1 supply chain management
TRANSCRIPT
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LOGISTICS & SUPPLY CHAIN MANAGEMENT
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Logistics and SCM Course Outline
SCM Introduction
Purchasing Management
Supplier Relationship
Globalization andInternational Trade
Logistics Service Providers
Inventory Management
Warehousing and MaterialManagement
Transport in Supply Chains
Information Flows and
Technology
Logistics and Financial
Management Measuring and Managing
Logistics Performance
Integration and
Collaboration Sustainable Logistics and
Supply Chain Systems
New Supply Chain Design
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SCM Introduction
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SCM1-4
What is a Supply Chain?
Objectives of a Supply Chain.
The Importance of Supply Chain Flows Trends in Supply Chain
Decision Phases in a Supply Chain
Process View of a Supply Chain
Examples of Supply Chains
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What is Supply Chain Management?
The planning and management of all activities
involved in sourcing and procurement, conversion,
and all logistics management activities also
includes coordination with channel partners, which
can be suppliers, intermediaries, third party service
providers, and customers.
Council of Supply Chain Management Professionals
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What is a Supply Chain?
A supply chain consists of the flow of products andservices from:Raw materials manufacturers, to
Component and intermediate manufacturers, to Final product manufacturers, toWholesalers and distributors and then toRetailers
Connected by transportation and storage activities, andIntegrated through information, planning, and process sharing
activities
Many large firms are moving away from in-house VerticallyIntegrated structures to Supply Chain Management
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Product and Services flow
Recycling and Returns
Information/planning/activity integration
and Funds
Transportation &
storage activities
End-product
manufacturer
(or focal firm)
Raw
material
suppliers Wholesalers,
distributors
Intermediate
components
manufacturers
Retailers
EndCustomer
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Develop Detergent Supply Chain Model
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1-9
What is a Supply Chain?
Customer wants
detergent and goes
to Jewel
Jewel
Supermarket
Jewel or third
party DC
P&G or other
manufacturer
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1-10
What is a Supply Chain?
Customer wants
detergent and goes
to Jewel
Jewel
Supermarket
Jewel or third
party DC
P&G or other
manufacturer
Plastic
Producer
Tenneco
Packaging
Chemical
manufacturer
(e.g. Oil Company)
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1-11
What is a Supply Chain?
Customer wants
detergent and goes
to Jewel
Jewel
Supermarket
Jewel or third
party DC
P&G or other
manufacturer
Plastic
Producer
Chemical
manufacturer
(e.g. Oil Company)
Tenneco
Packaging
Paper
Manufacturer
Timber
Industry
Chemical
manufacturer
(e.g. Oil Company)
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Product and Services flow
Information
Money
Managing Flows
DistributorManufacturerSupplier Retailer Customer
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Supply chain management is
the management of flows
between and among supplychain stages to maximize total
supply chain profitability
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Channels of Distribution
ConsumerChannel 1Channel 1
ConsumerConsumerChannelsChannels
ProducerProducer Agent/BrokerAgent/Broker WholesalerWholesaler RetailerRetailer UsersUsers
Channel 2Channel 2 Consumer
Channel 3Channel 3 Consumer
Channel 4Channel 4 Consumer
Channel 5Channel 5Consumer/Business
Channel 6Channel 6 Business
Channel 7Channel 7 Business
Channel 8Channel 8 Business
Consumer/Consumer/BusinessBusinessChannelChannel
BusinessBusinessChannelsChannels
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Customer in Supply Chain
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What is a Supply Chain? (cont.)
Customer is an integral
part of the supply chain
Potential stages in a Supply Chain
DistributorManufacturerSupplier Retailer Customer
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Successful Supply Chain
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Product and Services flow
Recycling and Returns
Information/planning/activity integration
Transportation &
storage activities
End-product
manufacturer
(or focal firm)
Raw
material
suppliers Wholesalers,
distributors
Intermediate
components
manufacturers
Retailers
EndCustomer
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Successful Supply Chain
(Group Work and Presentation)
Focal Organization (Laptop Manufacturer)
Management Vision
Management and Staff Attitude
Competency Level of Management and Staff in business areas
Ethical Values of Management and Employees
Upstream and Downstream Partners
Management Vision
Management and Staff Attitude
Competency Level of Management and Staff in business areas
Ethical Values of Management and Employees
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Supply Chain Objective
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Supply Chain Objectives
Reduce CostMaintain/Improve Quality
Enhance Customer Service Level
Optimize the profitability of all of the supply chain partners through customersatisfaction
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The Objective of a Supply Chain
Example: Dell receives $2000 from a customer for a computer
(revenue)
Supply chain incurs costs (information, storage, transportation,
components, assembly, etc.)
Difference between $2000 and the sum of all of these costs is
the supply chain profit
Supply chain profitability is total profit to be shared across all stages
of the supply chain
Supply chain success should be measured by total supply
chain profitability, not profits at an individual stage
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Product and Services flow
Recycling and Returns
Information/planning/activity integration
Transportation &
storage activities
End-product
manufacturer
(or focal firm)
Raw
material
suppliers Wholesalers,
distributors
Intermediate
components
manufacturers
Retailers
EndCustomer
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Cost Factors in Supply Chain ?
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Organizational Scope of Supply Chain Management
Demand Forecasting
Purchasing & Supplier Management
Production / Manufacturing Inventory Management
Warehouse Management
Logistics / Distribution New Product Development
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Cost Factor in Supply Chain
Raw Material cost for Manufacturer
Logistics and Warehousing
Conversion of raw material into component /finished
product
Finished Inventory Holding Cost
Information Management Cost
R & D ( New product Development)
Channel Members Markup
Marketing & Customer Services
Others ( Financial, Administrative etc)
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Cost in the Value Chain
Manufacturer
Procurement
Manufacturing & R&D
Inventory Management
Marketing
Inbound and
Outbound Logistics
Warehousing
Administrative
Others
Distribution
Procurement
Inventory Management
Marketing
Inbound and
Outbound Logistics
Warehousing
Administrative
Others
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Cost in Supply Chain
Raw Material Supplier
Component Manufacturer
Finished Product Manufacturer
Distributer / Wholesaler
Retailer
Customer
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Typical Series of Markups
1414 -- 2929
Manufacturers Cost $25.00
Manufacturers Markup $3.75 (15%)
Wholesalers Markup $5.75 (20%)
RetailersMarkup $25.88 (75%)
Customers Price $60.38
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Channels of Distribution
ConsumerChannel 1Channel 1
ConsumerConsumerChannelsChannels
ProducerProducer Agent/BrokerAgent/Broker WholesalerWholesaler RetailerRetailer UsersUsers
Channel 2Channel 2 Consumer
Channel 3Channel 3 Consumer
Channel 4Channel 4 Consumer
Channel 5Channel 5Consumer/Business
Channel 6Channel 6 Business
Channel 7Channel 7 Business
Channel 8Channel 8 Business
Consumer/Consumer/BusinessBusinessChannelChannel
BusinessBusinessChannelsChannels
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Cost reduction achieved through: Reducing Supplier Base (Reduced purchasing costs)
Sharing Information within and Channel Partners and Suppliers
Reducing waste ( Manufacturing, Storage, Transportation etc) Achieving Economies of scale in Purchasing, Manufacturing and
Transportation
Usage of Technology
Reducing excess inventory (through collaboration)
Reducing non-value added activities (Process Improvement) Process Automation ( Warehouse, Production, etc)
Information Management through ERP , CRM others
Outsourcing the non core activity (to achieve cost effectiveness andquality)
Creating win-win scenario- ( Proper Negotiation)
Continuous Improvement through Benchmarking- copy competitors
Trial & error
Increased knowledge of supply chain processes (experience)
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Supply Chain vs Supply Chain
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90 + + =
ProductManufacturer
Distributor Retailer Customer
100 + + =
100 + + =
95 + + =
Reducing Cost
A
B
C
D
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90 30+ + =
ProductManufacturer
Distributor Retailer Customer
100 20+ + =
100 30+ + =
95 25+ + =
Reducing Cost
A
B
C
D
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90 30 20+ + =
ProductManufacturer
Distributor Retailer Customer
100 20 20+ + =
100 30 10+ + =
95 25 15+ + =
Reducing Cost
A
B
C
D
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90 30 20+ + = 140
ProductManufacturer
Distributor Retailer Customer
100 20 20+ + = 140
100 30 10+ + = 140
95 25 15+ + = 135
Reducing Cost
A
B
C
D
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Successful Supply Chain
Knowledge and Ethical Values
Focal Organization
Management Vision
Management and Staff Attitude
Competency Level of Management and Staff in business areas
Ethical Values of Management and Employees
Upstream and Downstream Partners
Management Vision
Management and Staff Attitude
Competency Level of Management and Staff in business areas
Ethical Values of Management and Employees
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SCM and Competitive Advantage
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Responsiveness
Quality
AffordabilityService
ProductFeatures
What the Customer Wants ?
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The Value Chain
( Competitive Advantage?)
Supportactivities
Primary activities
Inbound logistics Materials receiving, storing, and distribution to manufacturing premises
Operations Transforming inputs into finished products.Outbound logistics Storing and distributing productsMarketing and Sales Promotions and sales forceService Service to maintain or enhance product valueCorporate infrastructure Support of entire value chain, e.g. general management planning,
financing, accounting, legal services, government affairs, and QMHuman resources management Recruiting, hiring, training, and developmentTechnology Development Improving product and manufacturing process
Procurement Purchasing input
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Responsiveness
Quality
AffordabilityService
ProductFeatures
What the Customer Wants ?
Information Sharing among supply chain partners
Quick Manufacturing
Agile Logistics
Quality ProcurementQuality Manufacturing
Proper Storage and Delivery
Customer Needs and Want
R & D
Supplier Involvement
Saving Cost at
Each Stage of Supply Chain
Sales & Marketing
Quick Manufacturing
Agile Logistics
Customer Services
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Successful Supply Chain
Knowledge and Ethical Values
Focal Organization
Management Vision
Management and Staff Attitude
Competency Level of Management and Staff in business areas
Ethical Values of Management and Employees
Upstream and Downstream Partners
Management Vision
Management and Staff Attitude
Competency Level of Management and Staff in business areas
Ethical Values of Management and Employees
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Product and Services flow
Recycling and Returns
Information/planning/activity integration
Transportation &
storage activities
End-product
manufacturer
(or focal firm)
Raw
material
suppliers Wholesalers,
distributors
Intermediate
components
manufacturers
Retailers
EndCustomer
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Old and New Paradigm
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Supply Chain Management
Old paradigm - Vertically integrated firm withemphasis on short-term, company focused performance.
Newparadigm - Focused activities in areas ofspecialization; voluntary, trust-based relationships withsuppliers and customers.
All participants in the supply chain benefit.
Boundaries extend from the firms suppliers suppliers to itscustomers customers (i.e., second tier suppliers and
customers).
Supply chains use reverse logistics to handle returned
products, warranty repairs, and recycling.
Th V l Ch i
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The Value Chain
( Competitive Advantage?)
Supportactivities
Primary activities
Inbound logistics Materials receiving, storing, and distribution to manufacturing premises
Operations Transforming inputs into finished products.Outbound logistics Storing and distributing productsMarketing and Sales Promotions and sales forceService Service to maintain or enhance product valueCorporate infrastructure Support of entire value chain, e.g. general management planning,
financing, accounting, legal services, government affairs, and QMHuman resources management Recruiting, hiring, training, and developmentTechnology Development Improving product and manufacturing process
Procurement Purchasing input
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Product and Services flow
Recycling and Returns
Information/planning/activity integration
Transportation &
storage activities
End-product
manufacturer
(or focal firm)
Raw
material
suppliers Wholesalers,
distributors
Intermediate
components
manufacturers
Retailers
EndCustomer
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Issues in Supply Chain
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Product and Services flow
Recycling and Returns
Information/planning/activity integration
Transportation &
storage activities
End-product
manufacturer
(or focal firm)
Raw
material
suppliers Wholesalers,
distributors
Intermediate
components
manufacturers
Retailers
EndCustomer
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Issues in Supply Chain
No collaboration between Supply Chain partners
Poor Communication/ information flow
Higher operational cost
Frequent Inventory Stock out or large Inventory build ups Very Long Lead Times
Poor Funds Flows
Poor Information Flowamong supply chain partners Poor Material flowamong supply chain partners
Poor Demand Forecasting
Result is Increased operational cost and poor
Th V l Ch i
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The Value Chain
( Competitive Advantage?)
Supportactivities
Primary activities
Inbound logistics Materials receiving, storing, and distribution to manufacturing premises
Operations Transforming inputs into finished products.Outbound logistics Storing and distributing productsMarketing and Sales Promotions and sales forceService Service to maintain or enhance product valueCorporate infrastructure Support of entire value chain, e.g. general management planning,
financing, accounting, legal services, government affairs, and QMHuman resources management Recruiting, hiring, training, and developmentTechnology Development Improving product and manufacturing process
Procurement Purchasing input
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Typical Issues in Organization
Poor Quality of the Finished Products
Poor Supplier Management
Excess Inventory
Inventory Stockout Poor Production Scheduling
Poor warehouse Management
Lack of departmental Coordination Poor Demand Forecasting
Poor Purchasing Management
Poor Logistics Management
S f l S l Ch i
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Successful Supply Chain
Knowledge and Ethical Values
Focal Organization
Management Vision
Management and Staff Attitude
Competency Level of Management and Staff in business areas Ethical Values of Management and Employees
Upstream and Downstream Partners
Management Vision
Management and Staff Attitude
Competency Level of Management and Staff in business areas
Ethical Values of Management and Employees
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Why Supply Chain Management?
Helps in the Integration of all the departments of anorganization (improve coordination and communication)
Helps in the optimization of Demand Forecasting
Purchasing & Supplier Management
Production
Inventory Management
Warehouse Management
Logistics New Product Development
SCM helps in fulfilling the Customers Needs and WantsSCM helps in reducing cost and increasing efficiency
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SCM provides Solutions for Problems
Poor Quality of the Finished Products ( TQM and Six Sigma)
Poor Supplier Management (Supplier evaluation & Certification)
Excess Inventory (JIT, ERP Procurement and Visibility, CPFR)
Inventory Stockout (ERP Inventory Management , CPFR)
Poor Production Scheduling ( MRP Planning and Production)
Poor warehouse Management (ERP Warehouse Management)
Lack of Partner Coordination (Supplier Management andChannel management ERP to ERP)
Poor Demand Forecasting (CPFR and ERP)
Poor Purchasing Management ( ERP Procurement and Smaller
Supply base)
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Product and Services flow
Recycling and Returns
Information/planning/activity integration
Transportation &
storage activities
End-product
manufacturer
(or focal firm)
Raw
material
suppliers Wholesalers,
distributors
Intermediate
components
manufacturers
Retailers
EndCustomer
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Supply Chain Management
Wal-Mart and Procter & Gamble (P&G) SCM
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1. Supply Chain Model2. Information Flow Model
Models in Supply Chain
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Supply Chain Model
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Product and Services flow
Recycling and Returns
Information/planning/activity integration
and Funds
Transportation &
storage activities
End-product
manufacturer
(or focal firm)
Raw
material
suppliers Wholesalers,
distributors
Intermediate
components
manufacturers
Retailers
EndCustomer
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Channels of Distribution
ConsumerChannel 1Channel 1
ConsumerConsumerChannelsChannels
ProducerProducer Agent/BrokerAgent/Broker WholesalerWholesaler RetailerRetailer UsersUsers
Channel 2Channel 2 Consumer
Channel 3Channel 3 Consumer
Channel 4Channel 4 Consumer
Channel 5Channel 5Consumer/Business
Channel 6Channel 6 Business
Channel 7Channel 7 Business
Channel 8Channel 8 Business
Consumer/Consumer/BusinessBusinessChannelChannel
BusinessBusinessChannelsChannels
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Information Model
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Process view of a supply chain
P d t d S i fl
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Product and Services flow
Recycling and Returns
Information/planning/activity integration
and Funds
Transportation &
storage activities
End-product
manufacturer
(or focal firm)
Rawmaterial
suppliers Wholesalers,
distributors
Intermediate
components
manufacturers
Retailers
EndCustomer
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Process View of a Supply Chain
Cycle view: processes in a supply chain are divided
into a series of cycles, each performed at the
interfaces between two successive supply chain
stages Push/pull view: processes in a supply chain are
divided into two categories:
Executed in response to a customer order(pull)
Executed in anticipation of a customer order
(push)
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Cycle View of Supply Chains
Customer Order Cycle
Replenishment Cycle
Manufacturing Cycle
Procurement Cycle
Customer
Retailer
Distributor
Manufacturer
Supplier
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Cycle View of a Supply Chain
Each cycle occurs at the interface between two
successive stages
Customer order cycle (customer-retailer)
Replenishment cycle (retailer-distributor)Manufacturing cycle (distributor-manufacturer)
Procurement cycle (manufacturer-supplier)
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Subprocesses in each SC Process
Supplier Stage
Market Products
Buyer returns reverse
flow to suppliers orthird party
Buyer Stage
Receive Supplies
Supplier Stage
Supplies Order
Buyer Stage
Places Order
Supplier Stage
Receive Order
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Within each Cycle
The Goal of the buyer
Ensure Product availability
Achieve economies of scale
Reduce the cost of receiving the order
The Goal of the Supplier
Accurate Customer order forecast
Reduce the cost of receiving the order Fill the order on time
Improve efficiency and accuracy of the order fulfillment
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Cycle View of Supply Chains
Customer Order Cycle
Replenishment Cycle
Manufacturing Cycle
Procurement Cycle
Customer
Retailer
Distributor
Manufacturer
Supplier
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Customer Order Cycle
Involves all processes directly involved in receiving
and filling the customers order
Customer arrival
Customer order entry
Customer order fulfillment
Customer order receiving
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Replenishment Cycle
All processes involved in replenishing retailer
inventories (retailer is now the customer)
Retail order trigger
Retail order entry
Retail order fulfillment
Retail order receiving
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Procurement Cycle
All processes necessary to ensure that materials areavailable for manufacturing to occur according toschedule
Manufacturer orders components from suppliers to
replenish component inventories However, component orders can be determined
precisely from production schedules (different fromretailer/distributor orders that are based on uncertain
customer demand) Important that suppliers be linked to the
manufacturers production schedule
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Supply Chain Management
Wal-Mart and Procter & Gamble (P&G) SCM
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Cycle View of a Supply Chain
Key PointA cycle view of the supply chain clearly defines the
process involved and the owners of each process. Thisview is very useful when considering operational
decision because it specifies the responsibilities of
each member of the supply chain and the desired
outcome for each process.
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Push and Pull View of the
Supply Chain
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Process View of a Supply Chain
Cycle view: processes in a supply chain are divided
into a series of cycles, each performed at the
interfaces between two successive supply chain
stages Push/pull view: processes in a supply chain are
divided into two categories:
Executed in response to a customer order
(pull)
Executed in anticipation of a customer order
(push)
Push/Pull View of
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Push/Pull View of
Supply Chain Processes
Supply chain processes fall into one of twocategories depending on the timing of theirexecution relative to customer demand
Pull: execution is initiated in response to a customer
order (reactive) Push: execution is initiated in anticipation of
customer orders (speculative)
Push/pull boundary separates push processes from
pull processes Strategic supply chain decisions may lead toStrategic supply chain decisions may lead to
changing the push/pull boundarychanging the push/pull boundary
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Push/Pull View of L.L Beans Supply Chains
Procurement,Manufacturing andReplenishment cycles
Customer OrderCycle
CustomerOrder Arrives
PUSH PROCESSES PULL PROCESSES
/
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Push/Pull View of DELL Supply Chain
Procurement Cycle Customer OrderAnd Manufacturing cycle
Customer Order ArrivesPUSH PROCESSES
PULL PROCESSES
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Push and Pull View
Key Point
A push and pull view of the supply chain categoriesprocesses based on whether they are initiated in
response to a customer order(pull) or in the
anticipation of a customer order (push) . This view is
very useful when considering strategic decisionsrelating to Supply Chain Design.
/ f S C
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Push/Pull View of Supply Chains
Develop Push / Pull View for the following
Buying Dell computer from the net.
Buying a PC from a Retail store.
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Push and Pull View of the
Supply Chain
B P
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Business Processes
Make to Stock ?
Assemble to Order?
Make to Order ?
Design to Order ( Engineer to order)?
Where to Take the Customer Order?
Order fulfillment Lead Time ?
Design to Order
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Make to Order
Assemble to Order
Make to Stock
SCM P b ildi bl k
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Pack
and Ship
Stock as
Inventory
Test
Sub
Assemble
Design
Procure
Fabricate
Final
Assemble
Stock
Standard
Module as
Inventory
Stock
Component
Design &
Standard
Part
(Custom
Design if
required)
Design
(Unique Engg.
Design or
Significant
Customization
Procure
(RM,
Standard
Component ,
ETC
SCM Process building blocks
D i P
Design to Order
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Pack and
Ship
Stock as
InventoryTest
Sub
AssembleDesign Procure Fabricate
Final
Assemble
Pack and
Ship
Test
Final
Assemble
The
CustomerSelected
Module
Sub
Assemble
Design Procure Fabricate
Stock
Standard
Module asInventory
Pack and
ShipTest
Final
Assemble
Sub
AssembleDesign Procure Fabricate
Stock
Component
Design &
Standard
Part
(Custom
Design if
required)
Pack and
ShipTest
Final
Assemble
Sub
Assemble
Design
(Unique Engg.
Design or
Significant
Customization
Procure
(RM,
Standard
Component ,
ETC
Fabricate
Make to Order
Assemble to Order
Make to Stock
M k k
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Pack
and Ship
Stock as
InventoryTest
Sub
AssembleDesign Procure Fabricate
Final
Assemble
Make to stock
M k k
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Pack
and Ship
Stock as
InventoryTest
Sub
AssembleDesign Procure Fabricate
Final
Assemble
Make to stock
MAKE TO STOCK. Refers to a product environment
where products can be and usually finished before
receipt of a customer order. Customer orders are
typically filled from existing stock, and productionorders are used to replenish those stocks. This is
mass manufacturing with pushing the sales
philosophy.
M k t t k
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Pack
and Ship
Stock as
InventoryTest
Sub
AssembleDesign Procure Fabricate
Final
Assemble
Customer
Order
Make to stock
L.T
A bl t O d
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Pack
and ShipTest
Final
AssembleThe
CustomerSelected
Module
Sub
AssembleDesign Procure Fabricate
Stock
StandardModule
as
Inventory
Assemble to Order
A bl t O d
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Pack
and ShipTest
Final
Assemble
The
Customer
Selected
Module
Sub
AssembleDesign Procure Fabricate
Stock
Standard
Module
asInventory
Assemble to Order
Denotes a production environment where goods or service can be
assembled after receipt of a customers order. The key components (
bulk, semi-finished , intermediate, subassembly, fabricated,
purchased, packaging, etc.) used in the assembly or finishing process
are planned and possibly stocked in anticipation of a customerorder. Receipt of an order initiates assembly of the customized
product. This strategy is useful where a large number of end
products ( based on the selection of options and accessories) can be
assembled from common components.
A bl t O d
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Pack
and ShipTest
Final
AssembleThe
CustomerSelected
Module
Sub
AssembleDesign Procure Fabricate
Stock
StandardModule
as
Inventory
Customer
Order
Assemble to Order
L.T
M k t O d
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Pack and
ShipTest
Final
Assemble
Sub
AssembleDesign Procure Fabricate
Stock
ComponentDesign &
Standard
Part
(CustomDesign if
required)
Make to Order
M k t O d
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Pack and
ShipTest
Final
Assemble
Sub
AssembleDesign Procure Fabricate
Stock
Component
Design &
Standard
Part
(Custom
Design if
required)
Make to Order
MAKE TO ORDER. In this environment, goods or service
can be manufactured / offered after receipt of a
customers order. The final product is usually a
combination of standard items custom- designed to meetthe special needs of the customer. This gives more
option( as compared to assemble-to-order) to the
customer in design, aesthetics, utility, accessories, etc.
Make to Order
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Pack and
ShipTest
Final
Assemble
Sub
AssembleDesign Procure Fabricate
Stock
ComponentDesign &
Standard
Part
(CustomDesign if
required)
Customer
Order
Make to Order
L.T
Design to Order
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Pack and
ShipTest
Final
Assemble
Sub
Assemble
Design
(Unique Engg.Design or
Significant
Customization
Procure
(RM,Standard
Component ,
ETC
Fabricate
Design to Order
Design to Order
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Pack and
ShipTest
Final
Assemble
Sub
Assemble
Design
(Unique Engg.
Design or
Significant
Customization
Procure
(RM,
Standard
Component ,
ETC
Fabricate
Design to Order
DESIGN TO ORDER. (ENGINEERING-TO-ORDER). This is
a highly focused environment where the individual
customer gives product specifications that require unique
engineering design, significant customization inmanufacturing, or even new purchased materials. Each
customer order result in unique set of part numbers, bills
of material, and routings.
Design to Order
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Pack and
ShipTest
Final
Assemble
Sub
Assemble
Design
(Unique Engg.Design or
Significant
Customization
Procure
(RM,Standard
Component ,
ETC
Fabricate
Customer
Order
Design to Order
L.T
CustomerOrder
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Pack
and Ship
Stock as
InventoryTest
Sub
AssembleDesign Procure Fabricate
Final
Assemble
Customer
Order
Pack and
ShipTest
Final
Assemble
The
Customer
Selected
Module
Sub
AssembleDesign Procure Fabricate
Stock
Standard
Module as
Inventory
CustomerOrder
Pack and
ShipTest
Final
Assemble
Sub
AssembleDesign Procure Fabricate
Stock
Component
Design &Standard
Part
(Custom
Design ifrequired)
Design to Order
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Make to Order
Assemble to Order
Make to Stock
Supply Chain Management
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Supply Chain Management
Integrated
System
PushPush
PullPull
DemandDemand
ForecastingForecasting
SourcingSourcing
andand
PurchasingPurchasing
PackagingPackaging
MaterialMaterial
HandlingHandling
RawRaw
MaterialsMaterials
InventoryInventory
InboundInboundTransportationTransportation
ManufacturingManufacturing
CustomerCustomer
OrderOrder
ProcessingProcessingPackaging/Packaging/
MaterialMaterial
HandlingHandling
FinishedFinished
GoodsGoodsInventoryInventory
DeploymentDeployment
OutboundOutbound
TransportationTransportation
CustomersCustomers
CustomerCustomer
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Proper SCM
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Role of Information in SCM
Supply Chain Management
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Supply Chain Management
Information replaces inventorythroughout the supply chain
The further the information transfers up and down thesupply chain
the more efficient the response
the more timely the supply of goods
resultant costs reduced
Supply Chain Management:
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The True Magnitude1-116
Compaq estimates it lost $.5 billion to $1 billion in
sales in 1995 because laptops were not available
when and where needed
When the 1 gig processor was introduced by AMD,the price of the 800 mb processor dropped by
30%
P&G estimates it saved retail customers $65 million
by collaboration resulting in a better match ofsupply and demand
Supply Chain Management
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Supply Chain Management
Information replaces inventory
throughout the supply chain if:
Relationships allow the trust to share
Accuracy assures information is useful
Responsiveness builds the relationships
Proper SCM
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Proper SCM
Ensure that goodsmove smoothly andon time from suppliersto customers
Keep inventories low Keep costs down
Proper SCMand inventorymanagement
requirescoordinationof all
activities and
links in thesupply chain
to:
The Value Chain
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V C
Supportactivities
Primary activities
Inbound logistics Materials receiving, storing, and distribution to manufacturing premisesOperations Transforming inputs into finished products.
Outbound logistics Storing and distributing productsMarketing and Sales Promotions and sales forceService Service to maintain or enhance product valueCorporate infrastructure Support of entire value chain, e.g. general management planning,
financing, accounting, legal services, government affairs, and QMHuman resources management Recruiting, hiring, training, and developmentTechnology Development Improving product and manufacturing processProcurement Purchasing input
Product and Services flow
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Recycling and Returns
Information/planning/activity integration
Transportation &
storage activities
End-product
manufacturer
(or focal firm)
Rawmaterial
suppliers Wholesalers,
distributors
Intermediate
components
manufacturers
Retailers
End
Customer
Proper SCM (cont.)
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Supply chain partnersdepend on each other
Partners dont always worktogether toward the samegoal
Coordinationis neededbecause:
Proper SCM (cont.)
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p ( )
Information flow is akey: communications
between businesspartners should be:
Effective Efficient
Support is neededto ensure this
communication andis enabled by:
IT support EC support
Benefits of Proper SCM
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Benefits of Proper SCM
Reduce uncertainty along the chain
Proper inventory levels in the chain
Minimize delays
Eliminate rush (unplanned) activities
Provide superb customer service
Major contributor of success (ever survival)
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Supply Chain Importance
Importance of Supply Chain Management
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p pp y M g
Firms have discovered value-enhancing and long term
benefits by employing SCM principles and techniques
Who benefits most? Firms with?
Large inventories
Large number of suppliers
Complex products
Customers with large purchasing budgets
Importance of Supply Chain Management (Cont.)
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p pp y g ( )
Lower costs, better quality, and better customer service are reasons
to employ Supply Chain Management. Also:
Reduced Bullwhip Effect- the magnified reduction of
safety stock costs based on coordinated planning andsharing of information (Information replaces inventory
throughout the supply chain)
Collaborative planning, forecasting, and replenishment
activities reduce the Bullwhip Effect and lead to bettercustomer service, lower inventory costs, improved quality,
reduced cycle time, better production methods, and other
benefits.
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Decision Phase in Supply Chain
Decision Phases of a Supply Chain
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Decision Phases of a Supply Chain
Supply chain strategy or design
Supply chain planning
Supply chain operation
Decisions Strategic Planning Operational
Generate pick list at the warehouse
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Timing and size of market promotions
Allocate an order to a particular shipping mode and
shipment
Planned buildup of inventories
Subcontracting, backup locations
Set a date that an order is to be filled
Allocate inventory or production to individual order
Selection of Modes of transportation
Set delivery schedules of trucks
Inventory policies
Products to be made or stored at various locations
Outsourcing decisions
Which markets will be supplied from which locations
Locations and capacities of facilities (warehouse and
Production)
Information systems
Place replenishment order
Supply Chain Strategy or Design
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Supply Chain Strategy or Design
Decisions about the structure of the supply chain andwhat processes each stage will perform
What are some strategic supply chain decisions? Locations and capacities of facilities (warehouse and
Production)Products to be made or stored at various locationsModes of transportation Information systems
Outsourcing decisions Supply chain design must support strategic objectives
Supply chain design decisions are long-term andexpensive to reverse must take into account market
uncertainty
Supply Chain Planning
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S pp y C g
Definition of a set of policies that govern short-term
operations
Fixed by the supply configuration from previous
phase Starts with a forecast of demand in the coming year
Supply Chain Planning
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pp y g
What are some planning decisions?
Which markets will be supplied from which locations
Planned buildup of inventories
Subcontracting, backup locations Inventory policies
Timing and size of market promotions
Must consider in planning decisions demand
uncertainty, exchange rates, competition over the
time horizon
Supply Chain Operations
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pp y p
What are some Operation decisions? Allocate inventory or production to individual order
Set a date that an order is to be filled
Generate pick list at the warehouse Allocate an order to a particular shipping mode
and shipment
Set delivery schedules of trucks
Place replenishment order The goal of the Supply Chain Operations is to handle the
customer order in the best possible manner.
SCM Tools levels
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Supply Chain Planning
services configure operations
to best meet projected
demand levels
The planning horizon rangesfrom developing a long term
strategic outlook to
developing a short term
tactical production schedule
Event Management
Order Management
Inventory Management
Warehouse Management
Production Planning
Supply Planning
Demand Planning
Network Design
SCM Service Offering
OperationalPlanning
TacticalPlanning
StrategicPlanning
Real time /
Minutes
Hours /
Days
Weeks /
MonthsQuarters Years
Supply Chain Planning Tools Supply Chain Execution Tools
Supply Chain Execution
services monitor and
control production
operations
They provide real time
tracking and alert
notification
Supply Chain Elements
Transportation Management
Source: BAH
Supply Chain Planning Process
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pp y g
Supply Planning
Balancesunconstraineddemand against highlevel supply chain
constraints Reflect order priority
and due dates
Network Design
Design where to placeproduction facilitiesand optimize the endto end chain
Construct alternateflow scenarios thatincorporateassociated constraints
Production Planning
Decompose thesupply plan into subassembly / productionneeds by site
Balance productioncapacity across sites
Production Scheduling
Optimize processingflows, sequence, andtiming
Produce a finitecapacity productionschedule
Demand Planning
Anticipate demandbased on historicaltrends and currentconditions
Perform what ifanalysis - highlight theimpact of changing
demand drivers
Hours /
Days
Weeks /
MonthsQuartersYears
Planning
Horizon
Supply Chain Execution Process
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136
Supply Chain Execution Process
Order Management
Record customerorders and trackstatus from receipt
to final delivery Direct efficient
response to orderswith dynamic cost /benefit analysis ofoptions
InventoryManagement
Streamlineinformationmovement and
provide tightinventory control Inventories
replenished usingkanban, min-max, orreorder point
Event Management
Monitor and manage critical planning and event information Broadcast alert notification and present response alternatives based on pre determined
business rules
Transportation
Management
Optimize and
track outbound
and inbound
shipping
Warehouse
Management
Optimization
and
management
of warehouse
processes
Product and Services flow
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Recycling and Returns
Information/planning/activity integration
Transportation &storage activities
End-product
manufacturer
(or focal firm)
Rawmaterial
suppliers Wholesalers,
distributors
Intermediate
components
manufacturers
Retailers
End
Customer
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Best Practices & Trends
Current Trends in Supply Chain Management
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139
Firms using Supply Chain Management:
1. Start working with key suppliers
2. Move on to other suppliers, customers, and
shippers3. Integrate second tier suppliers and customers
(second tier refers to the customers customers
and the suppliers suppliers)
Current Trends in Supply Chain Management
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Expanding the Supply Chain
Firms are expanding partnerships and building
facilities in foreign markets
The expansion involves: breadth- foreign manufacturing, office & retail sites,
foreign suppliers & customers
depth- second and third tier suppliers & customers
Current Trends in Supply Chain Management-
Cont
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Cont.
Reducing Supply Chain Costs
Cost reduction achieved through:
Reduced purchasing costs
Reducing waste Reducing excess inventory, and
Reducing non-value added activities
Continuous Improvement through
Benchmarking- copy competitors Trial & error
Increased knowledge of supply chain processes (experience)
Current Trends in Supply Chain Management
(Cont )
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(Cont.)
Increasing Supply Chain Responsiveness
Firms will increasingly need to be more flexible and
responsive to customer needs
Supply chains will need to benchmark industry
performance and meet and improve on a continuous
basis
Responsiveness improvement will come from more
effective and faster product & service delivery systems
Current Trends in Supply Chain Management
(C t )
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143
(Cont.)
The Greening of Supply Chains
- Producing, packaging, moving, storing, delivering and
other supply chain activities can be harmful to the
environment
Supply chains will work harder to reduce
environmental degradation
Large majority (75%) of U.S. consumers influenced by
a firms environmental friendliness reputation
Recycling and conservation are a growing alternative
in response to high cost of natural resources
What is Supply Chain
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Organizational Scope of Supply Chain Management
Demand Forecasting
Purchasing & Supplier Management
Production / Manufacturing
Inventory Management
Warehouse Management
Logistics / Distribution
New Product Development
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SCM provides Solutions for Problems
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Poor Quality of the Finished Products ( TQM and Six Sigma)
Poor Supplier Management (Supplier evaluation & Certification)
Excess Inventory (JIT, ERP Procurement and Visibility)
Inventory Stockout (ERP Inventory Management) Poor Production Scheduling ( MRP Planning and Production)
Poor warehouse Management ( ERP Warehouse Management)
Lack of Partner Coordination (Supplier Management and
Channel management ERP to ERP)
Poor Demand Forecasting (CPFR and ERP)
Poor Purchasing Management ( ERP Procurement and Smaller
Supply base)
Supply Chain Management
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pp y g
Old paradigm - Vertically integrated firm withemphasis on short-term, company focused performance.
Newparadigm - Focused activities in areas ofspecialization; voluntary, trust-based relationships withsuppliers and customers.
All participants in the supply chain benefit.
Boundaries extend from the firms suppliers suppliers to its
customers customers (i.e., second tier suppliers and
customers).
Supply chains use reverse logistics to handle returned
products, warranty repairs, and recycling.
Push/Pull View of DELL Supply Chain
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Procurement Cycle Customer OrderAnd Manufacturing cycle
Customer Order Arrives
PUSH PROCESSES
PULL PROCESSES
Push/Pull View of L.L Beans Supply Chains
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Procurement,Manufacturing andReplenishment cycles
Customer OrderCycle
CustomerOrder Arrives
PUSH PROCESSES PULL PROCESSES
Pack andT t
FinalSub
Design
(Unique Engg.
D i
Procure
(RM,
St d d F b i t
Design to Order
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Pack and
Ship
Stock as
InventoryTest
Sub
AssembleDesign Procure Fabricate
Final
Assemble
Pack and
ShipTest
Final
Assemble
The
Customer
SelectedModule
Sub
AssembleDesign Procure Fabricate
Stock
Standard
Module as
Inventory
Pack and
ShipTest
Final
Assemble
Sub
AssembleDesign Procure Fabricate
Stock
Component
Design &
Standard
Part
(Custom
Design if
required)
ShipTest
AssembleAssembleDesign or
Significant
Customization
Standard
Component ,
ETC
Fabricate
Make to Order
Assemble to Order
Make to Stock
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Supply Chain Trends
Product and Services flow
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Recycling and Returns
Information/planning/activity integration
Transportation &storage activities
End-product
manufacturer
(or focal firm)
Rawmaterial
suppliers Wholesalers,
distributors
Intermediate
components
manufacturers
Retailers
End
Customer
Important Supply Chain Elements
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153
Operations Trends:
Demand management- match demand to
available capacity Linking buyers & suppliers viaMRP and ERP
systems
Use JIT to improve the pullof materials to
reduce inventory levels Employ TQM to improve quality compliance
among suppliers
Important Supply Chain Elements
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154
Distribution Trends: Transportation management- tradeoff decisions
between cost & timing of delivery/customer service
via trucks, rail, water & air
Customer relationship management- strategies to
ensure deliveries, resolve complaints, improve
communications, & determine service requirements
Network design- creating distribution networks based
on tradeoff decisions between cost & sophistication ofdistribution system
Important Elements of Supply Chain
Management (Cont.)
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g ( )
Integration Trends:
Supply Chain Process Integration- when supply chain
participants work for common goals. Requires intrafirm
functional integration. Based on efforts to change
attitudes & adversarial relationships
INTEGRATING SCM, CRM, AND
ERP
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ERP
Data points where SCM, CRM, and ERP integrate