1. Supply Chain Management
Chapter 12
Supply Chain Management

2. Chapter 12 Supply Chain Management
A supply chain is the sequence of organizations - their facilities, functions, and activities - that are involved in producing and delivering a product or service.
Also referred to as a value chain
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3. Typical Supply Chain for a Manufacturer
Supplier
Storage
Mfg.
Dist.
Retailer
Customer
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4. Typical Supply Chain for a Service
Supplier }
Service
Storage
Customer
Supplier
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5. Customers are Suppliers
Initial
Supplier
Customer
Supplier
Customer
Supplier
Customer
Supplier
Final
Customer
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6. Need for Supply Chain Management
Improve operations
Increasing levels of outsourcing
Increasing transportation costs
Competitive pressures
Increasing globalization
Increasing importance of e-commerce
Complexity of supply chains
Manage inventories
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7. 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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8. Key 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
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9. Purchasing in Supply Chain Management
Increasing outsourcing
Increasing conversion to lean production and JIT requirements
Increasing globalization
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10. Chapter 12 Supply Chain Management
Supply Chain Issues
Strategic Issues
Tactical Issues
Operating Issues
Design of the supply chain Partnering
Inventory policies
Purchasing policies
Production policies
Transportation
policies
Quality policies
Quality control
Production planning and control
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11. SCOR Performance Measures
Perspective
Performance Measure
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
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12. Chapter 12 Supply Chain Management
Logistics
Logistics
The movement of materials and information within a facility and incoming and outgoing shipments of goods and materials
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13. Chapter 12 Supply Chain Management
Materials Movement
Figure 12-5
Work center
Work center
Work
center
Storage
Work
center
Storage
Storage
Customer
Supplier
Warehouse
Shipping
Receiving
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14. Chapter 12 Supply Chain Management
Traffic Management
Overseeing the shipment of incoming and outgoing materials and goods
Handles schedules and decisions on shipping method and times
Costs of alternatives
Regulations
Quantities and timing
Risk of delays
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15. Electronic Data Interchange (EDI)
Direct, computer-to-computer transmission of interorganizational transactions
Purchase orders
Shipping invoices
Debit or credit memos
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16. Chapter 12 Supply Chain Management
Reasons for Using EDI
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
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17. Chapter 12 Supply Chain Management
Quick Response
An application of EDI technology in the retail industry
Based on scanning bar codes at point-of-sale devices and transmitting information directly to vendors
Creates a JIT replenishment system keyed to customer buying patterns
Benefits
Reduced dependence on forecasts
Achieve better match between supply and demand
Savings of inventory carrying costs
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18. Distribution Requirements Planning (DRP)
A system for inventory management and distribution planning
Extends the concepts of material requirements planning (MRP) to multiechelon warehousing systems
Useful in planning and coordinating transportation, warehousing, workers, equipment, and financial flows
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19. Just-In-Time Deliveries
Suppliers are required to make frequent small deliveries on a precise schedule
Increases traffic into the customer firm
May be an increase in transportation cost per unit
Any disruption in the supply chain is felt very quickly throughout the chain
Some firm employ third-party logistics
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20. Chapter 12 Supply Chain Management
E-Commerce
The use of electronic technology to facilitate business transactions
Applications include
Internet buying and selling
Order and shipment tracking
EDI
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21. Advantages E-commerce
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
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22. Disadvantages of E-commerce
Customer expectations
Order quickly -> fast delivery
Order fulfillment
Order rate often exceeds ability to fulfill it
Inventory holding
Outsourcing loss of control
Internal holding costs
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23. Business-to-Business (B2B) Market Places
Buyer exchange (reverse auction)
MRO-catalog hub
Supplier exchange
Business process operations (BPO)
Neutral exchange
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24. Steps in Creating an Effective Supply Chain
Develop strategic objectives and tactics
Integrate and coordinate activities in the internal portions of the supply chain
Coordinate activities with suppliers and with customers
Coordinate planning and execution across supply chain
Consider strategic partnerships
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25. Supply Chain Performance Drivers
Quality
Cost
Flexibility
Velocity
material
information
Customer service
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26. Challenges in Designing and Operating a Supply Chain
Barriers to integration of separate organizations
Getting top management on board
Dealing with trade-offs
Small businesses
Variability and uncertainty
Long lead times
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27. Chapter 12 Supply Chain Management
Trade-offs (1 of 2)
Lot size-inventory
Bullwhip effect – inventories increase as you move backward through the supply chain
Inventory-transportation costs
Combine order to obtain full truckloads
Downsize truck capacity
Ship late in the process and cross-docking
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28. Chapter 12 Supply Chain Management
Trade-offs (2 of 2)
Lead time-transportation costs
Time required for supplier to produce truckload
Product variety-inventory
Delayed differentiation
Cost-customer service
Disintermediation - bypassing parts of the supply chain
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29. Chapter 12 Supply Chain Management
Bullwhip Effect
return
Tier 2
Suppliers
Tier 1
Producer
Distributor
Customers
Ordering
Amount of
inventory =
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30. Supply Chain Benefits and Drawbacks
Table 12-5
Problem
Potential
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 to absorb functions
Large number of parts
Modular design
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
Increased coordination
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