Supply Chain Management
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Supply Chain Management Presentation Transcript

  • 1. Supply Chain Management To Accompany Russell and Taylor, Operations Management, 4th Edition ,  2003 Prentice-Hall, Inc. All rights reserved.
  • 2. Supply Chain (Definition of)
    • The sequence of organizations- their facilities, functions, processes and activities- that are involved in producing and delivering a product or service
    • Sometimes referred to as value chain
  • 3. The Supply Chain Downstream SC members Products and Services Products and Services Products and Services Customers Total satisfaction with quality, price, delivery, and service Distributors Package and delivery Inventory Producers Finished goods, end products and services Inventory Suppliers Inventory Materials, parts, sub-assemblies, and services
  • 4. The Supply Chain Information Products and Services Products and Services Products and Services Customers Total satisfaction with quality, price, delivery, and service Distributors Package and delivery Inventory Producers Finished goods, end products and services Inventory Suppliers Inventory Materials, parts, sub-assemblies, and services
  • 5. The Supply Chain Information Cash Products and Services Products and Services Products and Services Customers Total satisfaction with quality, price, delivery, and service Distributors Package and delivery Inventory Producers Finished goods, end products and services Inventory Suppliers Inventory Materials, parts, sub-assemblies, and services
  • 6. Typical Supply Chain for a Manufacturer Supplier Supplier Supplier Storage } Mfg. Storage Dist. Retailer Customer
  • 7. Typical Supply Chain for a Service Supplier Supplier } Storage Service Customer
  • 8. Supply Chain Management
    • A total system approach to managing the entire flow of information, materials, and services from raw-material suppliers through factories and warehouses to the end user (planning, organizing, directing and controlling flows of materials)
    • Encompasses a ll activities associated with the flow and transformation of goods and services from raw materials to the end user, the customer
  • 9. Goals of Supply Chain Management (1 of 2)
    • Synchronization of activities required to achieve maximum competitive benefits
    • Coordination, cooperation, and communication and timing among SC members
    • Ensuring rapid flow of information among members
  • 10. Goals of Supply Chain Management (2 of 2)
    • Linking the market, distribution channels, processes and suppliers so that market demand is met as efficiently as possible across the chain
    • Matching supply and demand at each stage of the chain
    • Ultimate goal: Achieving customer satisfaction
  • 11.
    • Warehouses
    • Factories
    • Processing centers
    • Distribution centers
    • Retail outlets
    • Offices
    Facilities Involved in SCM
  • 12. Strategic or Operational
    • Two types of decisions in supply chain management
      • Strategic – design and policy
      • Operational – day-today activities
  • 13. Typical Supply Chain Activities
    • Major decision areas :
      • Location
      • Production
      • Inventory
      • Distribution
    Purchasing Receiving Storage Operations Storage Production Distribution
  • 14. Functions and Activities Involved in SCM
            • Forecasting
            • Scheduling
            • Purchasing
            • Inventory management
            • Information management
            • Quality assurance
            • Production and delivery
            • Logistics
            • Customer service
  • 15. Elements of Supply Chain Management Deciding how to best move and store materials Logistics Determining location of facilities Location Monitoring supplier quality, delivery, and relations Suppliers Evaluating suppliers and supporting operations Purchasing Meeting demand while managing inventory costs Inventory Controlling quality, scheduling work Processing Incorporating customer wants, mfg., and time Design Predicting quantity and timing of demand Forecasting Determining what customers want Customers Typical Issues Element
  • 16. Processes Involved in SCM
    • Acquiring customer orders
    • Procuring materials and components from suppliers
    • Producing or manufacturing products
    • Filling customer orders
  • 17. Supply-Chain Costs as a Percent of Sales
    • All industry
    • Automobile
    • Food
    • Lumber
    • Paper
    • Petroleum
    • Transportation
    • 52%
    • 67%
    • 60%
    • 61%
    • 55%
    • 79%
    • 62%
    Industry Percent of Sales
  • 18. Factors That Contribute to the Increased Need for Effective Supply Chain Management:
    • improve operations
    • increased levels of outsourcing
    • increasing transportation costs
    • competitive pressures
    • increasing globalization
    • increasing importance of e-commerce
    • increasing complexity of supply chains
    • increasing pressure to decrease inventories
  • 19. Benefits of Supply Chain Management
    • Lower inventories
    • Lower costs
    • Higher productivity
    • Greater agility
    • Shorter lead times
    • Higher profits
    • Greater customer loyalty
    • Integration of seperate organizations into a cohesive operating system
  • 20. Actual Benefits Gained by 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
  • 21. Effective Supply Chain
    • Requires linking the market, distribution channels processes, and suppliers
  • 22. Requirements of a Successful Supply Chain
    • Trust among trading partners
    • Effective communications
    • Supply chain should enable members to 1) s hare forecasts , 2) d etermine the status of orders in real time , 3) a ccess inventory data of partners
    • Supply chain visibility
    • Event-management capability
      • The ability to detect and respond to unplanned events
    • Measuring SC Performance: Performance metrics
  • 23. Measuring SC Performance : Inventory Turnover
    • One of the most commonly used measures is “Inventory Turnover”
  • 24. Measuring SC Performance : SCOR Metrics Total inventory days of supply Cash-to-cash cycle time Net asset turns Assets/utilization Supply chain management costs Warranty cost as a percent of revenue Value added per employee Expenses Supply chain response time Upside production flexibility Flexibility On-time delivery Order fulfillment lead time Fill rate (fraction of demand met from stock) Perfect order fulfillment Reliability Metrics Perspective
  • 25. Supply Chain Uncertainty
    • Forecasting, lead times, batch ordering, price fluctuations, and inflated orders contribute to variability
    • Inventory is a form of insurance
    • Distorted information is one of the main causes of uncertainty
  • 26. Bullwhip Effect Final Customer Initial Supplier Demand Inventory oscillations become progressively larger mov ing backward through the supply chain
  • 27. Inventories in a SC: Bullwhip Effect Order Quantity Time Retailer’s Orders Order Quantity Time Wholesaler’s Orders Order Quantity Time Manufacturer’s Orders The magnification of variability in orders in the supply-chain A lot of retailers each with little variability in their orders…. … can lead to greater variability for a fewer number of wholesalers, and… … can lead to even greater variability for a single manufacturer.
  • 28. Inventories in a SC: Bullwhip Effect Tier 2 Suppliers Tier 1 Suppliers Producer Distributor Retailer Final Customer Amount of inventory =
  • 29. Role of Information in the Supply Chain (1 of 2)
    • Centralized coordination of information flows
    • Integration of transportation, distribution, ordering, and production
    • Direct access to domestic and global transportation and distribution channels
    • Locating and tracking the movement of every item in the supply chain
  • 30. Role of I nformation in the Supply Chain (2 of 2)
    • Data interchange
    • Data acquisition at the point of origin and point of sale
    • Intercompany and intracompany information access
    • Instantaneous updating of inventory levels
  • 31. Some IT Applications for SCM (1 of 3)
    • Electronic Business (replacement of physical processes with electronic ones)
    • Electronic Data Interchange (a computer-to-computer exchange of business documents in a standard format)
    • Bar Coding (computer readable codes attached to items flowing through the SC). Generates point-of-sale data which is useful for determining sales trends, ordering, production scheduling, and deliver y plans
  • 32. Some IT Applications for SCM (2 of 3)
    • RFID Technology
    • Used to track goods in supply chain
    • RFID tag s attached to object s
    • Similar to bar codes but uses radio frequency to transmit product information to receiver
    • RFID eliminates need for manual counting and bar code scanning
  • 33. Some IT Applications for SCM (3 of 3)
    • Internet (provides instant access to organizations, individuals and information sources; fundamentaly changes the way organizations do business; add speed and accessibility to the SC)
    • Intranets (internet-like networks that operate within a single organization)
    • Extranets (intranets that can be connected to the global internet & that include a company’s suppliers and customers; they allow limited access)
  • 34. The Internet
    • Instant global access to organizations, individuals, and information sources
    • Fundamentally changes the way organizations do business
    • Removed geographic barriers
    • Adds speed and accessibility to the supply chain
  • 35. Build-to-Order Cars over the Internet
  • 36.
    • E-Business : the use of electronic technology to facilitate business transactions
    • Applications include :
      • Internet buying and selling
      • E-mail
      • Order and shipment tracking
      • Electronic data interchange
    E-Business
  • 37.  
  • 38.
        • Global presence and increased visibility
        • Global access to markets and customers
        • Improve d competitiveness , quality and service
        • Greater choices and more information for customers
        • Collection and analysis of customer data and preferences
        • Shorten ed supply chain response times
    Advantages of E-Business (1 of 2)
  • 39.
        • Shorten transaction times for ordering and delivery
        • C ost and price reductions
        • V irtual companies with lower prices
        • Level ing the playing field for small companies
        • Reducing or eliminating intermediaries
        • Improved service
    Advantages of E-Business (2 of 2)
  • 40.
    • Customer expectations
      • Order quickly -> fast delivery
    • Order fulfillment
      • Order rate often exceeds ability to fulfill it
    • Inventory holding
      • Outsourcing loss of control
      • Internal holding costs
    Disadvantages of E-Business
  • 41. IT Issues
    • Increased benefits and sophistication come with increased costs
    • Efficient web sites do not necessarily mean the rest of the supply chain will be as efficient
    • Security problems are very real
    • Partnership and trust are important elements that may be new to business relationships
  • 42.
    • Purchasing is responsible for obtaining the materials, parts, and supplies and services needed to produce a product or provide a service.
    • Purchasing cycle : Series of steps that begin with a request for purchase and end with notification of shipment received in satisfactory condition .
    Purchasing
  • 43.
    • Identifying sources of supply
    • Negotiating contracts
    • Maintaining a database of suppliers
    • Obtaining goods and services
    • Managing supplies
    Duties of Purchasing
  • 44. Purchasing Interfaces Purchasing Legal Accounting Operations Data processing Design Receiving Suppliers
  • 45. Purchasing Cycle
    • Requisition received
    • Supplier selected
    • Order is placed
    • O rders are monitored
    • O rders are received
    Purchasing Legal Accounting Operations Data process- ing Design Receiving Suppliers
  • 46.
    • Centralized purchasing
      • Purchasing is handled by one special department
    • Decentralized purchasing
      • Individual departments or separate locations handle their own purchasing requirements
    Centralized vs Decentralized Purchasing
  • 47.
    • Choosing suppliers
    • Evaluating sources of supply
    • Supplier audits
    • Supplier certification
    • Supplier relationships
    • Supplier partnerships
    Suppliers
  • 48. Sourcing
    • Sourcing is the selection of suppliers
    • Relationship between customers and suppliers focuses on collaboration and cooperation
    • Outsourcing has become a long-term strategic decision
    • Organizations focus on core competencies
    • Single-sourcing is increasingly a part of supplier relations
  • 49. Suppliers
    • Purchased materials account for about half of manufacturing costs
    • Materials, parts, and service must be delivered on time, of high quality, and low cost
    • Suppliers should be integrated into their customers’ supply chains
    • Partnerships should be established
    • On-demand delivery (JIT) is a frequent requirement
  • 50.
    • Evaluating the sources of supply in terms of:
    • Price
    • Quality
    • Flexibility
    • Location
    • Product or service changes
    • Reputation and financial stability
    • Lead times and on-time delivery
    • Inventory policy
    • Services (such as technical support) provided
    Vendor Analysis
  • 51. Supplier as a Partner Nearness is important Widely dispersed Location Relatively high Relatively low Flexibility High May be low Volume of business At the source; vendor certified May be unreliable; buyer inspects Quality High Low Openness High May not be high Reliability Moderately important Major consideration Low price Long-term May be brief Length of relationship One or a few Many Number of suppliers Partner Adversary Aspect
  • 52.
    • Ideas from suppliers could lead to improved competitiveness
      • Reduce cost of making the purchase
      • Reduce transportation costs
      • Reduce production costs
      • Improve product quality
      • Improve product design
      • Reduce time to market
      • Improve customer satisfaction
      • Reduce inventory costs
      • Introduce new products or services
    Supplier Partnerships
  • 53. E-Procurement
    • Business-to-business commerce conducted on the Internet
    • Benefits include lower transaction costs, lower prices, reduce clerical labor costs, and faster ordering and delivery times
    • Currently used more for indirect goods
    • E-Marketplaces service industry-specific companies and suppliers
  • 54. The Wal-Mart Supply Chain
  • 55. Centralized Supply at Honda America
  • 56. Distribution System
    • Encompasses all of the distribution channels, processes and functions, including warehousing and transportation, that a product passes through on its way to the final customer.
  • 57. Distribution
    • The actual movement of products and materials between locations
    • Handling of materials and products at receiving docks, storing products, packaging, and shipping
    • Often called logistics
    • Driving force today is speed
    • Particularly important for Internet dot-coms
  • 58. 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 Logistics
  • 59. Materials Movement RECEIVING Storage Work center Work center Work center Storage Work center Storage Shipping
  • 60. Figure 7.5 Order Fulfillment at Amazon.com
  • 61. Third-Party Logistics The term used to describe the outsourcing of logistics management.
  • 62. Reverse Logistics
    • Reverse logistics – the backward flow of goods returned to the supply chain
    • Processing returned goods
      • Sorting, examining/testing, restocking, repairing
      • Reconditioning, recycling, disposing
    • Gatekeeping – screening goods to prevent incorrect acceptance of goods
    • Avoidance – finding ways to minimize the number of items that are returned
  • 63. Distribution Centers and Warehousing
    • Trend is for more frequent orders in smaller quantities
    • Flow-through facilities and automated material handling
    • Final assembly and product configuration may be done at the DC
  • 64. Warehouse Management Systems
    • Highly automated systems
    • Controls item putaway, picking, packing, and shipping
    • Cross-docking : Goods arriving at a warehouse from a supplier are unloaded from the supplier’s truck and loaded onto outbound trucks
      • Avoids warehouse storage
  • 65. A WMS
  • 66. Vendor-Managed Inventory
    • Stocking information is accessed using EDI
    • A first step towards supply chain collaboration
    • Increased speed, reduced errors, and improved service
  • 67. Transportation
    • The movement of a product from one location to another as it makes its way to the end-use customer
    • Important element, often overlooked
    • Common methods are railroads, trucking, water, air, intermodal, package carriers, and pipelines
  • 68. Linking the Supply Chain with SAP
  • 69. SC Design System: CPFR
    • C ollaborative P lanning, F orecasting, and R eplenishment
    • A system based on the notion that there should be cooperation among supply chain partners in planning, coordination of activities and information sharing, which in turn requires partners to agree on common goals (goal sharing)
  • 70. CPFR Process
    • Internet-based exchange of data and information
    • Significant decrease in inventory levels and more efficient logistics
    • Companies focus on core competencies
  • 71. CPFR Results
    • Nabisco and Wegmans
      • 50% increase in category sales
    • Wal-mart and Sara Lee
      • 14% reduction in store-level inventory
      • 32% increase in sales
    • Kimberly-Clark and Kmart
      • Increased category sales that exceeded market growth
  • 72. Global Supply Chain Problems
    • National and regional differences
    • Customs, business practices, and regulations
    • Foreign markets are not homogeneous
    • Quality can be a major issue
  • 73. Some Issues in Global Supply Chains
      • Language
      • Culture
      • Currency fluctuations
      • Political
      • Transportation costs
      • Local capabilities
      • Finance and economics
      • Environmental
  • 74. Infrastructure Obstacles to Global Trade
    • Some emerging markets lack suitable distribution systems, i.e. roads, rail systems
    • Existing roads and ports may be inadequate
    • Market instability, political instability
    • Vertical integration is a common solution
  • 75.
    • Develop strategic objectives and tactics
    • Integrate and coordinate activities in the internal supply chain
    • Coordinate activities with suppliers & with customers
    • Coordinate planning and execution across the supply chain
    • Form strategic partnerships
    Creating an Effective Supply Chain
  • 76. Supply Chain Performance Drivers
    • Quality
    • Cost
    • Flexibility
    • Velocity
    • Customer service
  • 77. Velocity
    • Inventory velocity
      • The rate at which inventory(material) goes through the supply chain
    • Information velocity
      • The rate at which information is communicated in a supply chain
  • 78.
    • Barriers to integration of organizations
    • Getting top management on board
    • Small businesses
    • Variability and uncertainty
    • Long lead times
    • Dealing with trade-offs
    Challenges to Optimizing SCs
  • 79.
    • Lot-size-inventor y
    • Inventory-transportation costs
      • Cross-docking
    • Lead time-transportation costs
    • Product variety-inventory
      • Delayed differentiation
    • Cost-customer service
      • Disintermediation
    Trade-offs in SCM
  • 80. Techniques to Increase SC Efficiency
    • Delayed differentiation
      • Production of standard components and subassemblies, which are held until late in the process to add differentiating features
    • Disintermediation
      • Reducing one or more steps in a supply chain by cutting out one or more intermediarie s
      • + Cross Docking
      • + Drop Shipping
  • 81. Potential Solutions to SC Problems Less variety Able to match supply and demand Shorter lead times, better forecasts Variability Loss of control Reduced cost, higher quality Outsourcing Cost Quality Less variety Fewer parts Simpler ordering Modular Large number of parts May not be feasible May need absorb functions Quick response Delayed differentiation Disintermediation Long lead times Traffic congestion Increased costs Reduced holding costs Smaller, more frequent deliveries Large inventories Possible Drawbacks Benefits Potential Improvement Problem
  • 82. Critical Issues in SCM
    • Increased s trategic importance
    • Emphasis on c ost , q uality ,a gility and c ustomer service
    • Technology management
    • Increased conversion to lean production
    • Just-in-time deliveries
    • Few suppliers and vendor integration
    • Increased outsourcing
    • Globalization