1. Main Function of SCM (Part I)

2. Supply Chain in Economy (1990, 1996)
Freight Transportation $352, $455 Billion
Inventory Expense $221, $311 Billion
Administrative Expense $27, $31 Billion
Logistics Related Activity 11%, 10.5% of GNP

3. Main Functions
Procurement (supplier selection, optimal procurement policies, etc.)
Manufacturing (plant location, product line selection, capacity planning, production scheduling, etc.)
Distribution (warehouse location, customer allocation, demand forecasting, inventory management, etc.)
Logistics (selection of logistics mode, selection of ports, direct delivery, vehicle scheduling, etc.)
Global Decisions (product and process selection, planning under uncertainty, real-time monitoring and control, integrated scheduling)

4. Procurement Known as purchasing, and now supply management
To achieve lower operating costs, higher ROI, and a direct contribution to the bottom line
the cost of all of those processes and activities associated with procurement at anywhere from 30 percent to as high as 70 percent in some industries like automotive and chemicals

5. Manufacturing Just-in-time
Inventory strategy implemented to improve the return on investment of a business by reducing in-process inventory and its associated costs
Lean production
Came from Toyota Production System, which considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful

6. Manufacturing Agile Manufacturing (order to build)
Considered as improvement from Lean production, only possible due to shorter customer order cycle
Outsource
Also considered as strategy in Lean production, where company can stay focus and profitable

7. Supply Chain in Manufacturing
Profit 4%
Logistics Cost 21%
Marketing Cost 27%
Manufacturing Cost 48%

8. Distribution
Distribution Network Configuration: Number and location of suppliers, production facilities, distribution centers, warehouses and customers.
Distribution Strategy: Centralized versus decentralized, direct shipment, Cross docking, pull or push strategies, third party logistics.

9. Distribution in a Supply Chain
Location
centralization (efficiency) vs. decentralization (responsiveness)
other factors to consider (e.g., proximity to customers)
Capacity (flexibility versus efficiency)
Manufacturing methodology (product focused versus process focused)
Warehousing methodology (SKU storage, job lot storage, cross-docking)
Overall trade-off: Responsiveness versus efficiency

10. Cost Buildup as a Function of Facilities
Total Costs
Percent Service Level Within Promised Time
Cost of Operations
Facilities
Inventory
Notes:
Transportation
Labor
Number of Facilities
5-10

11. Where inventory needs to be for a 3 day order response time - typical results --> 5 DCs
Customer DC

12. Where inventory needs to be for a next day order response time - typical results --> 13 DCs
Customer DC

13. Case Study : Motorola’s Outsourced Manufacturing and Technology
Global outsourced manufacturing continues to dominate the agendas of executives across numerous industries, as companies look for new ways to deliver high quality products at the most cost effective prices
Motorola is expected to step up its outsourcing efforts in 2008, increasing as much as 50 percent of its total handset output to ODM partners, compared to 40 percent in

14. Motorola’s Key Issues in Outsourcing
Enabling Visibility to Outsourced Operations
Ensuring Continuity of Supply
Harmonizing Fragmented Business Processes
Establishing Common Performance Metrics and Indicators
Managing Extended Cycle Times
Managing Increased Demand and Supply Network Lead Times and Logistics Costs

15. Motorola’s strategies
Define Common Business Processes
Define Joint Performance Metrics and Align Incentives
Align the Organizations
Establish Partner Agreements
Deploy a Shared Process and Information Platform
Enable All Partners to Adopt Processes

16. How did technology outsourcing help Motorola ?
Signed 10-year IT infrastructure outsourcing contract worth US$1.6 billion with Computer Sciences Corporation to handle Motorola's global IT help desk and network infrastructure functions

17. The Outcome Cutting cost
Real-time forecasting and procurement between multi-tiers trading partners
Stable IT infrastructure
Keep competitive advantage with cutting edge technology

18. Discuss the following questions:
What problems do Motorola address? How does outsourcing help solve these problems?
What issues and challenges do outsourcing strategy present? What can be done to address these issues?
What are the business as well as the technology issues that should be addressed when Motorola outsourced manufacturing and technology?