chapter 7 supply chain management 2000 by prentice-hall, inc2 supply chain all activities...

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


The Supply Chain

Information

Cash

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


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


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


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


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


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


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


Table 7.1Supply Chain Evolution at Nabisco


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


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


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


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


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


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


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


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


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


Figure 7.3 The Wal-Mart Supply Chain


Figure 7.4 Centralized Supply at Honda America


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


Figure 7.5 Order Fulfillment at Amazon.com


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


Duties and Tariffs

APECAPEC

ASEANASEAN

ANZCERTAANZCERTA

FTAAFTAA

NAFTANAFTA

CALMCALM

ATPAATPA

MERCOSURMERCOSUR

TAFTATAFTA

Figure 7.9Figure 7.9


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


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

chapter 7 supply chain management 2000 by prentice-hall, inc2 supply chain all activities...

Documents

supply chain slide

supply chain management

nabisco slide

supply chain evolution

supply chain consolidation

inc2 supply chain

customer satisfaction

increased visibility