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Supply Chain Basics

Supply Chain Basics. Supply Chain Management IEEM 341 Fall, 2004 Dr. Lu. Outline. Syllabus of the class The definition of supply chain and supply chain management The layout of this course The goal of this this course Read: Chapter 1 and chapter 3. Syllabus of IEEM 341 .

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Supply Chain Basics

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  1. Supply Chain Basics Supply Chain Management IEEM 341 Fall, 2004 Dr. Lu

  2. Outline • Syllabus of the class • The definition of supply chain and supply chain management • The layout of this course • The goal of this this course • Read: Chapter 1 and chapter 3

  3. Syllabus of IEEM 341 • Instructor: Dr. Xiangwen Lu • Phone: 2358-8627 • Office: Room 5544. • E-mail: xwlu@ust.hk • Tentative office hours: • Tuesday 10-12, Thursday 10-12, by appointment, drop by • Teaching assistant:Mr. Miao Zhaowei, E-mail: miaomiao@ust.hk

  4. Tentative Schedule (1) • Basic Picture about SCM • Week 1-2: Introduction of Supply Chain Management • Week 3: The Strategic fit and scope; play the beer game • Week 4: The bullwhip effect

  5. Tentative Schedule (2) • Demand Forecasting and planning • Week 5-6, demand forecasting • Week 7: Aggregate Planning and Forward Buying • Managing the material flow • Week 8-11: Joint replenishment, forward buying, risk-pooling, postponement, tailored sourcing • Week 12: Network design and transportation

  6. Tentative Schedule (3) • Managing the information flow • Week 4: The bullwhip effect • Week 8: Guest speakers: the supply chain management in the internet age • Week 10: Risk pooling, postponement • Week 13: e-business • Managing the financial flow • Week 13: Supply chain coordination: buy back, discount and rebate

  7. Textbook and Reference • Textbook • Chopra and Meindl : Supply chain management, second edition, Prentice Hall. • Reference • Nahmias: Production and operation analysis, Irwin. • Thomas: Quantitative methods for business studies, Prentice Hall

  8. Grade Distribution • Homework 30% • Mid-term 35% • Final project 30% • Class participation 5% • Project • Finding a supply chain and provide detailed analysis for the current practice and for the recommendations

  9. Why SCM hot now? • 1970, Quality • 1980, lean manufacturing • 1990 and beyond, SCM • The Increased complexity of supply chain • Emergence of global supply chain • More demanding customers • Shorter production lifecycles • Outsourcing, decentralized control and more… • Feasibilities • radical improvement in information technology and communication capabilities

  10. Definition of Supply Chain A Network of facilities including • Material supply from the suppliers • Transformation of materials to finished products • Distribution of finished products to the customer As well as associated information flow and financial flow

  11. P &G Product of Detergent Manufacturer Wholesaler Retailer Customer Detergent manufacturer P&S or third party DC P&S Supermarket Customer wants detergent and goes To Supermarket Supplier Supplier Supplier Plastics Producer Packaging Firm Chemical Manufacturer (e.g. Oil Company) Chemical Manufacturer (e.g. Oil Company) Paper Manufacturer Timber Industry

  12. Dell Computer Direct Shipment Master Board Dell Assembly Plant Website or Phone Customer wants To buy computer Hard disk Customer’s Order SRAM

  13. Different Names • Supply network, supply network management • Demand chain, demand network management, demand network integration • Value chain, value chain management

  14. Capacity, promotion plans, delivery schedules Raw materials, in-process products, finished goods Credits, payment terms, invoices Suppliers manufacturer Distributors Resellers Customers Sales, orders, inventory, quality, promotion plans Returns, repairs, servicing, recycling, disposal Payments, consignment Supply Chain Flows Information Material Finance Information Material Finance

  15. Structures and Players • Basic supply chain structure • Serial, Distribution and Assemble • Players/Echelons • Supplier • Manufacturer • Distributor/Wholesaler • Retailer

  16. Serial Supply Chain • Boxes=Inventory/process locations • Arrows=product flows Supplier Wholesaler Retailer

  17. Distribution Network Supplier Wholesaler Retailer

  18. Assembly Network Supplier Manufacturer

  19. What Is SCM • SCM is the systematic coordination of activities/processes that procure, produce and deliver products and/or service in a manner that maximizes value to the end customer

  20. Goal of SCM • Maximize the overall value generated in the chain • Generate cost savings and better customer service over the entire supply chain • Ideal: • Have the right product • In the right amount • At the right place • At the right time • At the least cost

  21. SCM v.s. Logistics • Logistics • Transportation, inventory management, material management and purchasing • Functional area (s) within a firm • SCM • Accomplish logistics task from a chain’s perspective • Seeking strategic advantage by coordinating logistics activities among firms in the supply chain • Creative use of technology, reallocation decision rights, reconfiguring the supply chain network

  22. Pampers • Pampers is diaper produced by Procter and Gamble • The consumers are babies • They consume the product at pretty steady rate

  23. Bullwhip Effect Example (P & G) Lee et al., 1997, Sloan Management Review

  24. Bullwhip Effect • The variability is amplified when we move up along the chain Demand Orders by the retailer Orders by the manufacturer

  25. Ways to Reduce Bullwhip Effect • Good demand forecasting • We will discuss how to make good forecasting based on known information • Information sharing • Value of information sharing and VMI will be addressed • E-biz will be discussed • Coordination • Several kinds of mechanism to coordinate the chain will be introduced

  26. Course Layout • Demand forecasting • Managing the flow of material • Inventory, transportation and network design • The role of information and technology • Value of information sharing, e-business, e-commerce • Managing relationship: coordination and integration • Outsourcing, partnership, incentives, contracts

  27. Different Distribution System • Central warehousing Cross-docking Direct shipment

  28. Recent Successful Innovations • Cross docking • Wal-Mart • Direct Shipments • Amazon.com, Dell, eBay • Vendor managed inventory (VMI) programs • Wal-Mart and Procter & Gamble • Postponement • Hewlett-Packard • Assemble to order • Dell • Dynamic pricing • eBay (bid), IBM and airlines

  29. Course Objectives • Questions • Why are these innovations successful? • Can they be simply copied by other company? • Are there any theory or guidelines? • Can we innovate too? • We are trying to answer these questions by • Studying the basic concepts and theory • Listening to guest speaker • Analyzing the case • A bigger goal: a way of thinking

  30. Summary • What is supply chain • What is supply chain management (SCM) • Bullwhip effect • Successful innovations • Course layout and course goal • Next week • The drivers for the performance of the supply chain • The basic facts and their implications in the supply chain management

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