Supply Chains


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Supply Chains

  1. 1. Supply Chain Management AG BM 460
  2. 2. Introduction <ul><li>Hanover Foods – 95% of output is produced under contract </li></ul><ul><li>Contract w/ store or industrial customer or food service company including important variables </li></ul><ul><li>Then plan production </li></ul><ul><li>Then contract w/ farmers to get what you need – including all important variables </li></ul>
  3. 3. Enhancing the customer’s experience through excellence in delivering the right products, services, resources and information seamlessly to the right place at the right time ! Mission of the Supply Chain: “ Nowadays, it’s supply chains that compete with supply chains!” Price Waterhouse Coopers
  4. 4. Supply Chain Management Introduction <ul><li>Some definitions </li></ul><ul><ul><li>Supply Chain – the core business processes in an organization that create and deliver a product or service, from concept through development and manufacturing or conversion, and into a market for consumption </li></ul></ul><ul><ul><li>Supply Chain Management – the methods, systems and leadership that continuously improve an organization’s integrated processes for product and service design, purchasing, inventory management, logistics, distribution and customer satisfaction </li></ul></ul>
  5. 5. Supply Chain Management <ul><li>More definitions </li></ul><ul><ul><li>Upstream – the processes which occur before manufacturing or production into a deliverable product or service, typically processes dedicated to getting raw materials from suppliers </li></ul></ul><ul><ul><li>Downstream – the processes which occur after manufacturing or production, typically those processes dedicated to getting goods and services to customers and consumers </li></ul></ul>
  6. 6. Definitions of Supply Chain Management Supply Chain Management involves the flows between and among stages in a supply chain to maximize total profitability. Chopra and Meindl, 2001
  7. 7. Supply Chain Optimization <ul><li>The traditional approach to supply chain management usually involves a collection of separate functional activities </li></ul><ul><li>Integrated approach views costs to anybody as costs to the chain – prevents actions that save money on trucking but cost more money on inventory </li></ul>
  8. 8. Traditional versus Integrated SCM Approaches <ul><li>Independent inventory management policies </li></ul><ul><li>Minimization of firm costs </li></ul><ul><li>Short-term focus </li></ul><ul><li>Information sharing limited to current transaction </li></ul><ul><li>Corporate philosophies not relevant </li></ul><ul><li>Each to their own success or failure </li></ul><ul><li>Independent actions and information systems </li></ul><ul><li>Joint reduction of channel inventories </li></ul><ul><li>Channel-wide cost savings </li></ul><ul><li>Long-term perspective </li></ul><ul><li>As required for planning and monitoring </li></ul><ul><li>Compatible corporate philosophies </li></ul><ul><li>Sharing of risks and rewards </li></ul><ul><li>Channel leadership and compatible information systems </li></ul>
  9. 9. Some examples <ul><li>Inventory – independent or system-wide – supermarket buys 6 months of detergent on sale and stores it rather than work out a delivery schedule to get it as needed </li></ul><ul><li>Costs – minimize your costs or system-wide costs – sale in Denver region so buy detergent for whole country there and haul it back to where it is needed or work out a delivery schedule from plant to local warehouses </li></ul>
  10. 10. Some examples <ul><li>Short or long term focus – are you making optimal decisions for today or for longer term – hog plant that underpays farmers today may find them out of business tomorrow and then no hog plant </li></ul><ul><li>Information sharing – current transaction or broadly – are you working together to both succeed or just for short term gain </li></ul>
  11. 11. Some examples <ul><li>Corporate philosophies – working together requires recognition of other’s perspective, if not compatible philosophies – Hershey & WalMart </li></ul><ul><li>Each out for himself or sharing risks and rewards – Hershey managing candy section for WalMart </li></ul>
  12. 12. Information Systems <ul><li>Non compatible systems once were the standard </li></ul><ul><li>Now, electronic ordering – sharing scanner data – electronic invoicing – need compatible systems </li></ul>
  13. 13. SCM Activities: Industry Focus <ul><li>Integrated Behaviour </li></ul><ul><li>Mutual Sharing of Information </li></ul><ul><li>Mutual Sharing of Risks and Rewards </li></ul><ul><li>Cooperation </li></ul><ul><li>Same Goal and Same Focus on Serving Customers </li></ul><ul><li>Integration of Processes </li></ul><ul><li>Partners to Build and Maintain Long-term Relationships </li></ul>
  14. 14. Cost Inventory costs Transport costs Total costs Rail Truck Air
  15. 15. Setting the Stage <ul><li>A supply chain is a linked set of value creating activities. </li></ul><ul><ul><li>View chain as an integrated system. </li></ul></ul><ul><ul><li>Consumer driven … emphasis on quality. </li></ul></ul><ul><ul><li>Focus on improving system-wide performance … then on the distribution of gains from those improvements. </li></ul></ul><ul><ul><li>Transparency in inter-firm relationships. </li></ul></ul><ul><ul><li>Key role for chain leader. </li></ul></ul>
  16. 16. Setting the Stage <ul><li>Key concerns in the design of supply chains in the food system include: </li></ul><ul><ul><li>system-wide efficiency </li></ul></ul><ul><ul><li>distribution of returns </li></ul></ul><ul><ul><li>food safety and quality </li></ul></ul><ul><ul><li>adaptability and innovation </li></ul></ul><ul><li>Structural change and the need to link into more highly integrated supply chains pose new challenges for farm managers. </li></ul>
  17. 17. Mike Villa’s Produce Activities <ul><li>Contract with WalMart to supply produce over next 6 months </li></ul><ul><li>Cost targets </li></ul><ul><li>Quality targets </li></ul><ul><li>Delivery targets </li></ul><ul><li>Inventory targets </li></ul>
  18. 18. Consider a single product - onions <ul><li>Different sources </li></ul><ul><li>Storable to a degree </li></ul><ul><li>Planning ahead </li></ul><ul><li>Managing logistics </li></ul><ul><li>Dealing with surprises </li></ul>