1. 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 value chains

2. Supply-Chain Management Defined
Supply-chain is a term that describes how organizations (suppliers, manufacturers, distributors, and customers) are linked together.
Supply-chain management is 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 customer. 4

3. Supply Chain Management (SCM)
Definition: Philosophy that describes how organizations should manage their various supply chains to achieve strategic advantage

4. Supply Chain Management (SCM)
Objective: Synchronize requirements of the final customer with flow of materials and information along the supply chain to reach a balance between high customer satisfaction/service and cost.

5. The Supply Chain Information Supplier Network Manufacturing Unit
External
Suppliers
Internal
Information
Supplier Network
Manufacturing Unit
Distribution
Center
Retailer
Transformation Processes
Raw Material
& Component
Inventories
Work-in-
Process
Finished
Goods
Customer Network
U l t i m a t e
C u s t o m e r s

6. Facilities Warehouses Factories Processing centers
Distribution centers
Retail outlets
Offices

7. Functions and Activities
Forecasting
Purchasing
Inventory management
Information management
Quality assurance
Scheduling
Production and delivery
Customer service

8. Typical Supply Chains Purchasing Receiving Storage Operations
Production
Distribution

9. Typical Supply Chain for a Manufacturer
Figure 11.1a
Supplier
Storage }
Mfg.
Dist.
Retailer
Customer

10. Typical Supply Chain for a Service
Figure 11.1b
Supplier }
Storage
Service
Customer

11. 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

12. Bullwhip Effect Figure 16.3 Demand Initial Supplier Final Customer
Inventory oscillations become progressively larger looking backward through the supply chain

13. 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

14. 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

15. Global Supply Chains Increasing more complex Language Culture
Currency fluctuations
Political
Transportation costs
Local capabilities
Finance and economics
Environmental

16. Elements of Supply Chain Management
Table 11.1
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

17. 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

18. Logistics
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

19. Logistics Movement within the facility Incoming and outgoing shipments
Bar coding
EDI
Distribution
JIT Deliveries

20. Materials Movement Figure 11.4 Work center Work center Storage
RECEIVING
Storage
Work
center
Work center
Shipping

21. Distribution Requirements Planning
Distribution requirements planning (DRP) is a system for inventory management and distribution planning
Extends the concepts of MRPII

22. Uses of DRP Management uses DRP to plan and coordinate: Transportation
Warehousing
Workers
Equipment
Financial flows

23. E-Business
E-Business: the use of electronic technology to facilitate business transactions
Applications include
Internet buying and selling
Order and shipment tracking
Electronic data interchange

24. Advantages E-Business
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

25. Disadvantages of E-Business
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

26. 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

27. 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

28. 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

29. SCOR Metrics Table 11.4 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

30. 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

31. Creating an Effective Supply Chain
Develop strategic objectives and tactics
Integrate and coordinate activities in the internal supply chain
Coordinate activities with suppliers with customers
Coordinate planning and execution across the supply chain
Form strategic partnerships

32. Supply Chain Performance Drivers
Quality
Cost
Flexibility
Velocity
Customer service

33. Velocity Inventory velocity Information 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

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

35. Trade-offs Lot-size-inventory Inventory-transportation costs
Bullwhip effect
Inventory-transportation costs
Cross-docking
Lead time-transportation costs
Product variety-inventory
Delayed differentiation
Cost-customer service
Disintermediation

36. Trade-offs Bullwhip effect Cross-docking
Inventories are progressively larger moving backward through the supply chain
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

37. Trade-offs Delayed differentiation Disintermediation
Production of standard components and subassemblies, which are held until late in the process to add differentiating features
Disintermediation
Reducing one or more steps in a supply chain by cutting out one or more intermediaries

38. 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

39. Supply Chain Benefits and Drawbacks
Table 11.5
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 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