1. Chapter 10 Supply-Chain Strategy
Supply-Chain Management Defined?
Measuring Supply-Chain Performance
Bullwhip Effect
Outsourcing Defined
Value Density Defined
Mass Customization Defined

2. What is Supply-Chain Management? Defined
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. Supply Chain Mat'l Flow Credit Flow Supplier Mfg. Retailer Consumer
VISA
VISA
Mat'l Flow
Credit Flow
Supplier
Mfg.
Retailer
Consumer
Supplier
Wholesaler
Retailer
Order
Cash
Schedules
Flow
Flow

4. Supply Chain Model Suppliers Plants Retail DC Store Plant DC
Wholesaler
September 22, 1999
Racine

5. Quaker and HyVee Push vs. Pull

6. Quaker and HyVee Push vs. Pull
Tighter linkage between Quaker and HyVee means:
HyVee:
Quaker: Þ

7. Align Supply Chain Capability With Business Strategy
Supply Chain Role:
Supply Chain Measure:

8. Balancing Supply Chain Capability with Customer Demands
Information
Supply Chain
Capability
Customer
Requirements
Increased
Costs
Overtime
Expediting
Increased Inventory
Increased Demand:
Marketing programs
Promotions
Customer
Requirements
Supply Chain
Capability
Market Demand,New Products, Promotions
Suppliers, Manufacturers, Distributors, Carriers
Information

9. Formulas for Measuring Internal Supply-Chain Performance
Inventory Turnover =

10. 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?

11. 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.

12. Common practice is to measure within a function:
Supply Chain Measures
Common practice is to measure within a function:
Supplier
Plant
Distribution
Customer
Center

13. Measure Across Supply Chain Nodes
The correct method is to measure across a node:

14. 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

15. Bullwhip Effect
The magnification of variability in orders in the supply-chain.

16. What is the Bullwhip Effect?

17. The Bullwhip Effect – Cont’d

18. Causes of the Bullwhip Effect
Price fluctuations
Periodic order policies
Rational/shortage gaming
Production schedules

19. What is Outsourcing? Defined

20. Reasons to Outsource Organizationally-driven - Improvement-driven -
Financially-driven -
Revenue-driven -
Cost-driven -
Employee-driven -

21. When outsourcing (or whenever working with suppliers)
Confrontation
Low-Bid
Traditional
Partnership

22. Outsourcing
Under what conditions would you not want to outsource?

23. 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.

24. Consumer Supply Chain Logistics Reverse Logistics Supplier
Manufacturer
Supplier’s
Supplier
Wholesaler/
Distributor
Consumer
Retailer

25. 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.

26. 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.