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Supply Chain Management

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Presentation on theme: "Supply Chain Management"— Presentation transcript:

1 Supply Chain Management
Chapter 10 pages Business Plug-In B8 pages Business Plug-In B21 pages (RFID) Managing the flows of information between all of the parties directly and indirectly involved in the procurement of a product or raw material.

2 Players in a Supply Chain
Materials flow from suppliers and their “upstream” suppliers at all levels down to you Transformation of materials into semi-finished and finished products through the organization’s own production process Distribution of products to customers and their “downstream” customers at all levels Anyone involved with a product, from the order being made until its delivery to the customer Traditional SCM thinking involved “I buy from my suppliers, I sell to my customers.” Today, organizations are quickly realizing the tremendous value they can gain from having visibility throughout their supply chain Knowing immediately what is transacting at the customer end of the supply chain, instead of waiting days or weeks for this information to flow upstream, allows the organization to react immediately Best Buy checks inventory levels at each of its 750 stores across North America as often as every half-hour Collecting, analyzing, and distributing transactional information to all relevant parties, SCM systems help all the different entities in the supply chain work together more effectively SCM has significantly improved companies’ forecasting abilities over the last few years Businesses today have access to modeling and simulation tools, algorithms, and applications that can combine information from multiple sources to build forecasts for days, weeks, and months in advance

3 Basic Supply Chain Management Components
Plan for managing all of the resources that go toward meeting customer demand for products and services. Select suppliers to deliver goods and services needed. Transform materials into semi-finished and finished products Logistics: the transportation of order to the customer. Plan for the return of defective products.

4 ITs role in supply chain
Visibility and the ability to see upstream and downstream in as close to real-time as possible. Modeling, simulation and various forecasting tools to combine information from various sources to figure out what is needed (or might be needed) when. Eliminating time lags allows everyone to react faster at a lower cost Communication and trust-relationships are CRUCIAL for a successful supply chain Key Element: Reliable information quickly flowing from one entity or stage to another one (both upstream and downstream) Organizations must know about customer events triggered downstream and so must an organization’s suppliers and their suppliers This visibility needs to be in real-time or as close to real-time as possible

5 Focus of Organizational Supply Chain Strategies
Efficiency: focus on performance Getting the most from each resource (optimize resources) Looks at throughput, speed, availability Throughput: the volume that can be sent through the system Effectiveness: focus on doing what is right Setting the right goals and objectives and making sure they get accomplished. Looks at customer satisfaction, conversion rates, sell-through increases Do things right and/or Do the right things How much of each do you do? Sometimes, you have to trade one for the other.

6 SUPPLY CHAIN DRIVERS Organizations use these four drivers to support either a supply chain strategy focusing on efficiency or a supply chain strategy focusing on effectiveness

7 Facilities Efficiency (saves money at expense of other things)
Economies of scale when facilities centralized. Saves money but further from customers and longer to deliver Save money by building a facility that is only big enough to handle production requirements A single product focus lets me do a really good job producing just one thing. Effectiveness (tends to increase costs) Goods can get to customers faster with more facilities Building in lots of extra capacity provides flexibility A multi-product focus may allow me to perform the same operation on many different things. Efficiency A company can gain economies of scale when it centralizes it facilities It is cheaper for a company to maintain one large facility then several small facilities However, the goods are farther from the customers and it might take longer and be more difficult to deliver the goods in a timely fashion Effectiveness It costs more to have many facilities located closer to customers, however the company can deliver goods with relative ease and in a timely fashion A company can save money by building a facility that is only big enough to handle production requirements By spending more money and building in a lot of extra capacity, an organization can be prepared to handle unexpected future events If a company chooses a product focus design, it is anticipating that the facility will produce only a certain type of product All operations, including fabrication and assembly, will focus on developing a single type of product The facility becomes highly efficient in producing a single product If a company chooses a functional focus design, the facility will perform a specific function (e.g., fabrication only or assembly only) on many different products The facility becomes more effective since it can use a single process on many different types of products

8 Inventory Efficiency (saves money at expense of other things)
Saves money by not holding much inventory or using as much space. Incoming shipments must be received more frequently. A company can save money by not maintaining as much safety stock, but runs the risk of disappointing customers if inventory runs out during a busy season (such as Christmas) Single storage location Effectiveness (tends to increase costs) Spend money to hold larger amounts of inventory so as to immediately be able to respond to customer needs. A company spends money by maintaining higher amounts of safety stock so as to not run out during busy times (Christmas), but not enough demand may lead to price cuts and losses. Multiple storage locations (close to customers) Decide whether to risk the expense of carrying too much inventory (effective) or run the risk of losing sales (efficient) Efficiency A company can save money by not maintaining a lot of inventory Receiving inventory every day, or every week, allows a company to operate without the need for large amounts of inventory storage space Effectiveness A company spends money by maintaining large amounts of inventory, but they are better able to provide immediate goods and services to their customers (more effective) A company can save money by not maintaining a lot of safety inventory This company runs the risk of losing customers if it runs out of goods during Christmas and Easter A company spends money by maintaining large amounts of excess safety inventory However, this company is better able to fulfill its customers’ needs during busy seasons such as Christmas and Easter

9 Transportation Primary transportation methods
Truck, rail, ship, air, pipeline, electronic Speed of delivery and price of delivery are difference drivers Efficiency (saves money at expense of other things) A company can save money by shipping goods inexpensively, but this takes longer for the customer to receive the goods. Inexpensive shipping = Efficiency Effectiveness (tends to increase costs) To ensure speedy delivery, a more expensive delivery method is selected. More expensive shipping = Effective A company that uses Federal Express to ship goods is focusing on safe and timely delivery and not on the cost of delivery. Regardless of which transportation method is selected, having a global inventory management system is vital (ability to track and locate all components and materials in both the upstream and downstream portions of the supply chain) It is cheaper to send a package by boat then it is to send it by plane Efficiency A company can save money by shipping goods inexpensively However, this usually causes the shipment to take longer Effectiveness It costs a company money to ship goods quickly FedEx’s entire business strategy focuses on its customers’ need for highly effective transportation methods. Any company that uses FedEx to transport a package is focusing primarily on a safe and timely delivery and not on the cost of delivery. Many businesses even locate their facilities near FedEx hubs so that they can quickly transport inventory overnight to their customers.

10 Information An organization must decide how and what information it wants to share with its supply chain partners Efficiency (saves money at expense of other things) Freely sharing lots of information increases the speed and decreases the cost of supply chain processing. Pull strategy: partners are responsible for retrieving/pulling information when they need/want it (and they bear the cost of getting info) Must trust partners when letting them access your systems. Partners control when info is pulled Effectiveness (tends to increase costs) Share only selected information with certain individuals, which will decrease the speed and increase the costs of supply chain processing Push strategy: you send info to partners when YOU want to (partners may have to wait to get what they need and you bear the cost of sending/pushing info to them Using a push strategy, your organization controls what is shared and when it is shared. Efficiency A company can save money by sharing information with everyone involved in the supply chain Effectiveness It costs a company to be selective on what types of information it shares with its different partners It takes time and money to safeguard information, which is what the company would have to do to ensure it didn’t get into the wrong hands Pull strategy A company can save money by asking its partners to incur the expense and responsibility of pulling supply chain information from the organization’s systems Push strategy A company will have to incur the expense and responsibility of pushing supply chain information out to its supply chain partners



13 Wal-Mart's organizational goal is to be a low cost retailer that provides a variety of mass consumption goods. Wal-Mart’s supply chain emphasizes efficiency (saves money at expense of other things), but it does maintain an adequate level of effectiveness. Facilities focus (efficiency) Wal-Mart maintains few warehouses and builds warehouses only when demand is high enough, which saves them money. Inventory focus (efficiency) Wal-Mart ships directly to its stores from the manufacturer. This significantly reduces inventory since the inventory is held in stores, and not in the warehouses and stores. Obviously, low levels of inventory saves them money. Transportation focus (effective) Wal-Mart maintains its own fleet of trucks, and there is obviously an expense for doing so. However, they feel this expense is worth it since they are able to use their fleet of trucks to keep inventories low. Information focus (uses an effectiveness strategy to be more efficient, and therefore save money) Invests heavily in technology and the flow of information through its entire supply chain Although Wal-Mart has spent a lot of money on its supply chain and uses a push information sharing strategy – its overall information focus is on using information to enable the company to maintain small amounts of inventory (efficiency) Wal-Mart uses its supply chain to operate its business in a just-in-time fashion Wal-Mart’s strong information flows allow it to operate its business in a just-in-time fashion (JIT inventory)

14 Global Inventory Management Systems
Let you locate and track items moving through your supply chain. Lets you know what you have and where it is at. Radio Frequency Identification (RFID) Uses a microchip embedded in a tag or label to transmit information back and forth between an object and a receiving device.

15 Radio Frequency Identification (RFID)
Can be used to track inventory, count inventory and access product information. Pay at toll road plazas. Purchase products without standing in line (just walk past a scanner with the product). Produce/vegetable & Livestock tracking Manufacturing supply chain management Book tracking and luggage tracking. KSU uses RFID in the parking garage to track customers and customer types (counts customers, grants access to areas, monitors usage, including length of stay) US passports now have RFID chips containing information about the passport holder.

16 RFID RFID tags will be added to every product and shipping box
At every step of an item’s journey, a reader scans one of the tags and updates the information on the server Manufacturers and retailers can observe sales patterns in real-time and make swift decisions about production, ordering, and pricing

17 RFID Architecture


19 Information Technology and Supply Chain Management
Advances in information technology have made it possible to bring to life the idea of a truly integrated the supply chain. The key is to have as close to real-time visibility throughout the entire supply chain as possible. I can see what you are doing and you can see what I am doing. Real-time flow of accurate information with minimal time lags (communication is key) An organization needs to select its SC strategy and then IT can be used to implement and enhance that strategy. RFID is one of the technologies used in supply chain management.

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