Supply Chain Management- Chapter 11

1. Supply Chain Management- Chapter 11 There are no problem solving assignments from Chapter 11

2. 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

3. Facilities • Warehouses • Factories • Processing centers • Distribution centers • Retail outlets • Offices

4. Functions and Activities • Forecasting • Purchasing • Inventory management • Information management • Quality assurance • Scheduling • Production and delivery • Customer service

5. Production Distribution Purchasing Receiving Storage Operations Storage Typical Supply Chains

6. Supplier } Supplier Storage Mfg. Storage Dist. Retailer Customer Supplier Typical Supply Chain for a Manufacturer

7. Supplier } Storage Service Customer Supplier Typical Supply Chain for a Service

8. Need for Supply Chain Management • Improve operations • Increasing levels of outsourcing • Increasing transportation costs • Competitive pressures • Increasing globalization • Increasing importance of e-commerce • Complexity of supply chains • Manage inventories • For industries with volatile industries

9. Bullwhip Effect Demand InitialSupplier Final Customer Inventory oscillations become progressivelylarger looking backward through the supply chain

10. Benefits of Supply Chain Management • Lower inventories • Higher productivity • Greater agility • Shorter lead times • Higher profits • Greater customer loyalty • Integrates separate organizations into a cohesive operating system

11. Benefits of Supply Chain Management

12. Global Supply Chains • Increasing more complex • Language • Culture • Currency fluctuations • Political • Transportation costs • Local capabilities • Finance and economics • Environmental

13. Element Typical Issues Customers Determining what customers want Forecasting Predicting quantity and timing of demand Design Incorporating customer wants, mfg., and time Processing Controlling quality, scheduling work Inventory Meeting demand while managing inventory costs Purchasing Evaluating suppliers and supporting operations Suppliers Monitoring supplier quality, delivery, and relations Location Determining location of facilities Logistics Deciding how to best move and store materials Elements of Supply Chain Management

14. Strategic or Operational • Two types of decisions in supply chain management • Strategic – design and policy (mostly long term decisions) • Operational – day-today activities (short term decisions) • Major decisions areas • Location of members • Production processes • Inventory flow and management • Distribution system

15. Logistics • 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

16. Distribution Requirements Planning • Distribution requirements planning (DRP) is a system for inventory management and distribution planning

17. E-Business • 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

18. Advantages E-Business • 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

19. Disadvantages of E-Business • 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

20. 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

21. Effective/Successful 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

22. Effective/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

23. SCOR* Metrics *Refers to “Supply Chain Operations Reference,” which attempts to standardize measurements of supply chain performance.

24. 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

25. Intormation Velocity The rate at which information is communicated in a supply chain

26. NOTE The following slides simply outline the purchasing function which is common to most organizations.You will not be tested on the slides that follow this slide, but the information on these slides couldbe helpful in reference to job interviews. Hence,you should review these slides.

27. Purchasing • 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.

28. Goal of Purchasing • Develop and implement purchasing plans for products and services that support operations strategies

29. Duties of Purchasing • Identifying sources of supply • Negotiating contracts • Maintaining a database of suppliers • Obtaining goods and services • Managing supplies

30. Legal Operations Accounting Data processing Purchasing Design Receiving Suppliers Purchasing Interfaces

31. Legal Operations Accounting Data process- ing Purchasing Design Receiving Suppliers Purchasing Cycle • Requisition received • Supplier selected • Order is placed • Monitor orders • Receive orders

32. Value Analysis vs. Outsourcing • Value analysis • Examination of the function of purchased parts and materials in an effort to reduce cost and/or improve performance

33. Centralized vs Decentralized Purchasing • Centralized purchasing • Purchasing is handled by one special department • Decentralized purchasing • Individual departments or separate locations handle their own purchasing requirements

34. Suppliers • Choosing suppliers • Evaluating sources of supply • Supplier audits • Supplier certification • Supplier relationships • Supplier partnerships

35. Factors in Choosing a Supplier • Quality and quality assurance • Flexibility • Location • Price

36. Factors in Choosing a Supplier (cont’d) • Product or service changes • Reputation and financial stability • Lead times and on-time delivery • Other accounts

37. Evaluating Sources of Supply • Vendor analysis: Evaluating the sources of supply in terms of price, quality, reputation, and service

38. Evaluating Sources of Supply • Vendor analysis - evaluating the sources of supply in terms of • Price • Quality • Services • Location • Inventory policy • Flexibility

39. Supplier as a Partner

40. Supplier Partnerships • Ideas from suppliers could lead to improved competitiveness • Reduce cost of making the purchase • Reduce transportation costs • Reduce production costs • Improve product quality • Improve product design • Reduce time to market • Improve customer satisfaction • Reduce inventory costs • Introduce new products or services

41. Critical Issues • Strategic importance • Cost • Quality • Agility • Customer service • Competitive advantage • Technology management • Benefits • Risks

42. Critical Issues • Purchasing function • Increased outsourcing • Increased conversion to lean production • Just-in-time deliveries • Globalization