1 Slides used in class may be different from slides in student pack Chapter 10 Supply-Chain Strategy  Supply-Chain Management Defined?  Measuring Supply-Chain Performance  Bullwhip Effect  Outsourcing Defined  Value Density Defined  Mass Customization Defined

2 Slides used in class may be different from slides in student pack What is Supply-Chain Management? Defined  Supply-chain:  Supply-chain management is a total system approach to managing the entire flow of information, materials, and services from raw-material suppliers through factories and warehouses to the end customer.

3 Slides used in class may be different from slides in student pack Supply Chain Consumer Retailer Mfg. Mat'l Flow VISA ® Credit Flow Supplier Wholesaler Retailer Cash Flow Order Flow Schedules VISA ®

4 Slides used in class may be different from slides in student pack September 22, 1999 Racine Supply Chain Model Wholesaler SuppliersPlantsRetail DCStorePlant DC

5 Slides used in class may be different from slides in student pack Quaker and HyVee Push vs. Pull Push   Pull   

6 Slides used in class may be different from slides in student pack Quaker and HyVee Push vs. Pull Tighter linkage between Quaker and HyVee means: HyVee: Quaker: 

7 Slides used in class may be different from slides in student pack Align Supply Chain Capability With Business Strategy  Business Strategy: – –  Supply Chain Role: – –  Supply Chain Measure: – –

8 Slides used in class may be different from slides in student pack Balancing Supply Chain Capability with Customer Demands Information Supply Chain Capability Customer Requirements Increased Costs Overtime Expediting Increased Inventory Increased Demand: Marketing programs Promotions Supply Chain Capability Customer Requirements Information Market Demand,New Products, Promotions Suppliers, Manufacturers, Distributors, Carriers

9 Slides used in class may be different from slides in student pack Formulas for Measuring Internal Supply-Chain Performance  Inventory Turnover =

1010 Slides used in class may be different from slides in student pack Example of Measuring Internal Supply-Chain Performance  Suppose a company’s new annual report claims their costs of goods sold for the year is $160 million and their total average inventory (production materials + work-in- process) is worth $35 million. This company is used to having any inventory turn ratio of 10.  What is this year’s Inventory Turnover ratio? What does it mean?

1 Slides used in class may be different from slides in student pack Example of Measuring Supply-Chain Performance (Continued) Inventory Turnover = = = Without knowing the industry average of turns for this company it is not possible to comment on how they are competitively doing in the industry.

1212 Slides used in class may be different from slides in student pack Supply Chain Measures Common practice is to measure within a function: SupplierPlantDistribution Center Customer

1313 Slides used in class may be different from slides in student pack Measure Across Supply Chain Nodes The correct method is to measure across a node:

1414 Slides used in class may be different from slides in student pack Total Supply Chain Inventory  Sum of inventory on hand at each node of the supply chain  Supplier, Manufacturer, Distributor, Retailer  Measurement Timing: Weekly data collection

1515 Slides used in class may be different from slides in student pack Bullwhip Effect The magnification of variability in orders in the supply-chain.    

1616 Slides used in class may be different from slides in student pack What is the Bullwhip Effect? Variance in each customer’s orders * lots of customers = total variance for retailer Variance in each retailer’s orders * multiple retailers = total variance for wholesaler Variance in each wholesaler’s orders * multiple wholesalers = total variance for manufacturer

1717 Slides used in class may be different from slides in student pack The Bullwhip Effect – Cont’d

1818 Slides used in class may be different from slides in student pack Causes of the Bullwhip Effect –Price fluctuations –Periodic order policies –Rational/shortage gaming –Production schedules

1919 Slides used in class may be different from slides in student pack What is Outsourcing? Defined Outsourcing:

2020 Slides used in class may be different from slides in student pack Reasons to Outsource  Organizationally-driven -  Improvement-driven -  Financially-driven -  Revenue-driven -  Cost-driven -  Employee-driven -

2121 Slides used in class may be different from slides in student pack When outsourcing (or whenever working with suppliers) Confrontation Low-Bid Traditional Partnership

2 Slides used in class may be different from slides in student pack Outsourcing Under what conditions would you not want to outsource?

2323 Slides used in class may be different from slides in student pack Logistics  The process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirement.

2424 Slides used in class may be different from slides in student pack Consumer Supply Chain Supplier’s Supplier Manufacturer Wholesaler/ Distributor Retailer Consumer Logistics Reverse Logistics

2525 Slides used in class may be different from slides in student pack Value Density Defined  Value density: the value of an item per pound of weight.  It is used as an important measure when deciding where items should be stocked geographically and how they should be shipped. 

2626 Slides used in class may be different from slides in student pack Mass Customization Defined  Mass customization is a term used to describe the ability of a company to deliver highly customized products and services to different customers. 