Supply Chain Management- Chapter 11

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Supply Chain Management- Chapter 11
There are no problem solving assignments from
Chapter 11
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Supply Chain Management

• Supply Chain the sequence of organizations -
  their facilities, functions, and activities -
  that are involved in producing and delivering a
  product or service.

Sometimes referred to as value chains
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Facilities

• Warehouses
• Factories
• Processing centers
• Distribution centers
• Retail outlets
• Offices

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Functions and Activities

• Forecasting
• Purchasing
• Inventory management
• Information management
• Quality assurance
• Scheduling
• Production and delivery
• Customer service

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Typical Supply Chains
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Typical Supply Chain for a Manufacturer
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Typical Supply Chain for a Service
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Need for Supply Chain Management

1. Improve operations
2. Increasing levels of outsourcing
3. Increasing transportation costs
4. Competitive pressures
5. Increasing globalization
6. Increasing importance of e-commerce
7. Complexity of supply chains
8. Manage inventories
9. For industries with volatile industries

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Bullwhip Effect
Demand
InitialSupplier
Final Customer
Inventory oscillations become progressivelylarger
looking backward through the supply chain
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Benefits of Supply Chain Management

• Lower inventories
• Higher productivity
• Greater agility
• Shorter lead times
• Higher profits
• Greater customer loyalty
• Integrates separate organizations into a cohesive
  operating system

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Benefits of Supply Chain Management
Organization Benefit
Campbell Soup Doubled inventory turnover rate
Hewlett-Packard Cut supply costs 75
Sport Obermeyer Doubled profits and increased sales 60
National Bicycle Increased market share from 5 to 29
Wal-Mart Largest and most profitable retailer in the world
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Global Supply Chains

• Increasing more complex
• Language
• Culture
• Currency fluctuations
• Political
• Transportation costs
• Local capabilities
• Finance and economics
• Environmental

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Elements of Supply Chain Management
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Strategic or Operational

• Two types of decisions in supply chain management
• Strategic design and policy (mostly long term
  decisions)
• Operational day-today activities (short term
  decisions)
• Major decisions areas
• Location of members
• Production processes
• Inventory flow and management
• Distribution system

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Logistics

• Logistics
• Refers to the movement of materials and
  information within a facility and to incoming and
  outgoing shipments of goods and materials in a
  supply chain

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Distribution Requirements Planning

• Distribution requirements planning (DRP) is a
  system for inventory management and distribution
  planning

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E-Business

• E-Business the use of electronic technology to
  facilitate business transactions
• Applications include
• Internet buying and selling
• E-mail
• Order and shipment tracking
• Electronic data interchange

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Advantages E-Business

• Companies can
• Have a global presence
• Improve competitiveness and quality
• Analyze customer interests
• Collect detailed information
• Shorten supply chain response times
• Realize substantial cost savings
• Create virtual companies
• Level the playing field for small companies

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Disadvantages of E-Business

• Customer expectations
• Order quickly -gt fast delivery
• Order fulfillment
• Order rate often exceeds ability to fulfill it
• Inventory holding
• Outsourcing loss of control
• Internal holding costs

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Reverse Logistics

• Reverse logistics the backward flow of goods
  returned to the supply chain
• Processing returned goods
• Sorting, examining/testing, restocking, repairing
• Reconditioning, recycling, disposing
• Gatekeeping screening goods to prevent
  incorrect acceptance of goods
• Avoidance finding ways to minimize the number
  of items that are returned

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Effective/Successful Supply Chain

• Requires linking the market, distribution
  channels processes, and suppliers
• Supply chain should enable members to
• Share forecasts
• Determine the status of orders in real time
• Access inventory data of partners

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Effective/Successful Supply Chain

• Trust among trading partners
• Effective communications
• Supply chain visibility
• Event-management capability
• The ability to detect and respond to unplanned
  events
• Performance metrics

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SCOR Metrics
Perspective Metrics
Reliability On-time delivery Order fulfillment lead time Fill rate (fraction of demand met from stock) Perfect order fulfillment
Flexibility Supply chain response time Upside production flexibility
Expenses Supply chain management costs Warranty cost as a percent of revenue Value added per employee
Assets/utilization Total inventory days of supply Cash-to-cash cycle time Net asset turns
Refers to Supply Chain Operations Reference,
which attempts to standardize measurements of
supply chain performance.
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RFID Technology

• Used to track goods in supply chain
• RFID tag attached to object
• Similar to bar codes but uses radio frequency to
  transmit product information to receiver
• RFID eliminates need for manual counting and bar
  code scanning

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Intormation Velocity

• The rate at which information is communicated
  in a supply chain

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NOTE
The following slides simply outline the
purchasing function which is common to most
organizations.You will not be tested on the
slides that follow this slide, but the
information on these slides couldbe helpful in
reference to job interviews. Hence,you should
review these slides.
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Purchasing

• Purchasing is responsible for obtaining the
  materials, parts, and supplies and services
  needed to produce a product or provide a service.
• Purchasing cycle Series of steps that begin with
  a request for purchase and end with notification
  of shipment received in satisfactory condition.

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Goal of Purchasing

• Develop and implement purchasing plans for
  products and services that support operations
  strategies

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Duties of Purchasing

• Identifying sources of supply
• Negotiating contracts
• Maintaining a database of suppliers
• Obtaining goods and services
• Managing supplies

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Purchasing Interfaces
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Purchasing Cycle

1. Requisition received
2. Supplier selected
3. Order is placed
4. Monitor orders
5. Receive orders

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Value Analysis vs. Outsourcing

• Value analysis
• Examination of the function of purchased parts
  and materials in an effort to reduce cost and/or
  improve performance

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Centralized vs Decentralized Purchasing

• Centralized purchasing
• Purchasing is handled by one special department
• Decentralized purchasing
• Individual departments or separate locations
  handle their own purchasing requirements

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Suppliers

• Choosing suppliers
• Evaluating sources of supply
• Supplier audits
• Supplier certification
• Supplier relationships
• Supplier partnerships

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Factors in Choosing a Supplier

• Quality and quality assurance
• Flexibility
• Location
• Price

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Factors in Choosing a Supplier (contd)

• Product or service changes
• Reputation and financial stability
• Lead times and on-time delivery
• Other accounts

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Evaluating Sources of Supply

• Vendor analysis Evaluating the sources of supply
  in terms of price, quality, reputation, and
  service

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Evaluating Sources of Supply

• Vendor analysis - evaluating the sources of
  supply in terms of
• Price
• Quality
• Services
• Location
• Inventory policy
• Flexibility

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Supplier as a Partner
Aspect Adversary Partner
Number of suppliers Many One or a few
Length of relationship May be brief Long-term
Low price Major consideration Moderately important
Reliability May not be high High
Openness Low High
Quality May be unreliable buyer inspects At the source vendor certified
Volume of business May be low High
Flexibility Relatively low Relatively high
Location Widely dispersed Nearness is important
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Supplier Partnerships

• Ideas from suppliers could lead to improved
  competitiveness
• Reduce cost of making the purchase
• Reduce transportation costs
• Reduce production costs
• Improve product quality
• Improve product design
• Reduce time to market
• Improve customer satisfaction
• Reduce inventory costs
• Introduce new products or services

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Critical Issues

• Strategic importance
• Cost
• Quality
• Agility
• Customer service
• Competitive advantage
• Technology management
• Benefits
• Risks

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Critical Issues

• Purchasing function
• Increased outsourcing
• Increased conversion to lean production
• Just-in-time deliveries
• Globalization