Transcript Emerging Practices in SCM

Emerging Practices in
SCM
Logistics and Supply Chain
Chapter 16
1. Negative effects in SCM
1.
2.
3.
4.
5.
6.
7.
Large order quantities
Few customers
Long leadtimes
Non-alligned planning and control
Not sharing Point-Of-Sales (POS) data
Price fluctuations and promotions
Rationing and shortage gaming
Bullwhip Effect
See figure 16.1 page 367
 Variations are growing upstream the SCM
due to the lack of co-ordination in
information and materials flow


Can be conducted using


Vendor Managed Inventory VMI
Customer Managed Ordering CMO
Figure 16.1
Local
store
Local
store
Regional
store
Central
store
Synchronising the flow


16.3 Collaboration Concepts:
Optimizing allocation:

Customer Managed Ordering (CMO)


Vendor Managed Inventory (VMI)


page 372
page 375
Coordinating Flows:

Quick Respons (QR)


Efficient Consumer Response – ECR


Page 377
Page 378
Collaborative Planning Forecasting and Replenisment –
CPFR

Page 380
Price fluctuations

Temporary sales price changes or sales
promotions

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Can increase volumes in the short term, but
Buyers will stop buying when prices are high,
only buying again when discount prices are
offered
Many retailers adopt an everyday low price
The Bullwhip Effect – Time delay
Transfer of demand information in the
supply chain – see figure 16.2 page 369
 The changes in the market demand is
registered at the manufacturer with a time
delay
 Meaning that the production is short of
materials and then gaining back-orders
 When these are delivered – the demand
has lowered again, causing that the
retailer will wait ordering more and so on

Figure 16.2
Replenishment Replenishment Replenishment
order
order
order
End
consumer
Supplier
Product
manufacturer
Regional
distributor
Local
distributor
Development towards
make-to-order
Make-to-order means that the supplier
can be involved in the process of adding
value in conjuction with customer orders
 The time when no value is added often
arises in transisition between sequential
valueadding resources
 Examples:



Vola (internal transisition)
Nike (global transition)
Figure 16.3
Supplier
Supplier
Product
manufacturer
2. Driving forces towards increased coopreration in Supply Chain
1.
2.
3.
Uncertain demand
Operative dependency relationships
Outsourcing and transaction costs
2.1 Uncertain demand p 370

Increasing difficulty in predicting future
demand

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Ever-shorter product life cycles
Requirements to react faster to market
changes
Increased importance in avoiding time delay –
which means a better
Co-ordination of the flows of information and
materials
2.2 Operative dependency relationships

Companies are increasingly avoiding
different types of buffers


Materials: reduction of stocks
Information: reduction af leadtimes
This tendency will cause strong
dependency relationships
 Only possible if it takes place in a spirit of
co-operation between companies

2.3 Outsourcing and
transaction costs pp 371-372
Transactions become more complex and
costly when carried out between external
partners
 Example: Orders changed from 100 to 10
pieces per order - the transaction costs
will be multiplied by 10
 Be careful when using value-adding
transistions
 Use a joint perspective to become efficient

3. Supply Chain Collaboration Concepts
page 372
Customer Managed Ordering – CMO
2. Vendor Managed Inventory – VMI
3. Quick Respons
4. Efficient Consumer Response – ECR
5. Collaborative Planning Forecasting and
Replenisment – CPFR
1+2: more optimal allocation of
administrative work etc.
3+4+5: Strive to co-ordinate flows
1.
1+2: More optimal allocation of
administrative work etc.
1.
2.



Customer Managed Ordering – CMO
Vendor Managed Inventory – VMI
See figure 16.4 page 373
Reducing the total amount of
administrative work and the leadtime
ERP-systems shared or bridged
(extranet)
Figure 16.4
Procurement
process
Purcha- Inventory Finance
sing
control
Invoicing
Accounts
receivable
Transport Store
Order
entry
Pick
Forwarding
Order-to-delivery
process
Pack
Customer
Supplier
Finance
Transport Store
Invoicing
ForwardingPick
Order
entry
Purcha- Inventory Finance
sing
control
Transport
Forwarding
Accounts
receivable
Pack
Invoicing
Accounts
receivable
A common inter-organisational process for cross-company material flows
3.1 Customer Managed Ordering CMO
The customer can manage more of the
ordering process himself or
 The entire ordering process, meaning that
no order confirmation

Figure 16.5
Supplier
Customer
3.2 Vendor Managed Inventory VMI
Who owns the stocks that the vendor is
managing?
 Vendor´s deliveries are usually regulated
by an agreement between the parties
 Often the vendor will own the stocks
 The customer will then be invoiced when
products are withdrawn from the stock
 See figure 16.6 page 376

Figure 16.6
Supplier
Customer
3.3 Quick Respons
Enabling company to react faster to
market changes
 Holistic view of the supply chain
 Focus on synchronisation
 Based on access to and willingness to
exchange information
 Point-Of-Sales - POS-system
 See figure 16.7 page 378

Figure 16.7
Sales information from point-of-sale via EDI
Wholesaler
Retailer
Customer
Sales paced stock replenishment
3.4 Efficient Consumer Respons ECR
A joint initiative by members of the supply
chain to work to improve and optimise
aspects of SCM in order to
 Create benefits for the consumer:

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
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Lower prices
More variants
Better availability
See figure 16.8 page 379
Figure 16.8
Efficient product
launching
Efficient
promotion
Efficient product
range control
Efficient goods
supply
3.5 Colaborative Planning Forecasting
and Replenisment CPFR

Aimed at creating collaborative
relationships between suppliers and
customers through



To achieve




Common processes
Structured exchange of information
Increased sales
Cost effectiive material flow
Less tied-up capital
P 380-381
4. Supply Chain Design

Vertically integrated SC


One owner has ownership influence over the
parts of the supply chain
Laterally intergrated SC

Supply Chain structured around several
independent organisations
What a laterally SC gains in core
competence focus and flexibility it may
lose in lack of understanding and control
of the SC as a whole
 See figure 16.10 page 382

Figure 16.10
a) Lateral integration – Coordinated management of separately owned links in the supply chain
End
consumer
Supplier
Manufacturer
Distributor
Retailer
b) Vertical integration – Degree to which a firm directly controls multiple links in the supply chain
End
consumer
Supplier
Manufacturer
Distributor
Retailer
Based on APICS (2005)
Examples of Vertical and Lateral

Vertical integration


Zara and Ikea are examples of companies
building their supply chains on vertical
integration to some extent
Lateral integration

SuperBest, Nyt Syn and Sportsmaster are
examples



(120 frivillige kæder i DK)
(Matas og Tøjseksperten er eksempler på kæder der
er blevet solgt og dermed er blevet egentlige kæder)
(Detailomsætning i DK
 uafhængige forretninger omkring 1/6
 frivillige kæder, står for ca. 1/3
 butikker ejet af kapitalkæder har lidt under 1/2)
PUSH and PULL
PUSH
 Produces goods in accordance to forecasts
and then PUSHes the goods along the SC

PULL
 Starts producing when an order is
received from the customer and deliver in
a short time. The customer is then
PULLing the goods out of the supplier

New ways of designing PUSH/PULL
PULL
PUSH
Physical Efficient SC
Market-Responsive SC
Both Chains require short leadtimes but differ with respect to
•Costs and
•Adaptability
Physical Efficient SC (Lean SC) focus on:
•High utilisation of capacity in production
•Reducing stocks
Market-Responsive SC (Agile SC) focus on:
•Where it is best to have storage and extra production capacity
•How to satisfy the unpredictable demand at the lowest possible cost
4.1 Physical vs. Market-Responsive SC

Physical efficient SC (Lean Supply Chains)
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
Market-Responsive SC
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Cost minimising
Supporting functional products
Focus on demand and flexibility
Supporting innovative products
See how to match market and produst –
figure 16.11 page 386
Figure 16.11
Physical effeicient
Match
Mismatch
Responsive
Type of supply chain
Product type
Innovative
Functional
Mismatch
Match
Source: Fisher (1997)
Multiple Supply Chain

Combining physical efficient and marketresponsive approaches
Vertical combination
 Before and after the Customer Order
Decoupling Point (see fig. 16.12)

Horisontal combination
 Base demand and surge demand (see fig
16.13)

Figure 16.12
Total lead-time
Material supply
Production
Delivery
Lead-time gap
Delivery time
Physical efficient
Supply chain
Responsive
Supply chain
Customer order
de-coupling point
Figure 16.13
a) Same product
b) Different products
% of volume by value
Demand
80%
Surge
Base
Time
High
volume
products
Make-to-stock
Economy
ofscale
Surge demand
Base
demand
% of products
5. Risk Management Strategies
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Risk Identification
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Risk Analysis
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Environmental risks, supply risks, demand
risks, process risks, control risks
See figure 16.14 page 390
Gravity and probability
See figure 16.15 page 391
Risk Management Strategy

See case study 16.4 page 393 (Nokia –
Ericsson)
Figure 16.14
Environmental risk
Supply risk
Process risk
Control risk
Demand risk
High
Figure 16.15
Level of gravidity
High risk criticality
Low
Low risk criticality
Low
Risk probability
High