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Supply Chain Management

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17 Supply Chain Management

• Project Draft due April 2

• Review Items from Last Class

• Basic Supply Ideas and Terminology

• Video– UPS Supply Chain Management

• Supply Chain Strategy

• Electronics and Computer Supply Chains

• Case Discussion – Trouble in Paradise

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Supply Chain Strategy and the Course Organization

Operations As a Competitive Weapon

Operations StrategyProject Management Process Strategy

Process AnalysisProcess Performance and Quality

Constraint ManagementProcess LayoutLean Systems

Supply Chain StrategyLocation

Inventory ManagementForecasting

Sales and Operations PlanningResource Planning

Scheduling

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Supply Chain

(goods)

• The sequence of processes from raw materials through manufacturing and distribution to the ultimate consumer.

• A “process” takes place at a single site or least within the same firm

(services)

• Some analogies for services

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Supply Chain Example

Raw materialsEnd users

upstream downstream

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A Global Supply Chain

Fiber supplier in Australia

Textile Maker in Italy

Zipper Maker in China

Apparel Maker in Mauritius

Apparel Designer and Marketer in US

Carriers and Intermediaries

Carriers and Intermediaries

Retailer in US

Material flow

Information flow

Raw materialsEnd users

upstream downstream

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Definitions and Terminology I

• Supply Chain

• Supply Chain Management

• Upstream and Downstream

• Information and Material Flow

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Definitions and Terminology II

• Logistics management

• Distribution Channel

• Demand management

• Supplier Tiers

• Outsourcing

• Off-Shoring

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Logistics Management

• Broad definition = supply chain management

• Narrowly definition = transport and storage (not production, sourcing, etc.)

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Distribution Channel

The route from the producer forward (down stream) through the distributors

to the customer

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Demand Management

• Managing the demand for goods or services along the supply chain.

• Demand can be managed through such mechanisms as product availability promises, pricing, promotion, and distributor incentives.

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Supplier TiersSupplier Tiers

Figure 8.2Supplier of materialsSupplier of services

Tier 3

Legend

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Supplier TiersSupplier Tiers

Figure 8.2Supplier of materialsSupplier of services

Tier 3

Tier 2

Legend

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Supplier TiersSupplier Tiers

Figure 8.2Supplier of materialsSupplier of services

Tier 1

Tier 3

Tier 2

Legend

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Supplier TiersSupplier Tiers

Figure 8.2Supplier of materialsSupplier of services

Tier 1

Tier 3

Tier 2

Legend

Manufacturer

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Supply Chain Supply Chain Including Including DistributionDistribution

Figure 8.2Supplier of materialsSupplier of services

Tier 1

Tier 3

Tier 2

Legend

Distribution center

Distribution center

Manufacturer

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Supply Supply ChainChain

Figure 8.2Supplier of materialsSupplier of services

Tier 1

Tier 3

Tier 2

Legend

Customer Customer Customer Customer

Distribution center

Distribution center

Manufacturer

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Outsourcing

• Buying a part or service that previously was provided internally– Make-or-buy decision– Allows management to focus on firms “core

competencies” (same as “distinctive competencies” we talked about earlier)

– +other reasons

• Insourcing– Undoing an outsourcing decision

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Offshoring• Moving a process or operation that had been

done in the “home country” to another country– Comparative labor costs– Logistics costs– Tariffs and trade barriers– Better access to offshore markets– Local subsidies– …

• Offshoring can be In-house or Outsourced

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Video

• UPS Supply Chain Services

• What services are they talking about?– Package delivery– What else?– “Economy of Scope”

• Importance of Information Technology

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E-Commerce and Supply Chains

• Supply chain information movement is increasingly electronic:– Order, Invoice, Ship Notice, Payment, etc– EDI, other protocols

• e-Procurement – slow adoption – Business “E-bay”

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Types of e-procurement

• On-line catalogs listing products, prices, etc.

• Third-part auctions—reverse auctions

• Private exchanges to connect suppliers

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Supply Chain links in EnterpriseResource Planning Systems (like SAP in the this picture)

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Supply Chain Strategy

• Starts with “make or buy”

• Partner vs vendor

• Lowest cost vs highest quality vs fast vs reliable delivery vs quickest response to changing needs

• Can be a key strategic differentiator– Example: Wal-Mart

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Single Sourcing

• Purchase from very few (or one) supplier• More control of quality• Partnering for development• Partnering for production investments

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Global Supply Chain

• Look for best sources anywhere

– Provide supplier with technology if necessary

• Assess transport and import costs and supply disruption risk

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Uncertainty In Supply Chains

• Wrong forecasts

• Supplier Stock-outs

• Late deliveries

• Poor quality/wrong product

• Breakdowns and strikes

• Canceled orders

• Erroneous information

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Supply Chain Objectives

• Cost

• Quality

• Delivery

• Speed

• Flexibility

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Virtual CorporationA corporation that has:

No hard assets (contract for production, etc.)Might supply capital

No employees (contract for services, even management services and product design)

But controls the brand and supply chain for its products or services

Core competenciesStructuring and Managing a Supply Chain and BrandRaising capital (maybe)

There are no corporations that match this definition, but many businesses are moving in this direction

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Supply Chain / Industry Structure for US Electronics and Computer Companies

End Users

Brand Owner / Designers

Contract Manufacturers

Tiers of Parts Suppliers

Dell, HP, Apple, Lenovo

SCI, Flextronics, Solectron

Individuals, Bulk buyers

Retailers / DistributorsPC Warehouse, Comp USA

Intel, Kingston, Intex Tech, Seagate

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Dell’s Order Fulfillment Process

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Some Reasons for Contract Mfg. Growth

• Brand owner focus on product definition and design

• Contract manufacturer has economy of scale– Greater automation and process R&D investment

• Contract manufacturer has less vulnerability to ups and downs of brand owners

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(From T. Sturgeon)

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Trouble in Paradise• Background• What is the key issue?

a. Conflict in goals of JV partners; structure of the JV

b. Conflict between Chinese and US ways of management; hard to transplant Six Sigma, etc

c. Cut throat competition in the Chinese marketd. Mikes lack of leadership in implementing Six

Sigma, establishing outside relationships • Team group discussion:

– How can operations be improved?– What should Mike do?

• Report out