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  1. 1. Supply Chain Management Chang-Yang Lin, PhD Professor and Coordinator of CIS Eastern Kentucky University
  2. 2. SCM and Inaccuracy Problems <ul><li>On a typical day in a U.S. supermarket, 8.2% of the items are out of stock. </li></ul><ul><li>33% of out-of-stock items are located in the store, just not in the correct location. </li></ul><ul><li>The cost of stockouts in U.S. supermarkets are estimated at $7 to $12 billion of sales. </li></ul><ul><li>Before being stored on store shelves, items pass through several processes, including order processing, fulfillment, staging, shipment, receiving, short-term storage, and finally shelving. </li></ul>
  3. 3. A Typical Supply Chain a coordinated system of entities, activities, information and resources involved in moving a product or service from supplier to customer
  4. 4. A Supply Chain a network of organizations and facilities that transforms raw materials into products delivered to customers also includes transportation companies, warehouses, & inventories and some means for transmitting messages & information
  5. 5. <ul><li>Dell’s own channel for </li></ul><ul><li>manufacturing and selling </li></ul><ul><li>eliminated </li></ul><ul><li>distributors and </li></ul><ul><li>retailers </li></ul>
  6. 6. Supply Chain Management <ul><li>SCM is the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible </li></ul><ul><li>SCM spans all movement and storage of raw materials , work-in-process inventory , and finished goods from point-of-origin to point-of-consumption </li></ul>
  7. 7. SCM Problems <ul><li>Distribution network configuration: Number and location of suppliers, production facilities, distribution centers, warehouses and customers. </li></ul><ul><li>Distribution strategy: Centralized versus decentralized, direct shipment, pull or push strategies, third party logistics. </li></ul><ul><li>Information: Integrate systems and processes through the supply chain to share valuable information, including demand signals, forecasts, inventory and transportation. </li></ul><ul><li>Inventory management: Quantity and location of inventory including raw materials, work-in-process and finished goods . </li></ul>
  8. 8. SCM Activities/Functions <ul><li>The purpose of SCM is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and improving inventory velocity </li></ul><ul><li>SCM activities can be grouped into strategic, tactical, and operational level of activities </li></ul>
  9. 9. The Bullwhip Effect <ul><li>An observed phenomenon in forecast-driven distribution channel s </li></ul><ul><li>Because forecast errors are a given, companies often carry &quot;safety stock&quot; </li></ul><ul><li>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 </li></ul><ul><li>The effect is that variations are amplified the farther you get from the end-consumer </li></ul>
  10. 10. The bullwhip effect is a phenomenon in which the variability in the size and timing of orders increase at each stage up the supply chain, from customer to supplier
  11. 11. The Bullwhip Effect (continued) <ul><li>One way to eliminate the bullwhip effect is to give all participants in the supply chain access to consumer-demand information from the retailer. </li></ul><ul><li>Each organization can thus plan its inventory or manufacturing based on true demand and not on the observed demand from the next organization up in the supply chain. </li></ul><ul><ul><li>An interorganizational information system is necessary to share such data. </li></ul></ul>
  12. 12. Stabilizing the Bullwhip Effect: A Demand-Driven Supply Chain <ul><li>Individual Wal-Mart stores transmit POS data from the cash register back to corporate headquarters several times a day </li></ul><ul><li>This demand information is used to queue shipments from the Wal-Mart distribution center to the store and from the supplier to the Wal-Mart distribution center </li></ul><ul><li>The result is near-perfect visibility of customer demand and inventory movement throughout the supply chain </li></ul><ul><li>A demand-driven supply chain which reacts to actual customer orders. In manufacturing, this concept is called Kanban ( カンバン 看板 ) </li></ul>
  13. 13. B2B One Section of the Supply Chain
  14. 14. Supplier Relationship Management (SRM) <ul><li>SRM is a business process for managing all contacts between an organizational and its suppliers. </li></ul><ul><li>SRM applications support three basic processes: source, purchase, and settle. </li></ul><ul><li>SRM examines inventory, determines that items are required, and automatically creates the order via its connection to the supplier’s CRM </li></ul>
  15. 15. SRM Process
  16. 16. Definition of Key Terms Inventory <ul><li>Inventory consists of a list of goods and materials held available in stock </li></ul><ul><li>Manufacturing organizations usually divide their &quot;goods for sale&quot; inventory into: </li></ul><ul><ul><li>Materials and components (or Raw materials ) scheduled for use in making a product </li></ul></ul><ul><ul><li>Materials and components that have begun their transformation to finished goods (or Work in Process ) </li></ul></ul><ul><ul><li>Finished goods - goods ready for sale to customers </li></ul></ul>