15 supply chain
TRANSCRIPT
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Supply ChainManagement
Chapter 15
McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc !ll rights reser"e#
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Supply Chain
Supply Chain:
the sequence of organizations - their facilities,functions, and activities - that are involved inproducing and delivering a product or service
Sometimes referred to as value chains
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Facilities
The sequence of the supply chain begins withbasic suppliers and extends all the way to thenal customer!arehouses
"actories #rocessing centers$istribution centers %etail outlets&'ces
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Functions and Activities
Supply chain functions and activities "orecasting #urchasing (nventory management
(nformation management)uality assurance Scheduling #roduction and delivery Customer service
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Supply Chain Management
Supply Chain Management (SCM) The strategic coordination of business
functions within a business organization andthroughout its supply chain for the purpose of
integrating supply and demand management
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SCM Managers
SCM Managers #eople at various levels of the organization who are
responsible for managing supply and demand bothwithin and across business organizations*
(nvolved with planning and coordinating activitiesSourcing and procurement of materials and services Transformation activities+ogistics
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Key SCM ssues
The goal of SCM is to match supply to demand aseectively and e'ciently as possible
ey issues.$etermining appropriate levels of outsourcing
Managing procurementManaging suppliersManaging customer relationships /eing able to quic0ly identify problems and respond to
themManaging ris0
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!rends in SCM
!rends a"ecting supply chain designand management:Measuring supply chain %&(12reening3 the supply chain%e-evaluating outsourcing(ntegrating (TManaging ris0s4dopting lean principles
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#lo$al Supply Chains
#lo$al supply chains #roduct design often uses inputs from around the world Some manufacturing and service activities are outsourced
to countries where labor and5or materials costs are lower #roducts are sold globally
Comple%ities +anguage and cultural dierences Currency 6uctuations #olitical instability (ncreasing transportation costs and lead times
(ncreased need for trust amongst supply chain partners
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Management &esponsi$ilities
Aspects of management responsi$ility:+egal/eing 0nowledgeable about laws and regulations of
the countries where supply chains exist
&beying laws and operating to conform toregulations
7conomicSupplying products and services to meet demand as
e'ciently as possible
7thicalConducing business in ways that are consistent with
the moral standards of society
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Management &esponsi$ility:Strategic
Certain strategic responsibilities have a ma8orimpact on the success of both supply chainmanagement and the business itself.Supply chain strategy alignment9etwor0 conguration(nformation technology#roducts and servicesCapacity planningStrategic partnerships$istribution strategy:ncertainty and ris0 reduction
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!actical
"orecasting
Sourcing
&perations #lanning
Managing inventory
Transportation planning
Collaborating
Scheduling
%eceiving
Transforming
&rder fullling
Managing inventory
Shipping
(nformation sharing
Controlling
Management &esponsi$ility:!actical and 'perational
Operational
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rocurement
The purchasing department is responsible forobtaining the materials, parts, and suppliesand services needed to produce a product orprovide a service*
!he goal of procurement$evelop and implement purchasing plans for
products and services that support operationsstrategies
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uties of purchasing
(dentifying sources of supply
9egotiating contracts
Maintaining a database of suppliers
&btaining goods and services
Managing supplies
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!he urchasing Cycle
!he main steps:
;* #urchasing receives the requisition
* Monitoring orders
?* %eceiving orders
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*+,usiness
*+$usiness The use of electronic technology to facilitate business
transactions
4pplications include
(nternet buying and selling7-mail&rder and shipment trac0ing7lectronic data interchange#roduct and service promotion
#rovide information about products and services
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Advantages of *+,usiness
Companies can: @ave a global presence (mprove competitiveness and quality of service 4nalyze customer interests Collect detailed information about clientsA preferences
Shorten supply chain response times %educe or eliminate the role of BtraditionalA retailers and5or
intermediaries %ealize substantial cost savings
Also allo-s the: Creation of virtual companies +eveling of the playing eld for small companies
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*+,usiness 'rder Ful.llmentro$lems
Customer e%pectations &rder quic0ly )uic0 delivery
emand varia$ility creates order ful.llmentpro$lems
Sometimes nternet demand e%ceeds anorgani/ation0s a$ility to ful.ll orders
nventory &utsourcing order fulllment
+oss of control
/uild large warehouses
(nternal holding costs
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Supplier Management
Choosing suppliers
Supplier audits
Supplier certication
Supplier relationship managementSupplier partnershipsC#"% collaborative planning, forecasting, and
replenishmentD
Strategic partnering
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endor Analysis2 Supplier Audits2and Supplier Certi.cation
endor analysis7valuating the sources of supply in terms of
price, quality, reputation, and service
Supplier audit 4 means of 0eeping current on suppliersA production or
serviceD capabilities, quality and delivery problems andresolutions, and performance on other criteria
Supplier certi.cation
(nvolves a detailed examination of a supplierAs policiesand capabilities
The process veries the supplier meets or exceeds therequirements of a buyer
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Supplier &elationship Management
!ype of relationship is often governed $ythe duration of the trading relationship Short-term&ftentimes involves competitive bidding
Minimal interactionMedium-term&ften involves an ongoing relationship
+ong-term&ften involves greater cooperation that evolves into
a partnership
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Strategic artnering
Two or more business organizations that havecomplementary products or services 8oin sothat each may realize a strategic benet*%ample:!hen a supplier agrees to hold inventory for a
customer in return for a long-term commitment The customerAs inventory holding cost is reduced and
the supplier is relieved of the costs that would beneeded to continually nd new customers
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nventory Management
nventory issues in SCM(nventory locationCentralized inventories$ecentralized inventories
(nventory velocity The speed at which goods move through a supply
chain
The bullwhip eect
(nventory oscillations that become increasinglylarger loo0ing bac0ward through the supply chain
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!he ,ull-hip *"ect
ariations in demand cause inventory3uctuations to 3uctuate and get out ofcontrol (nventory 6uctuation can be magnied by
#eriodic ordering%eactions to shortages"orecast inaccuracies&rder batchingSales incentives and promotions
+iberal product return policies %esults in@igher costs+ower customer satisfaction
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!he ,ull-hip *"ect
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Mitigating the ,ull-hip *"ect
#ood supply chain management canovercome the $ull-hip e"ect Strategic bueringe*g*, holding inventory at a distribution center rather
than at retail outlets %eplenishment based on needendor+managed inventory Eendors monitor goods and replenish retail inventories when
supplies are low
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'rder Ful.llment
'rder ful.llment The process involved in responding to
customer orders&ften a function of the degree of customization
requiredCommon approaches7ngineer-to-&rder 7T&DMa0e-to-&rder MT&D4ssemble-to-&rder 4T&DMa0e-to-Stoc0 MTSD
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4ogistics
4ogistics%efers to the movement of materials, services,
cash, and information in a supply chainMovements within a facility
(ncoming shipments&utgoing shipments
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Movement ithin a Facility
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ncoming and 'utgoing Shipments
!ra6c management&verseeing the shipment of incoming and
outgoing goods@andles schedules and decisions on shipping
method and times, ta0ing into account.Costs of shipping alternatives2overnment regulations9eeds of the organizationShipping delays or disruptions
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!rac7ing #oods: &F
&adio fre8uency identi.cation (&F) 4 technology that uses radio waves to identify ob8ects,
such as goods in supply chainsSimilar to barcodes but
4re able to convey much more information
$o not require line-of-sight for reading
$o not need to be read one at a time
@as the ability to.(ncrease supply chain visibility(mprove inventory management(mprove quality control7nhance relationships with suppliers and customers
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9+4
!hird+party logistics (9+4) The outsourcing of logistics management(ncludes!arehousing and distribution
#otential benets include ta0ing advantage of. The specialistsA 0nowledge Their well-developed information system Their ability to obtain more favorable shipping rates
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Creating an *"ective Supply Chain
t $egins -ith strategic sourcing 4nalyzing the procurement process to lower costs by
reducing waste and non-value-added activities, increaseprots, reduce ris0s, and improve supplier performance
There must be
Trust7ective communication(nformation velocitySupply chain visibility7vent management capability#erformance metrics
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Managing &eturns
&everse 4ogistics The process of transporting returned items
#roducts are returned to companies or third partyhandlers for a variety of reasons and in a variety
of conditions 7lements of return management
#ate7eeping
Screening returned goods to prevent incorrectacceptance of goods
Avoidance"inding ways to minimize the number of items that are
returned
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Challenges
/arriers to integration of organizations
2etting top management on board
$ealing with trade-os
Small businesses
Eariability and uncertainty
%esponse time
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!rade+'"s
1 4ot+si/e+inventory trade+o" +arge lot sizes yield benets in terms of quantity discounts
and lower annual setup costs, but it increases the amount ofsafety stoc0 and inventory carrying costsD carried bysuppliers
; nventory+transportation cost trade+o" Suppliers prefer to ship full truc0loads instead of partial
loads to spread shipping costs over as many units aspossible* This leads to greater holding costs for customers
Cross+doc7ing4 technique whereby goods arriving at a warehouse from a
supplier are unloaded from the suppliers truc0 and loaded ontooutbound truc0, thereby avoiding warehouse storage
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!rade+'"s
9 4ead time+transportation costs trade+o" Suppliers li0e to ship in full loads, but waiting for su'cient
orders and5or production to achieve a full load mayincrease lead time
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!rade+'"s
5 Cost+customer service trade+o" #roducing and shipping in large lots reduces costs, but
increases lead time
isintermediation
%educing one or more steps in a supply chain by cuttingout one or more intermediaries
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'perations Strategy
*"ective supply chains are necessaryfor organi/ational success%equires integration of all aspects of the chainSupplier relationships are a critical component
of supply chain strategy+ean operations and six sigma are being
employed to improve supply chain success
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