Supply Chain Management Supply Chain Operational Reference (SCOR) Metrics PerspectiveMetrics 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 Agility to obtain competitiveness 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

Supply Chain Management CPFR  Collaborative Planning, Forecasting and Replenishment. 1.Focuses on information sharing among trading partners. 2.Forecasts can be frozen and then converted into a shipping plan. 3.Eliminates typical order processing.

Supply Chain Management CPFR Process Step 1 – Front-end agreement Step 2 – Joint business plan Steps 3-5 – Sales forecast Steps 6-8 – Order forecast collaboration Step 9 – Order generation/delivery execution

Supply Chain Management 1. Develop strategic objectives and tactics. 2. Integrate and coordinate activities in the internal supply chain. 3. Coordinate activities with suppliers with customers. 4. Coordinate planning and execution across the supply chain. 5. Form strategic partnerships. Creating an Effective Supply Chain

Supply Chain Management Supply Chain Performance Drivers 1. Quality 2. Cost 3. Flexibility 4. Velocity 5. Customer service

Supply Chain Management Velocity  Inventory velocity The rate at which inventory(material) goes through the supply chain.The rate at which inventory(material) goes through the supply chain.  Information velocity The rate at which information is communicated in a supply chain.The rate at which information is communicated in a supply chain.

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

Supply Chain Management 1. Cost-customer service DisintermediationDisintermediation 2. Lot-size-inventory Bullwhip effectBullwhip effect 3. Inventory-transportation costs Cross-dockingCross-docking 4. Lead time-transportation costs 5. Product variety-inventory Delayed differentiationDelayed differentiation Trade-offs

Supply Chain Management Trade-offs  Bullwhip effect Inventories are progressively larger moving backward through the supply chain.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.Goods arriving at a warehouse from a supplier are unloaded from the supplier’s truck and loaded onto outbound trucks. Avoids warehouse storage.Avoids warehouse storage.

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

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

Supply Chain Management Supply Chain Benefits and Drawbacks ProblemPotentialImprovementBenefitsPossibleDrawbacks 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 CostQualityOutsourcing Reduced cost, higher quality Loss of control Variability Shorter lead times, better forecasts Able to match supply and demand Less variety

Supply Chain Management  Ideas from suppliers could lead to improved competitiveness 1.Reduce cost of making the purchase 2.Increase Revenues 3.Enhance Performance Supplier Partnerships

Supply Chain Management Critical Issues  Technology management BenefitsBenefits RisksRisks  Strategic importance QualityQuality CostCost AgilityAgility Customer serviceCustomer service Competitive advantageCompetitive advantage

Supply Chain Management Operations Strategy  SCM creates value through changes in time, location and quantity.  SCM creates competitive advantage by integrating and streamlining the diverse range of activities that involve purchasing, internal inventory, transfers and physical distribution.