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Supply Chain Management. Chang-Yang Lin, PhD Professor and Coordinator of CIS Eastern Kentucky University. SCM and Inaccuracy Problems. On a typical day in a U.S. supermarket, 8.2% of the items are out of stock.
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Supply Chain Management Chang-Yang Lin, PhD Professor and Coordinator of CIS Eastern Kentucky University
SCM and Inaccuracy Problems • On a typical day in a U.S. supermarket, 8.2% of the items are out of stock. • 33% of out-of-stock items are located in the store, just not in the correct location. • The cost of stockouts in U.S. supermarkets are estimated at $7 to $12 billion of sales. • Before being stored on store shelves, items pass through several processes, including order processing, fulfillment, staging, shipment, receiving, short-term storage, and finally shelving. EKU Business
A Typical Supply Chain a coordinated system of entities, activities, information and resources involved in moving a product or service from supplier to customer
A Supply Chain a network of organizations and facilities that transforms raw materials into products delivered to customers also includes transportation companies, warehouses, & inventories and some means for transmitting messages & information
Dell’s own channel for • manufacturing and selling • eliminated • distributors and • retailers
Supply Chain Management • SCM is the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible • SCM spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption EKU Business
SCM Problems • Distribution network configuration: Number and location of suppliers, production facilities, distribution centers, warehouses and customers. • Distribution strategy: Centralized versus decentralized, direct shipment, pull or push strategies, third party logistics. • Information: Integrate systems and processes through the supply chain to share valuable information, including demand signals, forecasts, inventory and transportation. • Inventory management: Quantity and location of inventory including raw materials, work-in-process and finished goods. EKU Business
SCM Activities/Functions • The purpose of SCM is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and improving inventory velocity • SCM activities can be grouped into strategic, tactical, and operational level of activities EKU Business
The Bullwhip Effect • An observed phenomenon in forecast-driven distribution channels • Because forecast errors are a given, companies often carry "safety stock" • Moving up the supply chain from end-consumer to raw materials supplier, each supply chain participant has greater observed variation in demand and thus greater need for safety stock • The effect is that variations are amplified the farther you get from the end-consumer EKU Business
The bullwhip effect is a phenomenon in which the variability in the size and timing of orders increase at each stage up the supply chain, from customer to supplier
The Bullwhip Effect (continued) • One way to eliminate the bullwhip effect is to give all participants in the supply chain access to consumer-demand information from the retailer. • Each organization can thus plan its inventory or manufacturing based on true demand and not on the observed demand from the next organization up in the supply chain. • An interorganizational information system is necessary to share such data. EKU Business
Stabilizing the Bullwhip Effect:A Demand-Driven Supply Chain • Individual Wal-Mart stores transmit POS data from the cash register back to corporate headquarters several times a day • This demand information is used to queue shipments from the Wal-Mart distribution center to the store and from the supplier to the Wal-Mart distribution center • The result is near-perfect visibility of customer demand and inventory movement throughout the supply chain • A demand-driven supply chain which reacts to actual customer orders. In manufacturing, this concept is called Kanban (カンバン看板) EKU Business
Supplier Relationship Management (SRM) • SRM is a business process for managing all contacts between an organizational and its suppliers. • SRM applications support threebasic processes: source, purchase, and settle. • SRM examines inventory, determines that items are required, and automatically creates the order via its connection to the supplier’s CRM EKU Business
Definition of Key TermsInventory • Inventory consists of a list of goods and materials held available in stock • Manufacturing organizations usually divide their "goods for sale" inventory into: • Materials and components (or Raw materials) scheduled for use in making a product • Materials and components that have begun their transformation to finished goods (or Work in Process) • Finished goods - goods ready for sale to customers EKU Business