Transcript Week 2 - supply chain research

Week 2
BUSN 6110
Spring 2013
Supply Chain
Management
Supply Chain Management
• First appearance – Financial Times
• Importance → Inventory ~ 14% of GDP
→ GDP ~ $12 trillion
→ Warehousing/Trans ~ 9% of GDP
→ Rule of Thumb - $12 increase in sales to = $1
savings in Supply Chain
• 1982 Peter Drucker – last frontier
• Supply Chain problems can cause ≤ 11% drop in
stock price
• Customer perception of company
SCOR
Reference: www.supply-chain.org
End-to-End Supply Chain
Plan
Plan
Deliver
Source
Return
Return
Suppliers’
Supplier
Make
Deliver
Return
Supplier
Source
Return
Your Company
Internal or External
Make
Deliver
Return
Plan
Source
Make
Return
Deliver
Source
Return
Return
Customer
Internal or External
Customers’
Customer
SCOR reference model
•
Whether from Cow to Cone or from Rock to Ring SCOR is not limited by
organizational boundaries
Copyright © Supply Chain Council, 2008. All rights reserved
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Supply Chain
“The global network used to deliver products
and services from raw materials to end
customers through an engineered flow of
information, physical distribution, and cash.”
APICS Dictionary, 13th Edition
Supply Chain Uncertainty
 Forecasting, lead times, batch
ordering, price fluctuations, and
inflated orders contribute to
variability
 Inventory is a form of insurance
 Distorted information is one of the
main causes of uncertainty Bullwhip
effect
Information in the
Supply Chain
 Centralized coordination of
information flows
 Integration of transportation,
distribution, ordering, and production
 Direct access to domestic and global
transportation and distribution
channels
 Locating and tracking the movement of
every item in the supply chain - RFID
Bar Codes
 Computer readable codes attached to
items flowing through the supply chain
 Generates point-of-sale data which is
useful for determining sales trends,
ordering, production scheduling, and
deliver plans
1234
5678
IT Issues
 Increased benefits and sophistication come
with increased costs
 Efficient web sites do not necessarily mean
the rest of the supply chain will be as efficient
 Security problems are very real – camera
phones, cell phones, thumb drives
 Collaboration and trust are important
elements that may be new to business
relationships
Suppliers
 Purchased materials account for about half
of manufacturing costs
 Materials, parts, and service must be
delivered on time, of high quality, and low
cost
 Suppliers should be integrated into their
customers’ supply chains
 Partnerships should be established
 On-demand delivery (JIT) is a frequent
requirement - what is JIT and does it work?
Sourcing
 Relationship between customers and suppliers
focuses on collaboration and cooperation
 Outsourcing has become a long-term strategic
decision
 Organizations focus on core competencies
 Single-sourcing is
increasingly a part
How does
of supplier relations
single source
 Barriers
differ from sole
source?
Sourcing and Suppliers
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•
•
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Supplier Selection
Selection Evaluation
Supplier Certification
Sourcing and Ethics
Distribution
 The actual movement of products and
materials between locations
 Handling of materials and products at
receiving docks, storing products,
packaging, and shipping
 Often called logistics
 Driving force today
is speed
Distribution Centers
and Warehousing
 DCs are some of the largest business
facilities in the United States
 Trend is for more frequent orders in
smaller quantities
 Flow-through facilities and automated
material handling
 Final assembly and product
configuration (postponement) may be
done at the DC
Transportation
Railroads
 95,000 - 150,000 miles in US
 Low cost, high-volume
 Improving flexibility
 intermodal service
 double stacking
Complaints: slow, inflexible, large loads
Advantages: large/bulky loads, intermodal
Trucking
 Most used mode in US -75% of total
freight (volume not total weight)
 Flexible, small loads
 Consolidation,
Internet load match sites
 Truck load (TL) vs. Less Than Truck Load
(LTL)
Air
 Lightweight, small items
 Quick, reliable, expensive (relatively
expensive depending on costs of not
getting item there)
 Major airlines and US Postal Service,
UPS, FedEx
Package Carriers
 UPS, US Postal Service, FedEx Ground
 Significant growth driven by
e-businesses and the move to smaller
shipments and consumer desire to have it
NOW
 Use several modes of transportation
 Innovative use of technologies in some
cases
 Online tracking – some better than others
Intermodal
 Combination of several modes of
transportation
 Most common are truck/rail/truck and
truck/water/rail/truck
 Enabled by the use of containers – the
development of the 20 and 40 foot
containers significantly changed the face
of shipping
Water
 One of oldest means of transport
 Low-cost, high-volume, slow (relative)
 Security - sheer volume - millions of
containers annually
 Bulky, heavy and/or large items
 Standardized shipping containers improve
service
 The most common form of international
shipping
Pipelines
 Primarily for oil & refined oil products
 Slurry lines carry coal or kaolin
 High initial capital investment
 Low operating costs
 Can cross difficult terrain
Global Supply Chain
 Free trade & global opportunities
 Nations form trading groups
 No tariffs or duties
 Freely transport
goods across borders
 Security!!
Quality
Management
Quality is a measure of goodness that is
inherent to a product or service.
Bottom line: perspective has to be from the
Customer – fitness for use
What Is Quality?
 “The degree of excellence of a thing”
(Webster’s Dictionary)
 “The totality of features and
characteristics that satisfy needs” (ASQ)
 Fitness for use
 Quality of design
Quality
• Quality Management – not owned by any
functional area – cross functional
• Measure of goodness that is inherent to a
product or service
FedEx and Quality
• Digitally Assisted Dispatch System – communicate
with 30K couriers
• 1-10-100 rule
1 – if caught and fixed as soon as it occurs, it
costs a certain amount of time and money to fix
10 – if caught later in different department or
location = as much as 10X cost
100 – if mistake is caught by the customer =
as much as 100X to fix
Product Quality Dimensions
• Product Based – found in the product
attributes
• User Based – if customer satisfied
• Manufacturing Based – conform to specs
• Value Based – perceived as providing good
value for the price
Dimensions of Quality (Garvin)
1. Performance

Basic operating characteristics
2. Features

“Extra” items added to basic features
3. Reliability

Probability product will operate over time
Dimensions of Quality (Garvin)
4. Conformance

Meeting pre-established standards
5. Durability

Life span before replacement
6. Serviceability

Ease of getting repairs, speed & competence of repairs
Dimensions of Quality (Garvin)
7. Aesthetics

Look, feel, sound, smell or taste
8. Safety

Freedom from injury or harm
9. Other perceptions

Subjective perceptions based on brand name, advertising, etc
Service Quality
1. Time & Timeliness

Customer waiting time, completed on time
2. Completeness

Customer gets all they asked for
3. Courtesy

Treatment by employees
Service Quality
4. Consistency

Same level of service for all customers
5. Accessibility & Convenience

Ease of obtaining service
6. Accuracy

Performed right every time
7. Responsiveness

Reactions to unusual situations
Quality of Conformance
 Ensuring product or service
produced according to design
 Depends on




Design of production process
Performance of machinery
Materials
Training
Quality Philosophers
 Walter Shewhart – Statistical Process Control
 W. Edwards Deming
 Joseph Juran – strategic and planning based
 Armand Fiegenbaum – total quality control “entire
business must be involved in quality improvement”
Deming’s 14 Points
1.
2.
3.
4.
5.
Create constancy of purpose
Adopt philosophy of prevention
Cease mass inspection
Select a few suppliers based on quality
Constantly improve system and
workers
6. Institute worker training
Deming’s 14 Points
7. Instill leadership among supervisors
8. Eliminate fear among employees
9. Eliminate barriers between
departments
10. Eliminate slogans
11. Remove numerical quotas
Deming’s 14 Points
12. Enhance worker pride
13. Institute vigorous training and
education programs
14. Develop a commitment from top
management to implement these 13
points
The Deming Wheel
(or PDCA Cycle)
4. Act
1. Plan
Institutionalize
improvement;
continue the
cycle.
Identify the
problem and
develop the plan
for
improvement.
3. Study/Check
2. Do
Assess the plan; is it
working?
Implement the
plan on a test
basis.
Also known as the Shewart Cycle
Six Sigma
• Quality management program that measures
and improves the operational performance of
a company by identifying and correcting
defects in the company’s processes and
products
Six Sigma
Started By Motorola
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Define
Measure
Analyze
Improve
Control
Made Famous by
General Electric
40% of GE executives’
bonuses tied to 6 sigma
implementation
Malcolm Baldrige National Quality
Award
• Category 3 – determine requirements,
expectations, preferences of customers and
markets
• Category 4 – what is important to the
customer and the company; how does
company improve
Total Quality Management
1.
2.
3.
4.
5.
6.
7.
8.
Customer defined quality
Top management leadership
Quality as a strategic issue
All employees responsible for quality
Continuous improvement
Shared problem solving
Statistical quality control
Training & education for all employees
Cost of Quality
 Cost of achieving good quality
Prevention
 Planning, Product design,
Process, Training, Information
Appraisal
 Inspection and testing,
Test equipment,
Operator
Cost of Quality
 Cost of poor quality
Internal failure costs
 Scrap, Rework, Process failure,
Process downtime, Pricedowngrading
External failure costs
 Customer complaints,
Product return,
Warranty, Product
liability, Lost sales
Cause-and-Effect Diagram
Measurement
Faulty
testing equipment
Human
Poor supervision
Incorrect specifications
Lack of concentration
Improper methods
Inaccurate
temperature
control
Environment
Out of adjustment
Tooling problems
Old / worn
Inadequate training
Quality
Problem
Defective from vendor
Not to specifications
Dust and Dirt
Machines
Materialhandling problems
Materials
Also known as Ishikawa Diagram or Fish Bone
Poor process design
Ineffective quality
management
Deficiencies
in product design
Process
Hot House Quality
Lots of Hoopla and no follow
through
ISO 9000:2008
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Customer focus
Leadership
Involvement of the people
Process approach
Systems approach to management
Continual process improvement – GAO
Factual approach to decision making
Mutually beneficial supplier relationships
Implications Of ISO 9000
 Truly international in scope
 Certification required by many foreign firms
 U.S. firms export more than
$150 billion annually to Europe
 Adopted by U.S. Navy,
DuPont, 3M, AT&T, and others
ISO Accreditation
 European registration
 3rd party registrar assesses quality program
 European Conformity (CE) mark authorized
 United States 3rd party registrars
 American National Standards Institute (ANSI)
 American Society for Quality (ASQ)
 Registrar Accreditation Board (RAB)
Next week
• Supply chain case study