11/16 1 Inventory Management


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11/16 1 Inventory Management

  1. 1. Supply Chain Management Chapter 11 9 th Edition
  2. 2. Supply Chain Management <ul><li>Supply Chain : </li></ul><ul><li>THE SEQUENCE OF ORGANIZATIONS </li></ul><ul><li>their facilities, functions, and activities </li></ul><ul><li>THAT ARE INVOLVED IN PRODUCING AND DELIVERING A PRODUCT OR SERVICE </li></ul>Sometimes referred to as value chains
  3. 3. <ul><li>Warehouses </li></ul><ul><li>Factories </li></ul><ul><li>Processing centers </li></ul><ul><li>Distribution centers </li></ul><ul><li>Retail outlets </li></ul><ul><li>Offices </li></ul>Facilities
  4. 4. Functions and Activities <ul><li>Forecasting </li></ul><ul><li>Purchasing </li></ul><ul><li>Inventory management </li></ul><ul><li>Information management </li></ul><ul><li>Quality assurance </li></ul><ul><li>Scheduling </li></ul><ul><li>Production and delivery </li></ul><ul><li>Customer service </li></ul>
  5. 5. Typical Supply Chain MANUFACTURING Supplier Supplier Supplier Storage } Mfg. Storage Dist. Retailer Customer
  6. 6. Typical Supply Chain Service Supplier Supplier } Storage Service Customer
  7. 7. <ul><li>Improve operations </li></ul><ul><li>Increasing levels of outsourcing </li></ul><ul><li>Increasing transportation costs </li></ul><ul><li>Competitive pressures </li></ul><ul><li>Increasing globalization </li></ul><ul><li>Increasing importance of e-commerce </li></ul><ul><li>Complexity of supply chains </li></ul><ul><li>Manage inventories </li></ul>Need for Supply Chain Management
  8. 8. Bullwhip Effect Final Customer Initial Supplier Demand Inventory oscillations become progressively larger looking backward through the supply chain Vendor managed inventory or strategic buffering
  9. 9. Benefits of Supply Chain Management Largest and most profitable retailer in the world Wal-Mart Increased market share from 5% to 29% National Bicycle Doubled profits and increased sales 60% Sport Obermeyer Cut supply costs 75% Hewlett-Packard Doubled inventory turnover rate Campbell Soup Benefit Organization
  10. 10. Benefits of Supply Chain Management <ul><li>Lower inventories </li></ul><ul><li>Higher productivity </li></ul><ul><li>Greater agility </li></ul><ul><li>Shorter lead times </li></ul><ul><li>Higher profits </li></ul><ul><li>Greater customer loyalty </li></ul><ul><li>Integrates separate organizations into a cohesive operating system </li></ul>
  11. 11. Global Supply Chains <ul><li>Increasing more complex </li></ul><ul><ul><li>Language </li></ul></ul><ul><ul><li>Culture </li></ul></ul><ul><ul><li>Currency fluctuations </li></ul></ul><ul><ul><li>Political </li></ul></ul><ul><ul><li>Transportation costs </li></ul></ul><ul><ul><li>Local capabilities </li></ul></ul><ul><ul><li>Finance and economics </li></ul></ul><ul><ul><li>Environmental </li></ul></ul>
  12. 12. Strategic or Operational <ul><li>Two types of decisions in supply chain management </li></ul><ul><ul><li>Strategic – design and policy </li></ul></ul><ul><ul><li>Operational – day-today activities </li></ul></ul><ul><li>Major decisions areas </li></ul><ul><ul><li>Location </li></ul></ul><ul><ul><li>Production </li></ul></ul><ul><ul><li>Inventory </li></ul></ul><ul><ul><li>Distribution </li></ul></ul>
  13. 13. <ul><li>Logistics </li></ul><ul><ul><li>Refers to the movement of materials and information within a facility and to incoming and outgoing shipments of goods and materials in a supply chain </li></ul></ul>Logistics
  14. 14. Materials Movement Figure 11.4 RECEIVING Storage Work center Work center Work center Storage Work center Storage Shipping
  15. 15. <ul><li>Management uses DRP ( Distribution requirements planning) to plan and coordinate: </li></ul><ul><ul><li>Transportation </li></ul></ul><ul><ul><li>Warehousing </li></ul></ul><ul><ul><li>Workers </li></ul></ul><ul><ul><li>Equipment </li></ul></ul><ul><ul><li>Financial flows </li></ul></ul>Uses of DRP
  16. 16. <ul><li>E-Business : the use of electronic technology to facilitate business transactions </li></ul><ul><li>Applications include </li></ul><ul><ul><li>Internet buying and selling </li></ul></ul><ul><ul><li>E-mail </li></ul></ul><ul><ul><li>Order and shipment tracking </li></ul></ul><ul><ul><li>Electronic data interchange </li></ul></ul>E-Business
  17. 17. <ul><li>Companies can: </li></ul><ul><ul><li>Have a global presence </li></ul></ul><ul><ul><li>Improve competitiveness and quality </li></ul></ul><ul><ul><li>Analyze customer interests </li></ul></ul><ul><ul><li>Collect detailed information </li></ul></ul><ul><ul><li>Shorten supply chain response times </li></ul></ul><ul><ul><li>Realize substantial cost savings </li></ul></ul><ul><ul><li>Create virtual companies </li></ul></ul><ul><ul><li>Level the playing field for small companies </li></ul></ul>Advantages E-Business
  18. 18. Reverse Logistics <ul><li>Reverse logistics – the backward flow of goods returned to the supply chain </li></ul><ul><li>Processing returned goods </li></ul><ul><ul><li>Sorting, examining/testing, restocking, repairing </li></ul></ul><ul><ul><li>Reconditioning, recycling, disposing </li></ul></ul><ul><li>Gatekeeping – screening goods to prevent incorrect acceptance of goods </li></ul><ul><li>Avoidance – finding ways to minimize the number of items that are returned </li></ul>
  19. 19. Effective Supply Chain <ul><li>Requires linking the market, distribution channels processes, and suppliers </li></ul><ul><li>Supply chain should enable members to: </li></ul><ul><ul><li>Share forecasts </li></ul></ul><ul><ul><li>Determine the status of orders in real time </li></ul></ul><ul><ul><li>Access inventory data of partners </li></ul></ul>
  20. 20. Successful Supply Chain <ul><li>Trust among trading partners </li></ul><ul><li>Effective communications </li></ul><ul><li>Supply chain visibility </li></ul><ul><li>Event-management capability </li></ul><ul><ul><li>The ability to detect and respond to unplanned events </li></ul></ul><ul><li>Performance metrics </li></ul>
  21. 21. RFID Technology <ul><li>Used to track goods in supply chain </li></ul><ul><li>RFID tag attached to object </li></ul><ul><li>Similar to bar codes but uses radio frequency to transmit product information to receiver </li></ul><ul><li>RFID eliminates need for manual counting and bar code scanning </li></ul>
  22. 22. <ul><li>Develop strategic objectives and tactics </li></ul><ul><li>Integrate and coordinate activities in the internal supply chain </li></ul><ul><li>Coordinate activities with suppliers with customers </li></ul><ul><li>Coordinate planning and execution across the supply chain </li></ul><ul><li>Form strategic partnerships </li></ul>Creating an Effective Supply Chain
  23. 23. Supply Chain Performance Drivers <ul><li>Quality </li></ul><ul><li>Cost </li></ul><ul><li>Flexibility </li></ul><ul><li>Velocity </li></ul><ul><li>Customer service </li></ul>
  24. 24. Velocity <ul><li>Inventory velocity </li></ul><ul><ul><li>The rate at which inventory(material) goes through the supply chain </li></ul></ul><ul><li>Information velocity </li></ul><ul><ul><li>The rate at which information is communicated in a supply chain </li></ul></ul>
  25. 25. <ul><li>Purchasing is responsible for obtaining the materials, parts, and supplies and services needed to produce a product or provide a service. </li></ul><ul><li>Purchasing cycle : Series of steps that begin with a request for purchase and end with notification of shipment received in satisfactory condition. </li></ul>Purchasing
  26. 26. <ul><li>Identifying sources of supply </li></ul><ul><li>Negotiating contracts </li></ul><ul><li>Maintaining a database of suppliers </li></ul><ul><li>Obtaining goods and services </li></ul><ul><li>Managing supplies </li></ul>Duties of Purchasing
  27. 27. Purchasing Cycle <ul><li>Requisition received </li></ul><ul><li>Supplier selected </li></ul><ul><li>Order is placed </li></ul><ul><li>Monitor orders </li></ul><ul><li>Receive orders </li></ul>Purchasing Legal Accounting Operations Data process- ing Design Receiving Suppliers
  28. 28. <ul><li>Quality and quality assurance </li></ul><ul><li>Flexibility </li></ul><ul><li>Location </li></ul><ul><li>Price </li></ul><ul><li>Product or service changes </li></ul><ul><li>Reputation and financial stability </li></ul><ul><li>Lead times and on-time delivery </li></ul><ul><li>Other accounts </li></ul>Factors in Choosing a Supplier Consider developing the supplier as a partner