Supply Chain Management

Supply Change Management
Prepared by Pramod Bansal
PGPM - 1011001097
1/21/2012 Pramod Bansal ~ 1011001097 1
Supply Chain Management

Supply Chain: the sequence of Chain: 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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Pramod Bansal ~ 1011001097
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

Production Purchasing Distribution
Receiving Storage Operations Storage
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Typical Supply Chain for a Manufacturer Figure 14.1a

Supplier Supplier Supplier
Storage
Mfg.
Storage
Dist.
Retailer
Customer
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Typical Supply Chain for a Service Figure 14.1b

Supplier
Storage
Service
Customer
Supplier
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Need for Supply Chain Management

1.Improve operations 1.Improve 2.Increasing levels of outsourcing 2.Increasing 3.Increasing transportation costs 3.Increasing 4.Competitive pressures 4.Competitive 5.Increasing globalization 5.Increasing 6.Increasing importance of e-commerce 6.Increasing e7.Complexity of supply chains 7.Complexity 8.Manage inventories 8.Manage
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Figure 14.3
Bullwhip Effect
Amount of = inventory
Tier 2 Suppliers
Tier 1 Suppliers
Producer
Distributor
Retailer
Final Customer
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Benefits of Supply Chain Management

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

Higher productivity Greater agility Shorter lead times Higher profits Greater customer loyalty
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Elements of Supply Chain Management Table 14.1

Element
Customers Forecasting Design Processing Inventory Purchasing Suppliers Location Logistics
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Typical Issues
Determining what customers want Predicting quantity and timing of demand Incorporating customer wants, mfg., and time Controlling quality, scheduling work Meeting demand while managing inventory costs Evaluating suppliers and supporting operations Monitoring supplier quality, delivery, and relations Determining location of facilities Deciding how to best move and store materials
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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Logistics
Movement within the facility Incoming and outgoing shipments Bar coding EDI Distribution JIT Deliveries
0
214800 232087768
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Materials Movement
Work center Work center Work center Work center Storage
Storage Storage
RECEIVING
Shipping
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Distribution Requirements Planning

Distribution requirements planning (DRP) is a system for inventory management and distribution planning Extends the concepts of MRPII
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Uses of DRP
Management uses DRP to plan and coordinate:
Transportation Warehousing Workers Equipment Financial flows
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Electronic Data Interchange

EDI the direct transmission of interorganizational transactions, computer-tocomputer-to-computer, including purchase orders, shipping notices, and debit or credit memos.
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Electronic Data Interchange

Increased productivity Reduction of paperwork Lead time and inventory reduction Facilitation of just-in-time systems just-inElectronic transfer of funds Improved control of operations Reduction in clerical labor Increased accuracy
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Efficient Consumer Response

Efficient consumer response (ECR) is a supply chain management initiative specific to the food industry
Reflects companies efforts to achieve companies quick response using EDI and bar codes
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E-Commerce
E-Commerce: the use of electronic Commerce: 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-Commerce ECompanies 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-Commerce ECustomer expectations

Order quickly -> 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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Successful Supply Chain

Trust among trading partners Effective communications Supply chain visibility EventEvent-management capability
The ability to detect and respond to unplanned events
Performance metrics
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Table 14.4
SCOR Metrics
Metrics
On-time delivery OnOrder fulfillment lead time Fill rate (fraction of demand met from stock) Perfect order fulfillment Supply chain response time Upside production flexibility Supply chain management costs Warranty cost as a percent of revenue Value added per employee Total inventory days of supply Cash-toCash-to-cash cycle time Net asset turns
Perspective
Reliability
Flexibility
Expenses
Assets/utilization
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CPFR
Collaborative Planning, Forecasting, and Replenishment Focuses on information sharing among trading partners Forecasts can be frozen and then converted into a shipping plan Eliminates typical order processing
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CPFR Process
Step 1 Front-end agreement FrontStep 2 Joint business plan Steps 3-5 Sales forecast 3Steps 6-8 Order forecast collaboration 6Step 9 Order generation/delivery execution
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CPFR Results
Nabisco and Wegmans
50% increase in category sales
WalWal-mart and Sara Lee

14% reduction in store-level inventory store32% increase in sales
KimberlyKimberly-Clark and Kmart

Increased category sales that exceeded market growth
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Creating an Effective Supply Chain

1.Develop strategic objectives and tactics 1.Develop 2.Integrate and coordinate activities in the 2.Integrate internal supply chain 3.Coordinate activities with suppliers with 3.Coordinate customers 4.Coordinate planning and execution 4.Coordinate across the supply chain 5.Form strategic partnerships 5.Form
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Supply Chain Performance Drivers 1.Quality 1.Quality

2.Cost 2.Cost 3.Flexibility 3.Flexibility 4.Velocity 4.Velocity 5.Customer service 5.Customer
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Velocity
Inventory velocity
The rate at which inventory(material) goes through the supply chain
Information velocity
The rate at which information is communicated in a supply chain
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Challenges
Barriers to integration of organizations Getting top management on board Dealing with trade-offs tradeSmall businesses Variability and uncertainty Long lead times
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TradeTrade-offs
1. Lot-size-inventory Lot-sizeBullwhip effect
2. Inventory-transportation costs InventoryCross-docking Cross-
3. Lead time-transportation costs time4. Product variety-inventory varietyDelayed differentiation
5. Cost-customer service CostDisintermediation

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TradeTrade-offs
Bullwhip effect
Inventories are progressively larger moving backward through the supply chain
CrossCross-docking
Goods arriving at a warehouse from a supplier are unloaded from the suppliers supplier truck and loaded onto outbound trucks Avoids warehouse storage
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TradeTrade-offs
Delayed differentiation
Production of standard components and subassemblies, which are held until late in the process to add differentiating features
Disintermediation
Reducing one or more steps in a supply chain by cutting out one or more intermediaries
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Supply Chain Issues

Strategic Issues
Design of the supply chain, partnering
Tactical Issues
Inventory policies Purchasing policies Production policies Transportation policies Quality policies
Operating Issues
Quality control Production planning and control
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Supply Chain Benefits and Drawbacks Table 14.5

Problem
Large inventories Long lead times
Potential Improvement
Smaller, more frequent deliveries Delayed differentiation Disintermediation Modular
Benefits
Reduced holding costs Quick response
Possible Drawbacks
Traffic congestion Increased costs May not be feasible May need absorb functions Less variety
Large number of parts Cost Quality Variability

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Fewer parts Simpler ordering Reduced cost, higher quality
Outsourcing Shorter lead times, better forecasts
Loss of control Less variety

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Able to match supply and Pramod Bansaldemand ~ 1011001097
Purchasing
Purchasing is responsible for obtaining the materials, parts, and supplies and services needed to produce a product or provide a service.
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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
Legal Operations Accounting
Purchasing
Data processing
Design Receiving Suppliers
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Purchasing Cycle
Legal
1.Requisition received 1.Requisition 2.Supplier selected 2.Supplier 3.Order is placed 3.Order 4.Monitor orders 4.Monitor 5.Receive orders 5.Receive
Operations
Accounting
Purchasing
Data processprocessing
Design Receiving
Suppliers
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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 (cont (contd)

Product or service changes Reputation and financial stability Lead times and on-time delivery onOther accounts
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Evaluating Sources of Supply

Vendor analysis: Evaluating the analysis: 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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Table 14.9
Supplier as a Partner
Adversary
Many May be brief
Aspect
Number of suppliers Length of relationship Low price Reliability Openness Quality
Partner
One or a few Long-term Long-
Major consideration Moderately important May not be high Low May be unreliable; buyer inspects Relatively low High High At the source; vendor certified High Relatively high
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Volume of business May be low

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Flexibility
Supplier Partnerships
Ideas from suppliers could lead to improved competitiveness
1.Reduce cost of making the purchase 1.Reduce 2.Reduce transportation costs 2.Reduce 3.Reduce production costs 3.Reduce 4.Improve product quality 4.Improve 5.Improve product design 5.Improve 6.Reduce time to market 6.Reduce 7.Improve customer satisfaction 7.Improve 8.Reduce inventory costs 8.Reduce 9.Introduce new products or services 9.Introduce
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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 Just-inGlobalization
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Supply Chain Management

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Supply Chain Management

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Supply Change Management

Prepared by Pramod Bansal

Supply Chain Management

Pramod Bansal ~ 1011001097

Pramod Bansal ~ 1011001097

Functions and Activities

Typical Supply Chains

Receiving Storage Operations Storage

Pramod Bansal ~ 1011001097

Typical Supply Chain for a Manufacturer Figure 14.1a

Pramod Bansal ~ 1011001097

Typical Supply Chain for a Service Figure 14.1b

Pramod Bansal ~ 1011001097

Need for Supply Chain Management

Pramod Bansal ~ 1011001097

Benefits of Supply Chain Management

Benefits of Supply Chain Management Lower inventories

Pramod Bansal ~ 1011001097

Elements of Supply Chain Management Table 14.1

Pramod Bansal ~ 1011001097

Pramod Bansal ~ 1011001097

Pramod Bansal ~ 1011001097

Distribution Requirements Planning

Pramod Bansal ~ 1011001097

Pramod Bansal ~ 1011001097

Electronic Data Interchange

Pramod Bansal ~ 1011001097

Electronic Data Interchange

Efficient Consumer Response

Pramod Bansal ~ 1011001097

Pramod Bansal ~ 1011001097

Advantages E-Commerce ECompanies can:

Pramod Bansal ~ 1011001097

Disadvantages of E-Commerce ECustomer expectations

Successful Supply Chain

Pramod Bansal ~ 1011001097

WalWal-mart and Sara Lee

KimberlyKimberly-Clark and Kmart

Creating an Effective Supply Chain

Supply Chain Performance Drivers 1.Quality 1.Quality

Pramod Bansal ~ 1011001097

Pramod Bansal ~ 1011001097

Pramod Bansal ~ 1011001097

2. Inventory-transportation costs InventoryCross-docking Cross-

3. Lead time-transportation costs time4. Product variety-inventory varietyDelayed differentiation

5. Cost-customer service CostDisintermediation

Pramod Bansal ~ 1011001097

Supply Chain Issues

Pramod Bansal ~ 1011001097

Supply Chain Benefits and Drawbacks Table 14.5

Large number of parts Cost Quality Variability

Fewer parts Simpler ordering Reduced cost, higher quality

Outsourcing Shorter lead times, better forecasts

Loss of control Less variety

Able to match supply and Pramod Bansaldemand ~ 1011001097

Pramod Bansal ~ 1011001097

Pramod Bansal ~ 1011001097

Pramod Bansal ~ 1011001097

Design Receiving Suppliers

Pramod Bansal ~ 1011001097

Pramod Bansal ~ 1011001097

Value Analysis vs. Outsourcing

Pramod Bansal ~ 1011001097

2. Inventory-transportation costs InventoryCross-docking Cross-

3. Lead time-transportation costs time4. Product variety-inventory varietyDelayed differentiation

5. Cost-customer service CostDisintermediation