1. Supply Chain Management Strategy and Design
Chapter 10
Supply Chain Management Strategy and Design
Russell and Taylor
Operations and Supply Chain Management, 8th Edition

2. © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

3. © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

4. © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

5. © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

6. © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

7. Lecture Outline Supply Chains The Management of Supply Chains
Green Supply Chains
Information Technology: A Supply Chain Enabler
Supply Chain Integration
Supply Chain Management (SCM) Software
Measuring Supply Chain Performance
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

8. Learning Objectives
Describe the key characteristics and management strategies of the modern supply chain
Discuss sustainable supply chain practices and the impact of the environment on supply chain decisions
Describe the role of information technology in supply chains, and the need for supply chain integration
Present the SCOR model and calculate key performance indicators for monitoring supply chain performance
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

9. Supply Chains
The facilities, functions, and activities involved in producing and delivering a product or service from suppliers to customers
An integrated group of processes to “source,” “make,” and “deliver” products
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

10. The Supply Chain
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

11. Supply Chain for Denim Jeans
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

12. Supply Chain for Denim Jeans
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

13. Supply Chain Processes
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

14. Supply Chain for Service Providers
More difficult than manufacturing
Does not focus on the flow of physical goods
Focuses on human resources and support services
More compact and less extended
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

15. Value Chains Value chain Demand-driven value chain
Broader than supply chain
Customer management
New product innovation
Post-sales support
Change management
Demand-driven value chain
Supply management
Demand management
Product management
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

16. Supply Chain Management (SCM)
Managing flow of information through supply chain in order to attain the level of synchronization that will make it more responsive to customer needs while lowering costs
Keys to effective SCM
information
communication
cooperation
trust
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

17. Supply Chain Uncertainty and Inventory
A major objective of SCM:
respond to uncertainty in customer demand without creating costly excess inventory
Negative effects of uncertainty
lateness
incomplete orders
Inventory
insurance against supply chain uncertainty
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

18. Supply Chain Uncertainty and Inventory
Factors that contribute to uncertainty
inaccurate demand forecasting
long variable lead times
late deliveries
incomplete shipments
product changes
batch ordering
price fluctuations and discounts
inflated orders
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

19. Bullwhip Effect
Occurs when slight demand variability is magnified as information moves back upstream
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

20. Risk Management
Formal process for coping with supply chain uncertainty
Evaluate and anticipate likelihood of supply chain disruptions
Plan for possible disruptions
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

21. Risk Pooling
Risks are aggregated to reduce the impact of individual risks
Combine inventories from multiple locations into one
Reduce parts and product variability, thereby reducing the number of product components
Create flexible capacity
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

22. Supply Chain Sustainability
“Going green”
Meeting present needs without compromising the ability of future generations to meet their needs
Sustaining human and social resources
It can be cost effective and profitable
Can provide impetus for product and process innovations
Impetus comes from downstream in the supply chain and moves upstream to suppliers
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

23. Sustainability and Quality Management
Reducing waste through quality programs helps achieve sustainability goals
Improving fuel efficiency of vehicles
Telecommuting
Eco-friendly packing materials
Energy-efficient facilities
Changing thermostat settings
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

24. Information Technology: A Supply Chain Enabler
Information links all aspects of supply chain
E-business
replacement of physical business processes with electronic ones
Electronic data interchange (EDI)
a computer-to-computer exchange of business documents
Bar code and point-of-sale
data creates an instantaneous computer record of a sale
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

25. IT: Supply Chain Enabler
Radio frequency identification (RFID)
technology can send product data from an item to a reader via radio waves
Internet
allows companies to communicate with suppliers, customers, shippers and other businesses around the world instantaneously
Build-to-order (BTO)
direct-sell-to-customers model via the Internet; extensive communication with suppliers and customer
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

26. Supply Chain Enablers
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

27. E-Business & Supply Chain Management
Savings due to lower transaction costs
Reduction of intermediary roles
Shorter supply chain response times
Wider presence and increased visibility
Greater choices & more info for customers
Improved service
Collection & analysis of huge amounts of customer data & preferences
Access to global markets, suppliers & distribution channels
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

28. Electronic Data Interchange
Computer-to-computer exchange of documents in a standard format
Purchasing, shipping and receiving
Improve customer service
Reduce paperwork
Increase productivity
Improve billing and cost efficiency
Reduce bullwhip effect through information sharing
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

29. Bar Codes Automated data collection system
Bar code contains identifying information
Provide instantaneous tracking information
Checkout scanners create point-of-sale data
Update inventory records
Identify trends
Order material
Schedule orders
Plan deliveries
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

30. Radio Frequency Identification (RFID)
Use radio waves to transfer data from chip to a reader
Provides complete visibility of product location
Continuous inventory monitoring
Reduce labor to manage inventory
Reduce inventory costs
RFID is not standardized yet
Difficult to track between systems
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

31. RFID Capabilities
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32. RFID Capabilities
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33. Supply Chain Integration
Share information among supply chain members
Reduced bullwhip effect
Early problem detection
Faster response
Builds trust and confidence
Collaborative planning, forecasting, replenishment, and design
Lower costs (material, logistics, operating, etc.)
Higher capacity utilization
Improved customer service levels
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

34. Supply Chain Integration
Coordinated workflow, production and operations, procurement
Production efficiencies
Fast response
Improved service
Quicker to market
Adopt new business models and technologies
Penetration of new markets
Creation of new products
Improved efficiency
Mass customization
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

35. Collaborative Planning, Forecasting, and Replenishment (CPFR)
Two or more companies in a supply chain to synchronize their demand forecasts into a single plan to meet customer demand
Parties electronically exchange
past sales trends
point-of-sale data
on-hand inventory
scheduled promotions
forecasts
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

36. SCM Software Enterprise resource planning (ERP)
software that integrates the components of a company by sharing and organizing information and data
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

37. Measuring Supply Chain Performance
Key performance indicators
Metrics used to measure supply chain performance
Inventory turnover
Total value (at cost) of inventory
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

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39. Measuring Supply Chain Performance
Days of supply
Fill rate: fraction of orders filled by a distribution center within a specific time period
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

40. Computing Key Performance Indicators
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

41. Process Control and SCOR
not only for manufacturing operations
can be used in any processes of supply chain
Supply Chain Operations Reference (SCOR)
a cross industry supply chain diagnostic tool maintained by the Supply Chain Council
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

42. SCOR Model Processes
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43. SCOR Performance Metrics
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© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e