OM & IS BUSINESS WE ARE Decision Making Supply Chain Management (SCM) Organizational
Supply Chain Management What are some of the core “management” concerns of the various organizations comprising a typical supply chain? What is the three “main links” associated with the flow of products through a typical supply chain? Why do organizations place so much effort into managing their supply chain?
▪ Supply chains that can “work together” to bring a product to the consumer at the lowest possible cost can either: 1) pass the savings onto the consumer (competitive advantage), or take the savings as “shared” profits for supply chain members (profit taking). Supply Chain Management Waste Impacts Competitive Position ▪ The costs associated with the “movement” of a good through a typical supply chain can be up to three times the actual cost associated with the production of a good. Distribution Cost ▪ Billions of dollars are lost annually by members of a typical supply chain due to supply chain “waste”. Poor production planning, inefficient distribution processes, ineffective inventory management practices, needless competitive posturing result in needlessly increased distribution costs. Distribution Loss Cost
Supply Chain Management <ul><li>Materials flow from suppliers and their “upstream” suppliers at all levels in the chain. </li></ul><ul><li>Transformation of materials into semi-finished and finished products through the organization’s own production process. </li></ul><ul><li>Distribution of products to customers and their “downstream” customers at all levels in the chain. </li></ul>Three Main Links in the Chain
Supply Chain Management Organizations must embrace technologies that can effectively help to manage supply chains.
Supply Chain Management ▪ How do a provide my customer with up-to-date status on the delivery of products? (customer service) Transporter ▪ How quick do I need to respond to manufacturer transportation needs? (on time pick-up and delivery to support JIT) ▪ What is a reasonable rate to charge for product delivery? (competition) ▪ How much inventory should I have on hand? (spoilage/holding cost) Supplier ▪ What of my products should I produce? (no stock outs) ▪ How much of my product should I produce? (JIT manufacturer needs) ▪ When should I produce each product to meet manufacturer needs? (JIT) ▪ How much inventory should I have on hand? (spoilage/holding cost) Manufacturer ▪ What of my products should I produce? (no stock outs) ▪ How much of my product should I produce? (JIT buyer) ▪ When should I produce each product to meet buyer needs? (JIT)
Supply Chain Management ▪ How much should I sell each product for? (business strategy) Retailer ▪ How much of each product should I buy? (no stock outs) ▪ What products should my store carry? (consumer needs) ▪ Which retailer provides the highest customer service? (customer service) Consumer ▪ Which retailers have the products I like to buy? (no stock outs) ▪ Which retailer sells their products at a price I am willing to pay? (retailer selection) ▪ How much inventory should I have on hand? (spoilage/holding cost/theft/loss/product timeliness) ▪ How much should I pay to buy each product? (economies of scale)
Factors Driving SCM 2) Consumer Behavior ▪ Customer demands for a product drive the supply chain. Supply chains that are quickly able to respond to dynamic consumer demands and can rapidly bring the product gain a competitive advantage. ▪ Demand Planning Software: applications that use both historical and current “status” information to generate demand forecasts. Typically, these forecasts use models that include factors like: past sales, customer demand, demographics, marking plans, etc. 1) Visibility ▪ The ability of all organizations within a given supply chain to have access to pertinent information concerning the flow of goods both upstream and downstream in the supply chain. ▪ Bullwhip Effect: this occurs when poor product demand information is passed “up” the supply chain from one organization to the next resulting in the development of a faulty demand model. The end result is too much product supply in the chain. ▪ Visibility allows organizations to act “in concert” with one another to ensure the effectiveness and efficiency of the complete chain.
Factors Driving SCM ▪ Supply Chain Execution (SCE) Software: applications and technologies that automate the different steps and stages of the supply chain. Examples include: bar coding, EDI, EFT, RFID 3) Competition ▪ IT can be used to support both the efficiency and timing factors: ▪ The “game” is simple. Which ever supply chain can provide it’s products to the consumer at the least cost in a timeframe demanded by the customer wins! ▪ Supply Chain Planning Software (SCP): applications that use advanced mathematical models and algorithms to help plan the smooth flow of goods through the various organizations comprising a supply chain.
Factors Driving SCM SCP and SCE in the Supply Chain
SCM "Best Practices" <ul><li>SCM industry best practices include: </li></ul><ul><ul><li>Make the sale to suppliers </li></ul></ul><ul><ul><li>Wean employees off traditional business practices </li></ul></ul><ul><ul><li>Ensure the SCM system supports the organizational goals </li></ul></ul><ul><ul><li>Deploy in incremental phases and measure and communicate success </li></ul></ul><ul><ul><li>Be future oriented </li></ul></ul>
Why Invest in SCM? Top reasons why more and more executives are turning to SCM to manage their extended enterprises