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Introduction to Operations Management

Supply Chain Management Supply Chain Management (Ch.11)(Ch.11)

Hansoo Kim ( 金翰秀 )Dept. of Management Information

Systems, YUST

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OM Overview

Class Overview(Ch. 0)

Project Management

(Ch. 17)

Strategic Capacity Planning(Ch. 5, 5S)

Operations, Productivity, and Strategy

(Ch. 1, 2)

Mgmt of Quality/Six Sigma Quality

(Ch. 9, 10)

Supply Chain Management

(Ch 11)

Location Planning and Analysis

(Ch. 8)

Demand MgmtForecasting

(Ch 3)

Inventory Management

(Ch. 12)

Aggregated Planning

(Ch. 13)

Queueing/ Simulation

(Ch. 18)

MRP & ERP (Ch 14)

JIT & Lean Mfg System

(Ch. 15)

Term Project

Process Selection/

Facility Layout; LP(Ch. 6, 6S)X X X X X

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Today’s Outline Explain what a supply chain is. Explain the need to manage a supply chain and

the potential benefits of doing so. Explain the increasing importance of outsourcing. State the objective of supply chain management. List the elements of supply chain management. Identify the strategic, tactical, and operations

issues in supply chain management. Describe the bullwhip effect and the reasons why

it occurs.

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Today’s Outline Explain the value of strategic partnering. Discuss the critical importance of

information exchange across a supply chain. Outline the key steps, and potential

challenges, in creating an effective supply chain.

Explain the importance of the purchasing function in business organizations.

Describe the responsibilities of purchasing. Explain the term value analysis. Identify several guidelines for ethical

behavior in purchasing.

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Supply Chain Management

Supply Chain: the sequence of organizations - their facilities, functions, and activities - that are involved in producing and delivering a product or service.

Supply chain management: is the strategic coordination of business functions within a business organization and throughout its supply chain for the purpose of integrating supply and demand management.

Sometimes referred to as Sometimes referred to as value chainsvalue chains

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Warehouses Factories Processing centers Distribution

centers Retail outlets Offices

Facilities

Forecasting Purchasing Inventory

management Information

management Quality assurance Scheduling Production and

delivery Customer service

Functions /Activities

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Typical Supply Chain

In the past, most organizations did little to manage their supply chains, In the past, most organizations did little to manage their supply chains, but….but….

1.The need to improve operations 2.Increasing levels of outsourcing3.Increasing transportation costs4.Competitive pressures5.Increasing globalization6.Increasing importance of e-commerce7.Complexity of supply chains8.Manage inventories

Need for Supply Chain Management

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Bullwhip Effect

The bullwhip effect: demand variations begin at the customer end of the chain and become increasingly large as they radiate backwards through the chain

Inventory oscillations become progressivelylarger looking backward through the supply chain

Why?Why?

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Global Supply Chain and Outsourcing Global Supply Chain

Producing in China -> Selling in USA Supply Chains linked in global pattern

Made in USA? => Assembled in USA with China Components! => or Designed in USA but made in China!!!

Increasing more complex Language, Culture, Currency fluctuations, Political,

Transportation costs, Local capabilities, Finance and economics, Environmental

Outsourcing Producing? ->Buying More Concentrate on what we can do better!

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Benefits of Effective Supply Chain Management

Organization Benefit

Campbell Soup Doubled inventory turnover rate

Hewlett-Packard Cut supply costs 75%

Sport Obermeyer Doubled profits and increased sales 60%

National Bicycle Increased market share from 5% to 29%

Wal-Mart Largest and most profitable retailer in the world

Benefits of effective supply chain management include lower inventories, lower costs, higher productivity, greater agility, shorter lead times, higher profits, and greater customer loyalty.

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Elements of Supply Chain Management

Table 11.1

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Strategic or Operational

Two types of decisions in supply chain management Strategic – design and policy Operational – day-today activities

Major decisions areas Location Production Inventory Distribution

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Logistics

Logistics Refers to the movement of materials and

information within a facility and to incoming and outgoing shipments of goods and materials in a supply chain

관련내용 Movement within the facility Incoming and outgoing shipments Bar coding EDI Distribution JIT Deliveries

0

214800 232087768

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Distribution requirements planning (DRP) is a system for inventory management and distribution planning

Extends the concepts of MRPII

Management uses DRP to plan and coordinate: Transportation Warehousing Workers Equipment Financial flows

Distribution Requirements Planning (DRP)

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Ryder delivers (in trucks labeled “Saturn”) bins of speedometers and odometers to Saturn’s Spring Hill, Tennessee, plant. Thursday, 9:00 a.m.: A Ryder truck arrives at a Saturn supplier in Winchester, Virginia.

Drivers check the onboard computer, which provides destination and routing information, along with e stimated travel times.

Spring Hill, Tennessee, Friday, 3:00 a.m.: After parking the trailer in a computer-assigned spot in Ryder’s switching yard two miles from the Saturn plant, the driver downloads a key-shaped floppy disk from the onboard computer into Ryder’s mainframe. The mainframe generates performance reports for Saturn.

12:50 p.m.: The trailer approaches the Saturn plant.

12:53 p.m.: The trailer arrives at one of Saturn’s 56 receiving docks just in time for Saturn workers to unload the bins and unwrap the pre-inspected instruments to ready them for the production line.

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E-Business: the use of electronic technology to facilitate business transactions

Applications include Internet buying and selling E-mail Order and shipment tracking Electronic data interchange

E-Business

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Companies can: Have a global presence Improve competitiveness and quality Analyze customer interests Collect detailed information Shorten supply chain response times Realize substantial cost savings Create virtual companies Level the playing field for small companies

Advantages E-Business

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Customer expectations Order quickly -> fast delivery

Order fulfillment Order rate often exceeds ability to fulfill it

Inventory holding Outsourcing loss of control

Internal holding costs

Disadvantages of E-Business

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RFID

Source: As seen in Business 2.0 Copyright © 2002, Xplane Corp. Used with permission.

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CPFR CPFR

Collaborative Planning, Forecasting, and Replenishment

Focuses on information sharing among trading partners

Forecasts can be frozen and then converted into a shipping plan

Eliminates typical order processing

CPFR Process

Step 1 – Front-end agreement

Step 2 – Joint business plan

Steps 3-5 – Sales forecast

Steps 6-8 – Order forecast collaboration

Step 9 – Order generation/delivery execution

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CPFR Results

Nabisco and Wegmans 50% increase in category sales

Wal-mart and Sara Lee 14% reduction in store-level inventory

32% increase in sales

Kimberly-Clark and Kmart Increased category sales that exceeded market

growth

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Purchasing is responsible for obtaining the materials, parts, and supplies and services needed to produce a product or provide a service.

Purchasing cycle: Series of steps that begin with a request for purchase and end with notification of shipment received in satisfactory condition.

Goal of Purchasing is to develop and implement purchasing plans for products and services that support operations strategies

Duty of Purchasing Identifying sources of supply, Negotiating contracts, Maintaining a

database of suppliers, Obtaining goods and services, Managing supplies

Purchasing ( 구매 )

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Purchasing Interfaces

Figure 11.5

Purchasing Cycle• Requisition received• Supplier selected• Order is placed• Monitor orders• Receive orders

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Centralized purchasing Purchasing is handled by one

special department

Decentralized purchasing Individual departments or separate

locations handle their own purchasing requirements

Centralized vs Decentralized Purchasing

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Guidelines for ethical behavior in purchasing Principles

Loyalty to employer. Justice to those you deal with Faith in your profession

Standards of purchasing practice Avoid appearance of unethical or compromising

practice. Follow the lawful instructions of your employer. Refrain from private activity that might conflict

with the interests of your employer. Refrain from soliciting or accepting gifts, favors, or

services from present or potential suppliers. Handle confidential or proprietary employer or

supplier information with due care.

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Guidelines for ethical behavior in purchasing Standards of purchasing practice

Practice courtesy and impartiality in all aspects of your job.

Refrain from reciprocal agreements that constrain competition.

Know and obey the letter and spirit of laws governing purchasing.

Demonstrate support for small, disadvantaged, and minority owned businesses.

Discourage involvement in employer sponsored programs of nonbusiness, personal purchases.

Enhance the profession by maintaining current knowledge and the highest ethical standards.

Conduct international purchasing in accordance with the laws, customs, and practices of foreign countries, but consistent with the laws of the United States, your organization’s policies, and these guidelines.

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Choosing suppliers

Evaluating sources of supply

Supplier audits

Supplier certification

Supplier relationships

Supplier partnerships

Supplier Management

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Factors in Choosing a Supplier

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Vendor analysis - evaluating the sources of supply in terms of Price Quality Services Location Inventory policy Flexibility

Evaluating Sources of Supply

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Supplier as adversary versus supplier as partner

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Ideas from suppliers could lead to improved competitiveness

1.Reduce cost of making the purchase2.Reduce transportation costs3.Reduce production costs4.Improve product quality5.Improve product design6.Reduce time to market7.Improve customer satisfaction8.Reduce inventory costs9.Introduce new products or services

Supplier Partnerships

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Announcement

HW: No Homework!!! – Are you happy? ㅋㅋㅋ

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Good Bye!