Transcript Value creating processes conceptual framework

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.
Supply chain connects suppliers, producers and
final customers together in a tework that is
essential to the creation and delivery of goods
and services.
(Value chains are the chain of activities and
functions WITHIN a single organization.)
Supply Chain Management (SCM)
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The strategic coordination of the supply chain
for the purpose of intergating supply and
demand management.
Logistics
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The part of a supply chain involved with the
forward and reverse flow of goods, services,
cash and information.
Movement within the facility
 Incoming and outgoing shipments
 Distribution
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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
Key issues of SCM
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Determinate the appropriate level of outsourcing
Managing procurement
Managing suppliers
Managing customer relationships
Being able to quickly identify and respond to
problems
Managing risks and uncertainty
Typical Supply Chains
Production
Distribution
Purchasing Receiving Storage Operations Storage
Typical Supply Chain for a
Manufacturer
Supplier
Supplier
Supplier
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Storage
Mfg.
Storage
Dist.
Retailer
Customer
A farm-to-market supply chain
1.
Farm (wheat)
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2.
Mill (flour)
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3.
equipment, repair, energy
Bakery (bread)
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4.
Suppliers: equipment, repair, feed, seed, fertilizer,
pesticides, energy/fuel
equipment, repair, energy, other ingredients
Supermarket (bread sold to the final
customer)
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Typical Supply Chain for a
Service
Supplier
Supplier
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Storage
Service
Customer
Supply chain and Cash flow
Goods and services
Cash flow
Reverse
logistics
Suppliers
Consumers
Marketing
Design
Customers
Production
Logistics
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
Benefits of Supply Chain
Management
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Lower inventories
Higher productivity
Greater agility
Shorter lead times
Higher profits
Greater customer loyalty
Global supply chains
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Product design
Products sold globally
Outsourcing to low labor cost countries
Difficulties: language, culture, currency
fluctuations, increased tratnsportation costs and
lead time, increased need for trust
PROCUREMENT
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Purchasing is responsible for obtaining the materials, parts, and supplies and
services needed to produce a product or provide a service.
Goal: to develop and implement purchasing plans for products and services
that support operations strategies.
Duties:
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Identifying sources of supply
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Negotiating contracts
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Maintaining a database of suppliers
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Obtaining goods and services
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Managing supplies
Purchasing cycle: series of steps that begin with a request for purchase and
end with notification of shipment recieved in satisfactory condition.
Purchasing Cycle
Legal
1.
Requisition received
2.
Supplier selected
3.
Order is placed
4.
Monitor orders
Operations
Accounting
Purchasing
Data
processing
Design
5.
Receive orders
Receiving
Suppliers
Centralized vs. Decentralized
purchasing
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Centralized purchasing
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Purchasing is handled by one special department
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Lower prices, better service and closer attention from
suppliers, employing specialists
Decentralized purchasing
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Individual departments or separate locations handle
their own purchasing requirements
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Aware to different local needs, quicker response
Trade-offs
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Lot-size vs. inventory
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2.
Bullwhip effect
Inventory vs. transportation costs (reducing average costs)
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Cross-docking
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Lead time vs. transportation costs
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Product variety vs. inventory
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Delayed differentiation
Cost vs. customer service
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Disintermediation
Trade-offs
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Bullwhip effect
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Demand variations begin at the customer end of the chain
and become increasingly large as they radiate backwards
through the chain.
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Inventories are progressively larger moving backward
through the supply chain.
Cross-docking
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Goods arriving at a warehouse from a supplier are
unloaded from the supplier’s truck and loaded immediately
onto outbound trucks. Avoids warehouse storage. Reduces
holding costs and lead times.
Bullwhip Effect 1
(uncertainty)
Demand
Final
customer
Initial
supplier
Backward effect
Bullwhip Effect 2
Amount of
= inventory
Tier 2
Suppliers
Tier 1
Suppliers
Producer
Distributor
Retailer
Final
Customer
Trade-offs
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Delayed differentiation
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Production of standard components and
subassemblies, which are held until late in the
process to add differentiating features (expl.
automobiles produced without extras)
Disintermediation
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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 parts
Modular
Fewer parts
Simpler ordering
Less variety in final
products
Cost
Quality
Outsourcing
Reduced cost,
higher quality
Loss of control
(even on quality)
Variability
Shorter lead times,
better forecasts
Able to match
supply and demand
Less variety
Successful Supply Chain
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Trust among trading partners
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Effective communications
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Supply chain visibility
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Event-management capability
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The ability to detect and respond to unplanned
events (uncertainty)
Performance metrics
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