Supply Chain Management: An introduction for Non Supply Chain Professionals

SUPPLY CHAIN

MANAGEMENT GUIDE

Compiled by: Ioannis Dermitzakis

1. Introduction

INTRODUCTIONThe series of slides is a basic introduction into Supply Chain Management and it should be used as such, to introduce to the staff of your organisation to the concepts, theories, working and advantages of having a fully functioning integrated Supply Chain.Successful introduction, training and acceptance of supply chain concepts throughout the whole organisation has been achieved in large and small organisation including SABIC in the middle east.

KEY CONCEPTS SUPPLY CHAINSUPPLY CHAIN IS:the sequence of suppliers that contribute to the creation and delivery of a good or service to end customers.

Logistics is:the management of the storage and flow of goods, services and information throughout your organisation.

Supply Chain Management is:organizing the cost effective flow and storage of materials, in-process inventory, finished goods and related information from point of origin to point of consumption to satisfy customer requirements.

A Business Philosophy

A way of doing business with your customers and suppliers.

KEY CONCEPTS: A PHILOSOPHY

PRINCIPAL ISSUES: SUPPLY CHAIN (1)Supply Chain

The supply chain of a company consists of different departments, ranging from procurement of materials to customer service.

The supply chain includes activities associated with inventory (materials) acquisition, storing, use in production, transit, and delivery to customers.

PRINCIPAL ISSUES: SUPPLY CHAIN (2)The activities are planned, executed, and monitored under the guidelines set by the company’s chosen customer service levels and in line with the company’s other operating goals.

PRINCIPAL ISSUES: ELEMENTS OF LOGISTICSElements of Logistics:

materials management: sourcing and receiving of raw materials or unfinished products for subsequent use

material flow system: the ability to locate and schedule material through to end production and disposition

physical distribution: the delivery of finished goods to customers

PRINCIPAL ISSUES:LOGISTIC GOALLogistic goal and objectives

The right products

The right quantity

The right moment

At minimalcost

Flexibility Deliveryreliability

Delivery time/lead time

Inventorylevel

PRINCIPAL ISSUES: LOGISTIC STEPSLogistic steps:

accepting a customer orderreceive and entercredit clearance / authorizedelivery commitment

supplier orderingforecasting demandscheduling manufacturinginventory managementdelivery to customer.

PRINCIPAL ISSUES . EVOLUTION

Quality productsLowest possible cost

Order fulfillment

Integration of supply chainsCustomer service

Preferred partnersCommunication

Supply chain communitiesCommon goals, objectives

PRINCIPAL ISSUES: THE GOALSupply Chain Management GoalTo evolve a company’s supply

chain into an optimally efficient, customer-satisfying process, where the effectiveness of the whole supply chain is more important than the effectiveness of each individual department.

PRINCIPAL ISSUES: FOCUSSupply Chain Management focuses on business processes:product designplanningorder managementstock management

instead of functions:salespurchasingproduction

PRINCIPAL ISSUES: DRIVERS OF CHANGE (1)

Drivers of change:outsourcing trendactual customer demand: speed, flexibility and competitive pricing

new software: ERP, sophisticated application software

new technologiesElectronic Data Interchange (EDI)

internet, intranet, extranet

wireless communicationsteleconferencing and telecommuting

bar coding.

PRINCIPAL ISSUES: DRIVERS OF CHANGE (2)

PRINCIPAL ISSUES: ACTIVITIESSupply chain management activities:Forecasting demandSelecting suppliersOrdering materialManaging inventoryScheduling productionShipping and deliveryOrganizing information exchange

ANALYSIS: DIAGRAM

Understand thecustomer

Understand theproduct

Understand theprocess

Understand the information flow

ANALYSIS :UNDERSTAND THE CUSTOMER (1)

Know and understand the customers:Your existing customers, i.e.,

demographicsexisting and potential numberincome levels?

Who are your potential customers?How might these customers be grouped?

For which percentage of sales is each group responsible?

ANALYSIS: UNDERSTAND THE CUSTOMER (2)

What is the effect of various methods of communications (i.e., telephone, fax, e-mail, internet telephone systems) in your relation with your customers?

What do your customers want from you?

How well do your competitors meet customers needs?

ANALYSIS: UNDERSTAND THE PRODUCTSUnderstand the products:

How many?Where are they?Which percentage of sales?What is the product life cycle?

What is the product mix?

ANALYSIS: UNDERSTAND THE PROCESS

Understand the production process:process flow

linear flowjob shop - batch flowassembly linecontinuous flowproject flow

order fulfillment strategymake-to-ordermake-to-stock.

ANALYSIS: UNDERSTAND THE INFORMATION FLOW

Understand the information flow:What information is required for effective decision-making at each stage in the supply chain?

What data has to flow between each part of the supply chain?

PERFORMANCE INDICATORS (1)

A total view must be taken in assessing performance.

Performance measurements need to be focused on what factors add to total performance, total value or total cost.

The principle performance indicator is customer service. Optimum service levels are necessary from each supplier to each customer throughout the supply chain.

PERFORMANCE INDICATORS (2)

Suppliers Inputs Addingvalue Outputs Customers Results

EffectivenessEfficiency

Productivity

Profitability

Customer Service + Quality

CustomerService

PERFORMANCE INDICATORS (3)Effectiveness:

accomplishment of the right things, on time, within the requirements specified.

Efficiency:resources expected to be consumed divided by resources actually consumed.

PERFORMANCE INDICATORS (4)Productivity:

measures of output divided by measures of input for a given period of time.

Profitability:relationship between revenues and costs.

CONCLUSIONIntro to SCMProcess of SCMKPI’s of SCM