Post on 11-Feb-2018
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Supply Chain ManagementSupply Chain Management
OPIM 310-Lecture #6OPIM 310-Lecture #6
Instructor: Jose CruzInstructor: Jose Cruz
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Lecture OutlineLecture Outline
Supply Chain Management
Information Technology: A Supply Chain Enabler
Supply Chain Integration Suppliers
E-Procurement
Distribution
Supply Chain Management Software Measuring Supply Chain Performance
Global Supply Chain
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Supply ChainSupply Chain
All facilities, functions, activities,All facilities, functions, activities,
associated with flow and transformationassociated with flow and transformationof goods and services from raw materialsof goods and services from raw materials
to customer, as well as the associatedto customer, as well as the associated
information flowsinformation flows
An integrated group of processes toAn integrated group of processes tosource, make, and deliver productssource, make, and deliver products
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Supply Chain IllustrationSupply Chain Illustration
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Supply Chain ProcessesSupply Chain Processes
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Supply Chain for Service ProvidersSupply Chain for Service Providers
More difficult than manufacturingMore difficult than manufacturing
Does not focus on the flow of physical goodsDoes not focus on the flow of physical goods
Focuses on human resources and supportFocuses on human resources and support
servicesservices
More compact and less extendedMore compact and less extended
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Value vs. Supply ChainValue vs. Supply Chain
Value chain every step from raw materials to the eventual end
user ultimate goal is delivery of maximum value to theend user
Supply chain activities that get raw materials and subassembliesinto manufacturing operation
Terms are used interchangeably
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Supply Chain Management (SCM)
Managing flow of information through supplychain in order to attain the level of
synchronization that will make it moreresponsive to customer needs while loweringcosts
Keys to effective SCM
information communication cooperation trust
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Supply Chain ncertaintySupply Chain ncertainty
One goal in SCM: respond to uncertainty in
customer demandwithout creating costlyexcess inventory
Negative effects ofuncertainty lateness incomplete orders
Inventory insurance against supplychain uncertainty
Factors that contribute touncertainty
inaccurate demandforecasting long variable lead times late deliveries incomplete shipments product changes batch
ordering price fluctuations anddiscounts
inflated orders
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!ull"hip #ffect!ull"hip #ffect
Occurs when slight demand variability is magnified as informationmoves back upstream
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Information $echnology% & Supply
Chain #na'ler Information links all aspectsof supply chain
E-business replacement of physicalbusiness processes withelectronic ones
Electronic data interchange(EDI) a computer-to-computer
exchange of businessdocuments
Bar code and point-of-sale data creates aninstantaneous computer
record of a sale Radio frequency identification(RFID) technology can send productdata from an item to a readervia radio waves
Internet allows companies tocommunicate with suppliers,customers, shippers andother businesses around theworld, instantaneously
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#'usiness and Supply Chain
Cost savings and price reductions Reduction or elimination of the role of
intermediaries Shortening supply chain response andtransaction times
Gaining a wider presence and increased
visibility for companies Greater choices and more information forcustomers
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#'usiness and Supply Chain
(cont.)
Improved service as a result of instantaccessibility to services
Collection and analysis of voluminous amountsof customer data and preferences
Creation of virtual companies
Leveling playing field for small companies Gaining global access to markets, suppliers,and distribution channels
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*I+ Capa'ilities*I+ Capa'ilities
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*I+ Capa'ilities (cont.)*I+ Capa'ilities (cont.)
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Supply Chain IntegrationSupply Chain Integration
Information sharing among supply chainmembers Reduced bullwhip effect Early problem detection Faster response Builds trust and confidence
Collaborative planning, forecasting,replenishment, and design Reduced bullwhip effect Lower Costs (material, logistics, operating, etc.) Higher capacity utilization Improved customer service levels
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Coordinated workflow, production andoperations, procurement Production efficiencies Fast response Improved service Quicker to market
Adopt new business models andtechnologies Penetration of new markets Creation of new products Improved efficiency Mass customization
Supply Chain Integration (cont.)Supply Chain Integration (cont.)
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Colla'orative Planning,Colla'orative Planning,
*orecasting, and eplenishment*orecasting, and eplenishment
Process for two or more companies in asupply chain to synchronize their
demand forecasts into a single plan tomeet customer demand Parties electronically exchange
past sales trends
point-of-sale data on-hand inventory scheduled promotions forecasts
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SuppliersSuppliers
Procurement purchase of goods and services from suppliers
On-demand (direct response) delivery requires supplier to deliver goods whendemanded by customer
Continuous replenishment supplying orders in a short period of time
according to a predetermined schedule Cross-enterprise teams coordinateprocesses between company and supplier
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OutsourcingOutsourcing
Sourcing selection of suppliers
Outsourcing purchase of goods and services from anoutside supplier
Core competencies
what a company does best Single sourcing
a company purchases goods and servicesfrom only a few (or one) suppliers
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#Procurement#Procurement
Direct purchase from suppliers over theInternet
Direct products go directly into productionprocess a product, indirect products not
E-marketplaces web sites where companies and suppliers conduct
business-to-business activities Reverse auction
a company posts orders on the Internet forsuppliers to bid on
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Online Sourcing- Procurement
Process
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Online Sourcing- Procurement
Process (cont.)
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Online Sourcing- Procurement
Process (cont.)
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Source:Adapted from Garrison Wieland for Wal-MartsSuppl !hain, Harvard Business Review "#$%& March'April
())%*, pp+ #'"(+
Relationship between Facilities and Functionsalong the Wal-Mart Supply Chain
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+istri'ution+istri'ution
ncompasses all channels, processes, andncompasses all channels, processes, and
functions, including warehousing andfunctions, including warehousing andtransportation, that a product passes on itstransportation, that a product passes on itswa to final customerwa to final customer
.ften called logistics.ften called logistics
/ogistics/ogistics
transportation and distri0ution of goodstransportation and distri0ution of goodsand servicesand services
1riving force toda is speed1riving force toda is speed 2articularl important for 3nternet dot-coms2articularl important for 3nternet dot-coms
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Amazon.com
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+istri'ution Centers (+C)+istri'ution Centers (+C)
and arehousingand arehousing
1!s are some of the largest 0usiness1!s are some of the largest 0usiness
facilities in the 4nited Statesfacilities in the 4nited States
5rend is for more fre6uent orders in5rend is for more fre6uent orders insmaller 6uantitiessmaller 6uantities
7low-through facilities and automated7low-through facilities and automated
material handlingmaterial handling 2ostponement2ostponement final assem0l and product configurationfinal assem0l and product configuration
ma 0e done at the 1!ma 0e done at the 1!
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arehouse Managementarehouse Management
SystemsSystems 8ighl automated sstem that runs da-to-da8ighl automated sstem that runs da-to-da
operations of a 1!operations of a 1!
!ontrols item putawa, picking, packing, and!ontrols item putawa, picking, packing, andshippingshipping
7eatures7eatures transportation managementtransportation management order managementorder management ard managementard management la0or managementla0or management warehouse optimi9ationwarehouse optimi9ation
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VendorManaged InventoryVendorManaged Inventory
Manufacturers generate orders, not distri0utors orManufacturers generate orders, not distri0utors or
retailersretailers Stocking information is accessed using 13Stocking information is accessed using 13 A first step towards suppl chain colla0orationA first step towards suppl chain colla0oration 3ncreased speed, reduced errors, and improved3ncreased speed, reduced errors, and improved
serviceservice
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Colla'orative Logistics andColla'orative Logistics and
+istri'ution Outsourcing+istri'ution Outsourcing
!olla0orative planning, forecasting, and!olla0orative planning, forecasting, and
replenishment create greater economies ofreplenishment create greater economies ofscalescale
3nternet-0ased e:change of data and3nternet-0ased e:change of data and
informationinformation Significant decrease in inventor levels andSignificant decrease in inventor levels and
more efficient logisticsmore efficient logistics !ompanies focus on core competencies!ompanies focus on core competencies
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$ransportation$ransportation
Rail low-value, high-density, bulkproducts, raw materials,
intermodal containers not as economical for smallloads, slower, less flexiblethan trucking
Trucking main mode of freighttransport in U.S.
small loads, point-to-pointservice, flexible
More reliable, less damagethan rails; more expensivethan rails for long distance
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$ransportation (cont.)$ransportation (cont.)
Airmost expensive and fastest, mode offreight transport
lightweight, small packages
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$ransportation (cont.)$ransportation (cont.)
Waterlow-cost shipping modeprimary means of international shippingU.S. waterwaysslowest shipping mode
Intermodalcombines several modes of shipping-truck,water and rail
key component is containers
Pipelinetransport oil and products in liquid formhigh capital cost, economical uselong life and low operating cost
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Internet $ransportation #/changesInternet $ransportation #/changes
;ring together shippers and;ring together shippers and
carrierscarriers 3nitial contact, negotiations,3nitial contact, negotiations,
auctionsauctions :amples:amples
www+nte+comwww+nte+comwww+freight6uote+comwww+freight6uote+com
http://www.nte.com/http://www.nte.com/http://www.freightquote.com/http://www.freightquote.com/http://www.freightquote.com/http://www.nte.com/7/23/2019 Supply Chain Aanchal
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SCM Soft"areSCM Soft"are
Enterprise Resource Planning (ERP) software that integrates components of acompany by sharing and organizinginformation and data
SAP was first ERP software
mySAP.comweb enabled modules that allow collaborationbetween companies along the supply chain
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Linking Supply Chain with SAP
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Measuring Supply Chain
Performance Key performance indicators
inventory turnovercost of annual sales per inventory unit
inventory days of supplytotal value of all items being held in inventory
fill ratefraction of orders filled by a distribution center withina specific time period
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3nventor turns
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0ey Performance Indicators%
#/ample
3nventor turns $?@*
?B,B(,###?B,B(,###
< (%+?< (%+?
< %)+< %)+
(+ !ost of goods soldC B%@ million
%+ 2roduction materials and partsC B,%),###
?+ Work-in-processC (",B@,###
B+ 7inished goodsC (%,?%%,###
@+ 5otal average aggregate value of inventor $%D?DB*C ?B,B(,###
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Other Measures of Supply ChainOther Measures of Supply Chain
PerformancePerformance
Process ControlProcess Control
used to monitor and control any process inused to monitor and control any process in
supply chainsupply chain
Supply Chain Operations ReferenceSupply Chain Operations Reference
(SCOR)(SCOR) establish targets to achieve best in classestablish targets to achieve best in class
performanceperformance
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1lo'al Supply Chain1lo'al Supply Chain
5o compete glo0all re6uires an5o compete glo0all re6uires an
effective suppl chaineffective suppl chain 3nformation technolog is an3nformation technolog is an
ena0ler of glo0al tradeena0ler of glo0al trade
Eations form trading groupsEations form trading groups Eo tariffs or dutiesEo tariffs or duties
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O'stacles to 1lo'al ChainO'stacles to 1lo'al Chain
$ransactions$ransactions Increased documentation for invoices, cargoinsurance, letters of credit, ocean bills of lading
or air waybills, and inspections Ever changing regulations that vary fromcountry to country that govern the import andexport of goods
Trade groups, tariffs, duties, and landing costs Limited shipping modes Differences in communication technology andavailability
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O'stacles to 1lo'al ChainO'stacles to 1lo'al Chain
$ransactions (cont.)$ransactions (cont.) Different business practices as well as languagebarriers
Government codes and reporting requirements thatvary from country to country
Numerous players, including forwarding agents,custom house brokers, financial institutions, insuranceproviders, multiple transportation carriers, and
government agencies Since 9/11, numerous security regulations andrequirements
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+uties and $ariffs+uties and $ariffs
2roliferation of trade agreements2roliferation of trade agreements Group mem0ers charge uniform tariffsGroup mem0ers charge uniform tariffs
Mem0er nations have a competitiveMem0er nations have a competitiveadvantage within the groupadvantage within the group
5rade specialists
include freight forwarders, customs
house 0rokers, e:port packers, ande:port management and tradingcompanies
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+uties and $ariffs (cont.)+uties and $ariffs (cont.)
APECAPEC
ASEANASEAN
ANZCERTAANZCERTA
FTAAFTAA
NAFTANAFTA
CALMCALM
ATPAATPA
MERCOSURMERCOSUR
TAFTATAFTA
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Landed CostLanded Cost
Total cost of producing, storing, and transportingTotal cost of producing, storing, and transportinga product to the site of consumption or anothera product to the site of consumption or another
portport Value added tax (VAT) an indirect tax assessed on the increase in value of agood at any stage of production process from rawmaterial to final product
Clicker shock Occurs when an ordered is placed with a companythat does not have the capability to calculate landedcost
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e''ased International $radee''ased International $rade
Logistic SystemsLogistic Systems International trade logistics web-based softwaresystems reduce obstacles to global trade convert language and currency provide information on tariffs, duties, and customs processes attach appropriate weights, measurements, and unit prices toindividual products ordered over the Web
incorporate transportation costs and conversion rates calculate shipping costs online while a company enters anorder
track global shipments
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ecent $rends in 1lo'ali2ation forecent $rends in 1lo'ali2ation for
.S. Companies.S. CompaniesTwo significant changesTwo significant changes
passage of NAFTApassage of NAFTA
admission of China in WTOadmission of China in WTO
Electronic IndustryElectronic Industry
70% of cost is in components70% of cost is in components
major supply chains have moved to Chinamajor supply chains have moved to China
Proliferation of counterfeit partsProliferation of counterfeit parts
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#ffects of 3-44 on 1lo'al Chains#ffects of 3-44 on 1lo'al Chains
Increase security measuresIncrease security measures added time to supply chain schedulesadded time to supply chain schedules Increased supply chain costsIncreased supply chain costs
24 hours rules for risk screening24 hours rules for risk screening extended documentationextended documentation extend time by 3-4 daysextend time by 3-4 days
Inventory levels have increased 5%Inventory levels have increased 5%
Other costsOther costs include: new people, technologies, equipment, surveillance,communication, and security systems, and training necessaryfor screening at airports and seaports around the world