Transcript Document

Supply Chain
Management
Learning Objectives
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Explain what a supply chain is.
Explain the need to manage a supply chain and
the potential benefits of doing so.
Explain the increasing importance of outsourcing.
State the objective of supply chain management.
List the elements of supply chain management.
Identify the strategic, tactical, and operations
issues in supply chain management.
Describe the bullwhip effect and the reasons why
it occurs.
Learning Objectives
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Explain the value of strategic partnering.
Discuss the critical importance of information
exchange across a supply chain.
Outline the key steps, and potential challenges, in
creating an effective supply chain.
Explain the importance of the purchasing function
in business organizations.
Describe the responsibilities of purchasing.
Explain the term value analysis.
Identify several guidelines for ethical behavior in
purchasing.
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 value chains
Facilities
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Warehouses
Factories
Processing centers
Distribution centers
Retail outlets
Offices
Functions and Activities
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Forecasting
Purchasing
Inventory management
Information management
Quality assurance
Scheduling
Production and delivery
Customer service
Typical Supply Chains
Production
Distribution
Purchasing Receiving Storage Operations Storage
Manufacturer
Supplier
Supplier
Supplier
}
Storage
Mfg.
Storage
Dist.
Retailer
Customer
Need for Supply Chain
Management
1.Improve operations
2.Increasing levels of outsourcing
3.Increasing of transportation costs
4.Competitive pressures
5.Increasing globalization
6.Increasing importance of e-commerce
7.Complexity of supply chains
8.Manage inventories
Benefits of Supply Chain Management
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Lower inventories/increase inventory turnover
Higher productivity
Greater agility
Shorter lead times
Higher profits
Greater customer loyalty
Integrates separate organizations into a
cohesive operating system
Global Supply Chains
 Increasing more complex
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Language
Culture
Currency fluctuations
Political
Transportation costs
Local capabilities
Finance and economics
Environmental
Strategic / Operational
 Two types of decisions in supply chain
management
 Strategic – design and policy
 Operational – day-today activities
 Major decisions areas
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Location
Production
Inventory
Distribution
Elements of Supply Chain
Management
Element
Typical Issues
Customers
Determining what customers want
Forecasting
Predicting quantity and timing of demand
Design
Incorporating customer wants, mfg., and time
Processing
Controlling quality, scheduling work
Inventory
Meeting demand while managing inventory costs
Purchasing
Evaluating suppliers and supporting operations
Suppliers
Monitoring supplier quality, delivery, and relations
Location
Determining location of facilities
Logistics
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
Logistics
• Movement within the facility
• Incoming and outgoing shipments
• Bar coding
• RFID
• EDI
• Distribution
• JIT Deliveries
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Materials Movement
Work center
Work center
Work
center
Storage
Work
center
Storage
RECEIVING
Storage
Shipping
Distribution Requirements
Planning
 Distribution requirements planning
(DRP) is a system for inventory
management and distribution planning
 Extends the concepts of MRPII
Uses of DRP
 Management uses DRP to plan and
coordinate:
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Transportation
Warehousing
Workers
Equipment
Financial flows
E-Business
 E-Business: the use of electronic
technology to facilitate business
transactions
 Applications include
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Internet buying and selling
E-mail
Order and shipment tracking
Electronic data interchange (EDI)
Advantages E-Business
 Companies can:
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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
Disadvantages of E-Business
 Customer expectations
 Order quickly -> fast delivery
 Order fulfillment
 Order rate often exceeds ability to fulfill it
 Inventory holding
 Outsourcing loss of control
 Internal holding costs
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
Effective 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
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
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
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
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
CPFR Process
Step 1 – Front-end agreement
Step 2 – Joint business plan
Steps 3-5 – Sales forecast
Steps 6-8 – Order forecast collaboration
Step 9 – Order generation/delivery execution
Supply Chain Performance Drivers
1.Quality
2.Cost
3.Flexibility
4.Velocity
5.Customer service
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
Challenges
 Barriers to integration of organizations
 Getting top management on board
 Dealing with trade-offs
 Small businesses
 Variability and uncertainty
 Long lead times
Trade-offs
1. Lot size-inventory
 Bullwhip effect
2. Inventory-transportation costs
 Cross-docking
3. Lead time-transportation costs
4. Product variety-inventory
 Delayed differentiation
5. Cost-customer service
 Disintermediation
Trade-offs
 Bullwhip effect
 Inventories are progressively larger moving
backward through the supply chain
 Cross-docking
 Goods arriving at a warehouse from a
supplier are unloaded from the supplier’s
truck and loaded onto outbound trucks
 Avoids warehouse storage
Bullwhip Effect
Demand
Initial
Supplier
Final Customer
Inventory oscillations become progressively
larger looking backward through the supply chain
Trade-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
Supply Chain Benefits and
Drawbacks
Problem
Potential
Improvement
Benefits
Possible
Drawbacks
Large
inventories
Smaller, more
frequent deliveries
Reduced holding
costs
Traffic congestion
Increased costs
Long lead times
Delayed
differentiation
Disintermediation
Quick response
May not be feasible
May need absorb
functions
Large number of Modular
parts
Fewer parts
Simpler ordering
Less variety
Cost
Quality
Outsourcing
Reduced cost,
higher quality
Loss of control
Variability
Shorter lead times,
better forecasts
Able to match
supply and
demand
Less variety
Reduce inventory
Inventory level
Process
downtime
Scrap
Setup
time
Quality
problems
Late deliveries
Reduce inventory
Inventory
level
Process
downtime
Scrap
Setup
time
Quality
problems
Late deliveries
Reduce inventory
Inventory
level
Process
downtime
Scrap
Setup
time
Quality
problems
Late deliveries
Reduce Lot Sizes
Inventory
200 –
Q1 When average order size = 200
average inventory is 100
Q2 When average order size = 100
average inventory is 50
100 –
Time
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.
 Goal: Develop and implement purchasing
plans for products and services that support
operations strategies
Duties of Purchasing
 Identifying sources of supply
 Negotiating contracts
 Maintaining a database of suppliers
 Obtaining goods and services
 Managing supplies
Purchasing Interfaces
Legal
Operations
Accounting
Purchasing
Data
processing
Design
Receiving
Suppliers
Purchasing Cycle
1.Requisition received
2.Supplier selected
3.Order is placed
4.Monitor orders
5.Receive orders
Value analysis
 Examination of the function of purchased
parts and materials in an effort to reduce
cost and/or improve performance
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
Suppliers Management
 Choosing suppliers
 Evaluating sources of supply
 Supplier audits
 Supplier certification
 Supplier relationships
 Supplier partnerships
Factors in Choosing a Supplier
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Quality and quality assurance
Flexibility
Location
Price
Product or service changes
Reputation and financial stability
Lead times and on-time delivery
Other accounts
Evaluating Sources of Supply
 Vendor analysis - evaluating the
sources of supply in terms of
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Price
Quality
Services
Location
Inventory policy
Flexibility
Supplier as a Partner
Aspect
Supplier
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
Supplier Partnerships
 Ideas from suppliers could lead to
improved competitiveness;
1.Reduce cost of making the purchase
2.Reduce transportation costs
3.Reduce production costs
4.Improve product quality
5.Improve product design
6.Reduce time to market
7.Improve customer satisfaction
8.Reduce inventory costs
9.Introduce new products or services
Critical Issues
 Strategic importance
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Cost
Quality
Agility
Customer service
Competitive advantage
 Technology management
 Benefits
 Risks
Critical Issues
 Purchasing function
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Increased outsourcing
Increased conversion to lean production
Just-in-time deliveries
Globalization