BUSINESS DRIVEN TECHNOLOGY Business Plug-In B3 Supply Chain Management

1. BUSINESS DRIVEN TECHNOLOGY Business Plug-In B3 Supply Chain Management

2. LEARNING OUTCOMES • Describe supply chain planning and supply chain execution • List and describe the four drivers of supply chain management • Explain supply chain management strategies focused on efficiency

3. LEARNING OUTCOMES • Explain supply chain management strategies focused on effectiveness • Summarize the future of supply chain management

4. INTRODUCTION • Supply chain – consists of all parties involved, directly or indirectly, in the procurement of a product or raw material • Supply chain management (SCM) – involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

5. Supply Chain Strategies • There are two primary types of supply chain management software: • Supply chain planning (SCP) software–uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain while reducing inventory • Supply chain execution (SCE) software – automates the different steps and stages of the supply chain

6. Supply Chain Strategies • SCP and SCE software correlation to the supply chain

7. SUPPLY CHAIN DRIVERS • The four primary drivers of supply chain management: • Facilities • Inventory • Transportation • Information • Organizations use these four drivers to support either a supply chain strategy focusing on efficiency or a supply chain strategy focusing on effectiveness

8. SUPPLY CHAIN DRIVERS

9. FACILITIES DRIVER • Facility – processes or transforms inventory into another product, or it stores the inventory before shipping it to the next facility • Three primary facilities components: • Location • Capacity • Operational design

10. FACILITIES 1: Location • Location efficiency – centralize the location to gain economies of scale, which increases efficiency • Location effectiveness – decentralize the locations to be closer to the customers, which increases effectiveness

11. FACILITIES 2: Capacity • Capacity efficiency – minimal excess capacity with the ability to produce only what is required • Capacity effectiveness – large amounts of excess capacity which can handle wide swings in demand

12. FACILITIES 3: Operational Design • Operational design efficiency – product focus design allows the facility to become highly efficient at producing one single product, increasing efficiency • Operational design effectiveness – functional focus design allows the facility to perform a specific function on many different types of products, increasing effectiveness

13. FACILITIES DRIVER

14. INVENTORY DRIVER • Inventory – offsets discrepancies between supply and demand • Two primary inventory components: • Cycle inventory • Safety inventory

15. INVENTORY 1: Cycle Inventory • Cycle inventory efficiency – holding small amounts of inventory and receiving orders weekly or even daily • Cycle inventory effectiveness – holding large amounts of inventory and receiving inventory deliveries only once a month • Cycle inventory – the average amount of inventory held to satisfy customer demands between inventory deliveries

16. INVENTORY 2: Safety Inventory • Safety inventory efficiency – holding small amounts of safety inventory • Safety inventory effectiveness – holding large amounts of safety inventory • Safety inventory – extra inventory held in the event demand exceeds supply

17. INVENTORY DRIVER

18. TRANSPORTATION DRIVER • Transportation – moves inventories between the different stages in the supply chain • Two primary inventory components: • Method of transportation • Transportation route

19. TRANSPORTATION 1: Method of Transportation • Method of transportation efficiency– choosing an inexpensive method of transportation increases efficiency, but also typically increases delivery time • Method of transportation effectiveness – choosing an expensive method of transportation to ensure speedy delivery increases effectiveness

20. TRANSPORTATION 2: Transportation Route • Transportation route efficiency– a company can save money by shipping its products to a distributor that ships the products to its customers • Transportation route effectiveness – a company can ship its products directly to its customers

21. TRANSPORTATION DRIVER

22. INFORMATION DRIVER • Information – an organization must decide how and what information it wants to share with its supply chain partners • Two primary information components: • Information sharing • Push vs. pull strategy

23. INFORMATION 1: Information Sharing • Information sharing efficiency – freely share lots of information to increase the speed and decrease the costs of supply chain processing • Information sharing effectiveness – share only selected information with certain individuals, which will decrease the speed and increase the costs of supply chain processing

24. INFORMATION 2: Push vs. Pull Information Strategy • Pull information strategy (efficiency) – supply chain partners are responsible for pulling all relevant information • Pull technology environment – pulls information • Push information strategy effectiveness – organization takes on the responsibility to push information out to its supply chain partners • Push technology environment – sends information

25. INFORMATION DRIVER

26. APPLYING A SUPPLY CHAIN DESIGN • Wal-Mart’s supply chain management strategy emphasizes efficiency, but also maintains adequate levels of effectiveness • Facilities focus – Efficiency • Inventory focus – Efficiency • Transportation focus – Effectiveness • Information focus - Efficiency

27. APPLYING A SUPPLY CHAIN DESIGN

28. Future Trends • Fastest growing SCM components: • Supply chain event management (SCEM) – enables an organization to react quickly to resolve supply chain issues • Selling chain management – applies technology to the activities in the order life cycle from inquiry to sale • Collaborative engineering – allows an organization to reduce the costs required during the design process of a product • Collaborative demand planning – helps organizations reduce their investment in inventory, while improving customer satisfaction through product availability

29. Closing Case OneListerine’s Journey • When you use Listerine antiseptic mouthwash, you are experiencing the last step in a complex supply chain spanning several continents and requiring months of coordination by countless businesses and individuals • As raw material is transformed to finished product, what will be Listerine travels around the globe and through multiple supply chains and information systems

30. Closing Case One Questions • Summarize SCM and describe Warner-Lambert’s supply chain strategy • Detail Warner-Lambert’s facilities strategy • Detail Warner-Lambert’s inventory strategy

31. Closing Case One Questions • Detail Warner-Lambert’s transportation strategy • Detail Warner-Lambert’s information strategy • Describe what would happen to Warner-Lambert’s business if a natural disaster in Saudi Arabia depletes its natural gas resources

32. Closing Case TwoCrafting an SCM Strategy for Michaels • A retailer’s transportation systems must use the most efficient routes, optimize loads, and employ economical and reliable carrier to get the right products to the right place at the right time • Michaels choose to implement a transportation system from i2 to increase planning and processing efficiencies and gain visibility into transportation planning

33. Closing Case Two Questions • Describe Michaels’s transportation strategy in terms of methods and routes • Define the correlation between the information and transportation drivers. How can Michaels use the information driver to affect its transportation driver in terms of efficiency and effectiveness? • Explain how the new systems’ ability to use “what-if” scenarios to validate new distribution network strategies will benefit Michaels