BUENOS DIASBUENOS DIAS
AGENDAAGENDA
OverviewOverview Supply Chain ManagementSupply Chain Management
DefinitionDefinition NetworkNetwork CyclesCycles
AGENDAAGENDA
LogisticsLogistics DefinitionDefinition ComponentsComponents CostsCosts MeasuresMeasures
AGENDAAGENDA
InventoryInventory IntroductionIntroduction RationaleRationale CostsCosts TypesTypes ModelsModels
AGENDAAGENDA
Ex/ImEx/Im Basic TransactionBasic Transaction CostingCosting
Summary and ConclusionsSummary and Conclusions
OVERVIEW: INSTRUCTOROVERVIEW: INSTRUCTOR
Kevin BobergKevin Boberg PositionsPositions
Associate DeanAssociate Dean ProfessorProfessor
BackgroundBackground
OVERVIEW: ALL YOU NEEDOVERVIEW: ALL YOU NEED
kboberg@[email protected] http://cbae.nmsu.edu/~kboberghttp://cbae.nmsu.edu/~kboberg http://http://cbaecbae..nmsunmsu..eduedu/~/~kbobergkboberg//ctwctw
OVERVIEW: AUDIENCEOVERVIEW: AUDIENCE NameName BackgroundBackground InterestsInterests
GeneralGeneral TopicTopic
Goal: What do you want to learn?Goal: What do you want to learn?
AGENDAAGENDA
Supply Chain ManagementSupply Chain Management DefinitionDefinition NetworkNetwork CyclesCycles
DEFINITIONDEFINITION Supply Chain ManagementSupply Chain Management
IntegrationIntegration Business ProcessesBusiness Processes End UserEnd User Original SuppliersOriginal Suppliers Products, Services, InformationProducts, Services, Information Add ValueAdd Value
SUPPLY CHAIN NETWORKSUPPLY CHAIN NETWORKIn
itia
l Sup
plie
rs
Tie
r 3
to n
Sup
plie
rs 1
2
n
Tier 3 Tier 2 Tier 1 Tier 1 Tier 2 Tier 3
1
2
n
1
2
n
1
2
n
1
2
1
2
Tie
r 3
to n
Cus
tom
ers
End
Cus
tom
ers
Customer Order CycleCustomer Order Cycle Replenishment CycleReplenishment Cycle Manufacturing CycleManufacturing Cycle Procurement CycleProcurement Cycle
SUPPLY CHAIN CYCLESSUPPLY CHAIN CYCLES
Customer Order Cycle
Replenishment Cycle
Manufacturing Cycle
Procurement Cycle
Customer
Retailer
Distributor
Manufacturer
Supplier
SUPPLY CHAIN CYCLESSUPPLY CHAIN CYCLES
Customer Order CycleCustomer Order Cycle Customer ArrivalCustomer Arrival Customer Order EntryCustomer Order Entry Customer Order FulfillmentCustomer Order Fulfillment Customer Order ReceivingCustomer Order Receiving
SUPPLY CHAIN CYCLESSUPPLY CHAIN CYCLES
Customer Arrival
Customer Order Entry
Customer Order Receiving
Customer Order Fulfillment
Customer Order CycleCustomer Order Cycle
SUPPLY CHAIN CYCLESSUPPLY CHAIN CYCLES
Replenishment CycleReplenishment Cycle Retail Order TriggerRetail Order Trigger Retail Order EntryRetail Order Entry Retail Order FulfillmentRetail Order Fulfillment Retail Order ReceivingRetail Order Receiving
SUPPLY CHAIN CYCLESSUPPLY CHAIN CYCLES
Retail Order Trigger
Retail Order Entry
Retail Order Receiving
Retail Order Fulfillment
Replenishment CycleReplenishment Cycle
SUPPLY CHAIN CYCLESSUPPLY CHAIN CYCLES
Manufacturing CycleManufacturing Cycle Order Arrival From CustomerOrder Arrival From Customer Production SchedulingProduction Scheduling Manufacturing and ShippingManufacturing and Shipping Receiving by CustomerReceiving by Customer
SUPPLY CHAIN CYCLESSUPPLY CHAIN CYCLES
Order Arrival
Production Scheduling
Receiving
Manufacturing and Shipping
Manufacturing CycleManufacturing Cycle
SUPPLY CHAIN CYCLESSUPPLY CHAIN CYCLES
Procurement CycleProcurement Cycle Order Arrival From ManufacturerOrder Arrival From Manufacturer Supplier Production SchedulingSupplier Production Scheduling Component Manufacturing & ShippingComponent Manufacturing & Shipping Receiving at ManufacturerReceiving at Manufacturer
SUPPLY CHAIN CYCLESSUPPLY CHAIN CYCLES
Order Arrival
Supplier Production Scheduling
Receiving at Manufacturer
Component Mfr. and Shipping
Procurement CycleProcurement Cycle
SUPPLY CHAIN CYCLESSUPPLY CHAIN CYCLES
SUPPLY CHAIN CYCLESSUPPLY CHAIN CYCLES
Push/Pull ViewPush/Pull View PushPush
AnticipateAnticipate CustomerCustomer
PullPull ReactReact CustomerCustomer
Customer Order Cycle
Replenishment Cycle
Manufacturing Cycle
Procurement Cycle
Customer Order Cycle
Replenishment Cycle
Manufacturing Cycle
Procurement Cycle
Push Processes
Customer Order Cycle
Replenishment, Mfr., Procurement Cycle
Pull Processes
Order Arrives
SUPPLY CHAIN CYCLESSUPPLY CHAIN CYCLES
Customer Order Cycle
Replenishment Cycle
Manufacturing Cycle
Procurement CyclePush
Processes
Customer Order, Replenishment, Mfr. Cycle
Procurement Cycle
Pull Processes
Order Arrives
SUPPLY CHAIN CYCLESSUPPLY CHAIN CYCLES
AGENDAAGENDA
LogisticsLogistics DefinitionDefinition ComponentsComponents CostsCosts MeasuresMeasures
DEFINITIONDEFINITION LogisticsLogistics
Part of the Supply ChainPart of the Supply Chain Plans, Implements, ControlsPlans, Implements, Controls Flow and StorageFlow and Storage Goods, Services, InformationGoods, Services, Information Origin, Consumption, DisposalOrigin, Consumption, Disposal Adding ValueAdding Value
COMPONENTS OF LOGISTICSCOMPONENTS OF LOGISTICS
Natural Human
Financial
Physical
Info.
Inputs
Mgmt. Actions
Plan Implement Control
Logistics Management
RM WIP FG
MKTG
Utility
Efficient
Proprietary Asset.
Outputs
Suppliers Cust.
Logistics ActivitiesCS Inventory Location O/P
Forecasting WH Pkg. MH
Traffic IS MM Support
The Marketing Concept
Customer Satisfaction•Suppliers•Intermediate Customers•Final Customers
Company Profit•Max. Profits•Lower Total Cost•Proprietary Asset
Integrated Effort•Product•Price•Promotion•Place
COMPONENTS OF LOGISTICSCOMPONENTS OF LOGISTICS
LOGISTICS COSTSLOGISTICS COSTS
PRICE
PLACE
PROMO
PROD
OP/IS
ICC
OC
TC
WH
Mar
keti
ng
Log
isti
cs
Customer Service Level•Customer Service•Parts and Service Support
OP and IS•OP•Forecast•Communication
Warehousing•Store and handle•Location
Transportation Cost•Traffic and transport
Inventory Carrying Cost•Inventory Mgmt.•Pkg.•Reverse Logistics
Lot Quantity Costs•MH•Procurement
LOGISTICS COSTSLOGISTICS COSTS
Inventory CarryingInventory Carrying $332$332
TransportationTransportation $548$548
Shipper RelatedShipper Related $ 5$ 5
AdministrationAdministration $ 35$ 35
TotalTotal $920$920
LOGISTICS COSTSLOGISTICS COSTS
Inventory CarryingInventory Carrying 36.09%36.09%
TransportationTransportation 59.57%59.57%
Shipper RelatedShipper Related 0.54%0.54%
AdministrationAdministration 3.80%3.80%
TotalTotal 100.00%100.00%
LOGISTICS COSTSLOGISTICS COSTS
MEASURES: PROFIT MODELMEASURES: PROFIT MODEL
Assets
Sales
Sales
NP
NPM
ROALeverage
Asset T/O /
/
XX=ROI
MEASURES: ROAMEASURES: ROA
TURNOVER X MARGIN EARNINGSROA
ASSETS AVE.
SALES
SALES
INCOME NETXROA
MEASURES: ROAMEASURES: ROA
EQPMT& PLANTPROPERTY,PPE
OTHERINVENARCASHCA
WHEREPPE CA
SALESX
SALES
INCOME NETROA
MEASURES: ROAMEASURES: ROA
OTHER FINANCIAL MEASURESOTHER FINANCIAL MEASURES Cash Flow Conversion CycleCash Flow Conversion Cycle
WIP
RM
FG
Sales
Cash In
Conversion
Conversion Conversion
Conversion
OTHER FINANCIAL MEASURESOTHER FINANCIAL MEASURES Working CapitalWorking Capital
sLiabilitieCurrent
AssetsCurrent
Capital Working
CL
CA
WC
Where
CLCAWC
OTHER FINANCIAL MEASURESOTHER FINANCIAL MEASURES Current RatioCurrent Ratio
sLiabilitieCurrent
AssetsCurrent
RatioCurrent
CL
CA
CR
WhereCL
CACR
OTHER FINANCIAL MEASURESOTHER FINANCIAL MEASURES Quick RatioQuick Ratio
sLiabilitieCurrent
Inventory
AssetsCurrent
RatioCurrent
CL
INV
CA
CR
WhereCL
INVCAQR
OTHER FINANCIAL MEASURESOTHER FINANCIAL MEASURES Average Age of ReceivablesAverage Age of Receivables
sReceivable Trade Ave.
SalesCredit Net
Turnover Receivable
sReceivable of Age Average
RTO
Yearin Days
RTO
AAR
Where
AAR
OTHER FINANCIAL MEASURESOTHER FINANCIAL MEASURES Average Age of PayablesAverage Age of Payables
Payable Accounts
Yearin Days
Payable Acounts
Payables of Age Average
AP
DIYACCTPAY
AP
DIY
ACCTPAY
AAR
Where
AAP
OTHER FINANCIAL MEASURESOTHER FINANCIAL MEASURES Average Days Supply in InventoryAverage Days Supply in Inventory
Inventory Average
Sold Goods ofCost
TurnoverInventory
InventorySupply Days Average
ITO
Yearin Days
ITO
ADSI
Where
ADSI
AGENDAAGENDA
InventoryInventory IntroductionIntroduction RationaleRationale CostsCosts TypesTypes ModelsModels
INTRODUCTIONINTRODUCTION
InvestmentInvestment 20% of Total Assets for Mfr.20% of Total Assets for Mfr. 50% Of Total Assets for50% Of Total Assets for
WholesalersWholesalers RetailersRetailers
INTRODUCTIONINTRODUCTION
Manage to ImproveManage to ImproveROAROACash FlowCash FlowProductivityProductivityCustomer ServiceCustomer Service
INTRODUCTION: TRENDSINTRODUCTION: TRENDS
Product ProliferationProduct Proliferation Market DispersionMarket Dispersion Service ExpectationsService Expectations Shrinking PlcShrinking Plc Time-based CompetitionTime-based Competition
INTRODUCTION: SERVICEINTRODUCTION: SERVICE
CustomersCustomers InternalInternal ExternalExternal
MeasuresMeasures Fill rateFill rate TimelinessTimeliness
RATIONALERATIONALEEconomies of Scale: BalanceEconomies of Scale: Balance
Unit CostUnit CostHolding CostHolding Cost
RATIONALERATIONALESeasonalitySeasonality
DemandDemandSupplySupplyBothBoth
RATIONALERATIONALESpecializationSpecialization
Plant LevelPlant LevelDc LevelDc LevelFocused FactoryFocused FactoryAssignmentAssignment
RATIONALERATIONALEUncertaintyUncertainty
VariabilityVariabilityWithin LogisticsWithin LogisticsWithin FirmWithin FirmWithin Supply ChainWithin Supply Chain
RATIONALERATIONALE UncertaintyUncertainty
COSTS: TLCCOSTS: TLC
TradeoffsTradeoffsWithin LogisticsWithin LogisticsWithin FirmWithin FirmWithin Supply ChainWithin Supply Chain
COSTS: TLCCOSTS: TLC
PRICE
PLACE
PROMO
PROD
OP/IS
ICC
OC
TC
WH
COSTS: TYPESCOSTS: TYPES Ordering CostOrdering Cost
ORDER SIZE (Q)
OR
DE
R C
OS
T
COSTS: TYPESCOSTS: TYPES Stock Out CostStock Out Cost
ORDER SIZE (Q)
ST
OC
K O
UT
CO
ST
COSTS: TYPESCOSTS: TYPES Transport CostTransport Cost
ORDER SIZE (Q)TR
AN
SP
OR
T C
OS
T
COSTS: TYPESCOSTS: TYPES Carrying CostCarrying Cost
ORDER SIZE (Q)
CA
RR
YIN
G C
OS
T
COSTS: TYPESCOSTS: TYPES Carrying CostCarrying Cost
SERVE
K
ICC%
STORE
RISK
COSTS: TYPESCOSTS: TYPES Carrying CostCarrying Cost
K
ICC%
WACC
COSTS: TYPESCOSTS: TYPES Carrying CostCarrying Cost
ICC%
STORE PRIVATE
LEASED
PUBLIC
PLANT
COSTS: TYPESCOSTS: TYPES Carrying CostCarrying Cost
SERVEICC%
INSURANCE
TAXES
COSTS: TYPESCOSTS: TYPES Carrying CostCarrying Cost
ICC%
RISK
OBSOLESCENCE
SHRINKAGE
DAMAGE
RELOCATION
COST AND SALES: COST AND SALES: BALANCEBALANCE
ORDER SIZE (Q)
CO
ST
TAC
ICC$
OC
TYPESTYPES
CycleCycle Lot SizingLot Sizing Many MethodsMany Methods Sold or Used inSold or Used in
ProductionProduction MarketingMarketing
TYPESTYPES
CycleCycleConditions ofConditions of
CertaintyCertaintyMean PerformanceMean Performance
TYPESTYPES CycleCycle
Basic MathBasic Math
PERCENT COSTCARRYING
UNITPER VALUE
SIZE LOTSTOCK CYCLE
WHERE
2
1
C
V
Q
CVQTACCYCLE
TYPESTYPES
SafetySafetyLead TimeLead TimeDemandDemandOther FactorsOther Factors
TYPESTYPES
SafetySafety ConstantConstant Function ofFunction of
VariabilityVariability Customer Service LevelCustomer Service Level
TYPESTYPES SafetySafety
Basic MathBasic Math
PERCENT COSTCARRYING
UNITPER VALUE
VAR. OF MSR. X UNITSDAILY AVE.
WHERE
C
V
SS
CVSSTAC
Q
QSAFETY
TYPESTYPES
Transit or PipelineTransit or PipelineEn-routeEn-routeDoor-to-DoorDoor-to-DoorHow ValueHow Value
TYPESTYPES PipelinePipeline
Basic MathBasic Math
PERCENT COSTCARRYING
UNITPER VALUE
DOORTODOOR TIME TRANSIT
DEMAND ANNUAL
WHERE
365
C
V
t
D
CVtD
TACTRANSIT
BASIC Q-MODELBASIC Q-MODEL
CertaintyCertaintyBalanceBalance
Ordering CostOrdering Cost Inventory Carrying CostInventory Carrying Cost
BASIC Q-MODELBASIC Q-MODEL Determining Q (Cycle)Determining Q (Cycle)
UNITPER VALUE
PERCENT COSTCARRYING
DEMAND NNUAL
COSTORDERING
2
V
C
AD
P
WHERECV
PDQ
BASIC Q-MODELBASIC Q-MODEL Determining Q (Cycle)Determining Q (Cycle)
CVQICC
Q
DOC
WHERE
ICCOCTAC
2
1
P
$
BASIC Q-MODELBASIC Q-MODEL
Intensive AdministrativeIntensive Administrative Perpetual Inventory Perpetual Inventory High CostHigh Cost ““A-items”A-items”
BASIC P-MODELBASIC P-MODELFixed PFixed PVariable QVariable Q
BASIC P-MODELBASIC P-MODELLow AdministrationLow AdministrationKey is PKey is P““C” itemsC” items
AGENDAAGENDA
Ex/ImEx/Im Basic TransactionBasic Transaction CostingCosting
BASIC TRANSACTIONBASIC TRANSACTION
Source Port YouPortSource
Customs Customs
D-t-PContract
P-t-DContract
P-t-PContract
Bill of
Lading
Commercial Contract
Source Port YouPortSource
D-t-PContract
P-t-DContract
P-t-PContract
Bill of
Lading
Bill of Lading Evidence of Contract Evidence of Receipt Evidence of Title (order form)
BASIC TRANSACTIONBASIC TRANSACTION
Source Port YouPortSource
D-t-PContract
P-t-DContract
P-t-PContract
Bill of
Lading
Bill of Lading Whoever issues is the carrier Watch who issues
varies by mode varies by contract
BASIC TRANSACTIONBASIC TRANSACTION
Source YouSource
Commercial Contract
Payment Terms Sales Terms
BASIC TRANSACTIONBASIC TRANSACTION
BASIC TRANSACTIONBASIC TRANSACTION
Source YouSource
Commercial Contract
Payment Terms Cash Open Account Drafts and L/C Forfeiting
Source You
Commercial Contract
Sales Terms: INCO Terms E Term(s) C Terms D Terms F Terms
BASIC TRANSACTIONBASIC TRANSACTION
•E Term
–Ex Works
•C Terms
–CFR: Cost and Freight (named port of destination)
–CIF: Cost, Insurance, and Freight, (named port of destination)
BASIC TRANSACTIONBASIC TRANSACTION
•C Terms (continued)
–CPT: Carriage Paid To (named place of destination)
–CIP: Carriage and Insurance Paid To (named place of destination)
BASIC TRANSACTIONBASIC TRANSACTION
•D Terms
–DAF: Delivered At Frontier (named place)
–DES: Delivered Ex Ship (named port of destination)
–DEQ: Delivered Ex Quay (named port of destination)
–DDU: Delivered Duty Unpaid (named place of destination)
–DDP: Delivered Duty Paid (named placed of destination)
BASIC TRANSACTIONBASIC TRANSACTION
•F Terms
–FCA: Free Carrier (named place)
–FAS: Free Alongside Ship (named port of shipment)
–FOB: Free On Board (named port of shipment)
BASIC TRANSACTIONBASIC TRANSACTION
Any Mode• EXW• FCA• CPT• CIP• DAF• DDU• DDP
Marine Only (other than RoRo)
• EXW• FAS• FOB• CFR• CIF• DES• DEQ• DDU/DDP
BASIC TRANSACTIONBASIC TRANSACTION
Term Costs Time Variation Party Price
EXW
FAS
FOB
CFR
CIF
DES
DEQ
DDU
DDP
Total
BASIC TRANSACTIONBASIC TRANSACTION
SUMMARY SUMMARY AND AND
CONCLUSIONSCONCLUSIONS
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