integrated supply chain
DESCRIPTION
Definition An Integrated Supply Chain (ISC) is one that has full responsibility across the corporation (including different divisions, business units and geographies) for the planning and management of all activities involved end-toin end-to-end supply chain processes, including direct sourcing and procurement, conversion/manufacturing, and all logistics management activities.(Source : Supply Chain Digest, The Logistics Institute ± Georgia Tech)Reasons for ISC1 Manufacturer¶s Goals & RTRANSCRIPT
Integrated Supply Chain
309 – Arpan Mehra311 – Sunny Parekh
Definition
An Integrated Supply Chain (ISC) is one that has full
responsibility across the corporation (including
different divisions, business units and geographies) for
the planning and management of all activities involved
in end-to-end supply chain processes, including direct
sourcing and procurement, conversion/manufacturing,
and all logistics management activities.
(Source : Supply Chain Digest, The Logistics Institute – Georgia Tech)
Reasons for ISC
Manufacturer’s Goals
Reduce costs Reduce duplication of
effort Improve quality Reduce lead time Implement cost reduction
program Involve suppliers early Reduce time to market
Supplier’s Goals
Increase sales volume Increase customer
loyalty Reduce cost Improve demand data Improve profitability
The 3 ‘V’s are the essence to good supply-chain management
Improving visibility is the first step to better supply-chain management.
VelocityBetter management of variability results in an improved, more efficient and faster supply-chain
Visibility of these flows enhances the organization’s ability to manage, control, and affect change proactively
Variability
You can’t manage what you don’t see: Up- and down-stream visibility into product, information and money flows
Visibility
Steps In Integrated Supply Chain
Integrated SCM usually begins with the manufacturer integrating internal processes first.
The company tries to integrate the external suppliers.
The last step is integrating the external distributors.
Raw material (suppliers) Iron ore Silicon Farming
Backward integration Steel
Current transformation Automobiles Integrated
circuits Flour milling
Forward integration Distribution systems Circuit boards
Finished goods (customers) Dealers
Computers Watches
CalculatorsBaked goods
Vertical IntegrationVertical Integration Examples of Vertical Integration
• Japanese word for ‘affiliated chain’.
• System of mutual alliances and cross-ownership
– Company stock is held by allied firms
– Lowers need for short-term profits
• Links manufacturers, suppliers, distributors &
lenders
– ‘Partnerships’ extend across entire supply chain
Keiretsu Network Strategy
Issues in an Integrated Supply Chain
Local optimization - focusing on local profit or cost minimization based on limited knowledge
Incentives (sales incentives, quantity discounts, quotas, and promotions) - push merchandise prior to sale
Large lots - low unit cost but do not reflect sales
Bullwhip effect - stable demand becomes lumpy orders through the supply chain
Opportunities in an Integrated Supply Chain
Accurate “pull” data
Lot size reduction
Single stage control of replenishment
Vendor managed inventory
Postponement
Channel assembly
Drop shipping and special packaging
Blanket orders
Standardization
Electronic ordering and funds transfer
Opportunities in an Integrated Supply Chain
– Access to planning system– Sharing production plans– Joint EDI access / networks– Knowledge of inventory levels– Packaging customization– Delivery frequencies– Common logistical equipment / containers– Common use of third-party logistics
Measures of integration
Managing supply chain relationships
• How can broader-based relationships be formed between trading partners in the supply chain?
• Creating closer relationships
Managing supply chain relationships
R&DLogistics
Information system
MarketingOperations
Arm’s length transaction
Information system
Marketing
OperationsInformation
system
Partnership
Information system
R&DLogistics
supplier customer supplier customer
– The order winner
– The method making sourcing decisions
– The nature of electronic collaboration
– The attitude to capacity planning
– Price negotiations
– Managing product quality
– Managing research and development
– The level of pressure
Factors in forming supply chain relationships
Efficient consumer responseHow can collaboration be extended across the supply chain to focus on meeting consumer demand?
Efficient consumer response
Establish infrastructure
Optimize introductions
Optimize assortments
Optimize promotions
Integrated suppliers
Synchronized production
Continuous replenishment
Automated store ordering
Category management
Product replenishment
Reliable operations Cross-docking
EDI EFTItem coding
and database maintenance
ABCEnabling technologies
• Enabling technologies– Scanning data– Data warehousing– Data mining
• The data should include– Demand / consumption / sales information– Cash flow– Stocks of finished goods / work in progress– Delivery and output status
Efficient consumer response
Efficient consumer responseCategory
managementContinuous
replenishmentEnabling
technologies
Required
capability
Account managementDemand managementMultifunctional selling teamsPrice list restructuringEffective and customized promotions
Joint inventory managementCross-dock operationsContinuous replenishmentEffective logistics and product flowsQuick response
Effective information sharingAutomated order generationBar-coding and the use of other scanning technology
References
• White Paper on the Integrated Supply Chain – Aerospace Industries Association
• Operations Management by R. Dan Reid & Nada R. Sanders• Principles of Operations Management, 5e, and Operations
Management, 7e – Heizer /Render, Prentice Hall• http://www.cessna.com/index.html• http://www.ceeandgee.com/index.php - C & G International,
Inc.• http://www.transportgistics.com/index.htm