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Supply Chain Management - Opreations Management

Supply Chain Management - Opreations Management






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    Supply Chain Management - Opreations Management Supply Chain Management - Opreations Management Presentation Transcript

    • Supply Chain• All facilities, functions, activities, associated with flow and transformation of goods and services from raw materials to customer, as well as the associated information flows• An integrated group of processes to “source,” “make,” and “deliver” products
    • Supply Chain Illustration
    • Supply Chain Processes
    • Transportation• Rail • low-value, high-density, bulk products, raw materials, intermodal containers • not as economical for small loads, slower, less flexible than trucking• Trucking • main mode of freight transport in the world • small loads, point-to-point service, flexible • More reliable, less damage than rails; more expensive than rails for long distance
    • Australian Fuel Distributors
    • Transportation (cont.)• Air • most expensive and fastest, mode of freight transport • lightweight, small packages <500 lbs • high-value, perishable and critical goods • less theft• Package Delivery • small packages • fast and reliable • increased with e-Business • primary shipping mode for Internet companies
    • Transportation (cont.)• Water • low-cost shipping mode • primary means of international shipping • U.S. waterways • slowest shipping mode• Intermodal • combines several modes of shipping- truck, water and rail • key component is containers• Pipeline • transport oil and products in liquid form • high capital cost, economical use • long life and low operating cost
    • Supply Chain Management (SCM)• Managing flow of information through supply chain in order to attain the level of synchronization that will make it more responsive to customer needs while lowering costs• Keys to effective SCM • information • communication • cooperation • trust
    • Supply Chain Uncertainty• One goal in SCM: • Factors that contribute to • respond to uncertainty in customer demand without uncertainty creating costly excess • inaccurate demand forecasting inventory • long variable lead times• Negative effects of • late deliveries uncertainty • incomplete shipments • lateness • price fluctuations and discounts • incomplete orders• Inventory • insurance against supply chain uncertainty
    • Bullwhip EffectOccurs when slight demand variability is magnified as information moves back upstream The Bullwhip Effect (or Whiplash Effect) is an observed phenomenon in forecast-driven distribution channels. It refers to a trend of larger and larger swings in inventory in response to changes in demand, as one looks at firms further back in the supply chain for a product.
    • Elaboration of bullwhip effect• As the customer demand is rarely perfectly stable, the businesses must forecast the same demand to properly position inventory and other resources Forecasts are based on numerical values (statistics), and they are rarely perfectly accurate. companies often carry an inventory buffer called "safety stock”.• Moving up the supply chain from end-consumer to raw materials supplier, each supply chain participant has greater observed variation in demand and thus greater need for safety stock. The effect is that variations are amplified as one moves upstream in the supply chain (further from the customer).
    • Information Technology:• Information links all aspects of • Bar code and point-of-sale supply chain • record of a sale• E-business • Radio frequency identification • replacement of physical business (RFID) processes with electronic ones • technology can send product data• Electronic data interchange (EDI) from an item to a reader via radio • a computer-to-computer exchange waves of business documents • Internet • allows companies to communicate with suppliers, customers, shippers and other businesses around the world.
    • Supply Chain Evolution at NabiscoSource: F. Keenan, “Logistics Gets a Little Respect,” Business Week (November 20, 2000), pp. 112–115.
    • Supply Chain Evolution at Nabisco(cont.)Source: F. Keenan, “Logistics Gets a Little Respect,” Business Week (November 20, 2000), pp. 112–115.
    • Supply Chain Evolution at Nabisco(cont.)Source: F. Keenan, “Logistics Gets a Little Respect,” Business Week (November 20, 2000), pp. 112–115.
    • Build-to-order cars over the Internet
    • E-automotive Supply Chain Supply Chain Automotive E-Automotive Processes Past•• Customer sales Customer sales  Push—sell from  Pull—build-to-order inventory stock•• Production Production  Goal of even and  Focus on customer stable production demand, respond with supply chain flexibility  Fast, reliable, and  Mass approach customized to get cars•• Distribution Distribution to specific customer location  Shared by dealers and  Dealer-owned•• Customer Customer manufacturers relationship relationship
    • E-automotive Supply Chain (cont.) Supply Automotive Chain E-Automotive Past Processes•• Managing Managing  Large car  Small inventories with uncertainty uncertainty inventory at shared information and dealers strategically placed parts•• Procurement  Batch-oriented; inventories Procurement dealers order  Orders made in real time based on based on available-to- allocations promise information  Complex  Simplified products based on•• Product design Product design products don’t better information about what match customer customers want needs
    • Supply Chain Integration• Information sharing among supply chain members • Reduced bullwhip effect • Early problem detection • Faster response • Builds trust and confidence• Collaborative planning, forecasting, replenishment, and design • Reduced bullwhip effect • Lower Costs (material, logistics, operating, etc.) • Higher capacity utilization • Improved customer service levels
    • Supply Chain Integration (cont.)• Coordinated workflow, production and operations, procurement • Production efficiencies • Fast response • Improved service • Quicker to market
    • Collaborative Planning, Forecasting,and Replenishment• Process for two or more companies in a supply chain to synchronize their demand forecasts into a single plan to meet customer demand• Parties electronically exchange • past sales trends • point-of-sale data • on-hand inventory • scheduled promotions • forecasts
    • Measuring Supply ChainPerformance• Key performance indicators • inventory turnover • cost of annual sales per inventory unit • inventory days of supply • total value of all items being held in inventory • fill rate • rate of orders filled by a distribution center within a specific time period
    • Key Performance Indicators Cost of goods soldInventory turnover = Average aggregate value of inventory Average aggregate value of inventory = (average inventory for item i) X (unit value item i) = Average aggregate value of inventory Days of supply = (Costs of goods sold)/(365 days)
    • Key Performance Indicators: Example1. Cost of goods sold: $425 million2. Production materials and parts: $4,629,0003. Work-in-process: $17,465,0004. Finished goods: $12,322,0005. Total average aggregate value of inventory (2+3+4): $34,416,000 $425, 000, 000 Inventory turns = = 12.3 $34,416,000 $34,416,000 Days of supply = = 29.6 ($425,000,000)/(365)