2. SUPPL
Y CHAIN
• A supply
directly or indirectly, in fulfilling a
chain consists of all parties involved,
customer
requirements.
•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.
4. 4
• Supply chain management (SCM) is the
management of the flow of goods
• The goal or mission of supply chain
management can be defined using Mr.
Goldratt’s words as “Increase throughput
while simultaneously reducing both
inventory and operating expenses”
5. 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.
Supply Chain Management
6. • Supply chain management has been defined as
the "Design, planning, execution, control,
and monitoring of supply chain activities
with the objective of creating net value,
building a competitive infrastructure,
worldwide logistics, worldwide logistics,
leveraging, synchronizing supply with
demand and measuring performance
globally.
,
7. 11-7
Supply Chain Management
Supply Chain: the sequence of
organizations - their facilities, functions,
and activities - that are involved in
producing and delivering a product or
service.
Sometimes referred to as value chains
9. 9
Benefits of SCM
Contributes
to overall
increase in
profitability
&
competitive
advantage.
This positively
affects inventory
levels, cycle
time, business
processes &
customer
service.
Reduces
uncertainty
& risks in
the supply
chain.
10. 10
SUPPLYCHAIN STAGES
• Customers
• Retailers
• Wholesalers/Distributors
• Manufacturers
• Component/ Raw material suppliers
– It is not compulsory that all the stages should be
present in a supply chain
16. 11-16
1.Improve operations
2.Increasing levels of outsourcing
3.Increasing transportation costs
4.Competitive pressures
5.Increasing globalization
6.Increasing importance of e-commerce
7.Complexity of supply chains
8.Manage inventories
Need for Supply Chain
Management
17. 11-17
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
18. 11-18
Benefits of Supply Chain Management
Lower inventories
Higher productivity
Greater quickness
Shorter lead times
Higher profits
Greater customer loyalty
Integrates separate organizations into a
cohesive operating system
19. 11-19
Global Supply Chains
Increasing more complex
Language
Culture
Currency fluctuations
Political
Transportation costs
Local capabilities
Finance and economics
Environmental
20. 11-20
Elements of Supply Chain
Management
Deciding how to best move and store materials
Logistics
Determining location of facilities
Location
Monitoring supplier quality, delivery, and relations
Suppliers
Evaluating suppliers and supporting operations
Purchasing
Meeting demand while managing inventory costs
Inventory
Controlling quality, scheduling work
Processing
Incorporating customer wants, mfg., and time
Design
Predicting quantity and timing of demand
Forecasting
Determining what customers want
Customers
Typical Issues
Element
21. 11-21
Strategic or Operational
Two types of decisions in supply chain
management
Strategic – design and policy
Operational – day-today activities
Major decisions areas
Location
Production
Inventory
Distribution
22. 11-22
Logistics
Refers to the movement of materials and
information within a facility and to incoming
and outgoing shipments of goods and
materials in a supply chain
Logistics
23. 11-23
Logistics
• Movement within the facility
• Incoming and outgoing shipments
• Bar coding
• EDI
• Distribution
• JIT Deliveries
0
214800 232087768
25. 11-25
Distribution requirements planning
(DRP) is a system for inventory
management and distribution planning
Extends the concepts of MRPII
Distribution Requirements
Planning
26. 11-26
Management uses DRP to plan and
coordinate:
Transportation
Warehousing
Workers
Equipment
Financial flows
Uses of DRP
27. 11-27
E-Business: the use of electronic
technology to facilitate business
transactions
Applications include
Internet buying and selling
E-mail
Order and shipment tracking
Electronic data interchange
E-Business
28. 11-28
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-Business
29. 11-29
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-Business
30. 11-30
Reverse Logistics
Reverse logistics – the backward flow of
goods returned to the supply chain
Processing returned goods
Sorting, examining/testing, restocking, repairing
Reconditioning, recycling, disposing
Gatekeeping – screening goods to prevent
incorrect acceptance of goods
Avoidance – finding ways to minimize the
number of items that are returned
31. 11-31
Effective Supply Chain
Requires linking the market, distribution
channels processes, and suppliers
Supply chain should enable members to:
Share forecasts
Determine the status of orders in real time
Access inventory data of partners
32. 11-32
Successful Supply Chain
Trust among trading partners
Effective communications
Supply chain visibility
Event-management capability
The ability to detect and respond to
unplanned events
Performance metrics
33. 11-33
SCOR Metrics
Perspective Metrics
Reliability On-time delivery
Order fulfillment lead time
Fill rate (fraction of demand met from stock)
Perfect order fulfillment
Flexibility Supply chain response time
Upside 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
34. 11-34
RFID Technology
Used to track goods in supply chain
RFID tag attached to object
Similar to bar codes but uses radio frequency
to transmit product information to receiver
RFID eliminates need for manual counting
and bar code scanning
35. 11-35
CPFR
Collaborative Planning, Forecasting, and
Replacement
Focuses on information sharing among
trading partners
Forecasts can be solid and then
converted into a shipping plan
Eliminates typical order processing
36. 11-36
CPFR Process
Step 1 – Front-end agreement
Step 2 – Joint business plan
Steps 3-5 – Sales forecast
Steps 6-8 – Order forecast collaboration
Step 9 – Order generation/delivery execution
37. 11-37
CPFR Results
Nabisco and Wegmans
50% increase in category sales
Wal-mart and Sara Lee
14% reduction in store-level inventory
32% increase in sales
Kimberly-Clark and Kmart
Increased category sales that exceeded
market growth
38. 11-38
1.Develop strategic objectives and tactics
2.Integrate and coordinate activities in the
internal supply chain
3.Coordinate activities with suppliers with
customers
4.Coordinate planning and execution
across the supply chain
5.Form strategic partnerships
Creating an Effective Supply
Chain
40. 11-40
Velocity
Inventory velocity
The rate at which inventory(material) goes
through the supply chain
Information velocity
The rate at which information is
communicated in a supply chain
41. 11-41
Barriers to integration of organizations
Getting top management on board
Dealing with trade-offs
Small businesses
Variability and uncertainty
Long lead times
Challenges
43. 11-43
Trade-offs
Bullwhip effect
Inventories are progressively larger moving
backward through the supply chain
Cross-docking
Goods arriving at a warehouse from a
supplier are unloaded from the supplier’s
truck and loaded onto outbound trucks
Avoids warehouse storage
44. 11-44
Trade-offs
Delayed differentiation
Production of standard components and
subassemblies, which are held until late in
the process to add differentiating features
Disintermediation
Reducing one or more steps in a supply
chain by cutting out one or more
intermediaries
45. 11-45
Supply Chain Issues
Quality control
Production planning and
control
Inventory policies
Purchasing policies
Production policies
Transportation
policies
Quality policies
Design of the
supply chain,
partnering
Operating Issues
Tactical Issues
Strategic
Issues
46. 11-46
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 absorb
functions
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
47. 11-47
Purchasing is responsible for obtaining
the materials, parts, and supplies and
services needed to produce a product
or provide a service.
Purchasing cycle: Series of steps that
begin with a request for purchase and
end with notification of shipment
received in satisfactory condition.
Purchasing
48. 11-48
Develop and implement purchasing
plans for products and services that
support operations strategies
Goal of Purchasing
49. 11-49
Identifying sources of supply
Negotiating contracts
Maintaining a database of suppliers
Obtaining goods and services
Managing supplies
Duties of Purchasing
52. 11-52
Value analysis
Examination of the function of purchased
parts and materials in an effort to reduce
cost and/or improve performance
Value Analysis vs. Outsourcing
53. 11-53
Centralized purchasing
Purchasing is handled by one special
department
Decentralized purchasing
Individual departments or separate
locations handle their own purchasing
requirements
Centralized vs Decentralized
Purchasing
55. 11-55
Quality and quality assurance
Flexibility
Location
Price
Factors in Choosing a Supplier
56. 11-56
Product or service changes
Reputation and financial stability
Lead times and on-time delivery
Other accounts
Factors in Choosing a Supplier
(cont’d)
57. 11-57
Evaluating Sources of Supply
Vendor analysis: Evaluating the
sources of supply in terms of price,
quality, reputation, and service
58. 11-58
Vendor analysis - evaluating the
sources of supply in terms of
Price
Quality
Services
Location
Inventory policy
Flexibility
Evaluating Sources of Supply
59. 11-59
Supplier as a Partner
Aspect Adversary Partner
Number of suppliers Many One or a few
Length of
relationship
May be brief Long-term
Low price Major consideration Moderately important
Reliability May not be high High
Openness Low High
Quality May be unreliable;
buyer inspects
At the source;
vendor certified
Volume of business May be low High
Flexibility Relatively low Relatively high
Location Widely dispersed Nearness is
important
Table 11.9
60. 11-60
Ideas from suppliers could lead to improved
competitiveness
1.Reduce cost of making the purchase
2.Reduce transportation costs
3.Reduce production costs
4.Improve product quality
5.Improve product design
6.Reduce time to market
7.Improve customer satisfaction
8.Reduce inventory costs
9.Introduce new products or services
Supplier Partnerships