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Chapter 7

Chapter 7. Supply Chain Management. Supply Chain. All activities associated with the flow and transformation of goods and services from raw materials to the end user, the customer

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Chapter 7

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  1. Chapter 7 Supply Chain Management

  2. Supply Chain • All activities associated with the flow and transformation of goods and services from raw materials to the end user, the customer • A sequence of business activities from suppliers through customers that provide the products, services, and information to achieve customer satisfaction 2000 by Prentice-Hall, Inc

  3. Information Distributors Producers Suppliers Customers Finished goods, end products and services Package and delivery Materials, parts, sub-assemblies, and services Total satisfaction with quality, price, delivery, and service Products and Services Products and Services Products and Services Inventory Inventory Inventory Cash The Supply Chain Figure 7.1 2000 by Prentice-Hall, Inc

  4. Supply Chain Management • Synchronization of activities required to achieve maximum competitive benefits • Coordination, cooperation, and communication • Rapid flow of information • Vertical integration 2000 by Prentice-Hall, Inc

  5. Supply Chain Uncertainty • Forecasting, lead times, batch ordering, price fluctuations, and inflated orders contribute to variability • Inventory is a form of insurance • Distorted information is one of the main causes of uncertainty 2000 by Prentice-Hall, Inc

  6. Information in the Supply Chain • Centralized coordination of information flows • Integration of transportation, distribution, ordering, and production • Direct access to domestic and global transportation and distribution channels • Locating and tracking the movement of every item in the supply chain 2000 by Prentice-Hall, Inc

  7. Information in the Supply Chain • Consolidation of purchasing from all suppliers • Intercompany and intracompany information access • Data interchange • Data acquisition at the point of origin and point of sale • Instantaneous updating of inventory levels 2000 by Prentice-Hall, Inc

  8. Electronic Business • Replacement of physical processes with electronic ones • Cost and price reductions • Reduction or elimination of intermediaries • Shortening transaction times for ordering and delivery • Wider presence and increased visibility 2000 by Prentice-Hall, Inc

  9. Electronic Business • Greater choices and more information for customers • Improved service • Collection and analysis of customer data and preferences • Virtual companies with lower prices • Leveling the playing field for smaller companies • Gain global access to markets & customers 2000 by Prentice-Hall, Inc

  10. Table 7.1Supply Chain Evolution at Nabisco 2000 by Prentice-Hall, Inc

  11. Electronic Data Interchange • Computer-to-computer exchange of business documents in a standard format • Quick access, better customer service, less paperwork, better communication, increased productivity, improved tracing and expediting, improves billing and cost efficiency 2000 by Prentice-Hall, Inc

  12. 1234 5678 Bar Codes • Computer readable codes attached to items flowing through the supply chain • Generates point-of-sale data which is useful for determining sales trends, ordering, production scheduling, and deliver plans 2000 by Prentice-Hall, Inc

  13. The Internet • Instant global access to organizations, individuals, and information sources • Fundamentally changes the way organizations do business • Removed geographic barriers • Adds speed and accessibility to the supply chain 2000 by Prentice-Hall, Inc

  14. Figure 7.2 Build-to-Order Cars over the Internet 2000 by Prentice-Hall, Inc

  15. The E-Automotive Supply Chain SUPPLY CHAIN PROCESS AUTOMOTIVE PAST E-AUTOMOTIVE Table 7.2 2000 by Prentice-Hall, Inc

  16. Intranets and Extranets • Intranets are internet-like networks that operate within a single organization • Extranets are intranets that can be connected to the global internet • Difference is in who has access to the system 2000 by Prentice-Hall, Inc

  17. IT Issues • Increased benefits and sophistication come with increased costs • Efficient web sites do not necessarily mean the rest of the supply chain will be as efficient • Security problems are very real • Partnership and trust are important elements that may be new to business relationships 2000 by Prentice-Hall, Inc

  18. Suppliers • Purchased materials account for about half of manufacturing costs • Materials, parts, and service must be delivered on time, of high quality, and low cost • Suppliers should be integrated into their customers’ supply chains • Partnerships should be established • On-demand delivery (JIT) is a frequent requirement 2000 by Prentice-Hall, Inc

  19. Sourcing • Relationship between customers and suppliers focuses on collaboration and cooperation • Outsourcing has become a long-term strategic decision • Organizations focus on core competencies • Single-sourcing is increasingly a part of supplier relations 2000 by Prentice-Hall, Inc

  20. E-Procurement • Business-to-business commerce conducted on the Internet • Benefits include lower transaction costs, lower prices, reduce clerical labor costs, and faster ordering and delivery times • Currently used more for indirect goods • E-Marketplaces service industry-specific companies and suppliers 2000 by Prentice-Hall, Inc

  21. Figure 7.3 The Wal-Mart Supply Chain 2000 by Prentice-Hall, Inc

  22. Figure 7.4 Centralized Supply at Honda America 2000 by Prentice-Hall, Inc

  23. Distribution • The actual movement of products and materials between locations • Handling of materials and products at receiving docks, storing products, packaging, and shipping • Often called logistics • Driving force today is speed • Particularly important for Internet dot-coms 2000 by Prentice-Hall, Inc

  24. Figure 7.5 Order Fulfillment at Amazon.com 2000 by Prentice-Hall, Inc

  25. Distribution Centers and Warehousing • DCs are some of the largest business facilities in the United States • Trend is for more frequent orders in smaller quantities • Flow-through facilities and automated material handling • Final assembly and product configuration may be done at the DC 2000 by Prentice-Hall, Inc

  26. Warehouse Management Systems • Highly automated systems • Controls item putaway, picking, packing, and shipping • Transportation management, order management, yard management, labor management, warehouse optimization 2000 by Prentice-Hall, Inc

  27. Figure 7.6 A WMS 2000 by Prentice-Hall, Inc

  28. Vendor-Managed Inventory • Manufacturers generate orders, not distributors • Stocking information is accessed using EDI • A first step towards supply chain collaboration • Increased speed, reduced errors, and improved service 2000 by Prentice-Hall, Inc

  29. Collaborative Distribution and Outsourcing • Collaborative planning, forecasting, and replenishment (CPFR) • Internet-based exchange of data and information • Significant decrease in inventory levels and more efficient logistics • Companies focus on core competencies 2000 by Prentice-Hall, Inc

  30. Transportation • Important element, often overlooked • Common methods are railroads, trucking, water, air, intermodal, package carriers, and pipelines 2000 by Prentice-Hall, Inc

  31. Railroads • 150,000 miles in US • Low cost, high-volume • Improving flexibility • intermodal service • double stacking 2000 by Prentice-Hall, Inc

  32. Trucking • Most used mode in US • Flexible, small loads • Consolidation, Internet load match sites • Part of TQM supplier-customer relationship • Single sourcing reduces number of trucking firms serving a company 2000 by Prentice-Hall, Inc

  33. Air • Rapidly growing segment of transportation industry • Lightweight, small items • Quick, reliable, expensive • Major airlines and US Postal Service, UPS, FedEx, DHL 2000 by Prentice-Hall, Inc

  34. Package Carriers • FedEx, UPS, US Postal Service, DHL • Significant growth driven by e-businesses • Use several modes of transportation • Expensive • Fast and reliable • Innovative use of technologies 2000 by Prentice-Hall, Inc

  35. Intermodal • Combination of several modes of transportation • Most common are truck/rail/truck and truck/water/rail/truck • Enabled by the use of containers 2000 by Prentice-Hall, Inc

  36. Water • One of oldest means of transport • Low-cost, high-volume, slow • Bulky, heavy and/or large items • Standardized shipping containers improve service • The most common form of international shipping 2000 by Prentice-Hall, Inc

  37. Pipelines • Primarily for oil & refined oil products • Slurry lines carry coal or kaolin • High capital investment • Low operating costs • Can cross difficult terrain 2000 by Prentice-Hall, Inc

  38. Internet Transportation Exchanges • Bring together shippers and carriers • Initial contact, negotiations, auctions • Typically only one form of transportation, intermodal exchanges have been difficult to develop 2000 by Prentice-Hall, Inc

  39. Global Supply Chain • Free trade & global opportunities • Nations form trading groups • No tariffs or duties • Freely transport goods across borders 2000 by Prentice-Hall, Inc

  40. Global Supply Chain Problems • National and regional differences • Customs, business practices, and regulations • Foreign markets are not homogeneous • Quality can be a major issue 2000 by Prentice-Hall, Inc

  41. Duties and Tariffs • Proliferation of trade agreements • Group members charge uniform tariffs • Member nations have a competitive advantage within the group 2000 by Prentice-Hall, Inc

  42. APEC NAFTA TAFTA FTAA ASEAN CALM ATPA MERCOSUR ANZCERTA Duties and Tariffs Figure 7.9 2000 by Prentice-Hall, Inc

  43. Landed Cost and Internet-Based ITL Systems • Knowing landed cost is critical in international trade • Common components are transportation charges, tariffs, duties, and taxes • ITL systems convert language and currency between trading partners 2000 by Prentice-Hall, Inc

  44. Infrastructure Obstacles to Global Trade • Some emerging markets lack suitable distribution systems, i.e. roads, rail systems • Existing roads and ports may be inadequate • Market instability, political instability • Vertical integration is a common solution 2000 by Prentice-Hall, Inc

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