Supply Chain • All facilities, functions, activities, associated with flow and transformation of goods and services from raw materials to customer, as well as the associated information flows • An integrated group of processes to “source,” “make,” and “deliver” products
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Supply Chain
• All facilities, functions, activities, associated with flow and transformation of goods and services from raw materials to customer, as well as the associated information flows
• An integrated group of processes to “source,” “make,” and “deliver” products
Supply Chain Illustration
Supply Chain Processes
Transportation• Rail
• low-value, high-density, bulk products, raw materials, intermodal containers
• not as economical for small loads, slower, less flexible than trucking
• Trucking• main mode of freight transport in the
world• small loads, point-to-point service,
flexible• More reliable, less damage than rails;
more expensive than rails for long distance
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Transportation (cont.)
•Air• most expensive and fastest, mode of
freight transport• lightweight, small packages <500 lbs• high-value, perishable and critical goods• less theft
•Package Delivery• small packages• fast and reliable• increased with e-Business• primary shipping mode for Internet
companies
Transportation (cont.)
•Water• low-cost shipping mode• primary means of international shipping• U.S. waterways• slowest shipping mode
• Intermodal• combines several modes of shipping-truck, water
and rail• key component is containers
•Pipeline• transport oil and products in liquid form• high capital cost, economical use• long life and low operating cost
Supply Chain Management (SCM)• Managing flow of information through supply chain in
order to attain the level of synchronization that will make it more responsive to customer needs while lowering costs
• Keys to effective SCM• information• communication• cooperation• trust
Supply Chain Uncertainty
• One goal in SCM:• respond to uncertainty in
customer demand without creating costly excess inventory
• Negative effects of uncertainty• lateness• incomplete orders
• Inventory• insurance against supply chain
uncertainty
• Factors that contribute to uncertainty• inaccurate demand forecasting• long variable lead times• late deliveries• incomplete shipments• price fluctuations and discounts
Bullwhip EffectOccurs when slight demand variability is magnified as information moves back
upstream
The The Bullwhip EffectBullwhip Effect (or (or Whiplash EffectWhiplash Effect) is an observed phenomenon in ) is an observed phenomenon in forecast-driven distribution channels. It refers to a trend of larger and larger forecast-driven distribution channels. It refers to a trend of larger and larger swings in inventory in response to changes in demand, as one looks at firms swings in inventory in response to changes in demand, as one looks at firms further back in the supply chain for a product.further back in the supply chain for a product.
Elaboration of bullwhip effect• As the customer demand is rarely perfectly stable, the
businesses must forecast the same demand to properly position inventory and other resources Forecasts are based on numerical values (statistics), and they are rarely perfectly accurate. companies often carry an inventory buffer called "safety stock”.
• Moving up the supply chain from end-consumer to raw materials supplier, each supply chain participant has greater observed variation in demand and thus greater need for safety stock. The effect is that variations are amplified as one moves upstream in the supply chain (further from the customer).
Information Technology:
• Information links all aspects of supply chain
• E-business• replacement of physical business
processes with electronic ones• Electronic data interchange (EDI)
• a computer-to-computer exchange of business documents
• Bar code and point-of-sale• record of a sale
• Radio frequency identification (RFID)
• technology can send product data from an item to a reader via radio waves
• Internet• allows companies to communicate
with suppliers, customers, shippers and other businesses around the world.
Supply Chain Evolution at Nabisco
Source: F. Keenan, “Logistics Gets a Little Respect,” Business Week (November 20, 2000), pp. 112–115.
Supply Chain Evolution at Nabisco (cont.)
Source: F. Keenan, “Logistics Gets a Little Respect,” Business Week (November 20, 2000), pp. 112–115.
Supply Chain Evolution at Nabisco (cont.)
Source: F. Keenan, “Logistics Gets a Little Respect,” Business Week (November 20, 2000), pp. 112–115.
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