Supply Chain Management SCM

1. CHAPTER 3/10/B-8 Supply Chain Management (SCM)

2. Learning Objectives Understand the importance and the basics of a supply chain Explain two most common supply models Five SCM Components of Plan, Source, Make, Deliver, and Return Understand how SCM is evolving from its traditional form and the factors that are driving this change Explore how advances in IT are driving changes in supply chains Understanding strategic opportunities with SCM and the challenges to successful implementation of SCM Future technological trends in SCM Listerine case study

3. I know or have heard about supply chains before this class. True False

4. SCM Success Stories Top reasons why more and more executives are turning to SCM to manage their extended enterprises Suppliers are increasingly involved in product development while distributors acting as consultants in brand marketing For example, how does SCM help an organization control costs and save costs? Ans: Organizations gain visibility into their supply chains through an SCM system. This allows them to identify such things as inefficient and ineffective business process. Fixing these processes helps the organization control costs and save money.For example, how does SCM help an organization control costs and save costs? Ans: Organizations gain visibility into their supply chains through an SCM system. This allows them to identify such things as inefficient and ineffective business process. Fixing these processes helps the organization control costs and save money.

5. SCM Success Stories

6. Strategic InitiativesSupply Chain Management (SCM) What is a supply chain or distribution chain? Two popular supply/distribution models Sell-source-ship Buy-hold-sell SCM: Involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability SCM IT systems support SCM activities by automating the tracking of inventory and information among business processes and across companies

7. Basics of a Supply Chain The supply chain has three main links: Materials flow from suppliers and their “upstream” suppliers at all levels Transformation of materials into semifinished and finished products through the organization’s own production process Distribution of products to customers and their “downstream” customers at all levels Collecting, analyzing, and distributing transactional information to all relevant parties, SCM systems help all the different entities in the supply chain work together more effectively SCM has significantly improved companies’ forecasting abilities over the last few years Businesses today have access to modeling and simulation tools, algorithms, and applications that can combine information from multiple sources to build forecasts for days, weeks, and months in advance Collecting, analyzing, and distributing transactional information to all relevant parties, SCM systems help all the different entities in the supply chain work together more effectively SCM has significantly improved companies’ forecasting abilities over the last few years Businesses today have access to modeling and simulation tools, algorithms, and applications that can combine information from multiple sources to build forecasts for days, weeks, and months in advance

8. Basics of a Supply Chain Plan –Plan for managing all the resources that go toward meeting customer demand for products or services Source – Choose reliable suppliers that will deliver goods and services required for making products. Make – Can include scheduling the activities necessary for production, testing, packaging, and preparing for delivery. Deliver – Commonly referred to as logistics, processes that plans for and controls the efficient and effective transportation and storage of supplies from suppliers to customers. Return – The most problematic step in the supply chain. Processes to manage defective and excess products and customer support post-delivery Supply chain management improves ways for companies to find the raw components they need to make a product or service, manufacture that product or service, and deliver it to customers Plan – This is the strategic portion of supply chain management. A company must have a plan for managing all the resources that go toward meeting customer demand for products or services. A big piece of planning is developing a set of metrics to monitor the supply chain so that it is efficient, costs less, and delivers high quality and value to customers. Source – Companies must carefully choose reliable suppliers that will deliver goods and services required for making products. Companies must also develop a set of pricing, delivery, and payment processes with suppliers and create metrics for monitoring and improving the relationships. Make – This is the step where companies manufacture their products or services. This can include scheduling the activities necessary for production, testing, packaging, and preparing for delivery. This is by far the most metric-intensive portion of the supply chain, measuring quality levels, production output, and worker productivity. Deliver – This step is commonly referred to as logistics. Logistics is the set of processes that plans for and controls the efficient and effective transportation and storage of supplies from suppliers to customers. During this step, companies must be able to receive orders from customers, fulfill the orders via a network of warehouses, pick transportation companies to deliver the products, and implement a billing and invoicing system to facilitate payments. Return – This is typically the most problematic step in the supply chain. Companies must create a network for receiving defective and excess products and support customers who have problems with delivered products. Supply chain management improves ways for companies to find the raw components they need to make a product or service, manufacture that product or service, and deliver it to customers Plan – This is the strategic portion of supply chain management. A company must have a plan for managing all the resources that go toward meeting customer demand for products or services. A big piece of planning is developing a set of metrics to monitor the supply chain so that it is efficient, costs less, and delivers high quality and value to customers. Source – Companies must carefully choose reliable suppliers that will deliver goods and services required for making products. Companies must also develop a set of pricing, delivery, and payment processes with suppliers and create metrics for monitoring and improving the relationships. Make – This is the step where companies manufacture their products or services. This can include scheduling the activities necessary for production, testing, packaging, and preparing for delivery. This is by far the most metric-intensive portion of the supply chain, measuring quality levels, production output, and worker productivity. Deliver – This step is commonly referred to as logistics. Logistics is the set of processes that plans for and controls the efficient and effective transportation and storage of supplies from suppliers to customers. During this step, companies must be able to receive orders from customers, fulfill the orders via a network of warehouses, pick transportation companies to deliver the products, and implement a billing and invoicing system to facilitate payments. Return – This is typically the most problematic step in the supply chain. Companies must create a network for receiving defective and excess products and support customers who have problems with delivered products.

9. Supply Chain Management Traditional SCM thinking ? “I buy from my suppliers, I sell to my customers.” Today focus is shifting towards visibility throughout their supply chain Knowing immediately what is transacting at the customer end of the supply chain ? Reduces waiting time for this information to flow upstream Improves ability to act swiftly Best Buy checks inventory levels at each of its 750 stores across North America as often as every half-hour Reduces the guesswork out of inventory replenishment This chapter takes a look at extending an organization through SCM and discusses: The reasons for SCM’s explosive growth Using SCM to enhance decision making SCM success factors This chapter takes a look at extending an organization through SCM and discusses: The reasons for SCM’s explosive growth Using SCM to enhance decision making SCM success factors

10. lion : pride :: elephant : pack family brood herd

11. Factors Driving SCMIT’s Role in the Supply Chain

12. Visibility and Consumer Behavior Supply chain visibility – the ability to view all areas up and down the supply chain Bullwhip effect – occurs when distorted product demand information passes from one entity to the next throughout the supply chain Consumer Behavior Demand planning software – generates demand forecasts using statistical tools and forecasting techniques Supply chain visibility allows organizations to eliminate the bullwhip effect To explain the bullwhip effect to your students discuss a product that demand does not change, such as diapers. The need for diapers is constant, it does not increase at Christmas or in the summer, diapers are in demand all year long. The number of newborn babies determines diaper demand, and that number is constant. Retailers order diapers from distributors when their inventory level falls below a certain level, they might order a few extra just to be safe Distributors order diapers from manufacturers when their inventory level falls below a certain level, they might order a few extra just to be safe Manufacturers order diapers from suppliers when their inventory level falls below a certain level, they might order a few extra just to be safe Eventually the one or two extra boxes ordered from a few retailers becomes several thousand boxes for the manufacturer. This is the bullwhip effect, a small ripple at one end makes a large wave at the other end of the whip. Supply chain visibility allows organizations to eliminate the bullwhip effect To explain the bullwhip effect to your students discuss a product that demand does not change, such as diapers. The need for diapers is constant, it does not increase at Christmas or in the summer, diapers are in demand all year long. The number of newborn babies determines diaper demand, and that number is constant. Retailers order diapers from distributors when their inventory level falls below a certain level, they might order a few extra just to be safe Distributors order diapers from manufacturers when their inventory level falls below a certain level, they might order a few extra just to be safe Manufacturers order diapers from suppliers when their inventory level falls below a certain level, they might order a few extra just to be safe Eventually the one or two extra boxes ordered from a few retailers becomes several thousand boxes for the manufacturer. This is the bullwhip effect, a small ripple at one end makes a large wave at the other end of the whip.

13. Managing Competition Supply chain planning (SCP) software– uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain Depends entirely on information for its accuracy Supply chain execution (SCE) software – automates the different steps and stages of the supply chain can be as simple as electronically routing orders from a manufacturer to a supplier

14. Speed Criticality of high quality information in a supply chain Allows for precise planning, execution, deployment of resources Timeliness: If the information arrives three dates late, chances are high that managers have already made decisions based on inaccurate information Accuracy: crucial to reduce the inventory and human resource requirements to a competitive level Digital Dashboards An effective and efficient way to view enterprise-wide information at near real-time. Digital dashboards offer an effective and efficient way to view enterprisewide information at near real-time. According to Nucleus Research, there is a direct correlation between use of digital dashboards and a company’s return on investment (ROI), hence all executives should be using or pushing the development of digital dashboards to monitor and analyze organizational operations.Digital dashboards offer an effective and efficient way to view enterprisewide information at near real-time. According to Nucleus Research, there is a direct correlation between use of digital dashboards and a company’s return on investment (ROI), hence all executives should be using or pushing the development of digital dashboards to monitor and analyze organizational operations.

15. SCM Components Four basic components of supply chain management include: Supply chain strategy – strategy for managing all resources to meet customer demand Supply chain partner – partners throughout the supply chain that deliver finished products, raw materials, and services. Supply chain operation – schedule for production activities Supply chain logistics – product delivery process

16. Strategic Opportunities with SCM With properly configured and designed SCM systems, businesses can optimize these business processes within supply chain Fulfillment: right quantity of parts at right time Logistics: lower the transportation cost with safe and reliable delivery Production: keep production line functioning smoothly Revenue and profit: no sales are lost because of empty shelves Spend: keeping the purchase cost at acceptable levels Discuss these within the context of top-line versus bottom-line initiativeDiscuss these within the context of top-line versus bottom-line initiative

17. Challenges to Successful SCM Need to realize importance of SCM in company’s success Working closely with suppliers and customers to build world class business processes Bullwhip effect (refers to erratic shifts in orders up and down the supply chain.) Ability to integrate internal IT systems, supplier and customer IT systems in innovative ways Ability to continuously adapt SCM strategies to fit with changing business environment Other challenges include ineffective internal business unit communication and misaligned incentives Volvo is the best example

18. Current Trends: RFID Radio frequency identification (RFID) - Active or passive tags store unique identifiers and relay this information to electronic readers RFID tag - contains a microchip and an antenna, and transmits a serial number via radio waves to an electronic reader Will change the way a companies operate from managing maintenance, combating theft, to augmenting Sarbanes-Oxley initiatives Manufacturers and retailers can observe sales patterns in real-time and make swift decisions about production, ordering, and pricing

19. Chapter Ten CaseRFID – Future Tracking What are some advantages and disadvantages of using RFID tags? Describe the relationship between privacy rights and RFID

20. 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 Analyzing Listerine’s Supply Chain Determine all areas and potential threats that make the supply chain vulnerable. For example, An unusually bad season in Australia causes the eucalyptus harvest to fall short of expectation production levels, which causes the price to skyrocket The factory in Lititz, Pennsylvania, is destroyed by a fire One of its transportation ships sinks A hurricane causes one of its transportation ships to be delayedAnalyzing Listerine’s Supply Chain Determine all areas and potential threats that make the supply chain vulnerable. For example, An unusually bad season in Australia causes the eucalyptus harvest to fall short of expectation production levels, which causes the price to skyrocket The factory in Lititz, Pennsylvania, is destroyed by a fire One of its transportation ships sinks A hurricane causes one of its transportation ships to be delayed

21. Learning Objectives - Revisited Understand the importance and the basics of a supply chain Explain two most common supply models Five SCM Components of Plan, Source, Make, Deliver, and Return Understand how SCM is evolving from its traditional form and the factors that are driving this change Explore how advances in IT are driving changes in supply chains Understanding strategic opportunities with SCM and the challenges to successful implementation of SCM Future technological trends in SCM Listerine case study