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    Supply Chain Management

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    Supply chain management aims to integrate suppliers, factories, warehouses, and stores to minimize costs while meeting customer demand. It involves managing flows and assets across the supply chain to maximize surplus. Key issues include distribution network configuration, inventory control, supply contracts, integration with strategic partners, and product design. Effective supply chain management can generate substantial savings and competitive advantage.

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    Supply Chain Management

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    sara24391
    93 views34 pages
    Supply chain management aims to integrate suppliers, factories, warehouses, and stores to minimize costs while meeting customer demand. It involves managing flows and assets across the supply chain to maximize surplus. Key issues include distribution network configuration, inventory control, supply contracts, integration with strategic partners, and product design. Effective supply chain management can generate substantial savings and competitive advantage.

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    Supply chain management aims to integrate suppliers, factories, warehouses, and stores to minimize costs while meeting customer demand. It involves managing flows and assets across the supply chain to maximize surplus. Key issues include distribution network configuration, inventory control, supply contracts, integration with strategic partners, and product design. Effective supply chain management can generate substantial savings and competitive advantage.

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    93 views34 pages

    Supply Chain Management

    Uploaded by

    sara24391
    Supply chain management aims to integrate suppliers, factories, warehouses, and stores to minimize costs while meeting customer demand. It involves managing flows and assets across the supply chain to maximize surplus. Key issues include distribution network configuration, inventory control, supply contracts, integration with strategic partners, and product design. Effective supply chain management can generate substantial savings and competitive advantage.

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    Supply Chain Management

    Definition: Supply Chain Management is primarily concerned with the efficient integration of suppliers, factories, warehouses and stores so that merchandise is produced and distributed in the right quantities, to the right locations and at the right time, and so as to minimize total system cost subject to satisfying customer service requirements. Notice: Who is involved Cost and Service Level It is all about integration

    What is Supply Chain Management?


    Managing supply chain flows and
    assets, to maximize supply chain

    surplus.
    What is supply chain surplus?

    Sources: plants vendors ports

    Regional Warehouses: stocking points

    Field Warehouses: stocking points

    Customers, demand centers sinks

    Supply

    Inventory & warehousing costs


    Production/ purchase costs Transportation costs Inventory & warehousing costs Transportation costs

    What is a supply chain?


    P&G or other manufacturer Jewel or third party DC Jewel Supermarket Customer wants detergent and goes to Jewel

    Plastic Producer

    Tenneco Packaging

    Chemical manufacturer (e.g. Oil Company)

    Chemical manufacturer (e.g. Oil Company)

    Paper Manufacturer

    Timber Industry

    Decision Phases in Supply Chain


    Supply Chain Strategy & Design Supply Chain Planning Supply Chain Operations
    Strategy & Design

    Planning

    Operations

    Supply Chain Strategy & Design


    Location & capacity of production and warehouses Products to manufactured and in which locations Mode of transportation Types of information systems to be used Strategic sourcing decisions

    Supply Chain Planning


    Markets to be supplied & from which location Planned build-up of inventory Subcontracting of manufacturing Timing and size of market promotion Handling uncertainty in demand, foreign exchange fluctuations Establishing production plan under fixed strategic parameters

    Supply Chain Operations


    Decisions over individual customer orders (daily, weekly) Less uncertainty about demand information Exploit reduction of uncertainty to optimize performance Establish deliver dates Establish order fill rate

    Cycle View of Supply Chains


    Customer
    Customer Order Cycle

    Retailer
    Replenishment Cycle

    Distributor
    Manufacturing Cycle

    Manufacturer
    Procurement Cycle

    Supplier

    Strategic Scope
    Suppliers Competitive Strategy Product Dev. Strategy Supply Chain Strategy Marketing Strategy Manufacturer Distributor Retailer Customer

    Strategic Scope
    Intracompany Intraoperation Scope
    Minimize local cost view

    Intracompany Intrafunctional Scope


    Minimize functional cost view

    Intracompany Interfunctional Scope


    Minimize company profit view

    Intercompany Interfunctional Scope


    Maximize supply chain surplus view

    Supply Chain Challenges


    Achieving Global Optimization
    Conflicting Objectives Complex network of facilities System Variations over time

    Supply Chain Challenges


    Achieving Global Optimization
    Conflicting Objectives Complex network of facilities System Variations over time

    Managing Uncertainty
    Matching Supply and Demand Demand is not the only source of uncertainty

    Key Issues in Supply Chain Management


    Distribution Network Configuration Inventory Control Supply contract Distribution Strategies Supply Chain Integration & Strategic Partnering Outsourcing & Procurement Strategies

    Key Issues of SCM (cont)


    Product Design Information Technology & Decision Support System Customer Value

    Relationships between key SCM Issues and the business environment


    Global Optimization Dist. Conf. Inv. Control X X Managing Uncertainty

    Sup. Contract
    Dist. Strategies St. partnership Outsourcing Pr. Design IT & DSS Cust. Value

    X
    X X X X X X X X X X

    Prerequisites for Supply Chain Management


    Top management understanding & commitment Quest for excellence Effective and efficient communication Relationship instead of exchange Cross-functional teams Reality of team, partnerships & alliances (based on harmony & trust)

    Supply Chain: The Magnitude


    In 1998, American companies spent $898 billion in supply-related activities (or 10.6% of Gross Domestic Product).
    Transportation 58% Inventory 38% Management 4%

    Third party logistics services grew in 1998 by 15% to nearly $40 billion

    Supply Chain: The Magnitude


    (continued)

    It is estimated that the grocery industry could save $30 billion (10% of operating cost) by using effective logistics strategies.
    A typical box of cereal spends 104 days getting from factory to supermarket. A typical new car spends 15 days traveling from the factory to the dealership.

    Supply Chain: The Magnitude


    (continued) Compaq computer estimates it lost $500 million to $1 billion in sales in 1995 because its laptops and desktops were not available when and where customers were ready to buy them. Boeing Aircraft, one of Americas leading capital goods producers, was forced to announce writedowns of $2.6 billion in October 1997. The reason? Raw material shortages, internal and supplier parts shortages. (Wall Street Journal, Oct. 23, 1997)

    Supply Chain: The Potential


    Procter & Gamble estimates that it saved retail customers $65 million through logistics gains over the past 18 months. According to P&G, the essence of its approach lies in manufacturers and suppliers working closely together . jointly creating business plans to eliminate the source of wasteful practices across the entire supply chain. (Journal of Business Strategy, Oct./Nov. 1997)

    Supply Chain: The Potential


    Dell Computer has outperformed the competition in terms of shareholder value growth over the eight years period, 1988-1996, by over 3,000% (see Anderson and Lee, 1999) using

    - Direct business model


    - Build-to-order strategy.

    Supply Chain: The Potential


    In 10 years, Wal-Mart transformed itself by changing its logistics system. It has the highest sales per square foot, inventory turnover and operating profit of any discount retailer.

    Supply Chain: The Complexity


    National Semiconductors:
    Production: Produces chips in six different locations: four in the US, one in Britain and one in Israel Chips are shipped to seven assembly locations in Southeast Asia. Distribution The final product is shipped to hundreds of facilities all over the world 20,000 different routes 12 different airlines are involved 95% of the products are delivered within 45 days 5% are delivered within 90 days.

    Supply Chain Management: The Magnitude in the Traditional View


    Estimated that the grocery industry could save $30 billion (10% of operating cost by using effective logistics and supply chain strategies
    A typical box of cereal spends 104 days from factory to sale A typical car spends 15 days from factory to dealership Laura Ashley turns its inventory 10 times a year, five times faster than 3 years ago

    Supply Chain Management: The True Magnitude


    Compaq estimates it lost $0.5 billion to $1 billion in sales in 1995 because laptops were not available when and where needed When the 1 gig processor was introduced by AMD, the price of the 800 meg processor dropped by 30% P&G estimates it saved retail customers $65 million by collaboration resulting in a better match of supply and demand

    Drivers of Supply Chain Performance


    Efficiency Responsiveness

    Supply chain structure

    Inventory

    Transportation

    Facilities

    Information

    Drivers

    Considerations for Supply Chain Drivers


    Driver Inventory Transportation Facilities Information Efficiency Cost of holding Consolidation Responsiveness Availability Speed

    Consolidation / Proximity / Dedicated Flexibility What information is best suited for each objective

    Achieving Strategic Fit


    Understanding the Customer
    Lot size Response time Service level Product variety Price Innovation

    Implied Demand Uncertainty

    The Value Chain: Linking Supply Chain and Business Strategy


    Business Strategy
    New Product Marketing Strategy Strategy

    Supply Chain Strategy

    New Product Development

    Marketing and Operations Distribution Sales

    Service

    Finance, Accounting, Information Technology, Human Resources

    Flows in a Supply Chain


    Information Product

    Customer
    Funds

    Sequential Optimization vs. Global Optimization


    Sequential Optimization
    Procurement Planning Manufacturing Planning Distribution Planning Demand Planning

    Global Optimization
    Supply Contracts/Collaboration/Information Systems and DSS

    Procurement Planning

    Manufacturing Planning

    Distribution Planning

    Demand Planning

    Source: Duncan McFarlane

    The Dynamics of the Supply Chain


    Order Size

    Customer Demand Retailer Orders

    Distributor Orders

    Production Plan

    Time
    Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

    The Dynamics of the Supply Chain


    Order Size

    Customer Demand

    Production Plan

    Time
    Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

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