Supply Chain Management Chapter 7 Supply Chain Management

Supply Chain All activities associated with the flow and transformation of goods and services from raw materials to the end user, the customer A sequence of business activities from suppliers through customers that provide the products, services, and information to achieve customer satisfaction 2000 by Prentice-Hall, Inc

The Supply Chain Information Cash Figure 7.1 Customers Suppliers Products and Services Customers Total satisfaction with quality, price, delivery, and service Distributors Package and delivery Inventory Producers Finished goods, end products and services Suppliers Materials, parts, sub-assemblies, and services Figure 7.1 2000 by Prentice-Hall, Inc

Supply Chain Management Synchronization of activities required to achieve maximum competitive benefits Coordination, cooperation, and communication Rapid flow of information Vertical integration 2000 by Prentice-Hall, Inc

Supply Chain Uncertainty Forecasting, lead times, batch ordering, price fluctuations, and inflated orders contribute to variability Inventory is a form of insurance Distorted information is one of the main causes of uncertainty 2000 by Prentice-Hall, Inc

Information in the Supply Chain Centralized coordination of information flows Integration of transportation, distribution, ordering, and production Direct access to domestic and global transportation and distribution channels Locating and tracking the movement of every item in the supply chain 2000 by Prentice-Hall, Inc

Information in the Supply Chain Consolidation of purchasing from all suppliers Intercompany and intracompany information access Data interchange Data acquisition at the point of origin and point of sale Instantaneous updating of inventory levels 2000 by Prentice-Hall, Inc

Electronic Business Replacement of physical processes with electronic ones Cost and price reductions Reduction or elimination of intermediaries Shortening transaction times for ordering and delivery Wider presence and increased visibility 2000 by Prentice-Hall, Inc

Electronic Business Greater choices and more information for customers Improved service Collection and analysis of customer data and preferences Virtual companies with lower prices Leveling the playing field for smaller companies Gain global access to markets & customers 2000 by Prentice-Hall, Inc

Table 7.1 Supply Chain Evolution at Nabisco 2000 by Prentice-Hall, Inc

Electronic Data Interchange Computer-to-computer exchange of business documents in a standard format Quick access, better customer service, less paperwork, better communication, increased productivity, improved tracing and expediting, improves billing and cost efficiency 2000 by Prentice-Hall, Inc

Bar Codes Computer readable codes attached to items flowing through the supply chain Generates point-of-sale data which is useful for determining sales trends, ordering, production scheduling, and deliver plans 1234 5678 2000 by Prentice-Hall, Inc

The Internet Instant global access to organizations, individuals, and information sources Fundamentally changes the way organizations do business Removed geographic barriers Adds speed and accessibility to the supply chain 2000 by Prentice-Hall, Inc

Figure 7.2 Build-to-Order Cars over the Internet 2000 by Prentice-Hall, Inc

The E-Automotive Supply Chain SUPPLY CHAIN PROCESS AUTOMOTIVE PAST E-AUTOMOTIVE Customer sales Push—sell from inventory Pull—Build-to-order Production Goal of even and stable production Focus on customer demand, respond with supply chain flexibility Distribution Mass approach Fast, reliable, and customized to get cars to specific customer location Customer relationships Dealer-owned Shared by dealers and manufacturers Managing uncertainty Large car inventory at dealers Small inventories with shared information and strategically placed parts inventories Procurement Batch-oriented; dealers order based on allocations Orders made in real time based on available-to-promise information Product design Complex products don’t match customer needs Simplified products based on better information about what customers want Table 7.2 2000 by Prentice-Hall, Inc

Intranets and Extranets Intranets are internet-like networks that operate within a single organization Extranets are intranets that can be connected to the global internet Difference is in who has access to the system 2000 by Prentice-Hall, Inc

IT Issues Increased benefits and sophistication come with increased costs Efficient web sites do not necessarily mean the rest of the supply chain will be as efficient Security problems are very real Partnership and trust are important elements that may be new to business relationships 2000 by Prentice-Hall, Inc

Suppliers Purchased materials account for about half of manufacturing costs Materials, parts, and service must be delivered on time, of high quality, and low cost Suppliers should be integrated into their customers’ supply chains Partnerships should be established On-demand delivery (JIT) is a frequent requirement 2000 by Prentice-Hall, Inc

Sourcing Relationship between customers and suppliers focuses on collaboration and cooperation Outsourcing has become a long-term strategic decision Organizations focus on core competencies Single-sourcing is increasingly a part of supplier relations 2000 by Prentice-Hall, Inc

E-Procurement Business-to-business commerce conducted on the Internet Benefits include lower transaction costs, lower prices, reduce clerical labor costs, and faster ordering and delivery times Currently used more for indirect goods E-Marketplaces service industry-specific companies and suppliers 2000 by Prentice-Hall, Inc

Figure 7.3 The Wal-Mart Supply Chain 2000 by Prentice-Hall, Inc

Figure 7.4 Centralized Supply at Honda America 2000 by Prentice-Hall, Inc

Distribution The actual movement of products and materials between locations Handling of materials and products at receiving docks, storing products, packaging, and shipping Often called logistics Driving force today is speed Particularly important for Internet dot-coms 2000 by Prentice-Hall, Inc

Figure 7.5 Order Fulfillment at Amazon.com 2000 by Prentice-Hall, Inc

Distribution Centers and Warehousing DCs are some of the largest business facilities in the United States Trend is for more frequent orders in smaller quantities Flow-through facilities and automated material handling Final assembly and product configuration may be done at the DC 2000 by Prentice-Hall, Inc

Warehouse Management Systems Highly automated systems Controls item putaway, picking, packing, and shipping Transportation management, order management, yard management, labor management, warehouse optimization 2000 by Prentice-Hall, Inc

Figure 7.6 A WMS 2000 by Prentice-Hall, Inc

Vendor-Managed Inventory Manufacturers generate orders, not distributors Stocking information is accessed using EDI A first step towards supply chain collaboration Increased speed, reduced errors, and improved service 2000 by Prentice-Hall, Inc

Collaborative Distribution and Outsourcing Collaborative planning, forecasting, and replenishment (CPFR) Internet-based exchange of data and information Significant decrease in inventory levels and more efficient logistics Companies focus on core competencies 2000 by Prentice-Hall, Inc

Transportation Important element, often overlooked Common methods are railroads, trucking, water, air, intermodal, package carriers, and pipelines 2000 by Prentice-Hall, Inc

Railroads 150,000 miles in US Low cost, high-volume Improving flexibility intermodal service double stacking 2000 by Prentice-Hall, Inc

Trucking Most used mode in US Flexible, small loads Consolidation, Internet load match sites Part of TQM supplier-customer relationship Single sourcing reduces number of trucking firms serving a company 2000 by Prentice-Hall, Inc

Air Rapidly growing segment of transportation industry Lightweight, small items Quick, reliable, expensive Major airlines and US Postal Service, UPS, FedEx, DHL 2000 by Prentice-Hall, Inc

Package Carriers FedEx, UPS, US Postal Service, DHL Significant growth driven by e-businesses Use several modes of transportation Expensive Fast and reliable Innovative use of technologies 2000 by Prentice-Hall, Inc

Intermodal Combination of several modes of transportation Most common are truck/rail/truck and truck/water/rail/truck Enabled by the use of containers 2000 by Prentice-Hall, Inc

Water One of oldest means of transport Low-cost, high-volume, slow Bulky, heavy and/or large items Standardized shipping containers improve service The most common form of international shipping 2000 by Prentice-Hall, Inc

Pipelines Primarily for oil & refined oil products Slurry lines carry coal or kaolin High capital investment Low operating costs Can cross difficult terrain 2000 by Prentice-Hall, Inc

Internet Transportation Exchanges Bring together shippers and carriers Initial contact, negotiations, auctions Typically only one form of transportation, intermodal exchanges have been difficult to develop 2000 by Prentice-Hall, Inc

Global Supply Chain Free trade & global opportunities Nations form trading groups No tariffs or duties Freely transport goods across borders 2000 by Prentice-Hall, Inc

Global Supply Chain Problems National and regional differences Customs, business practices, and regulations Foreign markets are not homogeneous Quality can be a major issue 2000 by Prentice-Hall, Inc

Duties and Tariffs Proliferation of trade agreements Group members charge uniform tariffs Member nations have a competitive advantage within the group 2000 by Prentice-Hall, Inc

Duties and Tariffs Figure 7.9 APEC NAFTA TAFTA FTAA ASEAN CALM ATPA ANZCERTA FTAA NAFTA CALM ATPA MERCOSUR TAFTA Figure 7.9 2000 by Prentice-Hall, Inc

Landed Cost and Internet-Based ITL Systems Knowing landed cost is critical in international trade Common components are transportation charges, tariffs, duties, and taxes ITL systems convert language and currency between trading partners 2000 by Prentice-Hall, Inc

Infrastructure Obstacles to Global Trade Some emerging markets lack suitable distribution systems, i.e. roads, rail systems Existing roads and ports may be inadequate Market instability, political instability Vertical integration is a common solution 2000 by Prentice-Hall, Inc