36933005 scm4latest

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36933005 scm4latest

  1. 1. Supply Chain Management
  2. 2. CHAPTER OBJECTIVES ‡ Introduce the concept of a firm¶s supply chain and show how it has evolved over time to its present status. ‡ Present alternative supply chain strategies that are linked to the types of products being sold and the processes used to make them. ‡ Describe how the bullwhip effect can cause significant demand fluctuations in a supply chain. ‡ Identify current trends that are affecting the characteristics of a supply chain. ‡ Present the requirements necessary for a successful supply chain. ‡ Discuss the impact of technology on a firm¶s supply chain. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw- McGraw- McGraw-Hill/Irwin 4±2 4±
  3. 3. Managerial Issues ‡ Concentration of resources on the firm¶s core competencies such as supply chain management. ‡ Increasing proportion of purchased goods and services as inputs into products. ‡ Increased pressure to reduce inventories. ‡ Applying advances in information technology to strategically manage supplier relationships and the supply chain itself. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw- McGraw- McGraw-Hill/Irwin 4±3 4±
  4. 4. Definition of Supply Chain Management ‡ Supply Chain Management The long-term relationship between a firm and its suppliers to ensure the timely delivery of goods and services that are competitively priced. ‡ Supply Chain The steps and the firms that perform these steps in the transformation of raw inputs into finished products bought by customers. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw- McGraw- McGraw-Hill/Irwin 4±4 4±
  5. 5. Logistics ‡ Inbound Logistics The delivery of goods and services that are purchased from suppliers and/or their distributors. ‡ Outbound Logistics The delivery of goods and services that are sold to a firm s customers and/or distributors. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw- McGraw- McGraw-Hill/Irwin 4±5 4±
  6. 6. A Company¶s Supply Chain Exhibit 4.1 Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw- McGraw- McGraw-Hill/Irwin 4±6 4±
  7. 7. The Evolution of Supply Chain Management Exhibit 4.2A,B Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw- McGraw- McGraw-Hill/Irwin 4±7 4±
  8. 8. The Evolution of Supply Chain Management (cont¶d) Exhibit 4.2C,D Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw- McGraw- McGraw-Hill/Irwin 4±8 4±
  9. 9. Choosing a Successful Supply Chain Strategy ‡ Key Consideration Avoiding demand-side uncertainty that results in a mismatch of supply and demand. ‡ Functional Product A commodity-type product that exhibits stable demand and low profit margins. ‡ Innovative Product A new product that has a high degree of innovation and exhibits unstable demand and high profit margins. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw- McGraw- McGraw-Hill/Irwin 4±9 4±
  10. 10. Comparison of Demand Characteristics for Functional and Innovative Products Exhibit 4.3A Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw- McGraw- McGraw-Hill/Irwin 4±10 4±
  11. 11. Choosing a Successful Supply Chain Strategy (cont¶d) ‡ Key Consideration Avoiding supply-side uncertainty that results in a mismatch of supply and demand. ‡ Stable Supply Process A product that can be produced in a predictable way. ‡ Evolving Supply Process A product that lacks stability in the way in which it is produced. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw- McGraw- McGraw-Hill/Irwin 4±11 4±
  12. 12. Integration of supply chain Factors driving integration 1. Increased cost competitiveness having substantially improved the efficiency of internal ops, seeking further cost reduction by improving the efficiency and synergy of supply chains. Levi¶s 2. Shorter PLC Mobiles, cars state of art for less than one year, every new gene with half the PLC.
  13. 13. Factors driving integration ‡ 3. Faster Prod. Deve. Every introduction is rewarded by larger mkt shares and unit volumes to drive costs down rapidly. 4. Customization: customers can afford and demanding greater variety of products that address their specific needs. Mass customization is the new marketing mantra ‡ 5. Higher qlty: increasing customer affluence and greater competition to supply their needs, have led to demands for higher qlty.
  14. 14. Dell¶s virtual integration: characteristics ‡ Use of rapid seamless communication to build direct rela between custo and suppliers. ‡ Clear definition of core compe: what it does best i.e. branding, marketing mass custo and selling direct, with partnerships for the rest capital intensive and labour intensive processes. Focus on activities that create most value for customers and shareholders. ‡ Selection of partners, best in their respective fields: Intel, MS, IBM..
  15. 15. Dell¶s virtual integration: characteristics ‡ Use minimum number of suppliers to whom Dell is loyal as long as they maintain their leadership in tech, cost, qlty and delivery. ‡ Use of Internet: B2B, B2C, Intranet, Extranet, Internet, integral part of strategy to eliminate boundaries between companies and integrate. ‡ Less emphasis on gaurding intellectual assets and more on using them rapidly before they¶re obsolete.
  16. 16. The Bullwhip Effect ‡ Bullwhip Effect The phenomenon that occurs in a supply chain when order size variability is amplified as orders move upstream in the supply chain from the retailer up to the manufacturer. ‡ Causes of the Bullwhip Effect Demand forecast updating Order batching Price fluctuations Rationing and shortage gaming Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw- McGraw- McGraw-Hill/Irwin 4±16 4±
  17. 17. The Bullwhip Effect (cont¶d) ‡ Counteracting the Bullwhip Effect Improve forecasting accuracy by sharing information across the supply chain. Encourage smaller order batches by reducing the time and cost of placing an order. Allow vendors to manage their own inventories. Stabilize prices by instituting an everyday-low-price strategy to eliminate forward buying behavior. Keep customers updated about the supply situation. Institute ordering policies when shortages occur to reduce phantom orders and order gaming. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw- McGraw- McGraw-Hill/Irwin 4±17 4±
  18. 18. Current Trends in Supply Chain Management Reduced Supplier- Number of Managed Suppliers Inventories Increased Supply Contingent Competition Chain Inventories Shorter Shared or Product Reduced Advances In Life Cycles Risk Technology Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw- McGraw- McGraw-Hill/Irwin 4±18 4±
  19. 19. How Technology Is Changing the Supply Chain ‡ EDI (electronic data exchange) Direct link between a manufacturer s database and that of the vendor. ‡ Quick Response (QR) Programs Just-in-time replenishment system using bar-code scanning and EDI. ‡ Efficient Customer Response (ECR) Strategy for bringing distributors, suppliers, and grocers together using bar-code scanning and EDI. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw- McGraw- McGraw-Hill/Irwin 4±19 4±
  20. 20. Major Supply Chain Management (SCM) Software Packages Source: Kayte VanScoy, ³Recession-Proof Your Business,´ Smart Business, December 2001/January 2002, pp. 84±88. Exhibit 4.5 Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw- McGraw- McGraw-Hill/Irwin 4±20 4±
  21. 21. Requirements for Successful Supply Chain Long- Long-Term Trust Relationships Successful Supply Chain Management Information Individual Strengths Sharing Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw- McGraw- McGraw-Hill/Irwin 4±21 4±
  22. 22. The Role of Logistics in The Supply Chain ‡ Partnering Establishing a strategic alliance or partnership with a firm that specializes in transportation or logistics. Using a logistics partner to store finished goods at the logistics partner s hub or distribution center. ‡ In-Transit Inventory Costs Combination of transportation and carrying costs associated with delivery of raw materials and components that are inbound to the plant. Are reduced by locating distribution centers closer to customer markets. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw- McGraw- McGraw-Hill/Irwin 4±22 4±
  23. 23. Disintermediation ‡ Disintermediation The trend to reduce many of the steps in the supply chain by reducing the number of intermediaries in the chain. ‡ Cross-docking ‡ Direct-to-store shipments JIT II®: vendor and customer work closely together, eliminating many of the intermediate steps that now exist. ‡ Vendor representative located at facility ‡ Direct database linkage with vendor¶s manufacturing facility. Copyright © 2005 The McGraw-Hill Companies. All rights reserved. McGraw- McGraw- McGraw-Hill/Irwin 4±23 4±

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