Supply Chain Management

1. Supply Chain Management • Day 1 agenda • Who Am I • Syllabus • Who are you • getting up to speed / Introduction

2. Who am I • Mark - casual but professional • Work experience • McJobs / Project Manager = purchasing • NAPM / ISM chapter in Salem – next meeting 4/19/05 • Research – SCM is the area I am an “expert” in • There are not many of us in the country / world • Throughout the term my research will be part of class • Teaching • Because this is a new and growing area the information changes. Which means that when I learn new things you will as well. But it also means that the schedule is more like an outline. Things will change.

3. Syllabus Mark Pagell, Ph.D. 400E Bexell Hall 737-6036 541-431-3950 (home in Eugene) Pagellm@bus.oregonstate.edu Office hours: Tuesday 9-10 Thursday – 2-3 Otherwise by appointment – the pop-in is unlikely to work out

4. Syllabus continued • Course-pac is required and in the library – VR308 • Rules on academic honesty will be strictly enforced • If you have special needs see me ASAP • Slides will be on the web in materials folder (subject to change – we are switching to a new set-up) • 2 tests • NOT multiple choice • May be take home? • Can cover anything we cover in class (including readings and guests) • Test 1 25% of grade • Test 2 (final) 30% of grade

5. Syllabus • Participation is expected – this is an elective course • 10% of grade • Get either 0,5 or 10 points based on criteria in syllabus- not going to argue over a single point. • Attendance does not equal participation • Team projects- requires significant work – you will not do this (well) at the last minute • 35% of grade • You will be in a group - and you will be held accountable for your behavior in the group • 3 parts – 1&2 milestones – 3 final project. Grade is based on final project. Will not be able to wait till last minute to do. • This is a big project that will require input form the entire group as well as serious research - librarian

6. Syllabus • Grades: • A: 90% or above • B: 80-89.5% • C: 70-79.5% • D: 60-69.5% • F < 60% • Will discuss pluses and minuses if you really want them? • Schedule- tentative

7. Who are you? • Name • Career goal – what do you want to do when you leave OSU? • What you hope to get out of this class • Form groups

8. Introduction – agenda • Supply Chain Management ? • Traditional views of the value creation process • Non-traditional (but becoming accepted) views of the value creation process • The functions that participate directly in value creation • operations • purchasing • logistics • Note on terminology

9. Reading 1 • First “article” • This is the best advertisement for this class / material • At any given time in business there is one area that is getting the most attention- because it is the area that firms can leverage the most • For most companies the supply chain is the last place left to really gain a competitive advantage • There is a reason for this- it is messy and this is the only article you will ever see with the words sexy and SCM in it.

10. Reading 1 – last article • Not very well written • Good synopsis of the course – and a good outline for your commodity study • Strategic role of SCM – what business is the organization in ? • Resource acquisition • Building and maintaining relationships • Make verses buy – and the role of SCM even if we do decide to make something

11. Examples of SCM efforts • Reading one gives many examples of activities being undertaken to leverage the supply chain • Jeep - this is the state of the art for JIT and SCM in the USA • JIS / 420 trucks a day / modular construction /supplier selection based on previous relationship / • Smart car – also state of the art • Suppliers’ plants hooked into final assembly / hang on body panels -DFM /no paint booths / pay on build • Wal-Mart • Vendorville / partnering mode – working together • Steelmakers and new types of contracts

12. Some other examples • GE jet engines article in 12/30/02 Fortune – see reading 4 • Work with customers (mainly Boeing) • Work with suppliers- and have unique incentives – suppliers pay to be revenue sharing partners • Partner with companies who they sometimes compete with • Move to digital film • Easy to make Movies (Blair Witch) • Some argue quality suffers – Speilberg is an example • Is inevitable- because of distribution / logistics • Good example of optimizing the entire chain as opposed to part • Timber harvesting and preparation at Weyerhaeuser

13. Definitions • “The process of planning and controlling the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption” (CLM) • “… the planning and control of all factors that will have an impact on getting the correct product where it is needed, on time and at the optimal cost” (Daskin)

14. More definitions • The supply chain encompasses all activities associated with the flow and transformation of goods from the raw materials stage, through to the end user, as well as the associated information flows. Material and information flow both up and down the supply chain. • Supply Chain Management is the integration of these activities through improved supply chain relationships, to achieve a sustainable competitive advantage. (Handfield and Nichols)

15. All this means what? • In general many organizations are needed to create value for a customer • In almost all of these organizations many functions create value for the customer • Reading one gave examples of these activities • Managing each function within each organization separately is not likely to optimize the value of the good or service the customer receives. • Bullwhips • HR at Boeing Wichita

16. There is a problem with all of these definitions • All assume goods production • Is this a valid assumption? • If not why do you think the authors (and your professor) focus on goods production? • Hint – think of the processes and outputs needed to make a car as compared to the processes and outputs needed to do the venture funding for a new company. • Key point – SCM is just as applicable to service production as goods production

17. Step back • Lets actually walk through a supply chain

18. Two views of value creation Inputs transformation: operations Outputs Information Information Suppliers Operations Customers Logistics / Purchasing Logistics / Marketing

19. Why move away from the traditional model • Inputs operations outputs • What is missing here • What type of thinking does this lead to? • Where does this focus the majority of our effort • In this model a supplier is which of the following: a cost a source of raw materials a potential problem a potential opportunity

20. Why SCM ? • Companies have started to get beyond functional silos and NIH syndrome • Most companies can not do everything • Outsourcing as a pure cost play does not add much • Purchasing becomes strategic –Chrysler • Logistics becomes strategic – Wal-Mart • Information systems become strategic • Leading edge success stories

21. Why you should care ? • Money - SCM graduates at the few schools with such programs tend to be the highest paid and get the most job offers. People come from all over the world to recruit MSU students in this field. • Undergrad starting salaries average $60,000 (2002) • MBA salaries over $110,000 • PSU – claims placement at 98% last year • Broad knowledge base - managing value creation in many places not just one. • Most companies do this really badly. The need has been identified but most managers do not have the skills (opportunity) • Some of my recent scary research

22. Key functions in a supply chain • Operations- anyplace a process is performed to transform something • machining and other traditional factory tasks • calculation of credit risk in a venture capital supply chain • Purchasing - anytime we buy a good, service, or information from another organization • Logistics - moving goods and or information from step to step in a supply chain -and to the end customer

23. A note on terminology • If you look back at our definitions of logistics and SCM the only real difference is that definitions of logistics do not deal with transformation processes. • Purchasing, logistics and operations have traditionally been dealt with as different processes and functions - but a supply chain view tends to obscure these differences. So the key point is we are talking about the flows (stuff, information and $$) through a supply chain - regardless of what we call it.

24. More terminology • Push chains verses demand (or pull chains) • Inbound supply chain • Often linked with lean production (or JIT) • Outbound Supply chain (value chain) • Enterprise systems (ERP) • EDI • Channels of Distribution

25. For next week • Reading 2 • Read commodity study and come prepared to ask questions on Thursday • Your group will have to turn in commodity study topics by April 5 – I will handle them FCFS • Strategy slides already posted