45885323 supply chain management ppt

14-1 Supply Chain Management

Supply Chain Management

G. Krishna Ranga Rao


Supply Chain ManagementSupply Chain Management

• Supply Chain: the sequence of organizations - their facilities, functions, and activities - that are involved in producing and delivering a product or service.

Sometimes referred to as Sometimes referred to as value chainsvalue chains


• Warehouses• Factories• Processing centers• Distribution centers• Retail outlets• Offices

FacilitiesFacilities


Functions and ActivitiesFunctions and Activities

• Forecasting• Purchasing• Inventory management• Information management• Quality assurance• Scheduling• Production and delivery• Customer service


Typical Supply ChainsTypical Supply Chains

Purchasing Receiving Storage Operations Storage

Production Distribution


Typical Supply Chain for a ManufacturerTypical Supply Chain for a Manufacturer

Supplier

Supplier

Supplier

Storage} Mfg. Storage Dist. Retailer Customer

Figure 14.1a


Supplier

Supplier

} Storage Service Customer

Typical Supply Chain for a ServiceTypical Supply Chain for a ServiceFigure 14.1b


1. Improve operations

2. Increasing levels of outsourcing

3. Increasing transportation costs

4. Competitive pressures

5. Increasing globalization

6. Increasing importance of e-commerce

7. Complexity of supply chains

8. Manage inventories

Need for Supply Chain ManagementNeed for Supply Chain Management


Bullwhip EffectBullwhip Effect

Tier 2Suppliers

Tier 1Suppliers

ProducerDistributorRetailer FinalFinalCustomerCustomer

Amount ofAmount ofinventoryinventory=

Figure 14.3


Benefits of Supply Chain ManagementBenefits of Supply Chain Management

Organization Benefit

Campbell Soup Doubled inventory turnover rate

Hewlett-Packard Cut supply costs 75%

Sport Obermeyer Doubled profits and increased sales 60%

National Bicycle Increased market share from 5% to 29%

Wal-Mart Largest and most profitable retailer in the world


Benefits of Supply Chain ManagementBenefits of Supply Chain Management

• Lower inventories• Higher productivity• Greater agility• Shorter lead times• Higher profits• Greater customer loyalty


Elements of Supply Chain ManagementElements of Supply Chain Management

Deciding how to best move and store materialsLogistics

Determining location of facilitiesLocation

Monitoring supplier quality, delivery, and relationsSuppliers

Evaluating suppliers and supporting operationsPurchasing

Meeting demand while managing inventory costsInventory

Controlling quality, scheduling workProcessing

Incorporating customer wants, mfg., and timeDesign

Predicting quantity and timing of demandForecasting

Determining what customers wantCustomers

Typical IssuesElement

Table 14.1


• Logistics• Refers to the movement of materials and

information within a facility and to incoming and outgoing shipments of goods and materials in a supply chain

LogisticsLogistics


LogisticsLogistics

• Movement within the facility

• Incoming and outgoing shipments

• Bar coding

• EDI

• Distribution

• JIT Deliveries

0

214800 232087768


Materials MovementMaterials MovementFigure 14.4

RE

CE

IVIN

G

Storage

Workcenter

Work centerWork center

Storage

Workcenter

Storage

Shipping


• Distribution requirements planning (DRP) is a system for inventory management and distribution planning

• Extends the concepts of MRPII

Distribution Requirements PlanningDistribution Requirements Planning


• Management uses DRP to plan and coordinate: • Transportation• Warehousing• Workers• Equipment• Financial flows

Uses of DRPUses of DRP


Electronic Data InterchangeElectronic Data Interchange

• EDI – the direct transmission of interorganizational transactions, computer-to-computer, including purchase orders, shipping notices, and debit or credit memos.


• Increased productivity• Reduction of paperwork• Lead time and inventory reduction• Facilitation of just-in-time systems• Electronic transfer of funds• Improved control of operations• Reduction in clerical labor• Increased accuracy

Electronic Data InterchangeElectronic Data Interchange


• Efficient consumer response (ECR) is a supply chain management initiative specific to the food industry• Reflects companies’ efforts to achieve quick

response using EDI and bar codes

Efficient Consumer ResponseEfficient Consumer Response


• E-Commerce: the use of electronic technology to facilitate business transactions

• Applications include• Internet buying and selling• E-mail• Order and shipment tracking• Electronic data interchange

E-CommerceE-Commerce


• Companies can:• Have a global presence• Improve competitiveness and quality• Analyze customer interests• Collect detailed information• Shorten supply chain response times• Realize substantial cost savings• Create virtual companies• Level the playing field for small companies

Advantages E-CommerceAdvantages E-Commerce


• Customer expectations

• Order quickly -> fast delivery

• Order fulfillment

• Order rate often exceeds ability to fulfill it

• Inventory holding

• Outsourcing loss of control

• Internal holding costs

Disadvantages of E-CommerceDisadvantages of E-Commerce


Successful Supply ChainSuccessful Supply Chain

• Trust among trading partners

• Effective communications

• Supply chain visibility

• Event-management capability

• The ability to detect and respond to unplanned events

• Performance metrics


SCOR MetricsSCOR Metrics

Perspective Metrics

Reliability On-time deliveryOrder fulfillment lead timeFill rate (fraction of demand met from stock)Perfect order fulfillment

Flexibility Supply chain response timeUpside production flexibility

Expenses Supply chain management costsWarranty cost as a percent of revenueValue added per employee

Assets/utilization Total inventory days of supplyCash-to-cash cycle timeNet asset turns

Table 14.4


CPFRCPFR

• Collaborative Planning, Forecasting, and Replenishment

• Focuses on information sharing among trading partners

• Forecasts can be frozen and then converted into a shipping plan

• Eliminates typical order processing


CPFR ProcessCPFR Process

Step 1 – Front-end agreement

Step 2 – Joint business plan

Steps 3-5 – Sales forecast

Steps 6-8 – Order forecast collaboration

Step 9 – Order generation/delivery execution


CPFR ResultsCPFR Results

• Nabisco and Wegmans

• 50% increase in category sales

• Wal-mart and Sara Lee

• 14% reduction in store-level inventory

• 32% increase in sales

• Kimberly-Clark and Kmart

• Increased category sales that exceeded market growth


1. Develop strategic objectives and tactics

2. Integrate and coordinate activities in the internal supply chain

3. Coordinate activities with suppliers with customers

4. Coordinate planning and execution across the supply chain

5. Form strategic partnerships

Creating an Effective Supply ChainCreating an Effective Supply Chain


Supply Chain Performance DriversSupply Chain Performance Drivers

1. Quality

2. Cost

3. Flexibility

4. Velocity

5. Customer service


VelocityVelocity

• Inventory velocity

• The rate at which inventory(material) goes through the supply chain

• Information velocity

• The rate at which information is communicated in a supply chain


• Barriers to integration of organizations

• Getting top management on board

• Dealing with trade-offs

• Small businesses

• Variability and uncertainty

• Long lead times

ChallengesChallenges


1. Lot-size-inventory• Bullwhip effect

1. Inventory-transportation costs• Cross-docking

1. Lead time-transportation costs

2. Product variety-inventory• Delayed differentiation

1. Cost-customer service• Disintermediation

Trade-offsTrade-offs



• Bullwhip effect

• Inventories are progressively larger moving backward through the supply chain

• Cross-docking

• Goods arriving at a warehouse from a supplier are unloaded from the supplier’s truck and loaded onto outbound trucks

• Avoids warehouse storage



• Delayed differentiation

• Production of standard components and subassemblies, which are held until late in the process to add differentiating features

• Disintermediation

• Reducing one or more steps in a supply chain by cutting out one or more intermediaries


Supply Chain IssuesSupply Chain Issues

Quality controlProduction planning and control

Inventory policiesPurchasing policiesProduction policiesTransportation policiesQuality policies

Design of the supply chain, partnering

Operating IssuesTactical IssuesStrategic Issues


Supply Chain Benefits and DrawbacksSupply Chain Benefits and Drawbacks

Problem PotentialImprovement

Benefits PossibleDrawbacks

Large inventories

Smaller, more frequent deliveries

Reduced holding costs

Traffic congestionIncreased costs

Long lead times Delayed differentiationDisintermediation

Quick response May not be feasibleMay need absorb functions

Large number of parts

Modular Fewer partsSimpler ordering

Less variety

CostQuality

Outsourcing Reduced cost, higher quality

Loss of control

Variability Shorter lead times, better forecasts

Able to match supply and demand

Less variety

Table 14.5


• Purchasing is responsible for obtaining the materials, parts, and supplies and services needed to produce a product or provide a service.

PurchasingPurchasing


• Develop and implement purchasing plans for products and services that support operations strategies

Goal of PurchasingGoal of Purchasing


• Identifying sources of supply

• Negotiating contracts

• Maintaining a database of suppliers

• Obtaining goods and services

• Managing supplies

Duties of PurchasingDuties of Purchasing


Purchasing InterfacesPurchasing Interfaces

Purchasing

Legal

AccountingOperations

Dataprocessing

Design

ReceivingSuppliers

Figure 14.5


Purchasing CyclePurchasing Cycle

1. Requisition received

2. Supplier selected

3. Order is placed

4. Monitor orders

5. Receive orders

PurchasingPurchasing

LegalLegal

AccountingAccountingOperationsOperations

DataDataprocess-process-inging

DesignDesign

ReceivingReceiving

SuppliersSuppliers


• Value analysis• Examination of the function of purchased

parts and materials in an effort to reduce cost and/or improve performance

Value Analysis vs. OutsourcingValue Analysis vs. Outsourcing


• Centralized purchasing

• Purchasing is handled by one special department

• Decentralized purchasing

• Individual departments or separate locations handle their own purchasing requirements

Centralized vs Decentralized PurchasingCentralized vs Decentralized Purchasing


• Choosing suppliers

• Evaluating sources of supply

• Supplier audits

• Supplier certification

• Supplier relationships

• Supplier partnerships

SuppliersSuppliers


• Quality and quality assurance• Flexibility• Location• Price

Factors in Choosing a SupplierFactors in Choosing a Supplier


• Product or service changes• Reputation and financial stability• Lead times and on-time delivery• Other accounts

Factors in Choosing a Supplier (cont’d)Factors in Choosing a Supplier (cont’d)


Evaluating Sources of SupplyEvaluating Sources of Supply

• Vendor analysis: Evaluating the sources of supply in terms of price, quality, reputation, and service


• Vendor analysis - evaluating the sources of supply in terms of• Price• Quality• Services• Location• Inventory policy• Flexibility

Evaluating Sources of SupplyEvaluating Sources of Supply


Supplier as a PartnerSupplier as a Partner

Aspect Adversary PartnerNumber of suppliers Many One or a few

Length of relationship May be brief Long-term

Low price Major consideration Moderately important

Reliability May not be high High

Openness Low High

Quality May be unreliable; buyer inspects

At the source; vendor certified

Volume of business May be low High

Flexibility Relatively low Relatively high

Location Widely dispersed Nearness is important

Table 14.9


• Ideas from suppliers could lead to improved competitiveness

1. Reduce cost of making the purchase2. Reduce transportation costs3. Reduce production costs4. Improve product quality5. Improve product design6. Reduce time to market7. Improve customer satisfaction8. Reduce inventory costs9. Introduce new products or services

Supplier PartnershipsSupplier Partnerships


Critical IssuesCritical Issues

• Strategic importance• Cost• Quality• Agility• Customer service• Competitive advantage

• Technology management• Benefits• Risks


Critical IssuesCritical Issues

• Purchasing function• Increased outsourcing• Increased conversion to lean production• Just-in-time deliveries• Globalization

45885323 supply chain management ppt

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