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11/16 1 Inventory Management & Supply Chain

Supply ChainManagement

Chapter 11

9thEdition


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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

Sometimes referred to as value chains


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Warehouses Factories

Processing centers

Distribution centers

Retail outlets

Offices

Facilities


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Functions and Activities

Forecasting Purchasing

Inventory management

Information management

Quality assurance

Scheduling

Production and delivery

Customer service


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Typical Supply Chain

MANUFACTURING

Supplier

Supplier

Supplier

Storage

}Mfg. Storage Dist. Retailer Customer


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Supplier

Supplier}Storage Service Customer

Typical Supply ChainService


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1. Improve operations2. Increasing levels of outsourcing

3. Increasing transportation costs

4. Competitive pressures

5. Increasing globalization

6. Increasing importance of e-

commerce

7. Complexity of supply chains

8. Manage inventories

Need for Supply Chain Management


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Bullwhip Effect

Final CustomerInitial

Supplier

Demand

Inventory oscillations become progressively

larger looking backward through the supply chain


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Benefits of 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


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Benefits of Supply Chain Management

Lower inventories Higher productivity

Greater agility

Shorter lead times

Higher profits

Greater customer loyalty

Integrates separate organizations into

a cohesive operating system

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Global Supply Chains

Increasing more complex

Language

Culture

Currency fluctuations Political

Transportation costs

Local capabilities Finance and economics

Environmental

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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 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

Logistics

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Materials MovementFigure 11.4

RECEIVING

Storage

Work

center

Work center Work center

Storage

Work

center

Storage

Shipping

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Management uses DRP (Distr ibut ionrequ irements plann ing)to plan and

coordinate:

Transportation Warehousing

Workers

Equipment Financial flows

Uses of DRP

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E-Bus iness: 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 smallcompanies

Advantages E-Business

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Reverse Logistics

Reverse log ist icsthe backward flow of

goods returned to the supply chain

Processing returned goods

Sorting, examining/testing, restocking,

repairing

Reconditioning, recycling, disposing

Gatekeepingscreening goods to prevent

incorrect acceptance of goods

Avo idancefinding ways to minimize the

number of items that are returned

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Effective Supply Chain

Requires linking the market, distribution

channels processes, and suppliers

Supply chain should enable members to:

Share forecasts

Determine the status of orders in real time

Access inventory data of partners

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Successful Supply Chain

Trust among trading partners Effective communications

Supply chain visibility

Event-management capability

The ability to detect and respond to

unplanned events

Performance metrics



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RFID Technology

Used to track goods in supply chain

RFID tag attached to object

Similar to bar codes but uses radio

frequency to transmit product information

to receiver

RFID eliminates need for manual counting

and bar code scanning



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1. Develop strategic objectives andtactics

2. Integrate and coordinate activities in

the internal supply chain

3. Coordinate activities with suppliers

with customers

4. Coordinate planning and execution

across the supply chain

5. Form strategic partnerships

Creating an Effective Supply Chain



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Supply Chain Performance Drivers

1. Quality2. Cost

3. Flexibility

4. Velocity

5. Customer service



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Velocity

Inventory velocity The rate at which inventory(material)

goes through the supply chain

Information velocity

The rate at which information is

communicated in a supply chain



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Purchasingis responsible forobtaining the materials, parts, and

supplies and services needed to

produce a product or provide a

service.

Purchasing cyc le: Series of steps that

begin with a request for purchase and

end with notification of shipment

received in satisfactory condition.

Purchasing



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Identifying sources of supply Negotiating contracts

Maintaining a database of suppliers

Obtaining goods and services

Managing supplies

Duties of Purchasing



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Inventory Management & Supply Chain

Purchasing Cycle

1. Requisition received2. Supplier selected

3. Order is placed

4. Monitor orders

5. Receive orders

Purchasing

Legal

AccountingOperations

Data

process-ing

Design

Receiving

Suppliers



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Inventory Management & Supply Chain

Quality and quality assurance Flexibility

Location

Price Product or service changes

Reputation and financial stability

Lead times and on-time delivery

Other accounts

Factors in Choosing a Supplier

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