1. 1 IES 371 Engineering Management Chapter 9: Supply Chain Design Objectives: To understand the nature of supply-chains for service providers, as well as for manufacturers Week 8 July 27, 05

2. Dr. Karndee Prichanont IES371 1/2005 2 Supply Chain The customer relationship, order fulfillment, and supplier relationship processes and their interconnected linkages among the suppliers of services, material, Information, and the customers of the firm’s services and products Information Cash Products and Services Customers Total satisfaction with quality, price, delivery, and service Distributors Package and delivery Inventory Producers Finished goods, end products and services Inventory Suppliers Materials, parts, sub- assemblies, and services

3. Dr. Karndee Prichanont IES371 1/2005 3 Supply Chain Management The designs of those relationships and linkages in order to match the flow of services, materials, and information with customer demand Synchronization of activities required to achieve maximum competitive benefits Coordination, cooperation, and communication Rapid flow of information Vertical integration

4. Dr. Karndee Prichanont IES371 1/2005 4 Supply Chain for Florist Figure 9.2 Required for facilitating goods Required for explicit servicesRequired for supporting facilities Required for implicit services Home customers Commercial customers Florist FedEx delivery service PackagingLocal delivery service Flowers – local/ international Arrangement materials Internet services Maintenance services

5. Dr. Karndee Prichanont IES371 1/2005 5 The Wal-Mart Supply Chain

6. Dr. Karndee Prichanont IES371 1/2005 6 Supply Chain for a Manufacturing Firm Figure 9.5 Tier 1 Tier 2 Supplier of materialsSupplier of services Tier 3 Legend Customer Distributi on center Manufacturer

7. Dr. Karndee Prichanont IES371 1/2005 7 How is inventory created? Inventory: a stock of material used to satisfy customer demand or to support the production of services or goods 3 categories of inventory:  Raw material inventory (RM)  Work-in-process inventory (WIP)  Finished goods inventory (FG) Scrap flow Figure 9.3 Inventory level Output flow of materials Input flow of materials

8. Dr. Karndee Prichanont IES371 1/2005 8 Inventory at Successive Stocking Points Figure 9.4 SupplierManufacturing plantDistribution centerRetailer Rawmaterials Work in process Finishedgoods

9. Dr. Karndee Prichanont IES371 1/2005 9 Supply Chain Dynamics  Bullwhip Effect: The phenomenon in supply chains whereby ordering patterns experience increasing variance as proceeding upstream in the chain Time Order Quantity 9,000 – 7,000 – 5,000 – 3,000 – 0 – Consumers’ daily demand Retailers’ daily orders to manufacturer Manufacturer’s weekly orders to package supplier Package supplier’s weekly orders to cardboard supplier Figure 9.6 Facial Tissue

10. Dr. Karndee Prichanont IES371 1/2005 10 Causes of Variability  External Causes Volume changes Service and product mix change Late deliveries Underfilled shipments  Internal Causes Internally generated shortages Engineering changes New service or product introductions Service or product promotions Information errors