Supply Chain Management

1. Supply Chain Management

2. Supply Chain The sequence of organizations - their facilities, functions, and activities - that are involved in producing and delivering a product or service. Supply chain connects suppliers, producers and final customers together in a tework that is essential to the creation and delivery of goods and services. (Value chains are the chain of activities and functions WITHIN a single organization.)

3. Benefits of Supply Chain Management • Lower inventories • Higher productivity • Greater agility • Shorter lead times • Higher profits • Greater customer loyalty

4. Supply Chain Management (SCM) • The strategic coordination of the supply chain for the purpose of intergating supply and demand management.

5. Logistics • The part of a supply chain involved with the forward and reverse flow of goods, services, cash and information. • Movement within the facility • Incoming and outgoing shipments • Distribution

6. Facilities • Warehouses • Factories • Processing centers • Distribution centers • Retail outlets • Offices • …

7. Functions and Activities • Forecasting • Purchasing • Inventory management • Information management • Quality assurance • Scheduling • Production and delivery • Customer service

8. Key issues of SCM • Determinate the appropriate level of outsourcing • Managing procurement • Managing suppliers • Managing customer relationships • Being able to quickly identify and respond to problems • Managing risksand uncertainty

9. Production Distribution Purchasing Receiving Storage Operations Storage Typical Supply Chains

10. Supplier } Supplier Storage Mfg. Storage Dist. Retailer Customer Supplier Typical Supply Chain for a Manufacturer

11. A farm-to-market supply chain • Farm (wheat) • Suppliers: equipment, repair, feed, seed, fertilizer, pesticides, energy/fuel • Mill (flour) • equipment, repair, energy • Bakery (bread) • equipment, repair, energy, other ingredients • Supermarket (bread sold to the final customer) Transport

12. Supplier } Storage Service Customer Supplier Typical Supply Chain for a Service

13. Supply chain and Cash flow Goods and services Cash flow Reverse logistics Suppliers Consumers Marketing Customers Production Design Logistics

14. Element Typical Issues Customers Determining what customers want Forecasting Predicting quantity and timing of demand Design Incorporating customer wants, mfg., and time Processing Controlling quality, scheduling work Inventory Meeting demand while managing inventory costs Purchasing Evaluating suppliers and supporting operations Suppliers Monitoring supplier quality, delivery, and relations Location Determining location of facilities Logistics Deciding how to best move and store materials Elements of Supply Chain Management

15. Global supply chains • Product design • Products sold globally • Outsourcing to low labor cost countries • Difficulties: language, culture, currency fluctuations, increased tratnsportation costs and lead time, increased need for trust

16. PROCUREMENT • Purchasing is responsible for obtaining the materials, parts, and supplies and services needed to produce a product or provide a service.Goal: to develop and implement purchasing plans for products and services that support operations strategies. Duties: • Identifying sources of supply • Negotiating contracts • Maintaining a database of suppliers • Obtaining goods and services • Managing supplies • Purchasingcycle: series of stepsthatbeginwith a requestforpurchase and end withnotification of shipmentrecievedinsatisfactorycondition.

17. Legal Operations Accounting Data process- ing Purchasing Design Receiving Suppliers Purchasing Cycle • Requisition received • Supplier selected • Order is placed • Monitor orders • Receive orders

18. Centralized vs. Decentralized purchasing • Centralized purchasing • Purchasing is handled by one special department • Lower prices, better service and closer attention from suppliers, employing specialists • Decentralized purchasing • Individual departments or separate locations handle their own purchasing requirements • Aware to different local needs, quicker response

19. Trade-offs • Lot-size vs. inventory • Bullwhip effect • Inventory vs. transportation costs (reducing average costs) • Cross-docking • Lead time vs. transportation costs • Product variety vs. inventory • Delayed differentiation • Cost vs. customer service • Disintermediation

20. Trade-offs • Bullwhip effect • Demand variations begin at the customer end of the chain and become increasingly large as they radiate backwards through the chain. • Inventories are progressively larger moving backward through the supply chain.

21. Bullwhip Effect 1(uncertainty) Demand Final customer Initial supplier Backward effect

22. Amount of inventory = Bullwhip Effect 2 Tier 2 Suppliers Tier 1 Suppliers Producer Distributor Retailer FinalCustomer

23. Trade-offs • Cross-docking • Goods arriving at a warehouse from a supplier are unloaded from the supplier’s truck and loaded immediately onto outbound trucks. Avoids warehouse storage. Reduces holding costs and lead times.

24. Trade-offs • Delayed differentiation • Production of standard components and subassemblies, which are held until late in the process to add differentiating features (expl. automobilesproducedwithoutextras) • Disintermediation • Reducing one or more steps in a supply chain by cutting out one or more intermediaries.

25. Supply Chain Benefits and Drawbacks

26. Successful Supply Chain • Trust among trading partners • Effective communications • Supply chain visibility • Event-management capability • The ability to detect and respond to unplanned events(uncertainty) • Performance metrics

27. LOGISTICS The movement of materials, services, cash, and informationin a supplychain. Movementwithin a facility Incoming and outgoingshipments (trafficmanagemment)

28. Movement within a facility • From incoming vehicles to receiving • From receiving to storage • From storage to work centres • Between work centres (or temporary storages) • From operations to final storage • From storage to packing/shipping • From shipping to outgoing vehicles

31. Evaluatingshippingalternatives

32. Example

33. Solutions • Example 1: • H(d)/365 = (2000*10)(5-2)/365 = 164.38 • 164.38 < 135 • Usethe 2 daysfreight. • Example 2: • Betweenovernight and 2-days freights: • H(d)/365 = (200*0.3*80)(1)/365 = 13.15 • The 2-days freight is betterthantheovernight-freight [13.15<300-260]. • Between 2-days and 6-days freights: • H(d)/365 = (200*0.3*80)(4)/365 = 52.60 • The 6-days freight is betterthanthe 2-days-freight [52.60<(260-180)]. • The bestchoice is the 6-days freight.

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