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Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Business Plug-In B8 Supply Chain Management.

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Presentation on theme: "Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Business Plug-In B8 Supply Chain Management."— Presentation transcript:

1 Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Business Plug-In B8 Supply Chain Management

2 B8-2 LEARNING OUTCOMES 1.List and describe the four drivers of supply chain management. 2.Explain supply chain management strategies focused on efficiency. 3.Explain supply chain management strategies focused on effectiveness. 4.Summarize the future of supply chain management.

3 B8-3 INTRODUCTION Supply ChainConsists of all parties involved, directly or indirectly, in the procurement of a product or raw material Supply Chain Management (SCM)Involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability This plug-in takes a detailed look at how an organization can create a supply chain strategy focusing on efficiency and effectiveness

4 B8-4 SUPPLY CHAIN DRIVERS The four primary drivers of supply chain management: 1.Facilities 2.Inventory 3.Transportation 4.Information Organizations use these four drivers to support either a supply chain strategy focusing on efficiency or a supply chain strategy focusing on effectiveness

5 B8-5 FACILITIES DRIVER 1: LOCATION FacilityProcesses or transforms inventory into another product, or it stores the inventory before shipping it to the next facility Location EfficiencyCentralize the location to gain economies of scale, which increases efficiency Location EffectivenessDecentralize the locations to be closer to the customers, which increases effectiveness

6 B8-6 FACILITIES DRIVER 2: CAPACITY Capacity EfficiencyMinimal excess capacity with the ability to produce only what is required Capacity EffectivenessLarge amounts of excess capacity that can handle wide swings in demand

7 B8-7 FACILITIES DRIVER 3: OPERATIONAL DESIGN Operational Design EfficiencyProduct focus design allows the facility to become highly efficient at producing one single product, increasing efficiency Operational Design EffectivenessFunctional focus design allows the facility to perform a specific function on many different types of products, increasing effectiveness

8 B8-8 INVENTORY DRIVER 1: CYCLE INVENTORY Cycle InventoryThe average amount of inventory held to satisfy customer demands between inventory deliveries –Cycle Inventory EfficiencyHolding small amounts of inventory and receiving orders weekly or even daily –Cycle Inventory EffectivenessHolding large amounts of inventory and receiving inventory deliveries only once a month

9 B8-9 INVENTORY DRIVER 2: SAFETY INVENTORY Safety InventoryExtra inventory held in the event demand exceeds supply –Safety Inventory EfficiencyHolding small amounts of safety inventory –Safety Inventory EffectivenessHolding large amounts of safety inventory

10 B8-10 TRANSPORTATION DRIVER 1: METHOD OF TRANSPORTATION TransportationMoves inventories between the different stages in the supply chain Global Inventory Management System Provides the ability to locate, track, and predict the movement of every component or material anywhere upstream or downstream in the supply chain –Method of transportation efficiency –Method of transportation effectiveness

11 B8-11 TRANSPORTATION DRIVER 2: TRANSPORTATION ROUTE Transportation Planning Software Tracks and analyzes the movement of materials and products to ensure the delivery of materials and finished goods at the right time, the right place, and the lowest cost Distribution Management Software Coordinates the process of transporting materials from a manufacturer to distribution centers to the final customer –Transportation route efficiency –Transportation route effectiveness

12 B8-12 INFORMATION DRIVER 1: INFORMATION SHARING Information An organization must decide how and what information it wants to share with its supply chain partners Information Sharing Efficiency Freely share lots of information to increase the speed and decrease the costs of supply chain processing Information Sharing Effectiveness Share only selected information with certain individuals, which will decrease the speed and increase the costs of supply chain processing

13 B8-13 INFORMATION DRIVER 2: PUSH VS. PULL INFORMATON STRATEGY Pull Information Strategy (Efficiency)Supply chain partners are responsible for pulling all relevant information –Pull TechnologyPulls information Push Information Strategy Effectiveness Organization takes on the responsibility to push information out to its supply chain partners –Push TechnologySends information

14 B8-14 APPLYING A SUPPLY CHAIN DESIGN Wal-Marts supply chain management strategy emphasizes efficiency, but also maintains adequate levels of effectiveness –Facilities FocusEfficiency –Inventory FocusEfficiency –Transportation FocusEffectiveness –Information FocusEfficiency

15 B8-15 FUTURE TRENDS Just-in-time supplierConsumers purchasing products when they want, how they want, and at the price they want Radio Frequency Identification (RFID)Use active or passive tags in the form of chips or smart labels that can store unique identifiers and relay this information to electronic readers Integrating RFID and software –RFID tags are evolving


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