chapter 7 supply chain management 2000 by prentice-hall, inc2 supply chain all activities...
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Chapter 7
Supply Chain Management
2000 by Prentice-Hall, Inc 2
Supply Chain
All activities associated with the flow All activities associated with the flow and transformation of goods and and transformation of goods and services from raw materials to the end services from raw materials to the end user, the customeruser, the customer
A sequence of business activities A sequence of business activities from suppliers through customers from suppliers through customers that provide the products, services, that provide the products, services, and information to achieve customer and information to achieve customer satisfactionsatisfaction
2000 by Prentice-Hall, Inc 3
The Supply Chain
Information
Cash
Products and Services
Products and Services
Products and Services
CustomersCustomers
Total satisfaction with quality, price, delivery, and service
DistributorsDistributors
Package and delivery
Inventory
ProducersProducers
Finished goods, end products and services
Inventory
SuppliersSuppliers
Inventory
Materials, parts, sub-assemblies, and services
Figure 7.1Figure 7.1
2000 by Prentice-Hall, Inc 4
Supply Chain Management
Synchronization of activities required Synchronization of activities required to achieve maximum competitive to achieve maximum competitive benefitsbenefits
Coordination, cooperation, and Coordination, cooperation, and communicationcommunication
Rapid flow of informationRapid flow of information Vertical integrationVertical integration
2000 by Prentice-Hall, Inc 5
Supply Chain Uncertainty
Forecasting, lead times, batch ordering, Forecasting, lead times, batch ordering, price fluctuations, and inflated orders price fluctuations, and inflated orders contribute to variabilitycontribute to variability
Inventory is a form of insuranceInventory is a form of insurance Distorted information is one of the main Distorted information is one of the main
causes of uncertaintycauses of uncertainty
2000 by Prentice-Hall, Inc 6
Information in the Supply Chain
Centralized coordination of Centralized coordination of information flowsinformation flows
Integration of transportation, Integration of transportation, distribution, ordering, and productiondistribution, ordering, and production
Direct access to domestic and global Direct access to domestic and global transportation and distribution transportation and distribution channelschannels
Locating and tracking the movement Locating and tracking the movement of every item in the supply chainof every item in the supply chain
2000 by Prentice-Hall, Inc 7
Information in the Supply Chain
Consolidation of purchasing from all Consolidation of purchasing from all supplierssuppliers
Intercompany and intracompany Intercompany and intracompany information accessinformation access
Data interchangeData interchange Data acquisition at the point of origin Data acquisition at the point of origin
and point of saleand point of sale Instantaneous updating of inventory Instantaneous updating of inventory
levelslevels
2000 by Prentice-Hall, Inc 8
Electronic Business
Replacement of physical processes Replacement of physical processes with electronic oneswith electronic ones
Cost and price reductionsCost and price reductions Reduction or elimination of Reduction or elimination of
intermediariesintermediaries Shortening transaction times for Shortening transaction times for
ordering and deliveryordering and delivery Wider presence and increased visibilityWider presence and increased visibility
2000 by Prentice-Hall, Inc 9
Electronic Business
Greater choices and more information for Greater choices and more information for customerscustomers
Improved serviceImproved service Collection and analysis of customer data Collection and analysis of customer data
and preferencesand preferences Virtual companies with lower pricesVirtual companies with lower prices Leveling the playing field for smaller Leveling the playing field for smaller
companiescompanies Gain global access to markets & customersGain global access to markets & customers
2000 by Prentice-Hall, Inc 10
Table 7.1Supply Chain Evolution at Nabisco
2000 by Prentice-Hall, Inc 11
Electronic Data Interchange
Computer-to-computer exchange of Computer-to-computer exchange of business documents in a standard business documents in a standard formatformat
Quick access, better customer service, Quick access, better customer service, less paperwork, better communication, less paperwork, better communication, increased productivity, improved increased productivity, improved tracing and expediting, improves billing tracing and expediting, improves billing and cost efficiencyand cost efficiency
2000 by Prentice-Hall, Inc 12
Bar Codes
Computer readable codes attached to Computer readable codes attached to items flowing through the supply chainitems flowing through the supply chain
Generates point-of-sale data which is Generates point-of-sale data which is useful for determining sales trends, useful for determining sales trends, ordering, production scheduling, and ordering, production scheduling, and deliver plansdeliver plans
1234 5678
2000 by Prentice-Hall, Inc 13
The Internet
Instant global access to organizations, Instant global access to organizations, individuals, and information sourcesindividuals, and information sources
Fundamentally changes the way Fundamentally changes the way organizations do businessorganizations do business
Removed geographic Removed geographic barriersbarriers
Adds speed and accessibility Adds speed and accessibility to the supply chainto the supply chain
2000 by Prentice-Hall, Inc 14Figure 7.2 Build-to-Order Cars over the Internet
2000 by Prentice-Hall, Inc 15
The E-Automotive Supply Chain
SUPPLY CHAIN PROCESSSUPPLY CHAIN PROCESS AUTOMOTIVE PASTAUTOMOTIVE PAST E-AUTOMOTIVEE-AUTOMOTIVE
Customer salesCustomer sales Push—sell from inventoryPush—sell from inventory Pull—Build-to-orderPull—Build-to-order
ProductionProduction Goal of even and stable productionGoal of even and stable production Focus on customer demand, respond Focus on customer demand, respond with supply chain flexibilitywith supply chain flexibility
DistributionDistribution Mass approachMass approach Fast, reliable, and customized to get Fast, reliable, and customized to get cars to specific customer locationcars to specific customer location
Customer relationshipsCustomer relationships Dealer-ownedDealer-owned Shared by dealers and manufacturersShared by dealers and manufacturers
Managing uncertaintyManaging uncertainty Large car inventory at dealersLarge car inventory at dealers Small inventories with shared Small inventories with shared information and strategically placed information and strategically placed parts inventoriesparts inventories
ProcurementProcurement Batch-oriented; dealers order based on Batch-oriented; dealers order based on allocationsallocations
Orders made in real time based on Orders made in real time based on available-to-promise informationavailable-to-promise information
Product designProduct design Complex products don’t match customer Complex products don’t match customer needsneeds
Simplified products based on better Simplified products based on better information about what customers wantinformation about what customers want
Table 7.2Table 7.2
2000 by Prentice-Hall, Inc 16
Intranets and Extranets
Intranets are internet-like networks that Intranets are internet-like networks that operate within a single organizationoperate within a single organization
Extranets are intranets that can be Extranets are intranets that can be connected to the global internetconnected to the global internet
Difference is in who has access to the Difference is in who has access to the systemsystem
2000 by Prentice-Hall, Inc 17
IT Issues
Increased benefits and sophistication Increased benefits and sophistication come with increased costscome with increased costs
Efficient web sites do not necessarily Efficient web sites do not necessarily mean the rest of the supply chain will mean the rest of the supply chain will be as efficientbe as efficient
Security problems are very realSecurity problems are very real Partnership and trust are important Partnership and trust are important
elements that may be new to business elements that may be new to business relationshipsrelationships
2000 by Prentice-Hall, Inc 18
Suppliers
Purchased materials account for about Purchased materials account for about half of manufacturing costshalf of manufacturing costs
Materials, parts, and service must be Materials, parts, and service must be delivered on time, of high quality, and delivered on time, of high quality, and low costlow cost
Suppliers should be integrated into Suppliers should be integrated into their customers’ supply chainstheir customers’ supply chains
Partnerships should be establishedPartnerships should be established On-demand delivery (JIT) is a frequent On-demand delivery (JIT) is a frequent
requirementrequirement
2000 by Prentice-Hall, Inc 19
Sourcing
Relationship between customers and Relationship between customers and suppliers focuses on collaboration and suppliers focuses on collaboration and cooperationcooperation
Outsourcing has become a long-term Outsourcing has become a long-term strategic decisionstrategic decision
Organizations focus on core Organizations focus on core competenciescompetencies
Single-sourcing is Single-sourcing is increasingly a part increasingly a part of supplier relationsof supplier relations
2000 by Prentice-Hall, Inc 20
E-Procurement
Business-to-business commerce Business-to-business commerce conducted on the Internetconducted on the Internet
Benefits include lower transaction costs, Benefits include lower transaction costs, lower prices, reduce clerical labor costs, lower prices, reduce clerical labor costs, and faster ordering and delivery timesand faster ordering and delivery times
Currently used more for indirect goodsCurrently used more for indirect goods E-Marketplaces service industry-specific E-Marketplaces service industry-specific
companies and supplierscompanies and suppliers
2000 by Prentice-Hall, Inc 21
Figure 7.3 The Wal-Mart Supply Chain
2000 by Prentice-Hall, Inc 22
Figure 7.4 Centralized Supply at Honda America
2000 by Prentice-Hall, Inc 23
Distribution
The actual movement of products and The actual movement of products and materials between locationsmaterials between locations
Handling of materials and products at Handling of materials and products at receiving docks, storing products, receiving docks, storing products, packaging, and shippingpackaging, and shipping
Often called logisticsOften called logistics Driving force today Driving force today
is speedis speed Particularly important Particularly important
for Internet dot-comsfor Internet dot-coms
2000 by Prentice-Hall, Inc 24
Figure 7.5 Order Fulfillment at Amazon.com
2000 by Prentice-Hall, Inc 25
Distribution Centers and Warehousing
DCs are some of the largest business DCs are some of the largest business facilities in the United Statesfacilities in the United States
Trend is for more frequent orders in Trend is for more frequent orders in smaller quantitiessmaller quantities
Flow-through facilities and automated Flow-through facilities and automated material handlingmaterial handling
Final assembly and product Final assembly and product configuration may be done at the DCconfiguration may be done at the DC
2000 by Prentice-Hall, Inc 26
Warehouse Management Systems
Highly automated systemsHighly automated systems Controls item putaway, picking, Controls item putaway, picking,
packing, and shippingpacking, and shipping Transportation management, Transportation management,
order management, yard order management, yard management, labor management, management, labor management, warehouse optimizationwarehouse optimization
2000 by Prentice-Hall, Inc 27Figure 7.6 A WMS
2000 by Prentice-Hall, Inc 28
Vendor-Managed Inventory
Manufacturers generate orders, not Manufacturers generate orders, not distributorsdistributors
Stocking information is accessed Stocking information is accessed using EDIusing EDI
A first step towards supply chain A first step towards supply chain collaborationcollaboration
Increased speed, reduced errors, and Increased speed, reduced errors, and improved serviceimproved service
2000 by Prentice-Hall, Inc 29
Collaborative Distribution and Outsourcing
Collaborative planning, forecasting, and Collaborative planning, forecasting, and replenishment (CPFR)replenishment (CPFR)
Internet-based exchange of data and Internet-based exchange of data and informationinformation
Significant decrease in inventory levels Significant decrease in inventory levels and more efficient logisticsand more efficient logistics
Companies focus on core competenciesCompanies focus on core competencies
2000 by Prentice-Hall, Inc 30
Transportation
Important element, often Important element, often overlookedoverlooked
Common methods are railroads, Common methods are railroads, trucking, water, air, intermodal, trucking, water, air, intermodal, package carriers, and pipelinespackage carriers, and pipelines
2000 by Prentice-Hall, Inc 31
Railroads
150,000 miles in US150,000 miles in US Low cost, high-volumeLow cost, high-volume Improving flexibilityImproving flexibility
intermodal serviceintermodal service double stackingdouble stacking
2000 by Prentice-Hall, Inc 32
Most used mode in USMost used mode in US Flexible, small loadsFlexible, small loads Consolidation, Consolidation,
Internet load match sitesInternet load match sites Part of TQM supplier-customer relationshipPart of TQM supplier-customer relationship Single sourcing reduces number of trucking Single sourcing reduces number of trucking
firms serving a companyfirms serving a company
Trucking
2000 by Prentice-Hall, Inc 33
Air
Rapidly growing segment of Rapidly growing segment of transportation industrytransportation industry
Lightweight, small itemsLightweight, small items Quick, reliable, Quick, reliable,
expensiveexpensive Major airlines Major airlines
and US Postal Service, and US Postal Service, UPS, FedEx, DHLUPS, FedEx, DHL
2000 by Prentice-Hall, Inc 34
Package Carriers
FedEx, UPS, US Postal Service, DHLFedEx, UPS, US Postal Service, DHL Significant growth driven by Significant growth driven by
e-businessese-businesses Use several modes Use several modes
of transportationof transportation ExpensiveExpensive Fast and reliableFast and reliable Innovative use of Innovative use of
technologiestechnologies
2000 by Prentice-Hall, Inc 35
Intermodal
Combination of several modes of Combination of several modes of transportationtransportation
Most common are truck/rail/truck Most common are truck/rail/truck and truck/water/rail/truckand truck/water/rail/truck
Enabled by the Enabled by the use of containersuse of containers
2000 by Prentice-Hall, Inc 36
Water
One of oldest means of transportOne of oldest means of transport Low-cost, high-volume, slowLow-cost, high-volume, slow Bulky, heavy and/or large itemsBulky, heavy and/or large items Standardized shipping containers Standardized shipping containers
improve serviceimprove service The most common The most common
form of international form of international shippingshipping
2000 by Prentice-Hall, Inc 37
Pipelines
Primarily for oil & refined oil productsPrimarily for oil & refined oil products Slurry lines carry coal or kaolinSlurry lines carry coal or kaolin High capital investmentHigh capital investment Low operating costsLow operating costs Can cross difficult terrainCan cross difficult terrain
2000 by Prentice-Hall, Inc 38
Internet Transportation Exchanges
Bring together shippers and Bring together shippers and carrierscarriers
Initial contact, negotiations, Initial contact, negotiations, auctionsauctions
Typically only one Typically only one form of transportation, form of transportation, intermodal exchanges intermodal exchanges have been difficult to develophave been difficult to develop
2000 by Prentice-Hall, Inc 39
Global Supply Chain
Free trade & global opportunitiesFree trade & global opportunities Nations form trading groupsNations form trading groups No tariffs or dutiesNo tariffs or duties Freely transport Freely transport
goods across bordersgoods across borders
2000 by Prentice-Hall, Inc 40
Global Supply Chain Problems
National and regional differencesNational and regional differences Customs, business practices, and Customs, business practices, and
regulationsregulations Foreign markets are Foreign markets are
not homogeneousnot homogeneous Quality can be a Quality can be a
major issuemajor issue
2000 by Prentice-Hall, Inc 41
Duties and Tariffs
Proliferation of trade agreementsProliferation of trade agreements Group members charge uniform Group members charge uniform
tariffstariffs Member nations have a Member nations have a
competitive advantage within the competitive advantage within the groupgroup
2000 by Prentice-Hall, Inc 42
Duties and Tariffs
APECAPEC
ASEANASEAN
ANZCERTAANZCERTA
FTAAFTAA
NAFTANAFTA
CALMCALM
ATPAATPA
MERCOSURMERCOSUR
TAFTATAFTA
Figure 7.9Figure 7.9
2000 by Prentice-Hall, Inc 43
Landed Cost and Internet-Based ITL Systems
Knowing landed cost is critical in Knowing landed cost is critical in international tradeinternational trade
Common components are Common components are transportation charges, tariffs, transportation charges, tariffs, duties, and taxesduties, and taxes
ITL systems convert language and ITL systems convert language and currency between trading partnerscurrency between trading partners
2000 by Prentice-Hall, Inc 44
Infrastructure Obstacles to Global Trade
Some emerging markets lack suitable Some emerging markets lack suitable distribution systems, i.e. roads, rail distribution systems, i.e. roads, rail systemssystems
Existing roads and Existing roads and ports may be inadequateports may be inadequate
Market instability, Market instability, political instabilitypolitical instability
Vertical integration is a common solutionVertical integration is a common solution
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