Supply Chain

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Supply Chain

  1. 1. Supply Chain <ul><li>Operations Flow </li></ul><ul><li>Supply Chain Configurations </li></ul><ul><li>Supply Chain Strategies </li></ul>
  2. 2. Customer Retailer Information Flows Distributor Producer / Suppliers Payments: Funds Flow Goods/Services: Value Flow Requirements Customer Service Supply Chain Overview
  3. 3. D T R B P 6 Cylinder Mid-size 4 Cylinder Compact A H F S Flexible Flows at Health Clinic D: Doctor (exam room) R: Radiology (X ray) T: Triage (assess severity) B: Blood test P: Pharmacy Physical Exam Physical Exam Broken arm Broken arm Flu Flu Line Flows at Car Assembly Plant A: Front-end assembly H: Hood attachment F: Fluid filling S: Start-up & testing 6 Cylinder Mid-size 4 Cylinder Compact Operation Flows
  4. 4. Operations Flow and Competitive Strategy <ul><li>Flexible Flows </li></ul><ul><li>Customization </li></ul><ul><li>Low Volumes </li></ul><ul><li>High Design Quality </li></ul><ul><li>Long Delivery Time </li></ul><ul><li>More cost </li></ul><ul><li>Line Flows </li></ul>
  5. 5. Jumbled flows Some dominant flows Linear flows <ul><li>Flexible flows </li></ul><ul><li>Tool and die shop </li></ul><ul><li>Health Center </li></ul><ul><li>Intermediate flows </li></ul><ul><li>Branch offices </li></ul><ul><li>Print shop </li></ul><ul><li>Line flows </li></ul><ul><li>Assembly plant </li></ul><ul><li>Oil refinery </li></ul>Low Medium High Volume Volume Volume Relationship between Flows and Volume
  6. 6. A Ladder-back Chair Ladder-back subassembly Seat subassembly Front legs Leg supports Back legs Back slats Seat frame Seat cushion Seat-frame boards Bill of materials
  7. 7. Master Production Schedule MRP Explosion Inventory Records Bill of materials Materials Requirements Plan Materials Requirements Planning
  8. 8. MRP Explosion Materials Requirements Plan Materials Requirements Planning <ul><li>Release new orders </li></ul><ul><li>Adjust Due date </li></ul><ul><li>Supplier schedules </li></ul><ul><li>Capacity Requirements Plan </li></ul><ul><li>Manufacturing Resource Planning </li></ul><ul><li>Performance Reports </li></ul>Cost and Price Data
  9. 9. <ul><li>MRP Implementation </li></ul><ul><li>Prerequisites </li></ul><ul><li>Computing support for product and parts variety </li></ul><ul><li>Accurate production schedule, inventory records, BOM </li></ul><ul><li>Favorable Conditions </li></ul><ul><li>Number of BOM levels > 6 </li></ul><ul><li>Large lot sizes </li></ul><ul><li>Low volatility </li></ul>
  10. 10. Supply Chain <ul><li>Operations Flow </li></ul><ul><li>Supply Chain Configurations </li></ul><ul><li>Supply Chain Strategies </li></ul>
  11. 11. Supply Chain Management: Trends <ul><li>Link manufacturers, retailers, customers & suppliers </li></ul><ul><li>Streamline materials flow </li></ul><ul><li>Manage demand fluctuations, global sourcing, shorter life cycles, and lower brand loyalty </li></ul><ul><li>Customer service, growth, revenue enhancement </li></ul><ul><li>Need for information integration across the chain </li></ul>
  12. 12. Tier 1 Suppliers Tier 2 Suppliers Manufacturer Distribution Center 1 Distribution Center 2 Customer Customer Customer Customer Supply chain for a Manufacturer S S S S s s s s
  13. 13. The Bullwhip Effect in Supply Chains Customers Distributors Manufacturers <ul><li>Order variability increases up the chain leading to </li></ul><ul><li>Insufficient / Excessive inventory </li></ul><ul><li>Poor product forecasts </li></ul>
  14. 14. Causes Behind the Bullwhip Effect <ul><li>Forecast updating. Longer the lead time, greater the swings. </li></ul><ul><ul><li>Share demand data with upstream member </li></ul></ul><ul><ul><li>Upstream member controls inventory (e.g., Vendor Managed Inventory) </li></ul></ul><ul><ul><li>Bypass the distribution system (sell direct). </li></ul></ul><ul><ul><li>Shorten lead time. </li></ul></ul><ul><li>Order batching. Full truck load orders cause bigger fluctuations </li></ul><ul><ul><li>Share demand data with upstream member </li></ul></ul><ul><ul><li>Use electronic ordering </li></ul></ul><ul><ul><li>Use mixed SKU shipping </li></ul></ul><ul><ul><li>Use a 3 rd party logistics company </li></ul></ul>
  15. 15. <ul><li>Price fluctuations. Promotions and trade deals encourage forward buying. </li></ul><ul><ul><li>Reduce the frequency and level of discounting </li></ul></ul><ul><ul><li>Use every day low price policy </li></ul></ul><ul><li>Rationing. Manufacturer allocates product in short supply based on orders. </li></ul><ul><ul><li>Allocation based on past sales </li></ul></ul><ul><ul><li>Tighten manufacturer’s return policy </li></ul></ul><ul><ul><li>Advance orders to help increase capacity </li></ul></ul>Causes Behind the Bullwhip Effect (contd.)
  16. 16. Push-Based vs. Pull-Based Supply Chain Manufacturer Manufacturer Distribution Center Distribution Center Retail Store Retail Store <ul><li>Forecast </li></ul><ul><li>Master Scheduling </li></ul><ul><li>Stock Distribution Center </li></ul><ul><li>Manual ordering </li></ul><ul><li>Order point based on forecast </li></ul><ul><li>Deals, promotion, forward buying </li></ul><ul><li>Manual ordering </li></ul><ul><li>Manage shelf inventory </li></ul><ul><li>Promotions </li></ul><ul><li>Manual order entry </li></ul>Customer Purchase Customer Purchase <ul><li>POS data collection </li></ul><ul><li>Perpetual inventory control </li></ul><ul><li>Automatic electronic ordering </li></ul><ul><li>Automatic electronic ordering </li></ul><ul><li>Shipping container marking </li></ul><ul><li>EDI </li></ul><ul><li>POS data drives scheduling </li></ul><ul><li>Short cycle manufacturing </li></ul><ul><li>Advance shipping notice </li></ul><ul><li>Barcode scanner </li></ul>
  17. 17. Pull System Characteristics Manufacturing capability New Technologies Process Redesign Benefits Requirements
  18. 18. <ul><li>Supply Chain Dynamics </li></ul><ul><li>External </li></ul><ul><li>Volume / product mix changes from customers </li></ul><ul><li>Late / under-filled shipments </li></ul><ul><li>Internal </li></ul><ul><li>Internal shortages / breakdowns </li></ul><ul><li>Engineering changes/ new products/ sales promotions </li></ul><ul><li>Information errors (e.g., forecasting errors) </li></ul>
  19. 19. <ul><li>Operations Measure </li></ul><ul><li>Aggregate inventory value </li></ul><ul><li>Weeks of supply </li></ul><ul><li>Inventory turns </li></ul><ul><li>Production and material costs </li></ul><ul><li>Percentage defects </li></ul><ul><li>Percentage on-time delivery </li></ul><ul><li>New-product development time </li></ul><ul><li>Supplier lead time </li></ul><ul><li>Financial Measure </li></ul><ul><li>Current assets </li></ul><ul><li>Working capital </li></ul><ul><li>Working capital </li></ul><ul><li>Contribution margin </li></ul><ul><li>Contribution margin </li></ul><ul><li>Revenue </li></ul><ul><li>Revenue </li></ul><ul><li>Working capital </li></ul>Supply-Chain Performance Measures
  20. 20. Matching Environments with Supply Chains
  21. 21. Design Features for Supply Chains
  22. 22. Supply Chain <ul><li>Operations Flow </li></ul><ul><li>Supply Chain Configurations </li></ul><ul><li>Supply Chain Strategies </li></ul>
  23. 23. Competitive Advantage in the Supply Chain <ul><li>Proprietary </li></ul><ul><li>Supplier owns technology </li></ul><ul><li>Advantage to supplier </li></ul><ul><li>Generic </li></ul><ul><li>Technology in public domain </li></ul><ul><li>No advantage possible </li></ul><ul><li>Custom </li></ul><ul><li>Joint design, full protection </li></ul><ul><li>Full advantage </li></ul><ul><li>Tailored </li></ul><ul><li>Joint ownership, some protection </li></ul><ul><li>Variable advantage </li></ul>Many Customers Single Customer Single supplier Many suppliers Access and control of technological capabilities
  24. 24. Appropriate B2B Relationships Total equity Investment stake Strategic alliance Joint development Performance partnership Long term contract Preferred suppliers Competitive bids Short term contracts Spot market Outsource Insource Close Relational Market collaboration Competence competition Core strategy Control over capabilities Off strategy
  25. 25. Rely on Competition <ul><li>Criteria </li></ul><ul><li>Over-supply in market </li></ul><ul><li>Commoditization </li></ul><ul><li>Rapid innovations </li></ul><ul><li>Price collapse </li></ul><ul><li>Testing suppliers </li></ul><ul><li>Strategies </li></ul>
  26. 26. Rely on Collaboration <ul><li>Criteria </li></ul><ul><li>Complementary capabilities </li></ul><ul><li>Access to vital assets </li></ul><ul><li>Required for market access </li></ul><ul><li>Enduring relationships </li></ul><ul><li>Common goals </li></ul><ul><li>Strategies </li></ul><ul><li>Long term contracting </li></ul><ul><li>Share sales data </li></ul><ul><li>Joint R&D </li></ul><ul><li>Share cost data </li></ul><ul><li>Joint marketing </li></ul>
  27. 27. Redesign of Supply Chain <ul><li>Harmonize, Rationalize </li></ul><ul><li>SKU reduction </li></ul><ul><li>Process Design </li></ul><ul><li>Integrated platform </li></ul><ul><li>Supplier reduction </li></ul><ul><li>Supplier involvement </li></ul><ul><li>Brand rationalization </li></ul><ul><li>Electronic Chain </li></ul><ul><li>Intranet / Extranet / Internet </li></ul><ul><li>On-line catalogs </li></ul><ul><li>e-Purchasing </li></ul><ul><li>EDI </li></ul><ul><li>Efficient Consumer Response </li></ul><ul><li>Transaction processing </li></ul><ul><li>Cut Low Value Work </li></ul><ul><li>Outsource </li></ul><ul><li>Preferred suppliers </li></ul><ul><li>Certification </li></ul><ul><li>Share schedule </li></ul><ul><li>Supplier managed inventory </li></ul><ul><li>Purchasing cards </li></ul>
  28. 28. 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 Current Focus Required Focus <ul><li>Typical Activities: </li></ul><ul><li>New product </li></ul><ul><li>Design for manufacturability </li></ul><ul><li>Strategic cost management </li></ul><ul><li>Electronic chain </li></ul><ul><li>Breakthrough projects </li></ul><ul><li>Joint training </li></ul><ul><li>Contract management </li></ul><ul><li>Requisitioning </li></ul><ul><li>Stock control </li></ul><ul><li>Low value purchases </li></ul>
  29. 29. Change Management Quick Win Supplier reduction Analysis Cost analysis Capability Web procurement Major Project Outsource Restructure Strategic Alliance Functional Change Process Change Strategic Change Business Transformation Strategic Impact Incremental Change Short Term Migration Plan Long term
  30. 30. Low External Demand for Change High High Internal Support Low Transformational Leadership Opportunistic activity Process Initiatives Supply Chain Realignment Challenges of Supply Chain Redesign

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