LOG 411 SUPPLY CHAIN MANAGEMENT

1. LOG 411 SUPPLY CHAIN MANAGEMENT The Synchronous Supply Chain and The Era of Network Competition

2. The Synchronous Supply Chain • In conventional supply chains each stage in the chain tends to be disconnected from the others. • Even within the same company the tendency is for separate functions to optimise their own performance.

3. The Synchronous Supply Chain • As a result the interfaces between organisations and between functions within those organisations need to be buffered with inventory and/or time lags. • The effect of this is that end-to-end pipeline times are long, responsiveness is low and total costs are high.

4. The Synchronous Supply Chain • The effect of this is that end-to-end pipeline times are long, responsiveness is low and total costs are high. • Synchronisation implies that each stage in the chain is connected to the other. • The information to be shared between supply chain partners includes demand data and forecasts, production schedules, new product launch details and bill of material changes.

5. The Synchronous Supply Chain • To enable the degree of visibility and transparency, synchronisation requires a high level of process alignment. • Process alignment: “Set up the system so that people will use the tool to get their job done and as a byproduct all of the data you need is collected.”

6. The Synchronous Supply Chain • Some key processes that need to be linked, upstream and downstream, to provide the foundation for supply chain synchronisation.

7. The Synchronous Supply Chain

8. The Synchronous Supply Chain • One of Britain’s major retailers, Tesco, is using an extranet to link with its suppliers to share point-of-sale data.

9. Functions of a Logistics Information System • Planning Function: • Stock management (by product, by location) • Demand forecasting • Strategy planning • Coordination Function: • Production scheduling • Materials Requirement Planning • Sales/marketing planning • Customer Service Communication Function: • Customer order status • Inventory availabilty (by product, by stock location) • - Outbound shipment status Database: -External data (customer orders, inbound shipments) - Internal data (production, inventory) • Control Function: • Customer service levels • Vendor performance • Carrier performance • System performance

10. Cisco Systems: creating a virtual supply chain through shared information • Creation a virtual supply chain • Almost all manufacturing and physical logistics are outsourced to specialist contract manufacturers and third party logistics companies. • Creation of “e-hub”: the purpose of the e-hub is to act as the nerve centre and to ensure real time visibility of demand, inventory levels and production schedules. • As a result of its investment in creating sc wide visibility through shared information, Cisco has enabled a highly synchronised network of global partners to act as if they were a single business.

11. Laying the Foundations for Synchronisation • Under the synchronisation philosophy the requirement is for small shipments to be made more frequently and to meet the precise time requirements of the customer. • In a synchronous supply chain the management of in-bound materials flow becomes a crucial issue. In particular the search for consolidation opportunities has to be a priority. Thus, for example, rather than one supplier making a series of deliveries in small quantities to a customer, the orders from a number of suppliers are combined into a single delivery.

12. Laying the Foundatios for Synchronisation • The rise in 3PL companies • 3PL Companies can manage the pick-up of materials and components from suppliers on a “milk round” basis, using a central “hub” or transhipment centre for resorting and consolidating for in-bound delivery.

13. What is Milk-Run? • Delivery method for mixed loads from different suppliers. Instead of each of several (say 5) suppliers sending a vehicle every week to meet the weekly needs of a customer, one vehicle visits each supplier on a daily basis and picks up deliveries for that customer. This way, while still five vehicle loads are shipped every week, each vehicle load delivers the full daily requirements of the customer from each supplier. This method gets its name from the dairy industry practice where one tanker collects milk every day from several dairy farmers for delivery to a milk processing firm.

14. What is Milk-Run?

15. Similar Developments • Retail logistics • The idea of “stockless distribution centres” or “cross docking” enables a more frequent and efficient replenishment of product from manufacture to individual stores. Cross-docking often facilitated by a logistics service provider, is a simple, but powerful concept. • Point-of-sale data from individual stores is transmitted to the retailer’s head office to enable them to determine replenishment requirements.

16. “Quick Response” Logistics • The basic idea behind quick response is that in order to reap the advantages of time-based competition it is necessary to develop systems that are responsive and fast. • Essentially the logic behind QR is that demand captured in as close to real-time as possible and as close to the final consumer as possible.

17. Seven Major Business Transformations • 1) From supplier centric to customer centric • 2) From push to pull • 3) From transactions to relationships • 4) From inventory to information • 5) From “trucks and sheds” to “end-to-end” pipeline management • 6) From functions to processes • 7) From stand-alone competition to network rivalry

18. The Key Business Transformations and the Implications for Management Skills

19. The Key Business Transformations and the Implications for Management Skills

20. Supply Chain Orchestration • The task of managing, co-ordinating and focusing this value creating network might usefully be termed supply chain orchestration. • The idea of orchestration is that there has to be a common agreed agenda driving the achievement of the supply chain goals. This itself implies that there must be a supply chain strategy that is subscribed to by the entities in the chain. • Orchestrator e.g. Wal-Mart or Dell