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  1. 1. Supply Chain Management COSC643 E-Commerce Supply Chain Management Sungchul Hong
  2. 2. Logistics and Supply Chain <ul><li>Logistics and supply chain management refer to the art of managing the flow of materials and products from source to user . </li></ul><ul><li>The logistics system includes the total flow of materials, from the acquisition of raw materials to delivery of finished products to the ultimate users </li></ul>
  3. 3. Supply Chain Activities <ul><li>sourcing and purchasing </li></ul><ul><li>conversion (manufacturing) </li></ul><ul><ul><li>Capacity planning, technology solution, operations management, production scheduling, and materials planning (MRP II) </li></ul></ul><ul><li>Distribution planning and management industry warehouse operation </li></ul><ul><li>Inventory management and inbound and outbound transportation </li></ul><ul><li>Linkage with the customer service, sales, promotion, and marketing activities. </li></ul>
  4. 4. Physical Distribution <ul><li>Portion of a logistics system concerned with the outward movement of productions from the seller to customer or consumer. </li></ul>
  5. 5. Physical Supply <ul><li>The portion of a logistics system concerned with inward movement of materials or products from sources or the suppliers . </li></ul>
  6. 6. Manufacturing Planning and Control <ul><li>The management of materials through a manufacturing facility. </li></ul><ul><li>Generally involves raw-material inventory control, capacity planning, production scheduling, shop-floor control, work-in-process inventory control, and purchasing. </li></ul>
  7. 7. Distribution <ul><li>The combination activities and institutions associated with the advertising, sale, and physical transfer of products and services. </li></ul><ul><li>It is concerned with broader matters than logistics alone. </li></ul>
  8. 8. Extended supply chain <ul><li>The integrated set of activities completed by the full supply chain participants. </li></ul><ul><ul><li>suppliers, manufacturers, distributors, retailers/customers, and consumers/end users </li></ul></ul>
  9. 9. Integrated Logistics <ul><li>Integrated logistics management can improve both cost and customer service performance . </li></ul><ul><li>The total cost concept of logistics is based on the interrelationship of supply, manufacturing, and distribution costs. </li></ul><ul><ul><li>Ordering, inventory, transportation, production setup, warehousing, customer service and other logistics costs are interdependent </li></ul></ul>
  10. 10. Example <ul><li>Seasonal demand (400, 700, 500, 300) </li></ul><ul><li>Inventory level (450, 750, 550, 350) </li></ul><ul><ul><li>To meet the inventory level, the production should be changed. (450, 700, 500, 300) </li></ul></ul><ul><ul><li>Inventory cost $10 per 50 units </li></ul></ul><ul><li>Level of production </li></ul><ul><ul><li>Production costs $1,000 per 600 units </li></ul></ul><ul><li>Decide the method either inventory level model or level of production model. </li></ul>
  11. 12. Example 2 <ul><li>Regional stocking </li></ul><ul><ul><li>Warehouse cost vs. bulk transportation price </li></ul></ul><ul><li>Transportation cost </li></ul>
  12. 13. Functional Integration <ul><li>Businesses manage their activities through “functional groupings” </li></ul><ul><ul><li>sales, marketing, manufacturing, finance, distribution </li></ul></ul><ul><li>The functional excellence could be measured by higher sales, lower transportation costs, lower inventories, or better control of operations. </li></ul>
  13. 14. Two types of business environments <ul><li>Stable environment </li></ul><ul><ul><li>demand certainty, low seasonality, longer product life cycles, and low competitive intensity </li></ul></ul><ul><ul><li>it is best to organize for functional excellence. </li></ul></ul><ul><li>Dynamic environment </li></ul><ul><ul><li>Demand uncertainty, significant seasonality, short product life cycles, or high competitive intensity </li></ul></ul><ul><ul><li>Companies that organize for functional integration tend to outperform those that are organized for functional excellence. </li></ul></ul>
  14. 15. Strategies for Better Performance <ul><li>Mange the process, not the function. </li></ul><ul><li>Align measurement systems and incentives with overall goals. </li></ul><ul><li>Utilize integrating mechanisms such as the sales and operations planning meeting, cross-functional teams, and team problem- solving approaches. </li></ul><ul><li>Work to develop a culture that encourages teaming and cross-functional collaboration. </li></ul>
  15. 16. Managing the Pipeline <ul><li>Activities in an integrated pipeline </li></ul><ul><li>Supply: sourcing, purchasing, inbound transportation, raw materials, and parts inventory. </li></ul><ul><li>Operations: production planning, production scheduling, work-in-process inventory. </li></ul><ul><li>Distribution: forecasting, customer service, finished-goods inventory, warehousing, outbound transportation. </li></ul>
  16. 17. Variables for Integrated Pipeline <ul><li>Cost – The full cost of processing and moving materials from source to point of use. </li></ul><ul><li>Service-Including issues such as delivery reliability, in-stock performance, and delivery lead time. </li></ul><ul><li>Velocity-The time it takes to move products through the logistics pipeline. </li></ul>
  17. 18. Pipeline Analysis <ul><li>The effect of long production runs and manufacturing lead times on system inventory. </li></ul><ul><li>The impact of marketing promotions on operating costs and on effective net margins. </li></ul><ul><li>The cost of or savings available from transportation consolidations. </li></ul><ul><li>The cost of multiple handling through a multi-echelon warehouse network. </li></ul>
  18. 19. Fluid Distribution <ul><li>Inventory visibility </li></ul><ul><ul><li>point-of-sale information to monitor usage rtes at the retail level </li></ul></ul><ul><li>Manage flow, not replenishment </li></ul><ul><li>Flexible distribution </li></ul><ul><ul><li>Cross-dock operations and plant-direct shipments </li></ul></ul><ul><ul><li>Delivery lead time, amount of freight </li></ul></ul><ul><li>JIT (Just in Time) manufacturing </li></ul><ul><li>Advanced information systems </li></ul>
  19. 20. Seven Principles of Supply Chain Management <ul><li>Begin with the customer by understanding the customer’s values and requirements. </li></ul><ul><li>Mange logistics assets across the supply chain, not just within the enterprise. </li></ul><ul><li>Organize customer management so that it provides one “face’ to the customer for information and customer service. </li></ul><ul><li>Integrate sales and operations planning as the basis for a more responsive supply chain. </li></ul>
  20. 21. Seven Principles of Supply Chain Management <ul><li>Leverage manufacturing and sourcing for flexible and efficient operations. </li></ul><ul><li>Focus on strategic alliances and relationship management across channel partners. </li></ul><ul><li>Develop customer-driven performance measures. </li></ul>
  21. 22. What Is Logistics Strategy? <ul><li>Logistics strategy involves the determination of what performance criteria the logistics system must maintain-more specifically, the service levels and cost objectives the logistics system must meet . </li></ul>
  22. 23. Logistics strategy development and planning <ul><li>Critical inputs </li></ul><ul><li>Visioning session </li></ul><ul><li>Logistics strategic analysis </li></ul><ul><li>Logistics planning </li></ul><ul><ul><li>summarized, outlining objectives, programs, milestones, and key measures of performance </li></ul></ul>
  23. 24. The Logistics Strategy Pyramid <ul><li>Strategic </li></ul><ul><ul><li>What are the basic and distinctive service needs of your customers? </li></ul></ul><ul><ul><li>What must logistics do to meet those needs? </li></ul></ul><ul><ul><li>Can we use our logistics capabilities to provide unique services to our customers? </li></ul></ul>
  24. 25. The Logistics Strategy Pyramid <ul><li>Structural </li></ul><ul><ul><li>Should we serve the market directly or should we use distributors or other intermediaries to reach our customers? </li></ul></ul><ul><ul><li>What should our logistics network look like? </li></ul></ul><ul><ul><li>What products should be sourced from which manufacturing locations? </li></ul></ul><ul><ul><li>How many warehouses should we have? </li></ul></ul><ul><ul><li>Where should they be located, and what is the mission of each facility? </li></ul></ul>
  25. 26. The Logistics Strategy Pyramid <ul><li>Functional </li></ul><ul><ul><li>Achieving functional excellence requires that they design optimal operating practices for transportation management, warehouse operations, and materials management </li></ul></ul>