Supply Chain Management


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Supply Chain Management

  1. 1. Fundamentals of Operations Management BUS 3 – 140 Supply Chain Management Nov 6, 2007
  2. 2. Agenda <ul><li>Exam Recap and Review </li></ul><ul><li>Process Alternatives and Selection </li></ul><ul><li>Work Design </li></ul><ul><li>Supply Chain Management </li></ul>
  3. 3. Exam Review
  4. 4. Grade Distribution – Exam 2
  5. 5. Grade Distribution Comparison (Exam 1 to 2) 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% A+ A A- B+ B B- C+ C C- D+ D D- F First Second
  6. 6. Grade Change per Student – Exam 1 to 2 -30 -25 -20 -15 -10 -5 0 5 10 15 20 25 30 35 -30 -27 -24 -21 -18 -15 -12 -9 -6 -3 0 3 6 9 12 15 18 21 24 27 30 33
  7. 7. Semester to Date Grade Distribution (Exams 1 & 2) 25 16 15 5 1 0 5 10 15 20 25 30 A B C D F
  8. 8. Process Alternatives and Selection
  9. 9. Inputs and Outputs when Selecting a Process Capacity planning is focused on How Many (Quantity) that will be produced. Process planning is focused on HOW the items will be produced INPUTS OUTPUTS * From Stevenson, Operations Management , Ninth Edition, McGraw Hill Irwin Forecasting Product and Service Design Technological Change Capacity Planning Process Selection Facilities and Equipment Layout Work Design
  10. 10. Key Elements of Process Strategy <ul><li>Capital Intensity (does the output come more from machines or more from human labor?) </li></ul><ul><li>Process flexibility required </li></ul><ul><li>Technology </li></ul><ul><li>Likelihood of Changes </li></ul><ul><ul><li>Product Design </li></ul></ul><ul><ul><li>Volumes </li></ul></ul><ul><ul><li>Technology </li></ul></ul>
  11. 11. Uses of Technology and Automation Three (3) basic kinds of technology <ul><li>Product or service innovation (Cell Phones, Computers, etc..) </li></ul><ul><li>Process technology (increasing quality and productivity, lowering costs) </li></ul><ul><li>Information Technology (speed, data storage and retrieval, complex and high-volume processing, process support) </li></ul>
  12. 12. Process Types * From Stevenson, Operations Management , Ninth Edition, McGraw Hill Irwin Table 6.1
  13. 13. Key Characteristics of different Process Types * From Stevenson, Operations Management , Ninth Edition, McGraw Hill Irwin Table 6.2
  14. 14. Work System Design
  15. 15. Considerations in Work System Design <ul><li>Observe actual performance and then establish a BASIS for any estimates </li></ul><ul><ul><li>Sandwiches made per hour </li></ul></ul><ul><ul><li>Sales closed per quarter </li></ul></ul><ul><ul><li>Design changes per model </li></ul></ul><ul><ul><li>Other </li></ul></ul><ul><li>Be careful to distinguish between “busy” and “valuable” </li></ul><ul><li>Track your own output and trends and see how you can improve your individual performance </li></ul><ul><li>Watch your boss </li></ul>
  16. 16. Supply Chain Management
  17. 17. Operations is a Key Element of a Supply Chain Revenue Utilization of Assets (People, Plant, Equip) Cash Inventory BALANCING keeping Customers completely satisfied and Resources optimally utilized ……. against spending the least amount of Cash and carrying the least amount of Inventory
  18. 18. Supply Chain Scope (this course shaded) Customer Demand Production Scheduling Materials Mgmt Production Shipping Customer Service <ul><li>Forecasting </li></ul><ul><li>Aggregate Planning </li></ul><ul><li>Strategic Capacity Planning </li></ul><ul><li>Demand & Supply Matching </li></ul><ul><li>Scheduling </li></ul><ul><li>Just In Time (JIT) </li></ul><ul><li>Project Mgmt </li></ul><ul><li>Inventory Mgmt </li></ul><ul><li>MRP </li></ul><ul><li>ERP </li></ul><ul><li>Process Layout </li></ul><ul><li>Work System Design </li></ul><ul><li>Lean Operations </li></ul><ul><li>Quality </li></ul>
  19. 19. Example of Supply Chain Strategy <ul><ul><li>Responsiveness to Market opportunities </li></ul></ul><ul><ul><ul><li>Speed to react </li></ul></ul></ul><ul><ul><ul><li>Credibility of commits </li></ul></ul></ul><ul><ul><ul><li>Assurance of delivery </li></ul></ul></ul><ul><ul><li>Optimum utilization of resources </li></ul></ul><ul><ul><ul><li>Manufacturing </li></ul></ul></ul><ul><ul><ul><li>Product life cycle </li></ul></ul></ul><ul><ul><ul><li>Suppliers </li></ul></ul></ul><ul><ul><ul><li>Transportation and Logistics </li></ul></ul></ul><ul><ul><li>Scalability for growth and increased complexity </li></ul></ul><ul><ul><li>Secure collaboration and visibility among customers, suppliers, and the enterprise </li></ul></ul>MAXIMIZE PROFITABLE REVENUE <ul><ul><li>Optimal Inventory </li></ul></ul><ul><ul><ul><li>Company owned </li></ul></ul></ul><ul><ul><ul><li>Supplier owned </li></ul></ul></ul><ul><ul><ul><li>Customer owned </li></ul></ul></ul><ul><ul><li>Optimal headcount </li></ul></ul><ul><ul><ul><li>Manufacturing </li></ul></ul></ul><ul><ul><ul><li>Support </li></ul></ul></ul><ul><ul><ul><li>Worldwide indirect </li></ul></ul></ul><ul><ul><li>Lean optimization for entire Supply Chain </li></ul></ul><ul><ul><li>Optimized Supply Chain Network (including integrating Mergers & Acquisitions) </li></ul></ul><ul><ul><li>Automation whenever possible and supported by business case </li></ul></ul>MINIMIZE TOTAL COST <ul><ul><li>Assured Supply and best value </li></ul></ul><ul><ul><li>Accurate and timely exchange of demand and supply data </li></ul></ul><ul><ul><li>Shared savings from continuous improvement </li></ul></ul><ul><ul><li>Other </li></ul></ul><ul><ul><li>Other </li></ul></ul>MAXIMIZE CUSTOMER SATISFACTION
  20. 20. The Increasing Emphasis on Supply Chain Management <ul><li>Improve operations </li></ul><ul><li>Opportunities and Risks of outsourcing </li></ul><ul><li>Rising transportation costs </li></ul><ul><li>Competitive pressures </li></ul><ul><li>Globalization </li></ul><ul><li>e-commerce </li></ul><ul><li>Complexity of supply chains </li></ul><ul><li>Manage inventories </li></ul>Supply Chain Management is not simply a cost / efficiency discipline. It is a key differentiator in gaining customer satisfaction, market share and loyalty Several factors are driving this trend:
  21. 21. Benefits of Supply Chain Management * From Stevenson, Operations Management , Ninth Edition, McGraw Hill Irwin 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
  22. 22. Benefits of Supply Chain Management * From Stevenson, Operations Management , Ninth Edition, McGraw Hill Irwin <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>Monitoring Inventory is CRITICAL at virtually every step in the Chain
  23. 23. Selected Supply Chain Metrics * From Stevenson, Operations Management , Ninth Edition, McGraw Hill Irwin Table 11.4
  24. 24. Logistics The management of inventory at motion and at rest Logistics * That part of the supply chain that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers’ requirements Logistics – from the Council of Logistics Management (CLM) The movement of goods from the point of origin to the point of consumption: a subset of the overall Logistics process Transportation * Leenders, Johnson, Flynn, and Fearon, Purchasing and Supply Management , Thirteenth Edition, McGraw Hill Irwin
  25. 25. Services provided by Third Party Logistics providers (3PL) <ul><li>Economies of Scale </li></ul><ul><li>Professional focus and expertise </li></ul><ul><li>Warehousing </li></ul><ul><li>Outbound and Inbound transportation </li></ul><ul><li>Freight bill auditing and payment </li></ul><ul><li>Freight consolidation </li></ul><ul><li>Distribution </li></ul><ul><li>Order Fulfillment </li></ul><ul><li>Cross-docking </li></ul><ul><li>Packaging </li></ul><ul><li>Returns </li></ul>Major Carriers enable their customers to focus on core competencies, while the carrier drives efficiencies and increased services in transportation and logistics
  26. 26. Reverse Logistics <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 </li></ul><ul><ul><li>Providing Return Material Authorization (RMA) </li></ul></ul><ul><ul><li>screening goods to prevent incorrect acceptance of goods </li></ul></ul><ul><li>Avoidance </li></ul><ul><ul><li>finding ways to minimize the number of items that are returned </li></ul></ul>Good career opportunity for an entry level job The backward flow of goods returned to the supply chain
  27. 27. Example of Reverse Logistics Customer Returns Damaged Product Product Received at Local Service Center Product Collected and Forwarded to Repair Center Product Repaired to Refurbished Status Refurbished Product sent to Distribution Center(s) Refurbished Product shipped From FGI at DC Damaged Units Repaired Units
  28. 28. Distribution Requirements Planning (DRP) <ul><li>Expansion of MRP principles to plan and coordinate: </li></ul><ul><ul><li>Transportation </li></ul></ul><ul><ul><li>Warehousing </li></ul></ul><ul><ul><li>Regional allocations </li></ul></ul><ul><ul><li>Equipment </li></ul></ul><ul><ul><li>Financial flows </li></ul></ul>The right amount of inventory, at the right place, at the right time
  29. 29. Supply Chain Metrics
  30. 30. Supply Chain Challenges <ul><li>Barriers to integration of organizations </li></ul><ul><li>Top management support </li></ul><ul><li>Dealing with trade-offs </li></ul><ul><li>Small businesses </li></ul><ul><li>Variability and uncertainty </li></ul><ul><li>Long lead times </li></ul>