SCML 410: Global Supply Chain and Logistics Management

Supply Chain Management

Prof. Willem SelenMGMT 655: Chapter 1Understanding the Supply Chain 1Dr. Selen is professor of supply chain management and logistics at the United Arab Emirates University, and previously held positions as professor and Coordinator of Business Programs at the Middle East Technical University Northern Cyprus Campus, and professor and Chair of Operations Management at the Macquarie Graduate School of Management in Australia. He obtained a commercial engineering degree from Limburg University in Belgium, and a PhD in business administration from the University of South Carolina (1982). Willem Selen has been active in academia and management development for well over thirty years. As a consultant and educator, he worked with numerous organizations, such as EDS, Opel Belgium, Brabantia, BHP Steel, Dow Chemical, NCR, DHL, among others. Projects have involved issues such as capacity planning, inventory management, and business process flow re-engineering on a supply chain level.Willem will be returning to Australia in June after four years at UAEU to take up his new role as Dean of the School of Business & Law at Central Queensland University.

Course facilitator

21-3Chapter 1Understanding the Supply ChainCopyright 2010 Pearson Education, Inc.Introductions Names, prior work experience including summer, what do students hope to get from class?Mention some prototypical supply chains we will use repeatedly in class Wal-Mart, 7-Eleven, Dell and Compaq, Amazon and Borders, Supermarket and e-grocer, W.W. Grainger and McMaster Carr - our goal is to identify factors that drive supply chain success and make a comparison between different supply chains.Administration of course - We will discuss concepts and methodologies for supply chain management. The context within which both will be learnt and discussed is provided by cases. Discuss role of case packet readings, cases and book. 5 cases due - 10% for each case25% for final project20% for final exam5% for electronic postingDiscuss key dates for submitting project. Three groups will be selected to present. Show course web page and its organization1-4OutlineWhat is a Supply Chain?Decision Phases in a Supply ChainProcess View of a Supply ChainThe Importance of Supply Chain FlowsExamples of Supply Chains1-5OutlineWhat is a Supply Chain?Decision Phases in a Supply ChainProcess View of a Supply ChainThe Importance of Supply Chain FlowsExamples of Supply Chains1-6What is a Supply Chain?All stages involved, directly or indirectly, in fulfilling a customer requestIncludes manufacturers, suppliers, transporters, warehouses, retailers, and customersWithin each company, the supply chain includes all functions involved in fulfilling a customer request (product development, marketing, operations, distribution, finance, customer service) 2008 John Wiley & Sons Ltd.www.wileyeurope.com/college/Mangan

Figure 1.1 The evolution of the integrated supply chainUnderstanding the Global Supply ChainSuccess in todays global markets requires a business strategy that matches the preferences of customers with the realities of supply networksA sustainable strategy is criticalMeets the needs of shareholders and employeesPreserves the environmentSupply refers to processes that move information and material to and from the manufacturing and service processes of the firm1-10The Objective of a Supply ChainMaximize overall value createdSupply chain value: difference between what the final product is worth to the customer and the effort the supply chain expends in filling the customers requestValue is correlated to supply chain profitability (difference between revenue generated from the customer and the overall cost across the supply chain)

1-11The Objective of a Supply ChainExample: Dell receives $1000 from a customer for a computer (revenue)Supply chain incurs costs (information, storage, transportation, components, assembly, etc.)Difference between $1000 and the sum of all of these costs is the supply chain profitSupply chain profitability is total profit to be shared across all stages of the supply chainSupply chain success should be measured by total supply chain profitability, not profits at an individual stage1-12The Objective of a Supply ChainSources of supply chain revenue: the customerSources of supply chain cost: flows of information, products, or funds between stages of the supply chainSupply chain management is the management of flows between and among supply chain stages to maximize total supply chain profitability1-13OutlineWhat is a Supply Chain?Decision Phases in a Supply ChainProcess View of a Supply ChainThe Importance of Supply Chain FlowsExamples of Supply Chains1-14Decision Phases of a Supply ChainSupply chain strategy or designSupply chain planningSupply chain operation1-15Decision Phases of a Supply ChainSupply chain strategy or designSupply chain planningSupply chain operation1-16Supply Chain Strategy or DesignDecisions about the structure of the supply chain and what processes each stage will performStrategic supply chain decisionsLocations and capacities of facilitiesProducts to be made or stored at various locationsModes of transportationInformation systemsSupply chain design must support strategic objectivesSupply chain design decisions are long-term and expensive to reverse must take into account market uncertainty 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 2, Slide 17

Decisions Guided by the Structural StrategyCapacity

Size?Timing?Type?FacilitiesSize?Location?TechnologyEquipment?Processes?Information systems?Vertical IntegrationDirection?Extent?

17 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036Chapter 2, Slide 18

Decisions Guided by the Infrastructural StrategyOrganization Control/reward systems?Centralization/decentralization?Workforce skilled/semi-skilled?Sourcing and PurchasingSupplier selection/performance metrics?Procurement systems?Sourcing strategy?Planning and ControlForecasting?Inventory management?Production planning/control?Process and QualityContinuous improvement processes?Business process managementSPC/Six SigmaProduct and Service DesignDevelopment process?Organization/supplier roles?181-19Decision Phases of a Supply ChainSupply chain strategy or designSupply chain planningSupply chain operation1-20Supply Chain PlanningDefinition of a set of policies that govern short-term operationsFixed by the supply configuration from previous phaseStarts with a forecast of demand in the coming year1-21Supply Chain PlanningPlanning decisions:Which markets will be supplied from which locationsPlanned buildup of inventoriesSubcontracting, backup locationsInventory policiesTiming and size of market promotionsMust consider in planning decisions demand uncertainty, exchange rates, competition over the time horizon1-22Decision Phases of a Supply ChainSupply chain strategy or designSupply chain planningSupply chain operation1-23Supply Chain OperationTime horizon is weekly or dailyDecisions regarding individual customer ordersSupply chain configuration is fixed and operating policies are determinedGoal is to implement the operating policies as effectively as possibleAllocate orders to inventory or production, set order due dates, generate pick lists at a warehouse, allocate an order to a particular shipment, set delivery schedules, place replenishment ordersMuch less uncertainty (short time horizon)1-24OutlineWhat is a Supply Chain?Decision Phases in a Supply ChainProcess View of a Supply ChainThe Importance of Supply Chain FlowsExamples of Supply Chains1-25Process View of a Supply ChainCycle view: processes in a supply chain are divided into a series of cycles, each performed at the interfaces between two successive supply chain stagesPush/pull view: processes in a supply chain are divided into two categories depending on whether they are executed in response to a customer order (pull) or in anticipation of a customer order (push)1-26Cycle View of Supply ChainsCustomer Order CycleReplenishment CycleManufacturing CycleProcurement CycleCustomerRetailerDistributorManufacturerSupplierThe supply chain is a concatenation of cycles with each cycle at the interface of two successive stages in the supply chain. Each cycle involves the customer stage placing an order and receiving it after it has been supplied by the supplier stage.One difference is in size of order. Second difference is in predictability of orders - orders in the procurement cycle are predictable once manufacturing planning has been done.This is the predominant view for ERP systems. It is a transaction level view and clearly defines each process and its owner.1-27Cycle View of a Supply ChainEach cycle occurs at the interface between two successive stagesCustomer order cycle (customer-retailer)Replenishment cycle (retailer-distributor)Manufacturing cycle (distributor-manufacturer)Procurement cycle (manufacturer-supplier)Cycle view clearly defines processes involved and the owners of each process. Specifies the roles and responsibilities of each member and the desired outcome of each process.1-28Push/Pull View of Supply ChainsProcurement,Manufacturing andReplenishment cyclesCustomer OrderCycleCustomerOrder ArrivesPUSH PROCESSESPULL PROCESSESIn this view processes are divided based on their timing relative to the timing of a customer order. Define push and pull processes.They key difference is the uncertainty during the two phases.Give examples at Amazon and Borders to illustrate the two views1-29Push/Pull View of Supply Chain ProcessesSupply chain processes fall into one of two categories depending on the timing of their execution relative to customer demandPull: 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 (the customer order decoupling point)

4 CODP Positions in Supply Chains(ref: Hoekstra and Romme, 1992 )CODP-1 (Produce-to-Stock)End products are made to stock at the end of the production process, and from there delivered directly to customers.CODP-2 (Assemble-to-Order)Only modules and sub-assemblies are made based on forecast, the final assembly being based on specific orders.4 CODP Positions in Supply Chains -2(ref: Hoekstra and Romme, 1992 )CODP-3 (Produce-to-Order)Only raw materials and components are stocked, every customer order being identified as a specific project.CODP-4 (Purchase-and-Produce-to-Order)No stocks are held; purchases are based on specific orders, and production is entirely project-based.1-33OutlineWhat is a Supply Chain?Decision Phases in a Supply ChainProcess View of a Supply ChainThe Importance of Supply Chain FlowsExamples of Supply Chains1-34Flows in a Supply ChainCustomerInformationProductFundsSupply Chain1-35OutlineWhat is a Supply Chain?Decision Phases in a Supply ChainProcess View of a Supply ChainThe Importance of Supply Chain FlowsExamples of Supply Chains1-36Examples of Supply ChainsEXERCISE:

Look at STRATA in Al Ain and describe the position of STRATA in its supply chain.

Dell has three production sites worldwide and builds to order. Compaq does both. Consider some decisions involved - where to locate facilities? How to size them? Where is the push/pull boundary? What modes of transport to use? How much inventory to carry? In what form? Where to source from?1-37Summary of Learning ObjectivesWhat are the cycle and push/pull views of a supply chain?How can supply chain macro processes be classified?What are the three key supply chain decision phases and what is the significance of each?What is the goal of a supply chain and what is the impact of supply chain decisions on the success of the firm?End of Chapter 1

Customer Order Decoupling Point

Vendor

Production

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Assembly

Warehouse

Customers

CODP1

Produce to Stock

COPD2

Assemble to Order

CODP3

Produce to Order

CODP4

Purchase & Produce to Order