Supply Chain Defnition

1,229 views

Published on

Learn the Supply Chain Definition and find out why it is critical to an organization's success. A supply chain is a system of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer.

Find out more about Supply Chain and how it can help your business to perform better through our Supply Chain Optimization training in Malaysia, China, Dubai, Singapore, Indonesia, etc.

Visit us at http://SynerflexConsulting.com for more details.

Published in: Business, Technology
  • Be the first to comment

Supply Chain Defnition

  1. 1. Supply Chain Definition Find out What’s Supply Chain is… 1SynerflexConsulting.com
  2. 2. What You’ll Learn • Challenges of Supply Chain Management • Value of Information and Demand Distortion • Utilizing performance metrics to drive supply chain effectiveness • Transformation to Lean Supply Chain • Creative Supply Chain Partnership and Distribution Strategies 2SynerflexConsulting.com
  3. 3. Challenges of supply chain management 3SynerflexConsulting.com
  4. 4. 4 What is Supply Chain Mgmt? • SCM = Integration of the activities that procure materials, transform them into intermediate goods & final products, and deliver them to customer. SynerflexConsulting.com
  5. 5. 5 Suppliers Manufacturers Warehouses & distribution centers Customers Material Costs Transportation Costs Manufacturing Costs Inventory Costs SynerflexConsulting.com
  6. 6. 6 11% 31% 58% Material Dir Wages Other 71% 16% 13% COGS Payroll Other 83% 9%8% COGS Payroll Other Manufacturing Wholesale Retail Material Costs in Supply-Chain SynerflexConsulting.com
  7. 7. 7 Objective of SCM To build a chain of suppliers that focus on both reducing waste & maximizing value to the ultimate customer. SynerflexConsulting.com
  8. 8. 8 SCM - Strategic Importance How the Supply Chain can support the overall strategy? Low-CostLow-Cost StrategyStrategy ResponseResponse StrategyStrategy DifferentiationDifferentiation StrategyStrategy Supplier’s Goal SupplySupply demand atdemand at lowestlowest possible cost.possible cost. Respond quicklyRespond quickly to changingto changing requirements &requirements & demand to min.demand to min. stockouts.stockouts. Share marketShare market research; jointlyresearch; jointly develop products &develop products & options.options. Primary Selection Criteria SelectSelect primarily forprimarily for cost.cost. Select primarilySelect primarily for capacity,for capacity, speed, &speed, & flexibility.flexibility. Select primarily forSelect primarily for productproduct development skills.development skills. Process Characteris tics Maintain highMaintain high averageaverage utilization.utilization. Invest in excessInvest in excess capacity &capacity & flexible process.flexible process. Modular processesModular processes that lendthat lend themselves to massthemselves to mass customization.customization. SynerflexConsulting.com
  9. 9. 9 SCM - Strategic Importance (cont) How the Supply Chain can support the overall strategy? Low-CostLow-Cost StrategyStrategy ResponseResponse StrategyStrategy DifferentiationDifferentiation StrategyStrategy Inventory Characterist ics Min inventoryMin inventory throughout thethroughout the chain to holdchain to hold down costs.down costs. DevelopDevelop responsiveresponsive system, withsystem, with buffer stocksbuffer stocks positioned topositioned to ensure supply.ensure supply. Min inventory in theMin inventory in the chain to avoidchain to avoid obsolescence.obsolescence. Lead-Time Characterist ics Shorten leadShorten lead time as long astime as long as it does notit does not increase costs.increase costs. InvestInvest aggressively toaggressively to reduce productionreduce production lead time.lead time. Invest aggressivelyInvest aggressively to reduceto reduce development leaddevelopment lead time.time. Product- Design Characterist ics MaxMax performance &performance & min cost.min cost. Use productUse product designs that leaddesigns that lead to low setup timeto low setup time & rapid production& rapid production ramp-up.ramp-up. Use modular designUse modular design to postpone productto postpone product differentiation for asdifferentiation for as long as possible.long as possible.
  10. 10. Value of information and demand distortion 10SynerflexConsulting.com
  11. 11. 11 Supply Chain Dynamics Retailer Wholesaler Distributor Factory Order lead time Order lead time Order lead time Delivery lead time Delivery lead time Delivery lead time Production lead time Example: Diapers distribution SynerflexConsulting.com
  12. 12. “Bull-Whip Effect” 12SynerflexConsulting.com
  13. 13. 13 The “Bullwhip Effect” The ordering patterns share a common recurring theme: • The variability of an upstream site are always greater than those of the downstream site SynerflexConsulting.com
  14. 14. 14 Causes of “Bullwhip” Effect • Demand forecasting & Lead time • Order batching • Price fluctuation • Shortage gaming / Inflated orders SynerflexConsulting.com
  15. 15. 15 Order Variation in SCM SynerflexConsulting.com
  16. 16. 16 Demand Forecasting & Lead Time • Traditional inventory mgmt lead to bull-whip – min/max inv policy • Forecasting difficulties – based on historical data • Order change constantly – increase variability • Safety stocks that depend on erratic variance on demand & long lead time SynerflexConsulting.com
  17. 17. 17 Batch Ordering • Economic of scale • MRP driven requirement • Lower transportation cost • “Push Ordering” for short term performance measures SynerflexConsulting.com
  18. 18. 18 Price Fluctuation • Discounts & promotions • Quantity discounts • In anticipation of future price increase SynerflexConsulting.com
  19. 19. 19 Shortage Gaming/ Inflated Orders • Happen when demand > supply • Customers exaggerate real needs • When constraints removed, orders drop • Examples: Passive components in the 1999- 2000 SynerflexConsulting.com
  20. 20. 20 To Counteract the “Bullwhip” • Information Sharing • Break Order Batches & Collaborative Planning • Stabilize Prices • Eliminate Gaming in Shortage Situations Subscribe to our newsletter & find out more Details about these approaches… Go to SynerflexConsulting.com
  21. 21. Utilizing performance metrics to drive supply chain effectiveness 21SynerflexConsulting.com
  22. 22. 22 SCM Metrics • Biz performance measure: – No longer focused on individual company – Based on whole supply chain • Ultimate goal = Customer Satisfaction • Focus on Two dimensions – One dimension – single company – Two dimension – multi-functional & multi-company SynerflexConsulting.com
  23. 23. 23 3 Key Dimensions • Service – Anticipate & fulfill customer demand – Personalized products – On time delivery • Assets – Inventory & cash • Speed – Responsiveness & velocity of execution SynerflexConsulting.com
  24. 24. 24 Service Metrics Measure how well we are serving our customers Make to Stock (MTS) Make to Order (MTO) Line Item Fill Rate Complete Order Fill Rate Delivery Process On-Time $Backorder/Lost Sales No of Backorders Aging of Backorders Quoted Cust Response Time % On-Time Completion Delivery Process On-Time $ of Late Orders # of Late Orders Aging of Late Orders SynerflexConsulting.com
  25. 25. Subscribe to our newsletter & find out more Details about the other 2 dimensions of measurement (assets & Speed)… Go to SynerflexConsulting.com SynerflexConsulting.com 25
  26. 26. Utilizing Creative Approaches to Effectively Managing your supply chain 26SynerflexConsulting.com
  27. 27. 27 Approaches • CRP (Continuous Replenishment Program) • VMI (Vendor Managed Inventory) • Risk Pooling • Transshipment • Cross Docking • Design for Logistics SynerflexConsulting.com
  28. 28. Subscribe to our newsletter & find out more Details about these approaches… Go to SynerflexConsulting.com SynerflexConsulting.com 28

×