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  • 1. SME Supply Chain: Philippine SME Perspective Dennis T. Beng Hui Center for Operations Research and Management Science Department of Industrial Engineering De La Salle University-Manila
  • 2. Outline of Presentation
    • What is Supply Chain?
    • Why focus on the Supply Chain?
    • Basic Supply Chain Structures
    • Typical SME Supply Chain Structures
    • Subcontracting in the SME Supply Chain
    • Current Problems with SME Supply Chain Structures
    • Some future Interventions for the SME Supply Chain
  • 3. Development of Supply Chain Concept
    • Operations Management
    • Logistics
    • Distributions
    • Supply Chain
  • 4. What is Supply Chain?
    • A Supply Chain is the alignment of firms that bring products or services to market (Lambert, Stock, and Ellram)
    • A Supply Chain consists of all stages involved , directly or indirectly, in fulfilling a customer request . This includes manufacturers, suppliers, transporters, warehouses, retailers, and customers (Chopra and Meindle )
  • 5. What is Supply Chain?
    • The systematic and strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across business within the supply chain, for purposes of improving the long-term performance of the individual companies and the supply chain as a whole (Mentzer, DeWitt, Deebler, Min, Nix, Smith, and Zacharia)
  • 6. Why Supply Chains?
    • Competing in a Global business through Alliances
    • Reaching the Global Market
    • Focusing on Core Expertise/Business
    • The “Bullwhip Effect” on Inventory
  • 7. Bullwhip Effect (J ö rg Nienhaus, Swiss Federal Institute)
  • 8. Critical Success Factor of A Supply Chain
    • Alignment of Business Strategy
      • Understand the Market your company serves
      • Define core competencies of your company
      • Develop needed supply chain capability
  • 9. Major Goals of the Supply Chain
    • Efficiency
    • Responsiveness
    These two directions are mutually conflicting goals and it is important to determine where your strategy lies within these conflicting goals Efficiency Responsiveness
  • 10. Drivers of the Supply Chain (Chopra and Meindl, 2001) Production What, how, and when to produce Inventory How much to make and how much to store Transportation How and when to move the product Location Where best to do what activity Information The basis for making decisions
  • 11. Typical Effects to Supply Chain based on Goal
    • Cost of information drops while other costs rise
    • Collect and share timely, accurate data
    Information
    • Shipments are few and large
    • Slow and cheaper modes
    • Frequent shipments
    • Fast and flexible mode
    Transportation
    • Few central locations serving wide areas
    • Many locations close to customer
    Location
    • Low inventory levels
    • Fewer items
    • High Inventory levels
    • Wide range of items
    Inventory
    • Little excess capacity
    • Narrow focus
    • Few central plants
    • Excess Capacity
    • Flexible Manufacturing
    • Many small factories
    Production Efficiency (Limited Competition) Responsiveness (Highly Competitive) Goal Driver
  • 12. Types of Supply Chain Structure (Hugos, 2003)
    • Simple Supply Chain
    • Extended Supply Chain
    Supplier Company Customer Ultimate Supplier Supplier Company Customer Ultimate Customer
    • Service Provider
    • Logistics
    • Finance
    • Market Research
    • Product Design
    • IT
  • 13. Example of an Extended Supply Chain Structure (Hugos, 2003) Raw Material Producer Manufacturer Distributor Retailer Retail Customer Product Designers Market Research Logistics Provider Finance Provider Business Customer
  • 14. Supply Chain of the Costume Jewelry Sector (Beng Hui, 2005) Collectors of Raw Materials Middle Men/Resellers Exporters Subcontractors Foreign Buyers/Retailers Final Customer Manufacturers of Foreign Made components
  • 15. Supply Chain of the Processed Mango Sector (Beng Hui, 2005) Independent Farmers Middlemen Company Owned Farms Mango Processor Fresh Mango Exporter Foreign Buyers/ Retailers Foreign Customer Local Retailers Local Customers
  • 16. Supply Chain of the Fine Jewelry Sector (Beng Hui, 2005) Local Miners Middlemen/CB Jewelry Manufacturer Foreign/Buyers Retailers Local Retailers Foreign customers Local customers Supplier of Imported Jewels
  • 17. Supply Chain of the Leathergoods Sector (Manalang, 2005) Foreign Makers of Components Local Middlemen Local Tannery Local Fiber Processors Foreign Tannery Foreign Merchandisers LeathergoodsManufacturer Local Wholesalers/ Direct Selling Local Retailers Foreign Wholesalers Foreign Retailers Local Customers Foreign Customers Subcontractors of non-leather components
  • 18. Supply Chain of the Footwear Sector (Manalang, 2005) Foreign Makers of Components Local Middlemen Local Tannery Subcontracting for some large companies Footwear Manufacturer Local Wholesaler/ Direct Selling Local Retailers Local Customers
  • 19. Supply Chain of the Holiday Decors Sector (Mutuc, 2005) Local Supplier of Imported Materials Processors/Collectors of Local RM Local Middlemen Subcontracting Holiday Décor Manufacturer Foreign Buyers/Retailers Foreign Customers Local Retailers Local Customers
  • 20. Supply Chain of the Furniture Sector (Mutuc, 2005) Local Supplier of Imported Materials Processors/Collectors of Local RM Local Middlemen Subcontracting for special designs (i.e. weaving) Furniture Manufacturer Foreign Buyers/Retailers Foreign Customers Local Retailers Local Customers
  • 21. Supply Chain of the Houseware Sector (Mutuc, 2005) Local Supplier of Imported Materials Processors/Collectors of Local RM Local Middlemen Subcontracting Manufacturing Foreign Buyers/Retailers Foreign Customers Local Retailers Local Customers
  • 22. Comparison of Supply Chain Information Across Sectors (PEARL2, 2005) PCT – cycle time is based from order acceptance to release of shipment
  • 23. Supply Chain tiers and Subcontracting
    • Sectors with high Subcontracting resulted to as much as 6 to 8 weeks of cycle time
    • These are sectors with 6 tier (level) supply chains
    0% 50% % of Companies with Subcontracting Processed Mango Costume Jewelry Holiday Decors Houseware Leathergoods Furniture Footwear Fine Jewelry 100%
  • 24. Current Problems with SME Supply Chain
    • No unified or common strategy within its supply chain
    • Companies do not have a clear supply chain strategy (focusing on responsiveness or efficiency?)
    • Highly dependent on subcontracting resulting to more tiers in the supply chain.
    • Significant presence of “Bullwhip Effect” on raw materials causing fluctuations in supply availability and price
  • 25. Possible Interventions in the SME Supply Chain
    • Reduce tiers/levels of supply chain
      • Remove/streamline supply chain by integrating subcontractors into the manufacturer
      • Create direct links to Materials
    • Share information to improve responsiveness
      • Real time Monitoring and Regulation of material consumption (reduce bullwhip effect)
  • 26. Possible Interventions in the SME Supply Chain
    • Create unified strategy for supply chain
      • Strengthen Supplier to Customer Relationships by creating/distributing proportional benefits to other business units in the supply chain
      • Make subcontractors more responsive/efficient by sharing information
      • Create ownership among all firms within the supply chain.
  • 27. Possible Interventions in the SME Supply Chain
    • Create Strategic Partnerships
      • Material partnership across the Sectors.
  • 28. Possible Interventions in the SME Supply Chain
    • In general, it takes a common objective to work together. Go for Virtual Integration not Vertical Integration.
    • The current state of most companies in each sectors are focusing on efficiency not responsiveness.
    • There is a need to shift to responsiveness and deal with the resulting effects in each of the drivers of the supply chain.
  • 29. Challenges in Supply Chain Integration
    • No quick fixes and solutions
    • Focus on compromises and the good of the sectors.
    • Create consolidators across sectors.
    • No sector interest above the other sectors.
  • 30. End of Presentation