Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. OM Supply Chain Design 9 COLLIER/EVANS 5 1 Explain the concept of supply chain management Describe the key issues in designing supply chains Define metrics used in evaluating supply chain performance LEARNING OUTCOMES ‹#› Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. OM5 | CH9 2 Explain important factors and decisions in locating facilities Describe the role of transportation, supplier evaluation, technology, and inventory in supply chain management ‹#› Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. OM5 | CH9 LEARNING OUTCOMES (continued) Supply Chain Key subsystem of a value chain that focuses on physical movement of goods and materials Supports information through the supply, production, and distribution processes Coordinates the flow of materials, services, and information among the elements of the supply chain to maximize customer value ‹#› Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. OM5 | CH9 4 Key Functions of Supply Chain Purchasing and procurement of materials and supplies Sales and order processing Operations Inventory and materials management Transportation and distribution Information management Finance Customer service ‹#› Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. OM5 | CH9 9.1 Typical Goods-Producing Supply Chain Structure ‹#› Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. OM5 | CH9 Exhibit 6 Supply Chain Management (SCM) Management of all activities that facilitate the fulfillment of a customer order for manufactured goods To achieve satisfied customers at a reasonable cost Includes managing: Materials within supply chain Flows of information and money that are necessary to coordinate activities within the supply chain ‹#› Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. OM5 | CH9 7 The Supply Chain Operations Reference (SCOR) Model Framework for understanding the scope of SCM based on functions involved in managing a supply chain Plan Source Make Deliver Return ‹#› Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in wh.

1. Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM
Supply Chain Design
9
COLLIER/EVANS
5
1
Explain the concept of supply chain management
Describe the key issues in designing supply chains
Define metrics used in evaluating supply chain performance
LEARNING OUTCOMES
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
2

2. Explain important factors and decisions in locating facilities
Describe the role of transportation, supplier evaluation,
technology, and inventory in supply chain management
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
LEARNING OUTCOMES (continued)
Supply Chain
Key subsystem of a value chain that focuses on physical
movement of goods and materials
Supports information through the supply, production, and
distribution processes
Coordinates the flow of materials, services, and information
among the elements of the supply chain to maximize customer
value
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9

3. 4
Key Functions of Supply Chain
Purchasing and procurement of materials and supplies
Sales and order processing
Operations
Inventory and materials management
Transportation and distribution
Information management
Finance
Customer service
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
9.1 Typical Goods-Producing Supply Chain Structure
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
Exhibit

4. 6
Supply Chain Management (SCM)
Management of all activities that facilitate the fulfillment of a
customer order for manufactured goods
To achieve satisfied customers at a reasonable cost
Includes managing:
Materials within supply chain
Flows of information and money that are necessary to
coordinate activities within the supply chain
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
7
The Supply Chain Operations Reference (SCOR) Model
Framework for understanding the scope of SCM based on
functions involved in managing a supply chain
Plan
Source
Make
Deliver
Return
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May

5. not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
8
Designing the Supply Chain
Strategic and operational perspectives are included in supply
chain design decisions
Contract manufacturer: Firm that specializes in certain types of
goods-producing activities
Customized design
Manufacturing
Assembly, and packaging
Works under contract for end users
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
9
Advantages of Using Contract Manufacturing
Access to advanced manufacturing technologies
Faster product time-to-market
Customization of goods in regional markets
Lower total costs resulting from economies of scale

6. ‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
10
Third-Party Logistics (3PL) Providers
Provide integrated services that might include:
Packaging
Warehousing
Inventory management
Inbound or outbound transportation
Leverage business intelligence to create efficiencies and
economies of scale in the supply chain
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
Efficient and Responsive Supply Chains
Efficient supply chains: Designed for efficiency and low cost
By minimizing inventory and maximizing efficiencies in
process flow
Responsive supply chains: Focus on:

7. Flexibility and responsive service
Ability to react quickly to changing market demand and
requirements
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
12
Push and Pull Systems
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
13
Push system
Pull system
Produces goods in advance of customer demand

8. Produces only what is needed at upstream stages in the supply
chain in response to customer demand signals from downstream
stages
Uses a forecast of sales and moves them through the supply
chain to points of sale where they are stored as finished goods
inventory
Push and Pull Systems
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
Push-pull boundary

9. Point in the supply chain that separates the push system from
the pull system
Postponement
Process of delaying product customization until the product is
closer to the customer at the end of the supply chain
9.2 Supply Chain Push-Pull Systems and Boundaries
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9

10. Exhibit
15
Sustainable Supply Chains
Purpose - Reduce costs while helping the environment
Green sustainable supply chain: Process of using
environmentally friendly inputs and transforming these inputs
through change agents
Byproducts can improve or be recycled within the existing
environment
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
16
Manufactured Good Recovery
Developing options to recover manufactured goods that will be
discarded or stable
Reuse or resell
Repair
Refurbish
Remanufacture
Cannibalize parts

11. Recycle goods
Incineration or landfill disposal
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
17
Manufactured Good Recovery
Reverse logistics: Managing the flow of finished goods,
materials, or components that can be unusable or discarded
Through supply chain from customers toward either suppliers,
distributors, or manufacturers
For the purpose of reuse, resale, or disposal
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
18
9.3 Example of a Manufactured Good Recovery (Reverse

12. Logistics) Supply Chain
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
Exhibit
19
Measuring Supply Chain Performance
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
20
Delivery reliability
Responsiveness

13. Customer-related measures
Supply chain efficiency measures
Sustainability measures
Financial measures
Location Decisions in Value Chains
Profound effect on supply chain performance and a firm’s
competitive advantage
Type of facility and its location affect the supply chain
structure
Service organizations operate large numbers of similar facilities
Multisite management: Process of managing geographically
dispersed service-providing facilities

14. ‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
21
Critical Factors in Location Decisions
Economic factors
Facility costs - Construction, utilities, insurance, taxes,
depreciation, and maintenance
Operating costs - Fuel, direct labor, and administrative
personnel
Transportation costs - Associated with moving goods and
services from the origins to the final destinations
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
22
Critical Factors in Location Decisions
Noneconomic factors
Availability of labor, transportation services and utilities
Climate, community environment, and quality of life
State and local legal and political factors

15. ‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
Location Decision Process
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
24
Global location
Regional location
Community location
Local site location

16. Center of Gravity Method
Determines the X and Y coordinates (location) for a single
facility
Takes into account locations, demand, and transportation costs
to arrive at the best location
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
25
Center of Gravity Method
Cx= ΣXiWi/ΣWi
Cy= Σ YiWi/ΣWi
Where
Cx = x coordinate of the center of gravity
Cy = y coordinate of the center of gravity
Xi = x coordinate of location i
Yi = y coordinate of location i
Wi = Volume of goods and service moved to or from location i
Used to locate service facilities

17. ‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
Managing Supply Chains
Requires numerous operational decisions
Global sourcing
Selecting transportation services
Incorporating technology
Managing inventory
Vendor managed inventory (VMI)
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
Vendor-managed Inventory
Advantages
Optimize production operations
Better control on inventory and capacity
Reduce total supply chain costs
Disadvantage
Results in higher than necessary customer inventories
‹#›

18. Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
28
Supply chain management is managing materials within the
supply chain
Sustainable supply chains reduce costs while helping the
environment
Managing supply chains requires numerous operational
decisions
SUMMARY
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
Contract manufacturer
Efficient supply chains
Green sustainable supply chain
Multisite management
Postponement
Pull system
Push system
Push-pull boundary
Responsive supply chains

19. Reverse logistics
KEY TERMS
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
Supply chain management (SCM)
The supply chain operations reference (SCOR) Model
Vendor managed inventory (VMI)
KEY TERMS
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9
‹#›
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
OM5 | CH9

20. What is Supply Chain Management?
1
What is Supply Chain Management?
Here are two definitions:
The design and management of seamless, value-added process
across organizational boundaries to meet the real needs of the
end customer
-- Institute for Supply Management
Managing supply and demand, sourcing raw materials and parts,
manufacturing and assembly, warehousing and inventory
tracking, order entry and order management, distribution across
all channels, and delivery to the customer
-- The Supply Chain Council
2
Academic definitions also help. Please also Google SCM so that
you understand the different focus each organization places.
Compare them to the plain English one in the next slide.
What is Supply Chain Management?
In plain English:
Supply chain management (SCM) is the management of the flow
of goods from point of production to point of consumption.
SCM includes the movement and storage of raw materials,

21. work-in-process inventory, and finished goods throughout
networks, channels, and nodes in the provision of products and
services required by end customers in a supply chain.
3
Could you define SCM in your own words? What is your
perspective? Activities? Players involved? Goals and
objectives? Functional orientation?
The Value Chain Perspective
Porter‘s Value Chain
Supply side:
raw materials, inbound logistics and production processes
Demand side: outbound logistics, marketing and sales.
suppliers
customers
The value chain concept comes from Michael Porter, a Harvard
professor. In every step of the way when goods are moving from
suppliers to customers, each supply chain member adds value to
it. A supply chain consists of many value chains (your suppliers
have their own value chains and so do your customers). We will
discuss the value chain more in depth in a separate PPT but
right now you need to know the supply and demand sides of this
supply chain and where value is being added.
Long supply chains in ancient times:

22. the Silk Roads, spice trade, international trading by land and
sea
History of SCM: Ancient Trading Routes
Ancient trading routes are supply chain routes/networks. Why
did people engage in trading?
5
Why did Columbus sail west from Spain in 1492?
History of SCM: Ancient Trading Routes
Ancient trading routes also included water/ocean routes. In 15th
century, Indian Ocean saw busy merchant fleets from many
countries, transporting china, silk, spices from mainly East and
South Asia to the Arabian Peninsula, Africa, and Europe.
6
Derived from military logistics: logistics moves before military
maneuvers.
Tooth to Tail Ratio (T3R): ratio of combat force vs. support
personnel (think the almighty Mongolian army in the 13th
century!)
History of Supply Chain Management

23. We want more of this.
And less of this.
Soldiers carry 50-100 lbs.
Please research the T3R. We need more fierce teeth than body
for the dog, more combat soldiers than cooks in the army, and
have soldiers carry less into battlefield. Do you see the same
T3R in 1) your everyday life, 2) your organization, and 3)
anything that the government (or CSUSB) does?
7
U.S. Military T3R: Efficient?
The Other end of the spear : the tooth-to-tail ratio (T3R) in
modern military operations, John J. McGrath, 2007, p. 83.
8
In the end of World War II (ETO 1945 or European Theater
Operations), about 2 in 5 soldiers were combat solders or teeth.
Sixty years later, it’s one in four. Why such a change and how
can we build a military with more “teeth” and less “tail?”
A Supply Chain Web:

24. Videos
Watch the following videos from Arizona State and Deutsche
Post :
What is Supply Chain Management
From Cow to Consumer
Supply Chain Brings Everything to People
It involves managing people
It involves managing information
It involves managing physical assets
It involves managing finances
It involves managing products and services
It is versatile and all encompassing
11
SCM covers almost everything in a n organization!
American Football Analogy
Objective: Outscore your opponents.
How? Run or pass the ball to advance 10 yards or more in 4
tries… delivering the ball to the right person at the right time in
the right place.
Quaterback job description:

25. 12
What is the job of the quarterback? Is it similar to a corporate
manager/leader?
13
Retail Supply Chain
13
The roles identified on this page show how we manage a global
supply chain that has become ever more complex.
14
Seafood Supply Chain
14
How seafood comes to our dining tables.
15
Regional Food Supply Chain: Eat Local
15
Recent trends of eating locally produced food to reduce food-
miles.

26. 16
Supply Chain Analytics
Business Partner Processes
Strategy,
Operations
& Talent

27. Analyze & Influence Client Requirements
Plan Supply & Demand
Distribute & Global Logistics, Deliver

28. Manage Strategic Sourcing
Manage Client Contracts & Orders
Manufacture Products

29. Cash Management, Invoice & Payment
Manage Suppliers & Commodities
Asset Management

30. Supplier Order Execution
Proof of Concept
Solution
s

31. Procurement & Mfg Engineering
Fulfill