Professional Documents
Culture Documents
A basic purpose of supply chain management is to control inventory by managing the flow of materials throughout the supply chain.
In order to
Minimize total system cost Satisfy customer service requirements
6
Manufacturing Cost
45%
Manufacturing Cost
Effort spent for supply chain activities are invisible to the customers.
A picture is better than 1000 words! How many words would be better than 3 pictures?
- A supply chain consists of
Supplier Manufacturer Distributor Retailer Customer
Upstream
Downstream
- aims to Match Supply and Demand, profitably for products and services - achieves
SUPPLY SIDE
DEMAND SIDE
The right
Product
+ + +
The right The right
The right
Price
Store
Quantity
The right
Customer
The right
Time
Higher
Profits
8
Plastic Producer
Tenneco Packaging
Paper Manufacturer
Timber Industry
Supplier
Information Funds
Customer
10
Information
THAILAND INDIA N-Tier Suppliers Suppliers MEXICO Logistics TEXAS Distributors US Retailers
Supply Side
OEM
Demand Side
Demand Supply
The task of SCM is to design, plan, and execute the activities at the different stages so as to provide the desired levels of service to supply chain customers profitably
11
Toyota / GM / Volkswagen, McMaster Carr / W.W. Grainger, sell auto parts Amazon / Barnes and Noble Frozen food industry/Fast food industry/5 star restaurants Internet shopping: Webvan / Peapod
12
Connected by agents, transportation and storage activities, and Integrated through sharing of information, planning, and processing activities
13
14
Supply
Inventory & warehousing costs Production/ purchase costs Transportation costs Inventory & warehousing costs
Transportation costs
15
Receiving
Storage Operations
Storage
16
Supplier
Supplier
Storage
Mfg.
Storage
Dist.
Retailer
Customer
Supplier
17
Iron ore
Sheet metal
STEEL MILL
Forms steel ingot
Steel ingots
STEEL COMPANY
Forms sheet metal
Car door
AUTOMOBILE
MANUFACTURER
Makes automobile
FINAL CONSUMER
Drives automobile
18
Production
Materials Management Purchasing Production Control Warehousing and Shipping Inventory Control and Traffic
Customers
Suppliers
}
Supplier
Storage
Service
Customer
20
Firms with:
- Large
inventories
Benefits
- Lower purchasing/inventory costs, higher quality/customer
service
21
Importance of Supply Chain Mgt. Cont. Firms practicing Supply Chain Management:
1. Start with key suppliers 2. Move on to other suppliers, customers, and shippers 3. Integrate second tier suppliers and customers (second tier refers to the customers customers and the suppliers suppliers)
22
23
The Bullwhip Phenomenon Volatility amplification along the network Increase in demand variability as we move upstream away from the market Mainly because of lack of communication and coordination Delays in information and material flows
Bullwhip effect occurs because of various reasons: Order Batching - Accumulate orders Shortage gaming- Ask for more than what is needed Demand forecast updating
24
Third party logistics services grew in 1998 by 15% to nearly $40 billion
25
Supply Chain: the Magnitude It is estimated that the grocery industry could save $30 billion (10% of operating cost) by using effective logistics strategies.
A typical box of cereal spends more than three months getting from factory to supermarket.
A typical new car spends 15 days traveling from the factory to the dealership, although actual travel time is 5 days.
26
29
manufacturers and suppliers working closely together . jointly creating business plans to eliminate the source of wasteful practices across the entire supply chain. (Journal of business strategy, Oct./Nov. 1997)
31
Includes movement of products from suppliers to manufacturers to distributors, but also includes movement of information, funds, and products in both directions Probably more accurate to use the term supply network or supply web
Typical supply chain stages: customers, retailers, distributors, manufacturers, suppliers . All stages may not be present in all supply chains (e.g., no retailer or distributor for Dell)
33
Decision Phases of a Supply Chain Supply chain strategy or design Supply chain planning Supply chain operation
34
36
Must consider in planning decisions demand uncertainty, exchange rates, competition over the time horizon
37
Push/pull view: processes in a supply chain are divided into two categories depending on whether they are executed in response to a customer order (pull) or in anticipation of a customer order (push)
39
Retailer
Replenishment Cycle
Distributor
Manufacturing Cycle
Manufacturer
Procurement Cycle
Supplier
40
PUSH PROCESSES
PULL PROCESSES
In Pull systems, work release is based on actual demand or the actual status of the downstream customers
May cause long delivery lead times Acts reactively
e.g. Making a specific resume for a company after talking to the recruiter 43
44
Resource Scheduling
Short Term Planning ( Weekly, Daily)
46
47
Compression
(Planning/Manufacturing/Supply)
Changing Paradigm
Functional vs Process Products vs Customers Revenues vs Performance Inventory vs Information Transactions vs Relationships
49
Effectiveness of the whole supply chain is more important than the efficiency of each individual department.
51
52
Step 2 - Optimizing the supply chain Determine pathways from suppliers to the end customer
Customer markets to Distribution centers Distribution centers to production plants Raw material sources to production plants Identify constraints at vendors, plants and distribution centers Get the big picture Plan the procurement, production and distribution of product groups rather than individual products in large time periods- quarters or years
53
Techniques
ERP
54
Step 4 Transaction processing and short term scheduling Customer orders arrive at random
This is a day to day accounting system which tracks and schedules every order to meet customer demand
Visibility : See physical operations more effectively through information. Information can be used for effective coordination of value chain activities. Mirroring capability : In this stage, virtual activities are substituted for physical ones. A parallel value chain is created. New customer relationships : The company can draw on the flow of information in the virtual value chain to deliver value to customers in new ways.
57
Dealer Management
Conventional functions : Inventory ownership and management Sales and technical support Order handling Credit
58
Contemporary Trends
Channels being divided into two- Fulfillment and Franchised agent
Fulfillment channel- responsible for getting the manufacturers product from the plant to the end user through a highly efficient logistics and inventory management system
59
Contemporary Trends
Fulfillment channel may not take ownership of the product but may perform these functions on a per box fee structure Franchised agents responsible for sales and sales support but will not write the order or supply the product
60
64
Adversarial vs partnerships
Inspection vs no inspection
65
66
Important points to keep in mind Segment customers based on service needs. Modify the supply chain to meet these service requirements profitably. Customize the logistics network. Develop forecasts collaboratively involving every link of the supply chain. Locate the leverage point where the product is unalterably configured to meet a single requirement Delay product differentiation till the last possible moment. Assess options such as modularized design or modification of manufacturing processes that can increase flexibility.
67
Cultivate warm relationships with suppliers. Efficient supply chain management has to be accompanied by a technology strategy. Customization of logistics network Listen to signals of market demand and plan accordingly. Differentiate product close to the customer Source strategically Develop a supply chain wide technology strategy
68
69