Supply Chain Management

Supply Chain Management
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.

Introduction to Supply Chains Supply Chain Management
and Supply Chain Management

Supply Chain (Definition of)
The sequence of organizations- their facilities, functions, processes and activities- that are involved in producing and delivering a product or service Sometimes referred to as value chain

Components of Supply (Value) Chains
Supply Component: Starts at the beginning of the SC and ends with the internal operations of the organization. Demand Component: Starts at the point where the organization’s output is delivered to its immediate customer and ends with the final customer in the chain. Demand chain is the sales and distributon portion of the value chain The length of each component depends on where a particular organization is in the chain

The Supply Chain Downstream SC members Upstream SC members Customers
Products and Services Customers Total satisfaction with quality, price, delivery, and service Distributors Package and delivery Inventory Producers Finished goods, end products and services Suppliers Materials, parts, sub-assemblies, and services Downstream SC members Upstream SC members

The Supply Chain Information Customers Suppliers Producers
Products and Services Customers Total satisfaction with quality, price, delivery, and service Distributors Package and delivery Inventory Producers Finished goods, end products and services Suppliers Materials, parts, sub-assemblies, and services

The Supply Chain Information Cash Customers Suppliers Producers
Products and Services Customers Total satisfaction with quality, price, delivery, and service Distributors Package and delivery Inventory Producers Finished goods, end products and services Suppliers Materials, parts, sub-assemblies, and services

The Supply-Chain Material Flow Credit Flow Supplier Manufacturer
VISA Material Flow Credit Flow Supplier Manufacturer Retailer Consumer Supplier Wholesaler Retailer Order Cash Schedules Flow Flow

Flow Management Three types of flow Product and service flow
Involves movement of goods and services from suppliers to customers as well as handling customer service needs and product returns Information flow Involves sharing forecasts and sales data, transmitting orders, tracking shipments, and updating order status Financial flow Involves credit terms, payments, and consignment and title ownership arrangements

Typical Supply Chain for a Manufacturer
Supplier Storage } Mfg. Dist. Retailer Customer

Typical Supply Chain for a Service
Supplier } Storage Service Customer

Supply Chain Management (Definition of)
A total system approach to managing the entire flow of information, materials, and services from raw-material suppliers through factories and warehouses to the end user (planning, organizing, directing and controlling flows of materials) Managing all activities associated with the flow and transformation of goods and services from raw materials to the end user, the customer, as well as the associated information flows

Supply Chain Management(Definition of)
The strategic coordination of business functions within a business organization and throughout its supply chain for the purpose of integrating supply and demand management The process of planning, implementing and controlling supply chain operations.

Goals of Supply Chain Management (1 of 2)
Synchronization of activities required to achieve maximum competitive benefits Coordination, cooperation, and communication and timing among SC members Ensuring rapid flow of information among members

Goals of Supply Chain Management (2 of 2)
Linking the market, distribution channels, processes and suppliers so that market demand is met as efficiently as possible across the chain Matching supply and demand at each stage of the chain as effectively and efficiently as possible Ultimate goal: Achieving customer satisfaction and maximizing supply chain profits

Facilities Involved in SCM
The sequence of the supply chain begins with basic suppliers and extends all the way to the final customer Warehouses Factories Processing centers Distribution centers Retail outlets Offices

Elements of Supply Chain Management
Deciding how to best move and store materials Logistics Determining location of facilities Location Monitoring supplier quality, delivery, and relations Suppliers Evaluating suppliers and supporting operations Purchasing Meeting demand while managing inventory costs Inventory Controlling quality, scheduling work Processing Incorporating customer wants, mfg., and time Design Predicting quantity and timing of demand Forecasting Determining what customers want Customers Typical Issues Element

Supply Chain Management Issues (1 of 3)
Determining what customers want Predicting (forecasting) quantity and timing of demand Incorporating customer wants to product design Determining appropriate levels of outsourcing Managing procurement (purchasing) Managing and evaluating suppliers (monitoring supplier quality, delivery and relations)

Determining the location of facilities Managing customer relationships Information management Managing supporting operations Managing risk Managing flows Quality assurance and control

Production planning, scheduling and control Inventory management (meeting demand while managing inventory costs) Logistics Deciding how best to move and store materials (distribution and delivery) Cstomer service Identifying problems and responding to them

Strategic &Operational Decisions in Supply Chains
Three types of decisions in supply chain management Strategic – design and policy Tactical Operational – day-today activities

Supply Chain Issues Operating Issues Tactical Issues Strategic Issues
Quality control Production planning and control Inventory policies Purchasing policies Production policies Transportation policies Quality policies Design of the supply chain, partnering Operating Issues Tactical Issues Strategic Issues

Strategic Responsibilities
Supply chain strategy alignment Network configuration Information technology Products and services Capacity planning Strategic partnerships Distribution strategy Uncertainty and risk reduction

Tactical Responsibilities
Forecasting Sourcing Operations planning Inventory policies Quality policies Transportation planning Collaborating

Operational Responsibilities
Scheduling Receiving Transforming Order fulfilling Managing inventory Shipping Information sharing Controlling

Typical Supply Chain Activities
Purchasing Receiving Storage Operations Production Distribution Processes involved in SCM Acquiring customer orders Procuring materials and components from suppliers (sourcing and procurement) Producing or manufacturing products (transformation activities) Filling customer orders Logistics (the part of the SC involved with the forward and reverse flow of goods, services, cash and information)

Trends in SCM Reevaluation of outsourcing Risk management
Inventory management Lean supply chains Sustainability As a result of these trends, organizations are likely to give serious thought to reconfiguring their supply chains to reduce risks, improve flow, increase profits and increase customer satisfaction

Supply-Chain Costs as a Percent of Sales
Industry Percent of Sales All industry Automobile Food Lumber Paper Petroleum Transportation 52% 67% 60% 61% 55% 79% 62%

Factors That Contribute to the Increased Need for Effective Supply Chain Management
need to improve operations increased levels of outsourcing increasing transportation costs competitive pressures increasing globalization increasing importance of e-commerce increasing complexity of supply chains increasing pressure to decrease inventories

Benefits of Supply Chain Management
Lower inventories Lower costs Higher productivity Greater agility Shorter lead times Higher profits Greater customer loyalty Integration of seperate organizations into a cohesive operating system

Actual Benefits Gained by 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

Requirements of a Successful Supply Chain
It begins with strategic sourcing Analyzing the procurement process to lower costs by reducing waste and non-value-added activities, increasing profits, reducing risks and improving supplier performance Trust among trading partners Effective cooperation and communications Supply chain should enable members to 1) share forecasts, 2) determine the status of orders in real time, 3) access inventory data of partners Supply chain visibility Inventory velocity Event-management capability The ability to detect and respond to unplanned events Measuring SC Performance: Performance metrics

Creating an Effective Supply Chain
An Effective Supply Chain requires linking the market, distribution channels processes, and suppliers Develop strategic objectives and tactics Integrate and coordinate activities in the internal supply chain Coordinate activities with suppliers and with distributors Coordinate planning and execution across the supply chain Form strategic partnerships

SC Performance Measures

Supply Chain Performance Drivers
Quality Cost Flexibility Velocity (inventory velocity, information velocity) Customer service

Supply Chain Performance Measures
Financial Return on assets Cost Cash flow Profits Suppliers Quality On-time deliveriy Cooperation flexibility Operations Productivity

Supply Chain Performance Measures
4. Inventory Avarage value Turnover Weeks of supply 5. Order fulfillment Order accuracy Time to fill orders Percentage of incompete orders shipped Percentage of orders delivered on time 6. Customers. Costomer satisfaction Percentage of customer complaints

Measuring SC Performance: Inventory Turnover
One of the most commonly used measures is “Inventory Turnover”

Measuring SC Performance: SCOR Metrics
Perspective Metrics Reliability On-time delivery Order fulfillment lead time Fill rate (fraction of demand met from stock) Perfect order fulfillment Flexibility Supply chain response time Upside production flexibility Expenses Supply chain management costs Warranty cost as a percent of revenue Value added per employee Assets/utilization Total inventory days of supply Cash-to-cash cycle time Net asset turns

Inventory Management

Supply Chain Uncertainty
Forecasting, lead times, batch ordering, price fluctuations, and inflated orders contribute to variability Inventory is a form of insurance Distorted information is one of the main causes of uncertainty

Inventory Management within A SC
Inventory issues in SCM Inventory location Centralized inventories Decentralized inventories Inventory velocity The speed at which goods move through a supply chain The effect of demand variability on inventories The bullwhip effect Inventory oscillations that become increasingly larger looking backward through the supply chain

The Bullwhip Effect Variations in demand cause inventories to fluctuate and get out of control Results in higher costs and lower customer satisfaction Inventory fluctuation can be magnified by Periodic ordering Dverreactions to stockouts Quality problems Labor problems Unusual weather cnoditions Delays in shipments of goods Communication delays Incomplete communications Lack of coordination of activities among organizations Forecast inaccuracies Order batching Product mix changes Sales incentives and promotions Liberal product return policies

Bullwhip Effect Demand Initial Supplier Final Customer
Demand variations begin at the customer end of the chain and become increasingly large as they radiate backwards through the chain (nventory oscillations become progressively larger moving backward through the supply chain)

Inventories in a SC: Bullwhip Effect
The magnification of variability in orders in the supply-chain Wholesaler’s Orders Manufacturer’s Orders Retailer’s Orders Quantity Order Quantity Order Quantity Order Time Time Time A lot of retailers each with little variability in their orders…. …can lead to greater variability for a fewer number of wholesalers, and… …can lead to even greater variability for a single manufacturer.

Inventories in a SC: Bullwhip Effect
Amount of inventory = Tier 2 Suppliers Tier 1 Suppliers Producer Distributor Retailer Final Customer

Mitigating the Bullwhip Effect
Good supply chain management can overcome the bullwhip effect Strategic buffering Holding inventory at a distribution center rather than at retail outlets Replenishment based on need Vendor-managed inventory Vendors monitor goods and replenish retail inventories when supplies are low

Vendor-Managed Inventories
The use of a local supplier to maintain inventory for the manufacturer Stocking information is accessed using EDI A first step towards supply chain collaboration Increased speed, reduced errors, and improved service

Information Technology
Supply Chains and Information Technology

Role of Information in the Supply Chain (1 of 2)
Centralized coordination of information flows Integration of transportation, distribution, ordering, and production Direct access to domestic and global transportation and distribution channels Locating and tracking the movement of every item in the supply chain

Role of Information in the Supply Chain (2 of 2)
Data interchange Data acquisition at the point of origin and point of sale Intercompany and intracompany information access Instantaneous updating of inventory levels Increasing the rate at which information is communicated in a SC.

Some IT Applications for SCM (1 of 3)
Electronic Business (replacement of physical processes with electronic ones) Electronic Data Interchange (a computer-to-computer exchange of business documentsincluding purchase orders, shipping notices, and debit or credit memos) in a standard format) Bar Coding (computer readable codes attached to items flowing through the SC). Generates point-of-sale data which is useful for determining sales trends, ordering, production scheduling, and delivery plans

RFID (Radio Frequency Identification) Technology A technology that uses radio waves to identify objects, such as goods in supply chains) Similar to bar codes but uses radio frequency to transmit product information to receiver Are able to convey much more information Do not require line-of-sight for reading Do not need to be read one at a time Used to track goods in supply chain RFID tags attached to objects RFID eliminates need for manual counting and bar code scanning

Internet (provides instant access to organizations, individuals and information sources; fundamentaly changes the way organizations do business; add speed and accessibility to the SC) Intranets (internet-like networks that operate within a single organization) Extranets (intranets that can be connected to the global internet & that include a company’s suppliers and customers; they allow limited access)

The Wal-Mart Supply Chain

Wall-Mart Case Wal-Mart has a satellite network for electronic data interchange that allows vendors to directly access point-of-sale data in real time, enabling them to improve their forecasting and inventory management. Wal-Mart also uses the system for issuing purchase orders and receiving invoices from its vendors.

Benefits of Electronic Data Interchange
Increased productivity Reduction of paperwork Lead time and inventory reduction Facilitation of just-in-time systems Electronic transfer of funds Improved control of operations Reduction in clerical labor Increased accuracy

The Internet Instant global access to organizations, individuals, and information sources Fundamentally changes the way organizations do business Removed geographic barriers Adds speed and accessibility to the supply chain

Build-to-Order Cars over the Internet

Linking the Supply Chain with SAP

Electronic Business E-Business: the use of electronic technology to facilitate business transactions Involves the interaction of different business organizations as well as the interaction of individuals with business organizations. Replacement of physical processes with electronic ones Applications include: Internet buying and selling Order and shipment tracking Electronic data interchange

Essential Features of E-Business
The Web site (front-end design) Order fulfillment (back end) Order processsing Billing İnventory management Warehousing Packing Shiping Delivery

Advantages of E-Business (1 of 2)
Global presence and increased visibility Global access to markets and customers Improved competitiveness, quality and service Greater choices and more and easy access to information for customers Collection and analysis of detailed customer data, interests and preferences Shortened supply chain response times

Advantages of E-Business (2 of 2)
Shortened transaction times for ordering and delivery Cost savings and price reductions Virtual companies with lower prices Leveling the playing field for small companies Reducing or eliminating intermediaries (disintermetiation) Improved service

E-Business Order Fulfillment Problems
Efficient web sites do not necessarily mean the rest of the supply chain will be as efficient Customer expectations Order quickly  Quick delivery Demand variability creates order fulfillment problems Sometimes Internet demand exceeds an organization’s ability to fulfill orders Inventory Outsourcing order fulfillment Loss of control Build large warehouses Internal holding costs

IT Issues Increased benefits and sophistication come with increased costs Efficient web sites do not necessarily mean the rest of the supply chain will be as efficient Security problems are very real Partnership and trust are important elements that may be new to business relationships

Procurement

Procurement Development and implementation of purchasing plans for products and services that support operations strategies

E-Procurement Business-to-business commerce conducted on the Internet
Benefits include lower transaction costs, lower prices, reduce clerical labor costs, and faster ordering and delivery times Currently used more for indirect goods E-Marketplaces service industry-specific companies and suppliers

Purchasing 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.

Importance of Purchasing
Purchasing is important because: - it is a major cost center - affect quality of final product - aids strategy of low cost, response and differentiation

Goals of Purchasing Develop and implement purchasing plans for products and services that support operations strategies. Develop, evaluate, and determine the best supplier, price, and delivery for the products and services that can be best obtained externally

Duties of Purchasing Identifying sources of supply
Negotiating contracts Maintaining a database of suppliers Obtaining goods and services Managing supplies

Purchasing Interfaces
Legal Accounting Operations Data processing Design Receiving Suppliers

Purchasing Cycle Requisition received Supplier selected
Legal Accounting Operations Data processing Design Receiving Suppliers Requisition received Supplier selected Order is placed Orders are monitored Orders are received

Centralized vs Decentralized Purchasing
Purchasing is handled by one special department Decentralized purchasing Individual departments or separate locations handle their own purchasing requirements

Centralized Supply at Honda America

Supplier Management

Suppliers Purchased materials account for about half of manufacturing costs Materials, parts, and service must be delivered on time, of high quality, and low cost Suppliers should be integrated into their customers’ supply chains Partnerships should be established On-demand delivery (JIT) is a frequent requirement

Supplier Related Issues
Sourcing (choosing suppliers) Vendor analysis (evaluating sources of supply) Supplier audits Supplier certification Supplier relationship management Supplier partnerships CPFR Strategic partnering

Sourcing Sourcing is the selection of suppliers
Relationship between customers and suppliers focuses on collaboration and cooperation Outsourcing has become a long-term strategic decision Organizations focus on core competencies Single-sourcing is increasingly a part of supplier relations

Vendor Analysis Evaluating the sources of supply in terms of: Price
Quality and quality pratices Flexibility Location Past experience Product or service changes Reputation and financial stability Lead times and on-time delivery Inventory policy Services (such as technical support and training) provided The above criteria can be classified as 1) those related to the organization, 2) those related to the product, and 3) those related to the service provided

Supplier Audits and Certification
A means of keeping current on suppliers’ production (or service) capabilities, quality and delivery problems and resolutions, and performance on other criteria Supplier certification Involves a detailed examination of a supplier’s policies and capabilities The process verifies the supplier meets or exceeds the requirements of a buyer

Supplier Relationship Management
Type of relationship is often governed by the duration of the trading relationship Short-term Oftentimes involves competitive bidding Minimal interaction Medium-term Often involves an ongoing relationship Long-term Often involves greater cooperation that evolves into a partnership

Contrasting Supplier Relationships
Aspect Adversary Partner Number of suppliers Many One or a few Length of relationship May be brief Long-term Low price Major consideration Moderately important Reliability May not be high High Openness Low Quality May be unreliable; buyer inspects At the source; vendor certified Volume of business May be low Flexibility Relatively low Relatively high Location Widely dispersed Nearness is important

Supplier Partnerships
Ideas from suppliers could lead to improved competitiveness Reduce cost of making the purchase Reduce transportation costs Reduce production costs Improve product quality Improve product design Reduce time to market Improve customer satisfaction Reduce inventory costs Introduce new products or services

Collaborative Planning, Forecasting, and Replenishment
A system based on the notion that there should be information sharing among supply chain trading partners in planning, forecasting and inventory replenishment cooperation among supply chain trading partners in planning coordination of activities Requires partners to agree on common goals (goal sharing)

CPFR Process Internet-based exchange of data and information
Significant decrease in inventory levels and more efficient logistics Companies focus on core competencies Eliminates typical order processig

CPFR Results Nabisco and Wegmans 50% increase in category sales
Wal-mart and Sara Lee 14% reduction in store-level inventory 32% increase in sales Kimberly-Clark and Kmart Increased category sales that exceeded market growth

Strategic Partnering Two or more business organizations that have complementary products or services join so that each may realize a strategic benefit

Order Fulfillment

Order Fulfillment Order fulfillment
The process involved in responding to customer orders Often a function of the degree of customization required Common approaches Engineer-to-order (ETO) Make-to-order (MTO) Assemble-to-order (ATO) Make-to-stock (MTS)

Figure 7.5 Order Fulfillment at Amazon.com

Distribution System Design

Distribution System Encompasses all of the distribution channels, processes and functions, including warehousing and transportation, that a product passes through on its way to the final customer.

Logistics

Logistics Refers to the movement of materials, services, cash and information in a supply chain. Includes: movement within a facility, incoming and outgoing shipments of goods and materials (traffic management) decisions on shipping methods and time information flow throughout the supply chain (RFID to track goods)

Logistics Management - Includes and Integrates all materials functions
Purchasing Inventory management Production control Management of inbound outbound transportation, material handling Warehousing and stores Order fulfillment and distribution Incoming quality control Objective: Efficient, low cost operations

Materials Movement Within a Facility

Incoming and Outgoing Shipments
Traffic management Overseeing the shipment of incoming and outgoing goods Handles schedules and decisions on shipping method and times, taking into account: Costs of shipping alternatives Government regulations Needs of the organization Shipping delays or disruptions

Distribution The actual movement of products and materials between locations Handling of materials and products at receiving docks, storing products, packaging, and shipping Often called logistics Driving force today is speed Particularly important for Internet dot-coms

Transportation The movement of products and materials from one location to another as it makes its way to the end-use customer Important element, often overlooked Common methods are railroads, trucking, water, air, intermodal, package carriers, and pipelines

Evaluating Shipping Alternatives
Considerations include: Shipping costs Availabilitiy Materials being shipped Coordination of shipments with other SC activities Flexibility Speed Environmental considerations

Distribution Centers and Warehousing
Trend is for more frequent orders in smaller quantities Flow-through facilities and automated material handling Final assembly and product configuration may be done at the DC

Warehouse Management Systems
Highly automated systems Controls item putaway, picking, packing, and shipping Cross-docking: Goods arriving at a warehouse from a supplier are unloaded from the supplier’s truck and loaded onto outbound trucks Avoids warehouse storage

Third-Party Logistics
The term used to describe the outsourcing of logistics management. Includes warehousing and distribution

Reverse Logistics Reverse logistics – the backward flow of goods returned to the supply chain (the process of transporting returned items) Products are returned to companies or third party handlers for a variety of reasons (Defective products,recalled products,obsolete products, unsold products, parts replaced in the field, items for recycling, waste) and in a variety of conditions Processing returned goods Sorting, examining/testing, restocking, repairing Reconditioning, recycling, disposing Elements of return management Gatekeeping – screening returned goods to prevent incorrect acceptance of goods Avoidance – finding ways to minimize the number of items that are returned

Global Supply Chain Management

Global Supply Chains Product design often uses inputs from around the world Some manufacturing and service activities are outsourced to countries where labor and/or materials costs are lower Products are sold globally

Complexities of Global Supply Chains
National and regional differences Language and cultural differences Currency fluctuations Political instability Quality issues Customs, business practices, Nonhomogeneoity of foreign markets Financial and economic considerations Governmental, environmental and regulatory considerations. Increased transportation costs and lead time Increased need for trust amongst supply chain partners Local capabilities Inadequate transportation and communication infrastructures

Infrastructure Obstacles to Global Trade
Some emerging markets lack suitable distribution systems, i.e. roads, rail systems Existing roads and ports may be inadequate Market instability, political instability Vertical integration is a common solution

Global Supply-Chain Issues
Supply chains in a global environment must be: Flexible enough to react to sudden changes in parts availability, distribution, or shipping channels, import duties, and currency rates Able to use the latest computer and transmission technologies to schedule and manage the shipment of parts in and finished products out Staffed with local specialists to handle duties, trade, freight, customs and political issues

Challanges within a Supply Chain

Challenges to Optimizing SCs
Barriers to integration of organizations Getting top management on board Small businesses Variability and uncertainty Long lead times Dealing with trade-offs

Trade-offs in SCM Lot-size-inventory (bullwhip)
Inventory-transportation costs Cross-docking Lead time-transportation costs Product variety-inventory Delayed differentiation Cost-customer service Disintermediation

Trade-Offs Lot-size-inventory trade-off Inventory-transportation costs
Large lot sizes yield benefits in terms of quantity discounts and lower annual setup costs, but it increases the amount of safety stock (and inventory carrying costs) carried by suppliers Inventory-transportation costs Suppliers prefer to ship full truckloads instead of partial loads to spread shipping costs over as many units as possible. This leads to greater holding costs for customers Cross-docking A technique whereby goods arriving at a warehouse from a supplier are unloaded from the suppliers truck and loaded onto outbound truck, thereby avoiding warehouse storage

Trade-Offs Lead time-transportation costs Product variety-inventory
Suppliers like to ship in full loads, but waiting for sufficient orders and/or production to achieve a full load may increase lead time Product variety-inventory Greater product variety usually means smaller lot sizes and higher setup costs, as well as higher transportation and inventory management costs Delayed differentiation (a technique to increase SC efficiency) Production of standard components and subassemblies which are held until late in the process to add differentiating features

Trade-Offs Cost-customer service
Producing and shipping in large lots reduces costs, but increases lead time Disintermediation (a technique to increase SC efficiency) Reducing one or more steps in a supply chain by cutting out one or more intermediaries Drop Shipping Shipping directly from the supplier to the end consumer, rather than from the seller, saving both time and reshipping costs

Techniques to Increase SC Efficiency

Techniques to Increase SC Efficiency
Delayed differentiation Postponing the tasks of differentiating a product for a specific customer until the latest possible point in the supply-chain network. Production of standard components and subassemblies, which are held until late in the process to add differentiating features Channel assembly (sending distributors the individual components and modules rather than finished goods) Disintermediation Reducing one or more steps in a supply chain by cutting out one or more intermediaries + Cross Docking + Drop Shipping

Other Techniques to Increase SC Efficiency
Outsourcing Blanket orders (a long-term purchase commitment to a supplier for items that are to be delivered against short-term releases to ship Drop Shipping and Special Packaging – supplier will ship to end consumer rather than to seller Vendor managed inventory systems The use of a local supplier to maintain inventory for the manufacturer. Electronic ordering and funds transfer (paperless ordering, payment by wire) Internet purchasing (e-procurement)

Potential Solutions to SC Problems
Improvement Benefits Possible Drawbacks Large inventories Smaller, more frequent deliveries Reduced holding costs Traffic congestion Increased costs Long lead times Delayed differentiation Disintermediation Quick response May not be feasible May need absorb functions Large number of parts Modular Fewer parts Simpler ordering Less variety Cost Quality Outsourcing Reduced cost, higher quality Loss of control Variability Shorter lead times, better forecasts Able to match supply and demand

Critical Issues in SCM Increased strategic importance
Emphasis on cost, quality,agility and customer service Technology management Increased conversion to lean production Just-in-time deliveries Few suppliers and vendor integration Increased outsourcing Globalization

Supply-Chain Performance Compared
Typical Firms Benchmark Firms Administrative costs as percent of purchases 3.3% 0.8% Lead time (weeks) 15 8 Time spent in placing order 42 minutes 15 minutes Percentage of late deliveries 33% 2% Percentage of rejected material 1.5% .0001% Number of shortages per year 400 4

Supply Chain Management

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