1. CHAPTER 1: 21st-Century Supply Chains
McGraw-Hill/Irwin

2. Overview of 21st-century supply chains
The supply chain revolution
Why integration creates value
Generalized supply chain model
Responsiveness
Financial sophistication
Globalization

3. The supply chain revolution has reshaped contemporary strategic thinking
Supply Chain Management
Consists of firms collaborating to leverage strategic positioning and to improve operating efficiency
Supply Chain Strategy
Is a channel and business organizational arrangement based on acknowledge dependency and collaboration
Logistics
The work required to move and geographically position inventory

4. Successful supply chain strategies
Source: Supply Chain Management Review, March/ April 2000, p. 29.

5. The total integration of the overall business process creates value
Table 1.1 Integrative Management Value Proposition

6. Figure 1.1 The Integrated Supply Chain Framework
The integrated value-creation process must be managed across firms from end to end
Figure 1.1 The Integrated Supply Chain Framework

7. Logistics activities and decisions at each level of functionality
Figure 1.2 Information Functionality

8. Transaction system functionality consists of formalized rules and procedures
Standardized communications focus on tracking and regulating day-to day logistical transactions
For example,
Order entry
Order fulfillment
Inventory adjustment
Invoicing

9. Management control functionality focuses on performance management and reporting
Provides real time feedback on supply chain performance and resource utilization
Common performance dimensions include
Cost
Customer service
Productivity
Quality

10. Decision analysis functionality focuses on software tools to assist managers
Software tools help to identify, evaluate and compare alternatives to improve effectiveness
E.g., Excel solver
Types of analysis include
Supply chain design
Inventory management
Resource allocation
Routing
Segmental profitability
Also called decision support software in MIS departments

11. Strategic planning functionality transforms transactional data to assist in strategy evaluation
Organizes transaction and performance data into a relational database to assist in evaluating alternative business strategies
Examples include
Strategic alliance decisions
Development of manufacturing capabilities
Customer responsiveness opportunities

12. Figure 1.4 SCIS Usage, Decision Characteristics, and Justification
More opportunities exist for improvements at higher levels of functionality
Figure 1.4 SCIS Usage, Decision Characteristics, and Justification

13. Supply chain information system modules
Enterprise integration and administration
Enterprise supply chain operations
Enterprise planning and monitoring
Communication technology
Consumer connectivity

14. Application oriented perspective of SCIS modules
Figure 1.4 Application Oriented SCIS Framework

15. Enterprise resource management (ERP)
The backbone of most firm’s logistical information systems
Maintains an integrated database of current and historical data
Processes most (if not all) transactions across all business functions
Example transactions include
Order entry and management
Inventory assignment
Shipping

16. Figure 1.5 Enterprise Integration and Administration Components
Enterprise integration and administration modules are not specific supply chain apps
Figure 1.5 Enterprise Integration and Administration Components

17. Figure 1.6 Enterprise Operations Modules
Enterprise operations modules support day-to-day supply chain operations
Enterprise Operations
Customer
relationship
management
Logistics
Manufacturing
Purchasing
© Donald J. Bowersox, Ph.D. 2005
Inventory
Deployment
Customer Relationship
Management
(CRM)
Forecasting
Demand Management
(DMS)
Collaborative
Planning, Forecasting
and Replenishment
(CPFR)
Order Management
(OMS)
Finished Inventory
(FIM)
Order Processing
(OPS)
Warehouse
Management (WMS)
Transportation
Management (TMS)
Yard Management
(YMS)
Accounts Receivable
Interface
Resource Planning
(MRP II)
Capacity Management
Planning (CMP)
Master Production
Schedule (MPS)
Production Execution
and Control (Shop Floor)
Quality Management (QM)
Purchase Order
Administration
(POA)
Materials Requirements
Planning (MRP)
Supplier Relationship
Management (SRM)
Accounts Payable
Integrated Inventory Planning
Advanced Planning and Scheduling\
Figure 1.6 Enterprise Operations Modules

18. Figure 1.7 Enterprise Planning and Monitoring Modules
Enterprise planning and monitoring modules facilitate exchange of planning information
Figure 1.7 Enterprise Planning and Monitoring Modules

19. Table 1.2 Eight Supply Chain Processes
Integrative management requires simultaneous achievement of 8 processes
Table 1.2 Eight Supply Chain Processes

20. Concepts necessary for achieving integrated management
Lowest total process cost is the focus of integrated management
Differs from lowest cost of each function in the process
Collaboration of operating information, technology and risk has been encouraged by national legislation to keep US-based firms competitive
Enterprise extension includes expanded managerial influence and control beyond traditional ownership boundaries of a single enterprise
Integrated service providers (ISP) provide a range of logistics services to accommodate customers, ranging from order entry to product delivery
Commonly known as third (or fourth) party service providers

21. Enterprise extension
Information sharing paradigm – supply chain participants sharing operating information can achieve a high degree of collaboration and enhanced strategic planning.
Process specialization paradigm – the commitment to focus collaborative arrangements on planning joint operations with a goal of eliminating nonproductive or non-value adding redundancy by firms in a supply chain.

22. Integrated service providers (ISPs)
Outsourcing
Transportation modes
Public warehouses
Value-added services
Third- and fourth-party service providers
Asset- or nonasset-based service providers

23. Forces driving supply chain strategies
Information technology
Integrative management
Responsiveness
Financial sophistication
Globalization

24. Responsiveness emerges as a competitive advantage
Figure 1.8 Anticipatory Business Model
Figure 1.9 Responsive Business Model

25. Postponement strategies keep supply chains responsive
Types of Postponement
Manufacturing (or Form)
Geographic (or Logistics)
Combined
Manufacturing and geographic types are exact opposites in practice but have the same goal
Meeting customer demand quickly while minimizing inventories

26. Manufacturing (or form) postponement
Manufacturing one order at a time
Base modular construction of product
No customization until the exact customer specs and financial commitment is received
Objective is to maintain products in an uncommitted status as long as possible
Balances economy of scale with responsiveness
Can build a sufficient quantity of “ready to customize” basic units
Requires a lot of forethought during product design

27. Example of manufacturing postponement
Keeping all the car panels a base color (white or gray) until the order is received, then painting to the color ordered

28. Geographic (or logistics) postponement
Build or stock a full-line inventory at one or a few strategic locations
Forward deployment of inventory is postponed until customer orders are received
Once orders received, specific item is expedited to the local distributor
Advantages are manufacturing economies of scale along with responsiveness to customer
Often used for critical, high cost parts and assemblies (e.g. engines)

29. Example of geographic postponement
Keeping full inventory in a central warehouse and releasing customer orders to local distributors or direct shipping to customer

30. Combined postponement
Keeping the basic products centralized and performing the customization at the destination distributor
Historical example - Autos
Installing dealer options like sound systems, GPS, sun roofs on new cars purchased
Contemporary example - Computers
Dell Computers, doing final assembly or packaging additional system options like printers, digital cameras at a distribution center

31. Barriers to implementing responsive systems
Need for publicly held corporations to maintain planned quarterly profits
Expectations of continued financial results often drive promotional and pricing strategies to “load the channel” with inventory
Need to establish collaborative relationships
Most business managers do not have training or experience in development of collaborative arrangements

32. Financial sophistication enables measurement of time-based supply chain
Cash-to-Cash Conversion—the time required to convert raw material or inventory purchases into sales revenue
Dwell Time Minimization—dwell time is the ratio of time that an assets sits idle to the time required to satisfy its supply chain mission
Cash Spin—reducing assets in the supply chain can “spin” cash for reinvestment in other projects

33. Globalization offers firms several attractive opportunities
Demand exceeds local supply
90% of global demand is not fully satisfied by local supply
Strategic sourcing
Identifying and matching the sources of raw materials and components to manufacturers and distributors
Offshoring
Moving manufacturing and distribution operations to countries with favorable labor costs and tax laws

34. Significant differences for global logistics
Distance of typical order-to-delivery operations is significantly longer compared to domestic business
Documentation requirements for business transactions is significantly more complex
Operations must be deal with significant Diversity in work practices and local operating environments
How consumers Demand products and services must accommodate cultural variations