Transcript Chapter 8: Supply Chain Management

CHAPTER 8
SUPPLY CHAIN
MANAGEMENT
McGraw-Hill/Irwin
©2008 The McGraw-Hill Companies, All Rights Reserved
8-2
Chapter Eight Overview
• SECTION 8.1 – SUPPLY CHAIN FUNDAMENTALS
–
–
–
–
Basics of Supply Chain
Information Technology’s Role in the Supply Chain
Supply Chain Management Success Factors
SCM Success Stories
• SECTION 8.2 – APPLYING A SUPPLY CHAIN DESIGN
–
–
–
–
–
–
–
Using Information Technology to Drive the Supply Chain
Facilities Driver
Inventory Driver
Transportation Driver
Information Driver
Applying a Supply Chain Design
Future Supply Chain Trends
SECTION 8.1
SUPPLY CHAIN
FUNDAMENTALS
McGraw-Hill/Irwin
©2008 The McGraw-Hill Companies, All Rights Reserved
8-4
LEARNING OUTCOMES
1.
List and describe the components of a typical
supply chain
2.
Define the relationship between decision making
and supply chain management
3.
Identify the factors driving supply chain
management
4.
Summarize the best practices for implementing
a successful supply chain management system
8-5
BASICS OF SUPPLY CHAIN
• The average company spends nearly half
of every dollar that it earns on production
• In the past, companies focused primarily
on manufacturing and quality
improvements to influence their supply
chains
8-6
BASICS OF SUPPLY CHAIN
•
The supply chain has three main links:
1. Materials flow from suppliers and their
“upstream” suppliers at all levels
2. Transformation of materials into
semifinished and finished products through
the organization’s own production process
3. Distribution of products to customers and
their “downstream” customers at all levels
8-7
BASICS OF SUPPLY CHAIN
• Organizations must embrace technologies
that can effectively manage supply chains
8-8
BASICS OF SUPPLY CHAIN
8-9
INFORMATION TECHNOLOGY’S
ROLE IN THE SUPPLY CHAIN
• IT’s primary role is to create integrations or tight process and
information linkages between functions within a firm
8-10
INFORMATION TECHNOLOGY’S
ROLE IN THE SUPPLY CHAIN
Factors Driving SCM
8-11
Visibility
• Supply chain visibility – the ability to
view all areas up and down the supply
chain
• Bullwhip effect – occurs when distorted
product demand information passes from
one entity to the next throughout the
supply chain
8-12
Consumer Behavior
• Companies can respond faster and more
effectively to consumer demands through
supply chain enhances
• Demand planning software – generates
demand forecasts using statistical tools
and forecasting techniques
8-13
Competition
• Supply chain planning (SCP) software–
uses advanced mathematical algorithms to
improve the flow and efficiency of the supply
chain
• Supply chain execution (SCE) software –
automates the different steps and stages of
the supply chain
8-14
Competition
• SCP and SCE in the supply chain
8-15
Speed
8-16
SUPPLY CHAIN MANAGEMENT
SUCCESS FACTORS
8-17
SUPPLY CHAIN MANAGEMENT
SUCCESS FACTORS
•
SCM industry best practices include:
1. Make the sale to suppliers
2. Wean employees off traditional business
practices
3. Ensure the SCM system supports the
organizational goals
4. Deploy in incremental phases and measure
and communicate success
5. Be future oriented
8-18
SCM SUCCESS STORIES
• Top reasons why more and more executives are turning to
SCM to manage their extended enterprises
8-19
SCM SUCCESS STORIES
• Numerous decision support systems (DSSs) are
being built to assist decision makers in the design
and operation of integrated supply chains
• DSSs allow managers to examine performance
and relationships over the supply chain and
among:
–
–
–
–
Suppliers
Manufacturers
Distributors
Other factors that optimize supply chain performance
8-20
SCM SUCCESS STORIES
8-21
OPENING CASE QUESTIONS
Dell’s Famous Supply Chain
1. How might Dell use each of the five basic
SCM components?
2. How had Dell influenced visibility, consumer
behavior, competition, and speed though the
use of IT in its supply chain?
3. Explain the seven principles of SCM in
reference to Dell’s business model
SECTION 8.2
APPLYING A
SUPPLY CHAIN
DESIGN
McGraw-Hill/Irwin
©2008 The McGraw-Hill Companies, All Rights Reserved
8-23
LEARNING OUTCOMES
5. List and describe the four drivers of
supply chain management
6. Explain supply chain management
strategies focused on efficiency
7. Explain supply chain management
strategies focused on effectiveness
8-24
USING IT TO DRIVE THE SUPPLY
CHAIN
•
The four primary drivers of supply chain
management
1.
2.
3.
4.
•
Facilities
Inventory
Transportation
Information
Organizations use these four drivers to
support either a supply chain strategy focusing
on efficiency or a supply chain strategy
focusing on effectiveness
8-25
USING IT TO DRIVE THE SUPPLY
CHAIN
8-26
FACILITIES DRIVER
•
Facility – processes or transforms
inventory into another product, or it
stores the inventory before shipping it to
the next facility
•
Three primary facilities components
1. Location
2. Capacity
3. Operational design
8-27
FACILITIES 1:
Location
•
Location efficiency – centralize the
location to gain economies of scale,
which increases efficiency
•
Location effectiveness – decentralize
the locations to be closer to the
customers, which increases
effectiveness
8-28
FACILITIES 2:
Capacity
•
Capacity efficiency – minimal excess
capacity with the ability to produce only
what is required
•
Capacity effectiveness – large
amounts of excess capacity which can
handle wide swings in demand
8-29
FACILITIES 3:
Operational Design
•
Operational design efficiency – product
focus design allows the facility to become
highly efficient at producing one single
product, increasing efficiency
•
Operational design effectiveness –
functional focus design allows the facility to
perform a specific function on many
different types of products, increasing
effectiveness
8-30
FACILITIES DRIVER
8-31
INVENTORY DRIVER
•
Inventory – offsets discrepancies between
supply and demand
•
Inventory management and control
software – provides control and visibility to
the status of individual items maintained in
inventory
•
Two primary inventory components
1. Cycle inventory
2. Safety inventory
8-32
INVENTORY 1:
Cycle Inventory
•
Cycle inventory – the average amount
of inventory held to satisfy customer
demands between inventory deliveries
– Cycle inventory efficiency – holding small
amounts of inventory and receiving orders
weekly or even daily
– Cycle inventory effectiveness – holding
large amounts of inventory and receiving
inventory deliveries only once a month
8-33
INVENTORY 2:
Safety Inventory
•
Safety inventory – extra inventory held
in the event demand exceeds supply
– Safety inventory efficiency – holding
small amounts of safety inventory
– Safety inventory effectiveness – holding
large amounts of safety inventory
8-34
INVENTORY DRIVER
8-35
TRANSPORTATION DRIVER
•
Transportation – moves inventories
between the different stages in the
supply chain
•
Two primary inventory components
1. Method of transportation
2. Transportation route
8-36
TRANSPORTATION 1:
Method of Transportation
•
Global inventory management system –
provides the ability to locate, track, and
predict the movement of every component
or material anywhere upstream or
downstream in the supply chain
– Method of transportation efficiency
– Method of transportation effectiveness
8-37
TRANSPORTATION 2:
Transportation Route
•
Transportation planning software – tracks
and analyzes the movement of materials and
products to ensure the delivery of materials and
finished goods at the right time, the right place,
and the lowest cost
•
Distribution management software –
coordinates the process of transporting
materials from a manufacturer to distribution
centers to the final customer
–
–
Transportation route efficiency
Transportation route effectiveness
8-38
TRANSPORTATION DRIVER
8-39
INFORMATION DRIVER
•
Information – an organization must
decide how and what information it
wants to share with its supply chain
partners
•
Two primary information components
1. Information sharing
2. Push verses pull strategy
8-40
INFORMATION 1:
Information Sharing
•
Information sharing efficiency – freely share
lots of information to increase the speed and
decrease the costs of supply chain processing
•
Information sharing effectiveness – share
only selected information with certain
individuals, which will decrease the speed and
increase the costs of supply chain processing
8-41
INFORMATION 2:
Push vs. Pull Information Strategy
•
Pull information strategy (efficiency) –
supply chain partners are responsible for
pulling all relevant information
–
•
Pull technology – pulls information
Push information strategy effectiveness –
organization takes on the responsibility to
push information out to its supply chain
partners
–
Push technology – sends information
8-42
INFORMATION DRIVER
8-43
APPLYING A SUPPLY CHAIN
DESIGN
•
Wal-Mart’s supply chain management
strategy emphasizes efficiency, but also
maintains adequate levels of
effectiveness
–
–
–
–
Facilities focus – Efficiency
Inventory focus – Efficiency
Transportation focus – Effectiveness
Information focus - Efficiency
8-44
APPLYING A SUPPLY CHAIN
DESIGN
8-45
FUTURE SUPPLY CHAIN TRENDS
•
Fastest growing SCM components
–
–
–
–
Supply chain event management (SCEM)
Selling chain management
Collaborative engineering
Collaborative demand planning
8-46
OPENING CASE QUESTIONS
Dell’s Famous Supply Chain
4. Identify the four primary drivers of SCM and
explain how Dell uses each one to gain
efficiency or effectiveness in its supply chain
5. Choose one of the fast growth SCM
components and explain how Dell can use it to
increase business operations
6. What is RFID and how could Dell use the
technology to improve its supply chain?
8-47
CLOSING CASE ONE
BudNet
1. How can an SCM system help a distributor such
as Anheuser-Busch make its supply chain more
effective and efficient?
2. SCM is experiencing explosive growth. Explain
why this statement is true using BudNet as an
example
3. Evaluate BudNet’s effect on each of the five
factors that are driving SCM success
4. List and describe the components of a typical
supply chain along with its ability to help
Budweiser make effective decisions
8-48
CLOSING CASE TWO
Listerine’s Journey
1. Summarize SCM and describe WarnerLambert’s supply chain strategy.
Diagram the SCM components
2. Detail Warner-Lambert’s facilities
strategy
3. Detail Warner-Lambert’s inventory
strategy
8-49
CLOSING CASE TWO
Listerine’s Journey
4. What would happen to Warner-Lambert’s
business if a natural disaster in Saudi Arabia
depletes its natural gas resources?
5. Assess the impact to Warner-Lambert’s
business if the majority of the eucalyptus crop
was destroyed in a natural disaster
6. Detail Warner-Lambert’s information strategy
8-50
CLOSING CASE THREE
Levi’s
1. How did Levi Strauss achieve business success
through the use of supply chain management?
2. What might have happened to Levi’s if its top
executives had not supported investments in
SCM?
3. David Bergen, Levi’s CIO, put together a crossfunctional team of key managers from IT, finance,
and sales to transform Levi’s systems to meet
Wal-Mart’s requirements. Analyze the
relationships between these three business areas
and SCM systems. How can an SCM system help
support these three critical business areas?
8-51
CLOSING CASE THREE
Levi’s
4. Describe the five basic SCM
components in reference to Wal-Mart’s
business model
5. Explain RFID and provide an example of
how Levi’s could use the technology to
increase its business operations