Supply Chain Chap0122ce

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Operations Management, 2ndCanadian Edition, by Stevenson & Hojati

Copyright 2004 by The McGraw-Hill Companies, Inc. All rights reserved.

Supply Chain Management


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SUPPLY CHAIN MANAGEMENTPART FIVE

Chapter Twelve Supply Chain Management

Chapter Twelve Supplement Purchasing &Supplier Management

Chapter Thirteen Inventory Management

Chapter FourteenAggregate Planning

Chapter Fifteen MRP & ERP

Chapter Sixteen Just-in-Time Systems

Chapter SixteenSupplement Maintenance

Chapter Seventeen Scheduling


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Chapter 12

Supply ChainManagement


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Supply Chain: the sequence oforganizations - their facilities,

functions, and activities - that are

involved in producing and delivering

a product or service.


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Warehouses Factories

Processing centres

Distribution centres Retail outlets

Offices

Facilities


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Typical Supply Chains

PurchasingReceivingStorageOperations Storage

Production Distribution


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Typical Supply Chain for a Manufacturer

Supplier

Supplier

Supplier

Storage

}Mfg. Dist. Retailer CustomerStorage


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Supplier

Supplier

Storage

}Service Customer

Typical Supply Chain for a Service


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Customers are Suppliers

Initial

Supplier

Customer

Supplier

Customer

Supplier

Customer

Supplier

Final

Customer


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Improve operations

Increasing levels of outsourcing

Increasing transportation costs

Competitive pressures

Increasing globalization

Increasing importance of e-commerce

Complexity of supply chains

Manage inventories

Need for Supply Chain Management


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Benefits of Supply Chain Management

Organization Benefit

Campbell Soup Doubled inventory turnover rate

Hewlett-Packard Cut supply costs 75%

Sport Obermeyer Doubled profits and increased sales 60%

National Bicycle Increased market share from 5% to 29%

Wal-Mart Largest and most profitable retailer in the world


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Elements of Supply Chain Management

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 wantCustomersTypical IssuesElement


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Increasing outsourcing Increasing conversion to lean

production

Increasing globalization

Purchasing in Supply Chain Management


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Internal Supply Chain

External

Supply Chain

Internal

Supply ChainKey:

Suppliers Distribution CustomersProcessing

S l Ch


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Supply Chain Issues

Quality control

Production planning and

control

Inventory policies

Purchasing policies

Production policiesTransportation policies

Quality policies

Design of the supply

chain, partnering

Operating IssuesTactical IssuesStrategic Issues

12 16 S l Ch i M


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SCOR Metrics

Perspective MetricsReliability On-time delivery

Order fulfillment lead time

Fill rate (fraction of demand met from stock)

Perfect order fulfillment

Flexibility Supply chain response timeUpside production flexibility

Expenses Supply chain management costs

Warranty cost as a percent of revenue

Value added per employee

Assets/utilization Total inventory days of supply

Cash-to-cash cycle time

Net asset turns

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Logistics Refers to the movement of materials and

information within a facility and to incoming

and out going shipments of goods and

materials

Logistics

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Logistics

Movement within the facility

Incoming and outgoing shipments

Bar coding EDI

Distribution

JIT Deliveries

0

214800 232087768

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Materials Movement

Figure 12-3

RECEIVING

Storage

Work

centre

Work centre Work centre

Storage

Work

centre

Storage

Shipping

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Increased productivity Reduction of paperwork

Lead time and inventory reduction

Facilitation of just-in-time systems

Electronic transfer of funds

Improved control of operations

Reduction in clerical labour

Increased accuracy

Electronic Data Interchange

12 21 Supply Chain Management


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Efficient consumer response (ECR)is asupply chain management initiative

specific to the food industry

Reflects companies efforts to achieve

quick response using EDI and bar codes

Efficient Consumer Response



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Distribution requirements planning(DRP) is a system for inventory

management and distribution planning

Extends the concepts of MRPII

Distribution Requirements Planning



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Management uses DRP to plan andcoordinate:

Transportation

Warehousing

Workers

Equipment

Financial flows

Uses of DRP



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E-Commerce: the use of electronictechnology to facilitate businesstransactions

Applications include

Internet buying and selling E-mail

Order and shipment tracking

Electronic data interchange

E-Commerce

12-25 Supply Chain Management


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Companies can: Have a global presence Improve competitiveness and quality

Analyze customer interests

Collect detailed information

Shorten supply chain response times

Realize substantial cost savings

Create virtual companies Level the playing field for small companies

Advantages E-Commerce



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Customer expectations Order quickly -> fast delivery

Order fulfillment

Order rate often exceeds ability to fulfill it Inventory holding

Outsourcing loss of control

Internal holding costs

Disadvantages of E-Commerce



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Buyer exchange

MRO- catalogue hub

Supplier exchange

BPO Neutral exchange

B2B Market Places



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Develop strategic objectives and tactics Integrate and coordinate activities in the

internal supply chain

Coordinate suppliers with customers Coordinate planning and execution

Form strategic partnerships

Creating an Effective Supply Chain



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Quality

Cost

Flexibility

Velocity Customer service

Supply Chain Performance Drivers



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Barriers to integration of organizations Getting top management on board

Dealing with trade-offs

Small businesses Variability and uncertainty

Long lead times

Challenges



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Supply Chain anagement

Lot-size-inventory

Bullwhip effect

Inventory-transportation costs

Lead time-transportation costs

Product variety-inventory

Cost-customer service

Trade-offs



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pp y g

Bullwhip Effect

Tier 2

Suppliers

Tier 1

SuppliersProducer Distributor Customers

Ordering

Amount of

inventory=



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Supply Chain Benefits and Drawbacks

Problem Potential

Improvement

Benefits Possible

Drawbacks

Large

inventories

Smaller, more frequent

deliveries

Reduced holding

costs

Traffic congestion

Increased costs

Long lead times Delayed differentiation

Disintermediation

Quick response May not be feasible

May need absorbfunctions

Large number of

parts

Modular Fewer parts

Simpler ordering

Less variety

Cost

Quality

Outsourcing Reduced cost, higher

quality

Loss of control

Variability Shorter lead times, better

forecasts

Able to match supply

and demand

Less variety

Supply Chain Chap0122ce

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