Supply Chain and E-commerce
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Transcript of Supply Chain and E-commerce
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Supply Chain Management
Introduction
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Outline
What is supply chain management?
A supply chain strategy framework
Components of a SCM
Major obstacles and common problems
Seen !leen "apan
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#raditional $iew% Supply Chains in
the !conomy &'(()* '((+,
-reight #ransportation ./01* .200 3
– #ransportation manager in charge
– #ransportation software
Inentory !4pense .11'* ./'' 3 – Inentory manager in charge
– Inentory software
Administratie !4pense .15* ./' 3
6ogistics related actiity ''7* ')807 of 9:;
.
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#raditional $iew% Cost breakdown of a
manufactured good
Profit ')7
Supply Chain Cost 1)7
Marketing Cost 107
Manufacturing Cost 207
;rofit
Supply Chain
Cost
Marketing
Cost
Manufacturing
Cost
Effort spent for supply chain activities are invisible to the customers
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What can Supply Chain Management do?
Estimated that the grocery industry could save "3# billion $1#% of operatingcost& by using effective logistics and supply chain strategies – ' typical bo( of cereal spends 1#4 days from factory to sale
– ' typical car spends 1! days from factory to dealership
– )aster turnaround of the goods is better*
+aura 'shley $retailer of ,omen and children clothes& turns its inventory 1#times a year five times faster than 3 years ago – inventory is emptied 1# times a year- or an item spends about 12.1# months in the
inventory
– /o be responsive- it relocated its main ,arehouse ne(t to )edE( hub in Memphis- /E
0ational emiconductor used air transportation and closed ,arehouses- 34%increase in sales and 4% decrease in delivery lead time
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Magnitude of upply Chain Management
Compa estimates it lost "#! 5 to "1 5 in sales in 166! because laptops ,ere not available ,hen and ,hereneeded
P78 $Proctor78amble& estimates it saved retailcustomers "! M $in 19 months& by collaborationresulting in a better match of supply and demand
:hen the 1 gig processor ,as introduced by 'M;$'dvanced Micro ;evices&- the price of the 9## meg
processor dropped by 3#%
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/op 2!
upply Chains
'M= research http>..,,,amrresearchcom publishes reports on supply chainsand other issues
/he /op 2! supply chains report comesout in 0ovembers
/he table on the right@hand side is fromThe Second Annual Supply Chain
Top 25 prepared by evin =iley and=eleased in 0ovember 2##!
http://www.amrresearch.com/http://www.amrresearch.com/
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CM 8enerated Falue
MinimiGing supply chain costs
,hile keeping a reasonable service level
customer satisfaction.uality.on time delivery- etc
/his is ho, CM contributes to the bottom line
CM is not strictly a cost reduction paradigmH
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' picture is better than 1### ,ordsH
Io, many ,ords ,ould be better than 3 pictures*
> A supply chain consists of
> aims to Match Supply and emand*
profitably for products and serices
SUPPLY SIDE DEMAND SIDE
The right
Product
Higher
ProfitsThe right
TimeThe right
Customer The right
QuantitThe right
StoreThe right
Price=++ ++ +
> achiees
Supplier Supplier Manufacturer Manufacturer Distributor Distributor Retailer Retailer Customer Customer
Upstream Downstream
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etergent supply chain%
Customer wants
detergent
Customer wants
detergent
Albertson@s
Supermarket
Albertson@s
Supermarket
#hird
party C
#hird
party C
;9 or other
manufacturer
;9 or other
manufacturer
;lastic cup
;roducer
;lastic cup
;roducer
Chemical
manufacturer
&e8g8 Oil Company,
Chemical
manufacturer
&e8g8 Oil Company,
#enneco
;ackaging
#enneco
;ackaging
;aper
Manufacturer
;aper
Manufacturer
#imber
Industry
#imber
Industry
Chemical
manufacturer
&e8g8 Oil Company,
Chemical
manufacturer
&e8g8 Oil Company,
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)lo,s in a upply Chain
Customer
Material
Information
Funds
/he flo,s resemble a chain reaction
Supplier
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CM in a Supply :etwork
Supply Chain Management &SCM, is concerned with the management and control ofthe flows of material* information* and finances in supply chains8
Su!!"
Demand
Products and Ser#ices
Cash
Supply Side OEM Demand Side
THAIA!D I!DIA ME"ICO TE"AS #S
!$Tier Suppliers Suppliers o%istics Distributors Retailers
Information
#he task of SCM is to design* plan* and e4ecute the actiities at the different stagesso as to proide the desired leels of serice to supply chain customers profitably
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related
actiities &moement* storage* and control of products across supply chains,8ource> tate of +ogistics =eport
!liminating inefficiencies in supply chains can sae millions of
.8
Tier &Tier &
Supplier Supplier Manufacturer Manufacturer Distributor Distributor Retailer Retailer Customer Customer
Inefficient
"ogistics
High
stoc$outs
Ineffecti#e
!romotions
%re&uent Su!!"
shortages
High "anded costs
to the she"f
High in#entories
through the chain
Lo' order fi""
rates
("itch)*rong Materia"+
Machine is Do'n ,effect sno'-a""s
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Supply
Sources:plants vendorsports
RegionalWarehouses:stockingpoints
FieldWarehouses:stockingpoints
Customers,demandcenterssinks
Purchase
Inventory
TransportationInventory
' 8eneric upply Chain
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Cycle $iew of Supply Chains
Customer Order
Cycle
Beplenishment Cycle
Manufacturing Cycle
;rocurement Cycle
Customer
Retailer
Distributor
Manufacturer
Supplier
'ny cycle# Customer arrival
1 Customer triggers an order
2 upplier fulfils the order
3 Customer receives the order
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Push vs Pull ystem
:hat instigates the movement of the ,ork in the system*
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;ush;ull $iew of Supply Chains
Procurement-Manufacturing and=eplenishment cycles
Customer Drder
Cycle
Customer
Drder 'rrives
Push@Pull boundary
PUSH PROCESSES PULL PROCESSES
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E(amples of upply Chains
;ell . Compa
– ;ell buys some components for a product from its suppliers
after that product is purchased by a customer E(treme case of a
pull process Kara- painLs ans,er to
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SCM Strategy
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Mission@trategy@/actics@;ecisions
Mission- Mission statement – /he reason for e(istence of an organiGation
trategy – ' plan for achieving organiGational goals
/actics – /he actions taken to accomplish strategies
Dperational decisions – ;ay to day decisions to support tactics
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+ife trategy for /ed
Ted is an undergrad. He would like to have a career in usiness! have
a good "o! and earn enough income to live com#ortaly
Mission> +ive a good life 8oal> uccessful career- good income
trategy> Dbtain a masterLs degree
/actics> elect a college and a concentration
Dperations> =egister- buy books- takecourses- study- graduate- get a Job
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+inking C and 5usiness trategy
Ne Product
De!elopment
Mar"etin# and
Sales
Operations Distributi on Ser!ice
Finance$ %ccountin#$ Information &ec'nolo#($ Human Resources
Competiti!e )*usiness+ Strate#(
Product De!elopment Strate#(
@ Portfolio of products@&imin# of product introductions
Mar"etin# Strate#(
,Fre-uent discounts,Coupons
Suppl( C'ain Strate#(
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trategies>
Product ;evelopment
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trategies
Marketing and sales strategy relates to positioning- pricing and
promotion of products.services
– eg 0ever offer more than 4#% discount
– eg E;+P every day lo, price
't :al@Mart
– eg ;emand smoothing via coupons
5est5uy
Supply chain management strategy relates to procurement-transportation- storage and delivery
– eg 0ever use more than 1 supplier for every input
– eg 0ever e(pedite orders Just because they are late
– eg 'l,ays use domestic suppliers ,ithin the sales season not in advance
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)itting the C to the customer or vice versa*
Onderstand the customer Wishes
Onderstand the Capabilities of your C
Match the Wishes ,ith the Capabilities
Challenge> Io, to meet e(tensive Wishes
,ith limited Capabilities*
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'chieving trategic )it> Consistent CM
and Competitive strategies
)it C to the customer
Onderstanding the Customer
– =ange of demand- piGGa hut stable
– Production lot siGe- seasonal products
– =esponse time- organ transplantation
– ervice level- product availability
– Product variety
–
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Contributors to
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Onderstanding the upply Chain>
Cost@=esponsiveness /radeoff
Hi#' Lo
Lo
Hi#'
=esponsiveness $in time- high service level and product variety&
Cost in "
Efficiency frontier
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'chieving trategic )it> Wishes s8 Capabilities
Implied
uncertaintyspectrum
Besponsie
&high cost,
supply chain
!fficient
&low cost,
supply chainCertain
demand
=ncertain
demand
Besponsienes
spectrum E o n
e o f
S t r a
t e g i c
- i t
$unch u##et
%$ow margin&
'ourmet dinner
%High margin&
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+oosing the strategic fit> :ebvan
:ebvan started a merger ,ith Iome8rocer in ept 2### and
completed in May 2##1
;eclared bankruptcy in uly 2##1 :hy*
– B:ebvan ,as so behemoth that could deliver anything to anyone any,here
that it lost sight of a more mundane task> pleasing grocery customers day
after dayA
– hort to midterm cash mismanagement Fenture capital of "12 5 run out
– Merger costs> duplicated ,ork force- integration of technology- realignment
of facilities
Peapod has the same business model but more focused in terms of
service and locations
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/op 1# =etailers =eported in 2##9 – )irst 4
ource ,,,deloittecom.dtt.cda.doc.content.dttQ2##9globalpo,ersofretailingpdf
http://www.deloitte.com/dtt/cda/doc/content/dtt_2008globalpowersofretailing.pdfhttp://www.deloitte.com/dtt/cda/doc/content/dtt_2008globalpowersofretailing.pdf
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/op 1# =etailers =eported in 2##9 – )irst !@1#
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5ig retailersL trategy
:al@Mart> Efficiency
/arget> More uality and service
Carrefour> Confused – ueeGed bet,een /arget and :al@Mart
– =eliance on coupon sales
– ;o coupons stabiliGe or destabiliGe a upply chain*
@Mart and ears merged in 0ovember 2##4 0o, called ears Ioldings
@Mart gets cash
ears gets presence outside malls
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Dther )actors
Multiple products in a C Multiple customers for a given product – eparate supply chains or /ailored supply chains
eg 5arnes and 0oble> =etailing and.or e@tailing
– Product and.or customer classes eg O/; library loans books for months $2 ,eeks& to faculty $students& Customer segmentation by pricing
Competitors% more- faster and global O/; online programs compete globally
Product life cycle $shortening& – CM strategy moves to,ard efficiency and lo, implied uncertainty as products age
eg 'ir travel is becoming more efficient eg outh,est airlines lead the drive for efficiency eg 'irbus announced '39# accommodating !!!@9## people on an 1- 2##!
eg )lat screen /F producer of 'O Dptronics of /ai,an ,as looking for ,ays to make its Cmore efficient in une 2##4
– =eplacement sales elling to replace broken units
eg 'C replacement is about !#% of the market
– Macroeconomic factors for visibility
)orecasting Iome ;epot sales from 7P !## price inde( Positive correlation is detected
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'chieving trategic )it over a +ifecycle
Besponsie
&high cost,
supply chain
!fficient
&low cost,
supply chainCertain
demand
=ncertain
demand
E o n e
o f
S t r a
t e g i c
- i t
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trategic cope
Suppliers Manufacturer istributor Betailer Customer
Competitie
Strategy
;roduct e8
Strategy
Supply Chain
Strategy
Marketing
Strategy
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upply Chain ;rivers and Dbstacles
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;rivers of upply Chain Performance
Efficienc( Responsi!eness
In!entor( &ransportation Facilities
Information
Suppl( c'ain structure
6ogistical
riers
Ho to ac'ie!e
Sourcin# Pricin# Cross>
-unctional
riers
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1 Cycle inventory
– 0o customer buys eggs one by one
Onstable demand> easonal inventory
– 5athing suits – Rmas toys and computer sales
=andomness> afety inventory
– 2#% more syllabi than the class siGe ,ere available in the
first class
– CompaLs loss in 6!
Pipeline inventory
– :ork in process or transit
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+ittleLs la,
+ong run averages E(pected values
< = /
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2 /ransportation
'ir
/ruck
=ail
hip
Pipeline
Electronic
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3 )acilities
Production
– )le(ible vs ;edicated
– )le(ibility costs
Production> =emember 5M:> Ba sports car disguised as a sedanA ervice> Can your instructor teach music as ,ell as CM*
ports> ' playmaker ,ho shoots ,ell is rare
=eceiving- Prepackaging-toring- Picking- Packaging- orting- 'ccumulating-
hipping – ob +ot torage> 0eed more space =eticle storage in fabs
– Crossdocking> :al@Mart
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4
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Characteristics of the 8ood
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Suality of
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E=P ystems
Supplier Customer Retailer Distributor Manufacturer
Strate#ic
Plannin#
Operational ERP (otential
)*(
(otential )*(
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'nalytical 'pplications
Supplier Customer Retailer Distributor Manufacturer
Strate#ic
Plannin#
Operational
upplier
'pps
CM
ME
;em Plan
/ransport e(ecution 7
:M
'P /ransport 7
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E=P ystems
:ider focus
Push $M=P& versus Pull $demand information transmitted
uickly throughout the supply chain&
=eal@time information Coordination and
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upply Chain oft,are Push
ee /op 1## under .articleshtml
ource anakamedala-
=amsdell- rivatsan $2##3&
Mcinsey Suarterly- 0o 1
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! ourcing
=ole in the supply chain
– et of processes reuired to purchase goods and services in a supply chain
– upplier selection- single vs multiple suppliers- contract negotiation
=ole in the competitive strategy
– ourcing is crucial
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Pricing
=ole in the supply chain
– Pricing determines the amount to charge customers in a supply chain
– Pricing strategies can be used to match demand and supply
Price elasticity> ;o you kno, yours*
=ole in the competitive strategy – Ose pricing strategies to improve efficiency and responsiveness
– +o, price and lo, product availabilityN vary prices by response times
'maGon> )aster delivery is more e(pensive
Components of pricing decisions – Pricing and economies of scale
– Everyday lo, pricing versus high@lo, pricing
– )i(ed price versus menu pricing- depending on the product and services
Packaging- delivery location- time- customer pick up
5undling productsN products and services
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Considerations for upply Chain ;rivers
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MaJor Dbstacles to 'chieving )it
SC is big>
– Fariety of products.services
– poiled customer
– Multiple o,ners $Procurement- Production-
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ealing with Multiple Owners 6ocal OptimiDation
–
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MaJor obstacles to achieving fit
Instability and Bandomness>
– Push for customiGation- segmentation – )ragmentation of upply Chain o,nership> 8lobaliGation
Increasin# implied
uncertaint(
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Common problems
+ack of relevant CM metrics> Io, to measureresponsiveness*
Io, to measure efficiency- costs- ,orker performance- etc*
Poor inventory status information /heft> MaJor problem for furniture retailers /ransaction errors> =etailers ,ith inaccurate inventory records
for !% of Os
1% of items cannot be found at a maJor retailer
poilage> active ingredients in the products are losing their properties
Product uality and yield
+ack of visibility in Cs ;o you kno, the inventory your distribution centers hold* ;o you kno, the inventory your fello, retailer holds*
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Common problems
Poor delivery status information 0ot kno,ing the order status
Poor too much or too little
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ummary
upply Chain
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even Eleven apan $E&
' Case tudy
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)actual
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More on E
More factual info> 'verage sales about t,ice of an average O store
OLs offered in store> Dver 3-### $change by time of day- day of ,eek- season&
Firtually no storage space
0o food cooking at the stores
apanese Convenient
Cheerful and lively stores
Many ready made dinner items < buy
)amous for its great bo(ed lunch and dinner
@ Dn ,eekends- ,hen < ,as single- < ,ent to buy lunch and dinner
C strategy>
Micro matching of supply and demand $by location- time of day- day of ,eek- season&
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even Eleven @ 0umber of tores
)
')))
1)))
/)))
2)))
0)))
+)))
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even Eleven @ 0et ales $5 Ten&
ales 1-63 5 Ten in 2###
)
1))
2))
+))
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even Eleven @ Pre ta( Profit $5 Ten&
)
')
1)
/)
2)
0)
+)5)
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even Eleven @
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)acilities trategy
+imited storage space at stores ,hich have only 12!@1!# m2 space – )reuent and small deliveries to stores
;eliveries arrive from over 2## plants
Products are grouped by the cooling needs – Combined delivery system> froGen foods- chilled foods- room temperature and hot foods
– uch product groups are cross@docked at distribution centers $;C& )ood ;Cs store noinventory – ' single truck brings a group of products and visits several stores ,ithin a geographical region
– 'ggregation> 0o supplier $not even cokeH& delivers direct
/he number of truck deliveries per day is reduced by a factor of from 164 to 2###till- at least 3 fresh food deliveries per day 8oods are received faster ,ith the use of
scanners Iave many outlets- at convenient locations- close to ,here customers can ,alk
)ocus on some territories- not all> :hen they locate in a place they blanket $akaclustering& the area ,ith storesN stores open in clusters ,ith corresponding ;CLs – 944 stores in the /okyo regionN even Eleven had stores in 32 out of 4 prefectures in 2##4 0o
stores in obe
– uccess rate of franchise application U 1.1##
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/he Present and the )uture
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;eloitte 2##9 8lobal =etailers urvey
E(cerpts from ,,,deloittecom.dtt.cda.doc.content.dttQ2##9globalpo,ersofretailingpdf
;o,nloaded on an 3#- 2##9
http://www.deloitte.com/dtt/cda/doc/content/dtt_2008globalpowersofretailing.pdfhttp://www.deloitte.com/dtt/cda/doc/content/dtt_2008globalpowersofretailing.pdf