F O U R T H E D I T I O N Supply Chain Management © The McGraw-Hill Companies, Inc., 2003 chapter 13 DAVIS AQUILANO CHASE PowerPoint Presentation by Charlie Cook

Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., –2 Chapter Objectives Introduce the concept of a firm’s supply chain and show how it has evolved over time to its present status. Identify current trends that are affecting the characteristics of a supply chain. Present the requirements necessary for a successful supply chain. Discuss the impact of technology on a firm’s supply chain. Define in-transit inventory costs and show how they impact the purchasing decision.

Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., –3 Managerial Issues Concentration of resources on the firm’s core competencies such as supply chain management. Increasing proportion of purchased goods and services as inputs into products. Increased pressure to reduce inventories. Applying advances in information technology to strategically manage supplier relationships and the supply chain itself.

Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., –4 Definition of Supply Chain Management Supply Chain –The steps and the firms that perform these steps in the transformation of raw inputs into finished products bought by customers. Inbound Logistics –The delivery of goods and services that are purchased from suppliers and/or their distributors. Outbound Logistics –The delivery of goods and services that are sold to a firm’s customers and/or distributors.

Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., –5 A Company’s Supply Chain Exhibit 13.1

Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., –6 The Evolution of Supply Chain Management Exhibit 13.2a

Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., –7 The Evolution of Supply Chain Management Exhibit 13.2b

Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., –8 The Trend Toward Reducing the Number of Suppliers Exhibit 13.3

Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., –9 Key Terms Supplier-Managed Inventories –Inventories in a firm’s facility that are the responsibility of the supplier to maintain and to replenish as necessary. Consignment Inventories –Inventories that are physically present in a firm’s facility but that are still owned by the supplier. EDI (electronic data exchange) –Direct link between a manufacturer’s database and that of the vendor.

Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., –10 Key Terms (cont’d) Quick Response (QR) Programs –Just-in-time replenishment system using bar- code scanning and EDI. Efficient Customer Response (ECR) –Strategy for bringing distributors, suppliers, and grocers together using bar-code scanning and EDI.

Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., –11 Factors Impacting the Supply Chain Reduced Number of Suppliers Shorter Product Life Cycles Increased Competition Supply Chain Supplier- Managed Inventories Advances In Technology Contingent Inventories Shared or Reduced Risk

Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., –12 Requirements for Successful Supply Chain Successful Supply Chain Management TrustTrust Long-Term Relationships Information Sharing Individual Strengths

Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., –13 The Role of Logistics in The Supply Chain Partnering –Establishing a strategic alliance or partnership with a firm that specializes in transportation or logistics. –Using a logistics partner to store finished goods at the logistics partner’s hub or distribution center.

Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., –14 The Role of Logistics in The Supply Chain In-Transit Inventory Costs –Combination of transportation and carrying costs associated with delivery of raw materials and components that are inbound to the plant. Total annual (inbound) costs = Transportation costs + In-transit inventory carrying costs + Purchase costs TC=DM + (X/365)iDC + DC D=Annual demand M=Transportation cost per unit X=Transportation time in days i=Annual cost of capital C=Unit cost per item

Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., –15 The Trade-Off between Transportation Costs and the Cost of Capital with Respect to the Shipment of Products Exhibit 13.4

Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., –16 DisintermediationDisintermediation Disintermediation –The trend to reduce many of the steps in the supply chain by reducing the number of intermediaries in the chain. Cross-docking Direct-to-store shipments –JIT II ® : vendor and customer work closely together, eliminating many of the intermediate steps that now exist. Vendor representative located at facility Direct database linkage with vendor’s manufacturing facility.

Fundamentals of Operations Management 4e© The McGraw-Hill Companies, Inc., –17 Major SCM Software Packages Exhibit 13.5