Supply-Chain Design Chapter 9 This presentation covers the material in Chapter 9 - Supply-Chain Design. The graphic is based on Figure 9.5. To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

External Value-Chain Linkages First-Tier Supplier Service/Product Provider Support Processes Supplier Relationship Process New Service/ Product Development Process Order-Fulfillment Process Business-to-Business (B2B) Customer Relationship Process External Suppliers External Customers Figure 9.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Supply Chain for a Florist Home customers Commercial Florist FedEx delivery service Packaging Local delivery service Flowers – local/ international Arrangement materials Internet services Maintenance services Required for facilitating goods Required for explicit services Required for supporting facilities Required for implicit services Figure 9.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Creation of Inventory Input flow of materials Inventory level But some may be scrap. Output flow of materials Scrap flow Figure 9.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Inventory at Different Stocking Points Supplier Manufacturing plant Distribution center Retailer Raw materials Work in process Finished goods Figure 9.4 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Supply Chain Figure 9.5 Customer Distribution center Manufacturer Tier 1 Tier 2 Supplier of materials Supplier of services Tier 3 Legend Figure 9.5 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Supply Chain Dynamics for Facial Tissue Time Order Quantity 9,000 – 7,000 – 5,000 – 3,000 – 0 – Package supplier’s weekly orders to cardboard supplier Consumers’ daily demand Retailers’ daily orders to manufacturer Manufacturer’s weekly orders to package supplier Figure 9.6 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Materials Management Figure 9.7 Egg supplier Sugar supplier Flour supplier Chocolate chips supplier Maintenance services supplier Purchasing domain of responsibility The first slide presents the basic inputs to the bakery process and the area of the organization primarily responsible for acquisition and control of these inputs. To improve legibility, this portion of the Figure is expanded. Figure 9.7 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Materials Management FG storage Transformation process and WIP storage RM storage Transformation process and WIP storage Egg supplier Sugar supplier Flour supplier Chocolate chips supplier Maintenance services supplier Purchasing domain of responsibility The next slide shows the basic transformation process. To improve legibility, this portion of the Figure is expanded. Figure 9.7 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Materials Management Production domain of responsibility Figure 9.7 Egg supplier Sugar supplier Flour supplier Chocolate chips supplier Maintenance services supplier Purchasing domain of responsibility FG storage RM storage Transformation process and WIP storage The production control domain is added to the Figure. To improve legibility, this portion of the Figure is expanded. Figure 9.7 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Materials Management Figure 9.7 Production domain of responsibility Egg supplier Sugar supplier Flour supplier Chocolate chips supplier Maintenance services supplier Purchasing domain of responsibility FG storage RM storage Transformation process and WIP storage This portion of the Figure is reduced and placed in the proper position on the slide. This slide advances automatically. Figure 9.7 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Materials Management Figure 9.7 Supermarket A distribution center Supermarket B Transportation services supplier Distribution domain of responsibility Egg supplier Sugar supplier Flour supplier Chocolate chips supplier Maintenance services supplier Purchasing domain of responsibility FG storage RM storage Transformation process and WIP storage Production domain of responsibility The final series shows the output and distribution flow and domain. To improve legibility, this portion of the Figure is expanded. Figure 9.7 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Materials Management Figure 9.7 Egg supplier Sugar supplier Flour supplier Chocolate chips supplier Maintenance services supplier Purchasing domain of responsibility Supermarket A distribution center Supermarket B Transportation services supplier Distribution domain of responsibility FG storage RM storage Transformation process and WIP storage Production domain of responsibility This portion of the Figure is reduced and placed in the proper position on the slide. Figure 9.7 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Inventory Measures Average inventory = $2 million Cost of goods sold = $10 million 52 business weeks per year Weeks of supply = = 10.4 weeks $2 million ($10 million)/(52 weeks) Inventory turns = = 5 turns/year $10 million $2 million Example 9.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Inventory Measures Figure 9.8 This slide shows Figure 11.7, the Solver output from OM Explorer. Figure 9.8 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Supply-Chain Process Measures TABLE 9.1 SUPPLY–CHAIN PROCESS MEASURES Percent of orders taken accurately Time to complete the order placement process Customer satisfaction with the order placement process Customer Relationship Percent of incomplete orders shipped Percent of orders shipped on time Time to fulfill the order Percent of botched services or returned items Cost to produce the service or item Customer satisfaction with the order fulfillment process Order Fulfillment Percent of suppliers’ deliveries on time Suppliers’ lead times Percent defects in services and purchased materials Cost of services and purchased materials Supplier Relationship This side presents the process measures for Purchasing. To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Supply-Chain Environments TABLE 9.2 ENVIRONMENTS BEST SUITED FOR EFFICIENT AND RESPONSIVE SUPPLY CHAINS Factor Efficient Supply Chains Responsive Supply Chains Demand Predictable, low Unpredictable, high forecast errors forecast errors Competitive Low cost, consistent Development speed, fast priorities quality, on-time delivery times, delivery customization, volume flexibility, variety, top quality New-service/ Infrequent Frequent product introduction Contribution Low High margins Product variety Low High This slide shows the characteristics of responsive organizations for the basic factors. To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Supply-Chain Design TABLE 9.3 DESIGN FEATURES FOR EFFICIENT AND RESPONSIVE SUPPLY CHAINS Factor Efficient Supply Chains Responsive Supply Chains Operation Make-to-stock or Assemble-to-order, make- strategy standardized services; to-order, or customized emphasize high services; emphasize volume, standardized service or product services or products variety Capacity Low High cushion Inventory Low, enable high As needed to enable fast investment inventory turns delivery time This slide presents design elements for responsive organizations. Lead time Shorten, but do not Shorten aggressively increase costs Supplier Emphasize low prices, Emphasize fast delivery selection consistent quality, on- time, customization, time delivery variety, volume flexibility, top quality To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Pepperidge Farm SCM System © Order Commitment Transportation Management Purchasing Management Demand Management Vendor-Managed Inventory Replenishment Planning Configuration Material Planning Scheduling Master Planning Strategic Planning To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.