Heizer om10 ch11-supply chain
Upcoming SlideShare
Loading in...5
×
 

Heizer om10 ch11-supply chain

on

  • 1,392 views

 

Statistics

Views

Total Views
1,392
Views on SlideShare
1,392
Embed Views
0

Actions

Likes
0
Downloads
39
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Heizer om10 ch11-supply chain Heizer om10 ch11-supply chain Document Transcript

  • 10/16/2010 Supply-Chain 11 Management Global Company Profile: Outline Darden Restaurants The Supply Chain’s Strategic Importance PowerPoint presentation to accompany Supply Chain Risk Heizer and Render Operations Management, 10e Principles of Operations Management, 8e Ethics and Sustainability PowerPoint slides by Jeff Heyl Supply-Chain Economics Make-or-Buy Decisions Outsourcing© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 1 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 2 Outline – Continued Outline – Continued Managing the Supply Chain Supply-Chain Strategies Issues in an Integrated Supply Chain Many Suppliers Opportunities in an Integrated Supply Few Suppliers Chain Vertical Integration E-Procurement Joint Ventures Online Catalogs Keiretsu Networks Auctions Virtual Companies RFQs Realtime Inventory Tracking© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 3 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 4 Outline – Continued Outline – Continued Vendor Selection Logistics Management Vendor Evaluation Distribution Systems Vendor Development Third-Party Logistics Negotiations Cost of Shipping Alternatives Security and JIT Measuring Supply-Chain Performance© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 5 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 6 1
  • 10/16/2010 Learning Objectives Learning Objectives When you complete this chapter you When you complete this chapter you should be able to: should be able to: 1. Explain the strategic importance of 5. Explain major issues in logistics the supply chain management 2. Identify six supply-chain strategies 6. Compute percent of assets 3. Explain issues and opportunities in committed to inventory and the supply chain inventory turnover 4. Describe the steps in vendor selection© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 7 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 8 Darden Restaurants Darden Restaurants Largest publicly traded casual Sources food from five continents dining company in the world and thousands of suppliers Serves over 400 million meals Four distinct supply chains pp y annually in more than 1,800 Over $1.5 billion spent annually in restaurants in the US and Canada supply chains Annual sales of $6.7 billion Competitive advantage achieved Operations is the strategy through superior supply chain© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 9 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 10 Supply- Supply-Chain Management The Supply Chain’s Strategic Importance The objective is to build a chain of Supply chain management is the suppliers that focuses on integration of the activities that maximizing value to the ultimate g procure materials and services, services customer transform them into intermediate goods and final products, and deliver them through a distribution system Competition is no longer between companies; it is between supply chains© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 11 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 12 2
  • 10/16/2010 Supply Chain Management A Supply Chain for Beer Important activities include determining 1. Transportation vendors 2. Credit and cash transfers 3. Suppliers 4. Distributors 5. Accounts payable and receivable 6. Warehousing and inventory 7. Order fulfillment 8. Sharing customer, forecasting, and production information Figure 11.1© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 13 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 14 How Supply Chain How Supply Chain Decisions Impact Strategy Decisions Impact Strategy Low-Cost Response Differentiation Low-Cost Response Differentiation Strategy Strategy Strategy Strategy Strategy Strategy Supplier’s Supply demand Respond quickly Share market Process Maintain high Invest in excess Modular goal at lowest to changing research; charact- average capacity and processes that poss b e possible cost equ e e ts requirements jo t y develop jointly de e op e st cs eristics ut at o utilization e be flexible e d lend (e.g., Emerson and demand to products and processes themselves to Electric, Taco minimize options (e.g., mass Bell) stockouts (e.g., Benetton) customization Dell Computers) Inventory Minimize Develop Minimize Primary Select primarily Select primarily Select primarily charact- inventory responsive inventory in the selection for cost for capacity, for product eristics throughout the system with chain to avoid criteria speed, and development chain to hold buffer stocks obsolescence flexibility skills down cost positioned to ensure supply Table 11.1 Table 11.1© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 15 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 16 How Supply Chain Supply Chain Risk Decisions Impact Strategy Low-Cost Response Differentiation More reliance on supply chains means Strategy Strategy Strategy more risk Lead-time Shorten lead Invest Invest charact- time as long as aggressively to aggressively to Fewer suppliers increase dependence e st cs eristics it does not t ot educe reduce educe reduce increase costs production lead development Compounded by globalization and time lead time logistical complexity Product- Maximize Use product Use modular design charact- performance and minimize designs that lead to low design to postpone Vendor reliability and quality risks eristics costs setup time and product rapid differentiation Political and currency risks production as long as ramp-up possible Table 11.1© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 17 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 18 3
  • 10/16/2010 Supply Chain Risk Supply Chain Risk Mitigate and react to disruptions in Reducing risk in supply chains 1. Processes Process risk at McDonald’s 2. Controls Process risk at Ford 3. Environment Controls t Darden Restaurants C t l at D d R t t Control risk at Boeing Environmental risk at Hard Rock Café Environmental risk at Toyota© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 19 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 20 Ethics and Sustainability Principles and Standards for Ethical Supply Management Personal ethics Conduct Institute for Supply Management Principles and Standards LOYALTY TO YOUR ORGANIZATION Ethics ithi th Ethi within the supply chain l h i JUSTICE TO THOSE WITH WHOM YOU Ethical behavior regarding the DEAL environment FAITH IN YOUR PROFESSION Table 11.2© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 21 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 22 Principles and Standards for Principles and Standards for Ethical Supply Management Ethical Supply Management Conduct Conduct 1. PERCEIVED IMPROPRIETY Prevent the intent and 4. RESPONSIBILITIES TO YOUR EMPLOYER appearance of unethical or compromising Uphold fiduciary and other responsibilities using conduct in relationships, actions and reasonable care and granted authority to deliver communications value to your employer 2. CONFLICTS OF INTEREST Ensure that any 5. SUPPLIER AND CUSTOMER RELATIONSHIPS personal, business or other activity does not Promote positive supplier and customer conflict with the lawful interests of your employer relationships 3. ISSUES OF INFLUENCE Avoid behaviors or 6. SUSTAINABILITY AND SOCIAL RESPONSIBILITY actions that may negatively influence, or appear Champion social responsibility and sustainability to influence, supply management decisions practices in supply management Table 11.2 Table 11.2© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 23 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 24 4
  • 10/16/2010 Principles and Standards for Principles and Standards for Ethical Supply Management Ethical Supply Management Conduct Conduct 7. CONFIDENTIAL AND PROPRIETARY 10. PROFESSIONAL COMPETENCE Develop skills, INFORMATION Protect confidential and expand knowledge and conduct business that proprietary information demonstrates competence and promotes the 8. RECIPROCITY Avoid improper reciprocal supply management profession l t f i agreements 9. APPLICABLE LAWS, REGULATIONS AND TRADE AGREEMENTS Know and obey the letter and spirit of laws, regulations and trade agreements applicable to supply management Table 11.2 Table 11.2© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 25 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 26 Supply Chain Economics Supply Chain Economics Supply Chain Costs as a Percent of Sales Dollars of additional sales needed to equal $1 saved through the supply chain Industry % Purchased All industry 52 Percent of Sales Spent in the Supply Chain Automobile A t bil 67 Percent Net Profit Food 60 of Firm 30% 40% 50% 60% 70% 80% 90% 2 $2.78 $3.23 $3.85 $4.76 $6.25 $9.09 $16.67 Lumber 61 4 $2.70 $3.13 $3.70 $4.55 $5.88 $8.33 $14.29 Paper 55 6 $2.63 $3.03 $3.57 $4.35 $5.56 $7.69 $12.50 8 $2.56 $2.94 $3.45 $4.17 $5.26 $7.14 $11.11 Petroleum 79 10 $2.50 $2.86 $3.33 $4.00 $5.00 $6.67 $10.00 Transportation 62 Table 11.3 Table 11.4© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 27 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 28 Make-or- Make-or-Buy Decisions Outsourcing Choice between internal production Transfers traditional internal and external sources activities and resources of a firm to outside vendors Utilizes th efficiency that comes Utili the ffi i th t with specialization Firms outsource information technology, accounting, legal, logistics, and production© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 29 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 30 5
  • 10/16/2010 Supply Chain Strategies Many Suppliers Negotiating with many suppliers Commonly used for commodity products Long-term partnering with few suppliers Purchasing is typically based on price Vertical i t V ti l integration ti Suppliers compete with one Joint ventures another Keiretsu Supplier is responsible for Virtual companies that use technology, expertise, forecasting, suppliers on an as needed basis cost, quality, and delivery© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 31 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 32 Few Suppliers Vertical Integration Buyer forms longer term Vertical Integration Examples of Vertical Integration Raw material relationships with fewer suppliers (suppliers) Iron ore Silicon Farming Create value through economies of Backward Steel integration scale and learning curve g improvements Current Automobiles Integrated Flour milling transformation circuits Suppliers more willing to participate Distribution in JIT programs and contribute Forward integration systems Circuit boards design and technological expertise Finished goods Computers (customers) Dealers Watches Baked goods Cost of changing suppliers is huge Calculators Figure 11.2© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 33 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 34 Vertical Integration Joint Ventures Developing the ability to produce goods or service previously purchased Formal collaboration Integration may be forward, towards the Enhance skills customer, or backward, towards suppliers Secure supply Can improve cost, quality, and inventory Reduce costs but requires capital, managerial skills, Cooperation without diluting brand and demand or conceding competitive advantage Risky in industries with rapid technological change© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 35 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 36 6
  • 10/16/2010 Keiretsu Networks Virtual Companies A middle ground between few suppliers and vertical integration Rely on a variety of supplier Supplier becomes part of the company relationships to provide services on coalition demand Often provide financial support for Fluid Fl id organizational boundaries that i ti lb d i th t suppliers through ownership or loans allow the creation of unique enterprises Members expect long-term relationships to meet changing market demands and provide technical expertise and Exceptionally lean performance, low stable deliveries capital investment, flexibility, and speed May extend through several levels of the supply chain© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 37 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 38 Managing the Supply Chain Issues in an Integrated Supply Chain There are significant management issues in Local optimization - focusing on local controlling a supply chain involving many profit or cost minimization based on independent organizations limited knowledge Incentives (sales incentives, quantity I ti ( l i ti tit Mutual agreement on goals discounts, quotas, and promotions) - Trust push merchandise prior to sale Compatible organizational cultures Large lots - low unit cost but do not reflect sales Bullwhip effect - stable demand becomes lumpy orders through the supply chain© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 39 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 40 Opportunities in an Opportunities in an Integrated Supply Chain Integrated Supply Chain Accurate “pull” data Collaborative planning, Lot size reduction forecasting, and replenishment (CPFR) Single stage control of replenishment Blanket orders Vendor managed inventory Standardization (VMI)© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 41 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 42 7
  • 10/16/2010 Opportunities in an Radio Frequency Tags Integrated Supply Chain Radio Frequency Tags: Keeping the Shelves Stocked Supply chains work smoothly when sales are steady, but often break down when confronted by a sudden surge in demand. Radio frequency ID (or RFID) tags can change that by providing real-time information about what’s happening on store shelves. Here’s how the system works for Proctor & Gamble’s Pampers. Postponement Drop shipping and special packaging Pass-through facility Channel assembly© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 43 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 44 E-Procurement E-Procurement Uses the internet to facilitate Online catalogs purchasing 1. Catalogs provided by vendors Electronic ordering and funds El t i d i df d 2. Catalogs published by 2 C t l bli h d b transfer intermediaries Electronic data interchange (EDI) 3. Exchanges provided by buyers Advanced shipping notice© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 45 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 46 Internet Trading Exchanges E-Procurement Health care products – ghx.com Auctions Retail goods – gnx.com Maintained by buyers, sellers, or intermediaries Defense and aerospace products – exostar.com exostar com Low barriers to entry Food, beverage, consumer products – transora.com Increase in the potential Steel and metal products – number of metalsite.com buyers Hotels – avendra.com© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 47 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 48 8
  • 10/16/2010 E-Procurement Vendor Selection Vendor evaluation RFQs Critical decision Can make requests for quotes Find potential vendors ( (RFQs) less costly ) y Determine the likelihood of them Improves supplier selection becoming good suppliers Real-time inventory tracking Vendor Development Training Engineering and production help Establish policies and procedures© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 49 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 50 Vendor Evaluation Vendor Selection Scores Weight Criteria Weights (1-5) x Score Negotiations Engineering/research/innovation skills .20 5 1.0 Production process capability .15 4 .6 Cost- Cost-Based Price Model - supplier (flexibility/technical assistance) opens books to purchaser Distribution/delivery capability .05 4 .2 Market- Market-Based Price Model - price Quality systems and performance .10 2 .2 based on published, auction, or Facilities/location .05 2 .1 indexed price Financial and managerial strength .15 4 .6 (stability and cost structure) Competitive Bidding - used for Information systems capability (e- .10 2 .2 infrequent purchases but may make procurement, ERP) Integrity (environmental compliance/ .20 5 1.0 establishing long-term relationships ethics) difficult Total 1.00 3.9© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 51 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 52 Logistics Management Distribution Systems Objective is to obtain efficient Trucking operations through the integration Moves the vast majority of of all material acquisition, manufactured goods movement, and storage activities Chief advantage is flexibility Is a frequent candidate for Railroads outsourcing Capable of carrying large loads Allows competitive advantage to Little flexibility though be gained through reduced costs containers and piggybacking and improved customer service have helped with this© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 53 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 54 9
  • 10/16/2010 Distribution Systems Distribution Systems Airfreight Waterways Fast and flexible for light loads Typically used for bulky, low- May be expensive value cargo Used when shipping cost is more important than speed© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 55 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 56 Distribution Systems Third- Third-Party Logistics Pipelines Outsourcing logistics can reduce costs Used for transporting oil, gas, and improve delivery reliability and and other chemical products speed Coordinate supplier inventory with delivery services May provide warehousing, assembly, testing, shipping, customs© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 57 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 58 Cost of Shipping Cost of Shipping Alternatives Alternatives Value of connectors = $1,750.00 Product in transit is a form of Holding cost = 40% per year inventory and has a carrying cost Second carrier is 1 day faster and $20 more expensive Faster shipping is generally more Daily cost of = Annual x Product /365 expensive than slower shipping holding product holding value cost We can evaluate the two costs to = (.40 x $1,750)/ 365 = $1.92 better understand the trade-off Since it costs less to hold the product one day longer than it does for the faster shipping ($1.92 < $20), we should use the cheaper, slower shipper© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 59 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 60 10
  • 10/16/2010 Security and JIT Measuring Supply-Chain Supply- Borders are becoming more open in the Performance U.S. and around the world Benchmark Monitoring and controlling stock moving Typical Firms Firms through supply chains is more important Lead time (weeks) 15 8 than ever Time spent placing an order 42 minutes 15 minutes New technologies are Percentage of late deliveries 33% 2% being developed to allow close monitoring Percentage of rejected material 1.5% .0001% of location, storage Number of shortages per year 400 4 conditions, and movement Table 11.6© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 61 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 62 Measuring Supply-Chain Supply- Measuring Supply-Chain Supply- Performance Performance Assets committed to inventory Inventory as a % of Total Assets (with exceptional performance) Percent Total inventory Manufacturing 15% invested in = i di investment x 100 (Toyota 5%) inventory Total assets Wholesale 34% (Coca-Cola 2.9%) Investment in inventory = $11.4 billion Restaurants 2.9% (McDonald’s .05%) Total assets = $44.4 billion Retail 27% Percent invested in inventory = (11.4/44.4) x 100 = 25.7% (Home Depot 25.7%) Table 11.7© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 63 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 64 Measuring Supply-Chain Supply- Measuring Supply-Chain Supply- Performance Performance Inventory turnover Examples of Annual Inventory Turnover Food, Beverage, Retail Manufacturing Cost of goods sold Inventory Anheuser Busch 15 Dell Computer 90 turnover = Inventory Coca-Cola 14 Johnson Controls 22 investment Home Depot 5 Toyota (overall) 13 McDonald’s 112 Nissan (assembly) 150 Table 11.8© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 65 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 66 11
  • 10/16/2010 Measuring Supply-Chain Supply- Measuring Supply-Chain Supply- Performance Performance Inventory turnover Inventory turnover Net revenue $32.5 Net revenue $32.5 Cost of goods sold Cost of goods sold $14.2 $14 2 Cost of goods sold = Inventory turnover I t t $14.2 $14 2 Inventory: Inventory: Inventory investment Raw material inventory $.74 Raw material inventory $.74 Work-in-process inventory $.11 = 14.2 / 1.69 = 8.4 Work-in-process inventory $.11 Finished goods inventory $.84 Finished goods inventory $.84 Total inventory investment $1.69 Total inventory investment $1.69© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 67 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 68 Measuring Supply-Chain Supply- The SCOR Model Performance Processes, metrics and best practices Inventory turnover Plan: Demand/Supply planning and Management Net revenue $32.5 Cost of goods sold Cost of goods weekly Average sold Inventory turnover = I t t $14.2 $14 2 = $14.2 /investment 52 = $.273 Inventory: goods soldInventory cost of Source: Identify, Make: Manage Deliver: Invoice, select, manage, and production execution, warehouse, transport Raw material inventory $.74 assess sources testing and packaging and install Work-in-process = 14.2 / 1.69 = 8.4 Inventory investment Weeks of supply = inventory $.11 Finished goods inventory weekly cost of Average $.84 Total inventory investment goods sold $1.69 Return: Raw material Return: Finished goods = 1.69 / .273 = 6.19 weeks Figure 11.3© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 69 © 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 70 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.© 2011 Pearson Education, Inc. publishing as Prentice Hall 11 - 71 12