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SUPPLY CHAIN MANAGEMENT:

SUPPLY CHAIN MANAGEMENT:. An Overview. Learning Objectives. Evaluate the external change drivers in the global economy and their impact on global supply chains.

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SUPPLY CHAIN MANAGEMENT:

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  1. SUPPLY CHAIN MANAGEMENT: An Overview

  2. Learning Objectives • Evaluate the external change drivers in the global economy and their impact on global supply chains. • Discuss the development of supply chain management in leading organizations and understand its contributions to their financial viability. • Appreciate the significance and role of supply chain management among private as well as public or nonprofit organizations. • Understand the contributions of supply chain management to organizational efficiency and effectiveness for competing successfully in the global marketplace.

  3. Learning Objectives, continued • Explain the benefits that can be achieved from implementing supply chain practices. • Understand the major challenges and issues facing organizations developing and implementing supply chain strategies.

  4. The APICS-Standard Planning Framework

  5. Intro to Supply Chain • Materials • Any commodities used directly or indirectly in producing a product or service. • Raw material (ROH), semi-finished product (HALB), finished product (FERT), and Trading material (HAWA). • Supply chain • Flow of materials through various organizations from the raw material supplier to the finished goods consumer.

  6. Supply Chain Management • Definition • All management functions related to the flow of materials from the company’s direct suppliers to its direct customers. • Functions included: • purchasing, traffic, production control, inventory control, warehousing, and shipping. • Two alternative names: • Materials management • Logistics management

  7. Supply Chains Definition • Supply Chain • A supply chain is the network of organizations, people, technology, activities, information and resources involved in the production of a product or a service • Includes suppliers, manufacturers, transporters, warehouses, retailers and customers • Production System • A manufacturing subsystem that includes all functions required to design, produce, distribute, and service a manufactured product. • A Supply Chain consists of one or many production systems that work together in the fulfillment of a customer order • Best viewed as a network

  8. Supply Chain for Steel in an Automobile Door STEEL MILL Forms steel ingot MINING COMPANY Mines iron ore STEEL COMPANY Forms sheet metal Iron ore Steel ingots Sheet metal AUTOMOTIVE SUPPLIER Makes door AUTOMOBILE MANUFACTURER Makes automobile CAR DEALERSHIP Does preparation Car Car door Prepared car FINAL CONSUMER Drives automobile

  9. Supply Chain Managementin a Manufacturing Plant Receiving and Inspection Raw Materials, Parts, and In-process Ware- Housing Production Finished Goods Ware- housing Inspection, Packaging, And Shipping Customers Suppliers Materials Management Warehousing and Inventory Control Shipping and Traffic Purchasing Production Control Physical materials flow Information flow

  10. Logistics • Logistics usually refers to management of: • movement of materials within the factory (Internal) • shipment of incoming materials from suppliers (Inbound) • shipment of outgoing products to customers (Outbound)

  11. Movement of Materials within Factories The typical locations from/to which material is moved: Incoming Vehicles Receiving Dock Quality Control Warehouse Work Center Other Work Centers Packaging Finished Goods Shipping Shipping Dock Outgoing Vehicles

  12. Material flow (shipping) Decisions • “Transportation Problem” • Problem involves shipping a product from several sources (ex. factories) with limited supply to several destinations (ex. warehouses) with demand to be satisfied • Per-unit cost of shipping from each source to each destination is specified • Optimal solution minimizes total shipping cost and specifies the quantity of product to be shipped from each source to each destination

  13. Warehousing • Definition • Warehousing is the management of materials while they are in storage. • Viewed as distribution center (DC) • Conventional warehousing activities: • Ordering • Storing • Dispersing • Accounting

  14. Warehousing • Record keeping within warehousing requires a stock record for each item that is carried in inventories. • The individual item is called a stock-keeping unit (SKU). • Stock records are running accounts that show: • On-hand balance • Receipts and expected receipts • Disbursements, promises, and allocations

  15. Forces Driving the Rate of Change Major external forces that change today’s enterprise operations and raise the importance of SCM: • Globalization • Enabling technology • Focus on core business and competence • Partnership and consolidation (vertical & horizontal integration) and power shift (to SCM) • The empowered consumer • Government policy and regulation

  16. The Supply Chain Concept • Short supply chain history • Started in the 1960s with the development of the physical distribution concept • Initial focus on physical distribution and outbound logistics • It took off in the 1980s, the logistics or integrated logistics management concept developed in a growing number of organizations • The underlying logic of the systems or total cost concept was developed as the rationale for logistics management • Supply chain management can be viewed as a pipeline or conduit (or value chain) for the efficient and effective flow of products/materials, services, information, and financials

  17. Figure 1-1A View of Logistics Management

  18. Figure 1-2 Integrated Logistics Management Source: Center for Supply Chain Research, Penn State University.

  19. Figure 1-3Generic Value Chain Source: Michael Porfun, Competitive Advantage (New York: The Free Press, 1985): 37

  20. Figure 1-4 Integrated Supply Chain Source: Center for Supply Chain Research, Penn State University

  21. Figure 1-5Throughput time comparison Source: “Efficient Consumer Response: Enhancing Consumer Value in the Grocery Industry” by Kurt Salmon Associates, Inc. (Jan. 1993)

  22. Figure 1-6Total Supply Chain Management Cost Source: Supply Chain Council

  23. Major Supply Chain Issues • Supply Chain Networks • The network facilities and supporting transportation is important • Increased complexity for organizations is a problem • Inventory Deployments • Inventory duplication • Bullwhip effect • Collection and storage of vast amounts of data • Cost/Value • Efficiency (cost) and effectiveness (value) prevention of suboptimization • Organizational Relationships • Tradeoffs and optimization • Performance Measurement • Why and how

  24. Major Supply Chain Issues, continued • Supply Chain Networks (continued) • Technology • Challenge is to evaluate and successfully implement the technology • Transportation Management • Right product, right time, right quantity, right quality, right cost, right destination • Supply Chain Security • Concern and potential challenge since 9/11

  25. Summary • Cash flow has become one of the most important measures of financial viability in today’s global markets. Supply chains are an important determinant of improved cash flow since they impact order cycle time to customers. • Supply chains are an important determinant of capital consumption since they impact working capital, inventory levels, and other assets such as warehouses. • Efficient and effective supply chains can free up valuable resources and improve customer fulfillment systems so as to increase return on investment or assets and improve shareholder value.

  26. Summary, continued • The accelerated rate of change in our economy has accelerated the necessity of continuing changes in organizations or even transformation to remain competitive. • The rate of change has been driven by a set of external forces including but not limited to globalization, technology, organizational consolidation and shifts in power in supply chains, an empowered consumer, and government policy and regulations. • The conceptual basis of the supply chain is not new. In fact, organizations have evolved from physical distribution management to logistics management to supply chain management.

  27. Summary, continued • Supply chains are boundary spanning and require managing three flows—products, information, financials (cash), and demand. • Supply chain management is a journey, not a goal, and there are no “silver bullets” since all supply chains are unique. • Information is power, and collaborative relationships internally and externally are a necessary ingredient for success. • The performance of supply chains must be measured in terms of overall corporate goals for success. • Supply chains need to focus on the customers at the end of the supply chain and be flexible and responsive.

  28. Summary, continued • Technology is important to facilitate change, but it must follow a process and educate people to address problems and issues appropriately. • Transportation management and security have become increasingly important in the twenty-first century because of changes that have occurred.

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