Ch'7: Supply Chain Management

1
Ch.7 Supply Chain Management

• What is a supply chain?
• Objectives of supply chain management
• Supply chain drivers

2
The Supply Chain
Information
Cash
Figure 7.1 (modified)
3
Example Supply Chain
Customer wants detergent and goes to Fortinos
Fortinos Supermarket
Fortino or third party DC
PG or other manufacturer
Plastic Producer
Tenneco Packaging
Chemical manufacturer (e.g. Oil Company)
Chemical manufacturer (e.g. Oil Company)
Paper Manufacturer
Timber Industry
4
Supply Chain Management

• Management of flows between and among stages in
  the supply chain to maximize total profit

Need for coordination and cooperation
5
History Merits of coordination

• Minimize operational cost
• Minimize functional cost
• Maximize company profit
• Maximize supply chain surplus

6
Examples of Coordination

• Share information to improve forecasting system
• Return policies
• Redistribution of excess inventories in global
  supply chains

7
Supply Chain Drivers
Competitive Strategy
Supply Chain Strategy
Supply chain structure
Drivers
8
Drivers Strategic decisions
9
Information Role

• Inter-stages coordination
• Intra-company operations
• Forecasting
• Production scheduling system
• Warehouse management system

10
Information Enabling technologies

• Electronic data interchange (EDI)
• Internet
• Enterprise resource planning (ERP)
• Supply chain management

11
Transportation Modes

• Air most expensive but very fast
• Truck quick and expensive, flexible
• Rail inexpensive, large quantities
• Ship slowest but good for large overseas
  shipments
• Pipeline oil and gas
• Electronic
• Intermodal

12
Transportation Operational Decisions

• Network selection
• In house or outsource
• Who ships and what quantity?
• Route selection
• Sequencing and scheduling

13
Transportation System Design

• What are the distribution options? Which one to
  select? On what basis?
• Direct
• DC
• Cross-Docking

14
Design Options
Direct
Direct with Milk runs
Central DC
DC using milk runs
15
Design Options (contd)

• DC
• Warehouse
• Cross-docking
• Tailored network

16
Tailored Network
By customer density and distance
17
Pros and cons of options
18
Who Ships, What Quantity?
60
2
.78
300
200
800
400
100
1.5
340
19
Route SelectionSavings Matrix Method

• Identify distance
• Identify savings using consolidation
• Assign Customers to routes
• Choose route with highest saving
• Consolidate customers while feasible

Savings a b - c
20
Savings Matrix Example GroceryGateway.com
Customer location and demand
GroceryGateway has 2 trucks max 200 units/truck
21
Example (contd)

• Distance matrix

22
Example (contd)

• Savings matrix

23
Example (Contd)

• Routing

24
Sequencing

• Farthest Insert Insert the customer giving the
  longest trip
• Nearest Insert Insert the customer giving the
  shortest trip
• Nearest Neighbor Start at DC and at each step
  add closest customer
• Sweep Sweep a line from any point in grid and
  select customers in the order they are
  encountered.
• (see handout for examples)