my presentation

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Supply network design
Supply chain management
Powered by Babak Mahmoodi-MBA Tabriz University-Operation Management

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Operation Management

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A supply network perspective means
setting an operation in the context of all
the other operations with which it interacts

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all the operations which form the network of suppliers’ suppliers and
customers’ customers, etc. are called the total supply network.

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Why consider the whole supply network?
It helps an understanding of
competitiveness
It helps identify significant links in the
network
It helps focus on long-term issues

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Changing the shape of the supply network
Disintermediation : Cutting out the middle men’ in this way is called disintermediation
Co-opetition : All the players in the network, whether they are customers, suppliers,
competitors or complementors , can be both friends and enemies at different times. The
t
erm used to capture this idea is ‘co-opetition’.
Outsourcing : No single business does everything that is required to produce its
products and services

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Three companies operating in the wind power generation industry with
different vertical integration positions

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WHERE SHOULD AN OPERATION BE LOCATED?
There is an old saying in retail operations management, ‘There are three important things in
retailing – location, location and location’, and any retailing operation knows exactly what that
means. Get the location wrong and it can have a significant impact on profits, or service.

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Reasons for location decisions
Changes in demand : A change in location may be prompted by customer demand
shifting. For example, as garment manufacture moved to Asia, suppliers of zips,
threads, etc., started to follow them.
Changes in supply: The other stimulus for relocation is changes in the cost, or
availability, of the supply of inputs to the operation. For example, a mining or oil
company will need to relocate as the minerals it is extracting become depleted.

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The objectives of the location decision
Supply-side and demand-side factors in location decisions

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Supply-side influences
Labour costs : labour costs exert a major influence on the location decision, especially
in some industries such as clothing, where labour costs as a proportion of total costs
are relatively high.
Land costs : the cost of acquiring the site itself is sometimes a relevant factor in choosing a
location. Land and rental costs vary between countries, cities and districts.
Energy costs : Operations which use large amounts of energy, such as aluminium smelters, can
be influenced in their location decisions by the availability of relatively inexpensive energy.
Transportation costs: Transportation costs include both the cost of transporting inputs from
their source to the site of the operation, and the cost of transporting outputs to customers.
Community factors: community factors are those influences on an operation’s costs which
derive from the social, political and economic environment of its site.

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Demand-side influences
Labour skills : The abilities of a local labour force can have an effect on customer reaction to
the products or services which the operation produces.
The suitability of the site itself: Different sites may have different intrinsic characteristics
which can affect an operation’s ability to serve customers and generate revenue.
Image of the location Some locations are firmly associated in customers’ minds with a
particular image.
Convenience for customers: Locating a general hospital, for instance, in the middle of the
countryside may have many advantages for its staff, and even perhaps for its costs, but it clearly
would be very inconvenient to its customers (patients)

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Some of the terms used to describe the management of different parts of the supply chain

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Location techniques
Weighted-score method: The procedure involves, first of all, identifying the criteria which will
be used to evaluate the various locations. Second, it involves establishing the relative importance
of each criterion and giving weighting factors to them. Third, it means rating each location
according to each criterion. The scale of the score is arbitrary. In our example we shall use 0 to
100, where 0 represents the worst possible score and 100 the best.
The centre-of-gravity method: The centre-of-gravity method is used to find a location which
minimizes transportation costs. It is based on the idea that all possible locations have a ‘value’
which is the sum of all transportation costs to and from that location. The best location, the one
which minimizes costs, is represented by what in a physical analogy would be the weighted
centre of gravity of all points to and from which goods are transported.

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WHAT IS SUPPLY CHAIN MANAGEMENT?
Supply chain management is the
management of the interconnection of
organizations that relate to each other
through upstream and downstream
linkages between the processes that
produce value to the ultimate consumer in
the form of products and services.

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Supply chains and the five operations performance objectives
Quality: The quality of a product or service when it reaches the customer is a function of the
quality performance of every operation in the chain that supplied it.
Speed: This has two meanings in a supply chain context. The first is how fast customers
can be served, an important element in any business’s ability to compete.second is the time
taken for goods and services to move through the chain.
Dependability: Like speed, one can almost guarantee ‘on-time’ delivery by keeping excessive
resources, such as inventory, within the chain.
Flexibility : In a supply chain context is usually taken to mean the chain’s ability to cope with
changes and disturbances.
Cost: Many developments in supply chain management, such as partnership agreements or
reducing the number of suppliers, are attempts to minimize transaction costs.

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SINGLE- AND MULTI-SOURCING
An important decision facing most purchasing managers is whether to source each individual
product or service from one or more than one supplier, known, respectively, as single-sourcing
and multi-sourcing.

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Advantages and disadvantages of single- and multi-sourcing

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The decision logic of outsourcing

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Purchasing, the internet and e-procurement
By making it easier to search for alternative
suppliers, the internet changed the economics of
the search process and offers the potential for
wider searches. It also changed the economics of
scale in purchasing. E-procurement is the
generic term used to describe the use of
electronic methods in every stage of the
purchasing process from identification of
requirement through to payment, and potentially
to contract management.

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The effects of e-business on supply chain management practice
New information technology applications combined with internet-based e-business have
transformed the supply chain management practice. Information is the lifeblood of
supply chain management. Without appropriate information, supply chain managers cannot
make the decisions that co-ordinate activities and flows through the chain.

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Global sourcing
One of the major supply chain developments of
recent years has been the expansion in the
proportion of products and services which
businesses are willing to source from outside
their home country; this is called global sourcing

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Logistics, physical distribution management and distribution
storage
security
warehousin
g
Order
processing
Material
handling
transportati
on
Ever since businesses started
making physical products
they have had to arrange for
the movement of raw
materials to their operations
and finished products to their
destination, as well as
organize their protection,
storage and inventory control.
This is variously called
logistics.

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The bullwhip effect – supply chain dynamics
The ‘bullwhip effect’ is used to describe how a small disturbance at the downstream end of a
supply chain causes increasingly large disturbances, errors, inaccuracies and volatility as it
works its way upstream. Its main cause is an understandable desire by the different links in the
supply chain to manage their production rates and inventory levels sensibly.

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Benchmarking the Supply Chain
The SCOR Model : Perhaps the best-known benchmarking system is the five-part Supply Chain
Operations Reference (SCOR), the five parts are Plan (planning activities forsupply and demand),
Source (purchasing activities), Make (production activities), Deliver (distribution activities), and
Return (closed-loop supply chain activities).

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The SCOR Model
The SCOR model defines over 200 process elements, 550 measurable metrics, and 500 best
practices. The best practices describe the techniques used by benchmark firms that have scored
very well on the metrics. SCOR combines these metrics with “Performance Attributes”.

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