supply chain management. supply chain the sequence of organizations - their facilities, functions,...
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Supply ChainSupply Chain ManagementManagement
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Supply ChainSupply Chain
TThe sequence of organizations - their he sequence of organizations - their facilities, functions, and activities - that are facilities, functions, and activities - that are involved in producing and delivering a involved in producing and delivering a product or service.product or service.Supply chain connects suppliers, Supply chain connects suppliers, producers and final customers together in producers and final customers together in a tework that is essential to the creation a tework that is essential to the creation and delivery of goods and services.and delivery of goods and services.
(Value chains are the chain of (Value chains are the chain of activities and activities and functions WITHIN a functions WITHIN a single organization.)single organization.)
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Benefits of Supply Chain Benefits of Supply Chain ManagementManagement
Lower Lower inventoriesinventories Higher Higher productivityproductivity Greater Greater agilityagility Shorter Shorter lead timeslead times Higher Higher profitsprofits Greater customer Greater customer loyaltyloyalty
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Supply Chain Management Supply Chain Management (SCM)(SCM)
The strategic coordination of the The strategic coordination of the supply chain for the purpose of supply chain for the purpose of intergating supply and demand intergating supply and demand management.management.
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LogisticsLogistics
The part of a supply chain involved The part of a supply chain involved with the forward and reverse flow of with the forward and reverse flow of goods, services, cash and goods, services, cash and information.information. Movement within the facility Incoming and outgoing shipments Distribution
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FacilitiesFacilities
WarehousesWarehouses FactoriesFactories Processing centersProcessing centers Distribution centersDistribution centers Retail outletsRetail outlets OfficesOffices ……
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Functions and ActivitiesFunctions and Activities
ForecastingForecasting PurchasingPurchasing Inventory managementInventory management Information managementInformation management Quality assuranceQuality assurance SchedulingScheduling Production and deliveryProduction and delivery Customer serviceCustomer service
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Key issues of SCMKey issues of SCM
Determinate the appropriate level of Determinate the appropriate level of outsourcingoutsourcing
Managing Managing procurementprocurement Managing Managing supplierssuppliers Managing Managing customercustomer relationships relationships Being able to quickly identify and Being able to quickly identify and
respond to problemsrespond to problems Managing Managing risksrisks and uncertaintyand uncertainty
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Typical Supply ChainsTypical Supply Chains
Purchasing Receiving Storage Operations Storage
Production Distribution
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Typical Supply Chain for a Typical Supply Chain for a ManufacturerManufacturer
Supplier
Supplier
Supplier
Storage} Mfg. Storage Dist. Retailer Customer
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A farm-to-market supply A farm-to-market supply chainchain
1.1. Farm (wheat)Farm (wheat) Suppliers: equipment, repair, feed, Suppliers: equipment, repair, feed,
seed, fertilizer, pesticides, energy/fuelseed, fertilizer, pesticides, energy/fuel
2.2. Mill (flour)Mill (flour) equipment, repair, energyequipment, repair, energy
3.3. Bakery (bread)Bakery (bread) equipment, repair, energy, other equipment, repair, energy, other
ingredientsingredients
4.4. Supermarket (bread sold to the final Supermarket (bread sold to the final customer)customer)
Transport
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Supplier
Supplier
} Storage Service Customer
Typical Supply Chain for Typical Supply Chain for a Servicea Service
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Supply chain and Cash Supply chain and Cash flowflow
Reverse logistics
Customers
Logistics
Suppliers
Production
Goods and servicesCash flow
Consumers
Marketing
Design
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Elements of Supply Chain Elements of Supply Chain ManagementManagement
Deciding how to best move and store materialsLogistics
Determining location of facilitiesLocation
Monitoring supplier quality, delivery, and relationsSuppliers
Evaluating suppliers and supporting operationsPurchasing
Meeting demand while managing inventory costsInventory
Controlling quality, scheduling workProcessing
Incorporating customer wants, mfg., and timeDesign
Predicting quantity and timing of demandForecasting
Determining what customers wantCustomers
Typical IssuesElement
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Global supply chainsGlobal supply chains
Product designProduct design Products sold globallyProducts sold globally Outsourcing to low labor cost Outsourcing to low labor cost
countriescountries
Difficulties: language, culture, Difficulties: language, culture, currency fluctuations, increased currency fluctuations, increased tratnsportation costs and lead time, tratnsportation costs and lead time, increased need for trustincreased need for trust
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PROCUREMENTPROCUREMENT PurchasingPurchasing is responsible for obtaining the materials, is responsible for obtaining the materials,
parts, and supplies and services needed to produce a parts, and supplies and services needed to produce a product or provide a service.product or provide a service. GoalGoal: to d: to develop and implement purchasing plans for evelop and implement purchasing plans for products and services that support operations strategiesproducts and services that support operations strategies. .
DutiesDuties:: Identifying sources of supplyIdentifying sources of supply Negotiating contractsNegotiating contracts Maintaining a database of suppliersMaintaining a database of suppliers Obtaining goods and servicesObtaining goods and services Managing suppliesManaging supplies
Purchasing cycle: series of steps that begin with a Purchasing cycle: series of steps that begin with a request for purchase and end with notification of request for purchase and end with notification of shipment recieved in satisfactory condition.shipment recieved in satisfactory condition.
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Purchasing CyclePurchasing Cycle
1.1. Requisition receivedRequisition received
2.2. Supplier selectedSupplier selected
3.3. Order is placedOrder is placed
4.4. Monitor ordersMonitor orders
5.5. Receive ordersReceive orders
PurchasingPurchasing
LegalLegal
AccountingAccountingOperationsOperations
DataDataprocess-process-inging
DesignDesign
ReceivingReceiving
SuppliersSuppliers
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Centralized vs. Centralized vs. Decentralized purchasingDecentralized purchasing
Centralized purchasingCentralized purchasing Purchasing is handled by one special Purchasing is handled by one special
departmentdepartment Lower prices, better service and closer attention Lower prices, better service and closer attention
from suppliers, employing specialistsfrom suppliers, employing specialists
Decentralized purchasingDecentralized purchasing Individual departments or separate locations Individual departments or separate locations
handle their own purchasing requirementshandle their own purchasing requirements Aware to different local needs, quicker responseAware to different local needs, quicker response
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1.1. Lot-sizeLot-size vs. vs. inventoryinventory Bullwhip effectBullwhip effect
2.2. Inventory Inventory vs. vs. transportation coststransportation costs (reducing (reducing average costs)average costs) Cross-dockingCross-docking
3.3. Lead time Lead time vs. vs. transportation coststransportation costs
4.4. Product variety Product variety vs. vs. inventoryinventory Delayed differentiationDelayed differentiation
5.5. Cost Cost vs. vs. customer servicecustomer service DisintermediationDisintermediation
Trade-offsTrade-offs
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Trade-offsTrade-offs Bullwhip effectBullwhip effect
Demand variations begin at the customer Demand variations begin at the customer end of the chain and become increasingly end of the chain and become increasingly large as they radiate backwards through the large as they radiate backwards through the chain.chain.
Inventories are progressively larger moving Inventories are progressively larger moving backward through the supply chain.backward through the supply chain.
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Bullwhip EffectBullwhip Effect 1 1((uncertaintyuncertainty))
Initial supplier
DemandFinal
customer
Backward effect
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Bullwhip EffectBullwhip Effect 2 2
Tier 2Suppliers
Tier 1Suppliers
Producer Distributor Retailer FinalFinalCustomerCustomer
Amount ofAmount ofinventoryinventory=
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Trade-offsTrade-offs
Cross-dockingCross-dockingGoods arriving at a warehouse from a supplier are unloaded from the supplier’s truck and loaded immediately onto outbound trucks. Avoids warehouse storage. Reduces holding costs and lead times.
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Trade-offsTrade-offs Delayed differentiationDelayed differentiation
Production of standard components Production of standard components and subassemblies, which are held and subassemblies, which are held until late in the process to add until late in the process to add differentiating featuresdifferentiating features (expl. (expl. automobiles produced without extras)automobiles produced without extras)
DisintermediationDisintermediation Reducing one or more steps in a Reducing one or more steps in a
supply chain by cutting out one or supply chain by cutting out one or more intermediariesmore intermediaries..
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Supply Chain Benefits Supply Chain Benefits and Drawbacksand Drawbacks
ProblemProblem PotentialPotentialImprovementImprovement
BenefitsBenefits PossiblePossibleDrawbacksDrawbacks
Large Large inventoriesinventories
Smaller, more Smaller, more frequent frequent deliveriesdeliveries
Reduced Reduced holding costsholding costs
Traffic Traffic congestioncongestionIncreased costsIncreased costs
Long lead Long lead timestimes
Delayed Delayed differentiationdifferentiationDisintermediationDisintermediation
Quick responseQuick response May not be May not be feasiblefeasibleMay need May need absorb absorb functionsfunctions
Large Large number of number of partsparts
Modular Modular Fewer partsFewer partsSimpler Simpler orderingordering
Less varietyLess variety in in final productsfinal products
CostCostQualityQuality
OutsourcingOutsourcing Reduced cost, Reduced cost, higher qualityhigher quality
Loss of controlLoss of control (even on (even on quality)quality)
VariabilityVariability Shorter lead Shorter lead times, better times, better forecastsforecasts
Able to match Able to match supply and supply and demanddemand
Less varietyLess variety
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Successful Supply ChainSuccessful Supply Chain
TrustTrust among trading partners among trading partners
Effective Effective communicationscommunications
Supply chain Supply chain visibilityvisibility
Event-management capabilityEvent-management capability The ability to detect and respond to The ability to detect and respond to
unplanned eventsunplanned events (uncertainty)(uncertainty)
Performance metricsPerformance metrics
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LOGISTICSLOGISTICS
The movement of materials, The movement of materials, services, cash, and information in a services, cash, and information in a supply chain.supply chain.
Movement within a facilityMovement within a facility Incoming and outgoing shipments Incoming and outgoing shipments
(traffic managemment)(traffic managemment)
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Movement within a Movement within a facilityfacility
From incoming From incoming vehicles to vehicles to receivingreceiving
From receiving to From receiving to storagestorage
From storage to From storage to work centreswork centres
Between work Between work centres (or centres (or temporary storages)temporary storages)
From operations to From operations to final storagefinal storage
From storage to From storage to packing/shippingpacking/shipping
From shipping to From shipping to outgoing vehiclesoutgoing vehicles
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Evaluating shipping Evaluating shipping alternativesalternatives
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ExampleExample
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SolutionsSolutions Example 1:Example 1:
H(d)/365 = (2000*10)(5-2)/365 = 164.38H(d)/365 = (2000*10)(5-2)/365 = 164.38 164.38 < 135164.38 < 135 Use the 2 days freight.Use the 2 days freight.
Example 2:Example 2: Between overnight and 2-days freights:Between overnight and 2-days freights:
H(d)/365 = (200*0.3*80)(1)/365 = 13.15H(d)/365 = (200*0.3*80)(1)/365 = 13.15 The 2-days freight is better than the overnight-freight The 2-days freight is better than the overnight-freight
[13.15<300-260].[13.15<300-260]. Between 2-days and 6-days freights:Between 2-days and 6-days freights:
H(d)/365 = (200*0.3*80)(4)/365 = 52.60H(d)/365 = (200*0.3*80)(4)/365 = 52.60 The 6-days freight is better than the 2-days-freight The 6-days freight is better than the 2-days-freight
[52.60<(260-180)].[52.60<(260-180)].
The best choice is the 6-days freight.The best choice is the 6-days freight.
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THANK YOU FOR YOUR THANK YOU FOR YOUR ATTENTION!ATTENTION!