SEEM 4610 Supply Chain Management

1. SEEM 4610 Supply Chain Management Janny M.Y. Leung Supply Chain Management

2. What is a Supply Chain? A supply chain consists of all stages involved, directly and indirectly, in fulfilling a customer’s request. Supply Chain Management

3. Who is in a supply chain? • Suppliers • transporters • manufacturers • warehouses • distributors • retailers • customers Supply Chain Management

4. Transporter Supplier Manufacturer Distributor Retailer Supplier What happens in a supply chain? Supply Chain Management

5. Flows in a supply chain • Material flows • Information flows • Cash flows Supply Chain Management

6. Manufacturer Bank Supplier Manufacturer Order assembler Supplier Transporter On-line retailer What happens in a supply chain? Supply Chain Management

7. Traditional view of logistics • Manufacturing cost 48% • Marketing cost 27% • Logistics cost 21% • Profit 4 % • Logistics related activity account for 11% of GNP of USA • Savings in cost reduction: • typical box of cereal spends 104 days from factory to sale • US Grocery industry: 10% operating cost = $30 billion Supply Chain Management

8. Supply Chain Management: The True Magnitude • Compaq estimates it lost US$1 billion in sales in 1995 because laptops were not available when and where needed • When the new 1 gig processor was introduced by AMD, the price of 800 MB processor dropped by 30% • Proctor&Gamble estimated savings of US$65 million by collaboration resulting in better matching of supply and demand Supply Chain Management

9. “Staple yourself to an order” • Every time an order is handled, a customer is handled • Every time an order is neglected, a customer is neglected • Supply chain management: • focus on the systemic view • focus on the customers’ interest Supply Chain Management

10. The order management cycle Supply Chain Management

11. Objective of a supply chain Maximise the overall value generated = (Worth of product to customer) – (cost/effort expended in filling request) The customer is the ONLY source of revenue! Supply chain management is the management of the flows in a supply chain to maximise total profitability Supply Chain Management

12. Customer order cycle Replenishment cycle Manufacturing cycle Procurement cycle Customer Retailer Distributor Manufacturer Supplier Cycle view of a supply chain Supply Chain Management

13. Customer Order Cycle • Customer Arrival • Customer order entry • Customer order fulfilment • Customer order receiving Supply Chain Management

14. Replenishment Cycle • Retail order trigger • Retail order entry • Retail order fulfilment • Retail order receiving Supply Chain Management

15. Manufacturing Cycle • Order Arrival • (from distributor, retailer or customer) • Production Scheduling • Manufacturing • Shipping • Receiving at distributor/retailer/customer Supply Chain Management

16. Procurement Cycle • Order trigger • Production/purchase planning • Shipping • Delivery/receipt of order Component orders can be much better controlled once manufacturing schedule is set! Supply Chain Management

17. Push/Pull Boundary in a Supply Chain • Pull processes • initiated in response to a customer order • e.g. Dell • Push processes • initiated in anticipation of customer orders • e.g. supermarket Supply Chain Management

18. Drivers of Supply Chain Performance Responsiveness Efficiency • Supply chain structure • inventory • transportation • facilities • information Supply Chain Management

19. Considerations for Supply chain drivers Supply Chain Management

20. Decision Phases in a Supply Chain • Supply chain strategy and design • configuration • location/capacity • transportation modes • Supply chain planning • distribution flow planning • inventory level/location • outsourcing • Supply chain operation • order fulfilment • replenishment • shipment Supply Chain Management

21. Importance of Supply Chain - Dell’s Success Story • Dell since 1993, earnings growth > 65% • Direct Sales • customers -> manufacturers -> suppliers • Customer management • enormous database • steers customers over phone to configurations in stock • Make-to-order; low inventory • matching supply to demand; reduce obsolescence risk • Co-ordinates direct shipment from suppliers with service representatives • sophisticated information exchange among suppliers and logistics provider • Few manufacturing centers (Austin, Brazil, China, Ireland, Malaysia) • Tight tracking and management of cash flow Supply Chain Management

22. Custom-designed Computers • The Traveler specifies unique configuration • The Traveler travels throughout assembly to shipping • JIT Inventory • Mat’l immediately ready to use • Qty meeting order vol. Dell.com • Kitting • Traveler is pulled, all components required to make the system are picked into a tote • Build to Order • Workers use the kit to assemble and initial test the entire system • Inside Sales Reps • Take order • Review info • Enter in system Voice-to-voice Testing and Integration Face-to-face test Boxing & Shipping Dell’s Direct Model Supply Chain Management

23. Seven-Eleven Japan • Phenomenal growth • 1974: first store; 1999: 8097 stores • In last decade: sales tripled, inventory reduced by 1/3, profits quadrupled • Company image • convenient, cheerful • ready-made lunch and dinner Supply Chain Management

24. Seven Eleven stores • Key products (over 3000 SKUs): • processed foods 50 % • fresh foods 30% • non-food 20% • Small stores, no storage space Supply chain objective: Micro-matching of supply and demand (by location, time of day, day of week, season,etc.) Supply Chain Management

25. 7-11 Supply Chain strategy • Facilities • dominant location strategy • 844 in Tokyo, 5523 in 21 prefectures • Information • high-speed data network linking stores, HQ, suppliers and DCs • store computer linked to POS and scanner for sales and receiving • sales analysis by SKU and product categories • sales trend impacts store display • Distribution • deliveries from over 200 plants • cross-docking at distribution centres (hold no food inventory) • combined delivery (fresh+chilled+frozen) reduce truck visit to stores • no direct delivery Approx. 60 inventory turns per year!! Supply Chain Management

26. Other Supply Chain Examples • Amazon.com • no retail stores • purchase from book distributor instead of from publisher • “assemble”-to-order • books and music • Li & Fung • integrator role • Supply Chain Management - Hong Kong Style Supply Chain Management

27. Readings “Staple yourself to an order”, B.P. Shapiro, V.K. Rangan, J.J. Sviokla, Harvard Business Review, July-August, 1992. “Fast Global and Entrepreneurial: Supply Chain Management, Hong Kong Style” Harvard Business Review, Sept-Oct 1998. Supply Chain Management