Li & Fung integrator role Supply Chain Management - Hong Kong Style
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Readings “Staple yourself to an order”, B.P. Shapiro,
V.K. Rangan, J.J. Sviokla, Harvard Business Review, July-August, 1992.
“Fast Global and Entrepreneurial: Supply Chain Management, Hong Kong Style” Harvard Business Review, Sept-Oct 1998.