kul 1 chopra intro sept2011

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2007 Pearson Education

The Supply Chain Management

Introduction

1Syarif Hidayat 2007


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Sasaran Mata Kuliah

Memahami konsep dan framework system rantai

pasokan sebagai suatu system integral.

Memahami cara merancang, mengoperasikan danmengendalikan system rantai pasokan.

Mampu memformulasikan permasalahan yang ada

pada system rantai pasokan dan mencari jawabnya.



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2007 Pearson Education 1-3

Outline

What is a Supply Chain?

Decision Phases in a Supply Chain

Process View of a Supply Chain

The Importance of Supply Chain Flows

Examples of Supply Chains


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CAKUPAN KULIAH SUPPLY CHAINSISTEM RANTAI PASOK

INTRO

KONSEP

FORECASTING

PERAMALANPENGADAAN

AGREGAT

PLANNING

DRIVER

PENGHAMBAT

KINERJA

MATERIAL

HANDLING

PRODUCTION

PLANNING

DEMAND VS

SUPPLY

PLANNING

INVENTORY

MGMT

SUPPLY

NETWORK

CUSTOMER

SERVICE

DISTRIBUTI

ON

TRANSPOR

TATION

PRODUCTIVI

TY &

EFFICIENCY

INFORMAT-

ION

SYSTEM

KOORDI-

NASI4Syarif Hidayat 2007


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All stages involved, directly or indirectly, in fulfilling

a customer request

Includes manufacturers, suppliers, transporters,

warehouses, retailers, and customersWithin each company, the supply chain includes all

functions involved in fulfilling a customer request

(product development, marketing, operations,

distribution, finance, customer service)

Examples: Fig. 1.1 Detergent supply chain (Wal-

Mart), Dell


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Customer is an integral part of the supply chain

Includes movement of products from suppliers tomanufacturers to distributors, but also includes

movement of information, funds, and products in bothdirections

Probably more accurate to use the term supplynetwork or supply web

Typical supply chain stages: customers, retailers,distributors, manufacturers, suppliers (Fig. 1.2)

All stages may not be present in all supply chains(e.g., no retailer or distributor for Dell)


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What is a Supply Chain?Customer wants

detergent and goes

to Jewel

Jewel

Supermarket

Jewel or third

party DC

P&G or other

manufacturer

Plastic

Producer

Chemical

manufacturer

(e.g. Oil Company)

Tenneco

Packaging

Paper

Manufacturer

Timber

Industry

Chemical

manufacturer

(e.g. Oil Company)


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Supply Chain

A network of facilities and distribution optionsthat performs the functions of procurement of

materials, transformation of these materials intointermediate and finished products, and thedistribution of these finished products tocustomers.



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Definition

A supply chain is a set of three or more organizations

linked directly by one or more of the upstream or

downstreamflows ofproducts, services, finances,and information from a source to a customer.




Key Concepts

Shift from vertical (functional) to horizontal (cross-functional) organizationfocus on interrelated setofprocessesrather than series of discrete, nonalignedactivities

Supply chain activities and flows extend acrossorganizational boundaries

Supply chain is subset of value chainthe primary

activities or operational part




CORPORATE

INFRASTRUC

TURE

HRM

TECHNOL

OGY &

DEVELOPMENT

PROCURE

MENT

PRIMARY

ACTIVITIES

QUALITY &

COMPLIANCE

INBOUND OPERATIONS OUTBOUND MKTG & SERVICE

LOGISTICS LOGISTICS SALES

RECEIVING &

INTL SHIPPING

CLASSIFY

STORE

OPEN PICK CARD;

SPIN

WEAVE : SETUP,

RUN, FIX, STORE

FINISH : CUT,

WRAP

WAREHOUSING

SHIPPING

BILLING

PACKAGING

MATERIALS

MATERIAL

HANDLING

EQPT

REPLACEMENT

PARTS &

OPERATING

SUPPLIES

ORDER

ATIVITIES

CORP REQTS

VENDOR

RELATIONS

PRINTING

OBTAIN

ADVERTISING

MEDIA

PACKAGING

ORDER

PROCESSING &

INTL SHIPPING

CLASSIFY

STORE

DELIVERY MONITORING

TECH SUPPORT

FIELD MONITORING

CUTOMER REL

INSPECTION OF

MATERIAL :

LENGTH, WEIGHT

ETC

MATERIAL

HANDLING

PACKAGING(TEST & DEVLP)

RECEIVING &

INTL SHIPPING

CLASSIFY

STORE

DYE FORMULAS

TESTING NATURAL

SYNTHETIC

FINISHBATH

FORMULA

DESIGN PATTERNS,

DETERMINE SPECS

MATL RESEARCHMARKETING

BUYER PROCESS

TECHNOLOGIES

FIRST QUALITY

PERFORMANCEREWORK

PERFMNCE

FINAL

INSPECTION

FIELD

INSPECTION

HIRE &

TRAINING

ACCOUNTING & FINANCIAL SERVICES EDP SERVICESPREMISES MAINTENANCE PERSONNEL POLICIES

HIRE & TRNG

INCENTIVE

PROGRAMS

HIRE & TRNG

MONITOR PERF

PIECE RATES

ATTITUDESURVEYS

HIRE &

TRAINING

HIRE & TRNG

MONITOR PERF

PIECE RATES

ATTITUDESURVEYS

SUPPORT :VALUE CHAIN FOR A TEXTILE INDUSTRY GRAYSON




Traditional View: Logistics in theEconomy (1990, 1996)

Freight Transportation $352, $455 Billion

Inventory Expense $221, $311 Billion

Administrative Expense $27, $31 Billion

Logistics Related Activity 11%, 10.5% of GNP

Source: Cass Logistics



Traditional View: Logistics in theManufacturing Firm

Profit 4%

Logistics Cost 21%

Marketing Cost 27%

Manufacturing Cost 48%

Profit

Logistics

Cost

Marketing

Cost

Manufacturing

Cost



Flows in a Supply Chain

Customer

Information

Product

Funds



The Objective of a Supply Chain

Maximize overall value created

Supply chain value: difference between what the final

product is worth to the customer and the effort the

supply chain expends in filling the customers requestValue is correlated to supply chain profitability

(difference between revenue generated from the

customer and the overall cost across the supply chain)




Example: Dell receives $2000 from a customer for acomputer (revenue)

Supply chain incurs costs (information, storage,

transportation, components, assembly, etc.)Difference between $2000 and the sum of all of these

costs is the supply chain profit

Supply chain profitability is total profit to be shared

across all stages of the supply chainSupply chain success should be measured by total

supply chain profitability, not profits at an individualstage




Sources of supply chain revenue: the customer

Sources of supply chain cost: flows of information,

products, or funds between stages of the supply chain

Supply chain management is the management offlows between and among supply chain stages to

maximize total supply chain profitability


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Decision Phases of a Supply Chain

Supply chain strategy or design

Supply chain planning

Supply chain operation


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Supply Chain Strategy or Design

Decisions about the structure of the supply chain andwhat processes each stage will perform

Strategic supply chain decisions

Locations and capacities of facilities Products to be made or stored at various locations

Modes of transportation

Information systems

Supply chain design must support strategic objectivesSupply chain design decisions are long-term and

expensive to reversemust take into account marketuncertainty


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Supply Chain Planning

Definition of a set of policies that govern short-term

operations

Fixed by the supply configuration from previous

phaseStarts with a forecast of demand in the coming year


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Supply Chain Planning

Planning decisions:

Which markets will be supplied from which locations

Planned buildup of inventories

Subcontracting, backup locations Inventory policies

Timing and size of market promotions

Must consider in planning decisions demand

uncertainty, exchange rates, competition over the time

horizon


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Supply Chain Operation

Time horizon is weekly or daily

Decisions regarding individual customer orders

Supply chain configuration is fixed and operating

policies are determinedGoal is to implement the operating policies as

effectively as possible

Allocate orders to inventory or production, set order

due dates, generate pick lists at a warehouse, allocatean order to a particular shipment, set deliveryschedules, place replenishment orders

Much less uncertainty (short time horizon)


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SCM entails aligning, coordinating and

synchronizing a wide range of activities:purchasing/material releasing; inbound and outbound

transportation; receiving; materials handling;

warehousing and distribution; inventory control and

manage-ment; demand and supply planning; order

processing; production planning and scheduling;

shipping; order fulfillment; processing; customer

service

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Supply Chain Management: TheMagnitude in the Traditional View

Estimated that the grocery industry could save $30

billion (10% of operating cost) by using effective

logistics and supply chain strategies

A typical box of cereal spends 104 days from factory to sale A typical car spends 15 days from factory to dealership

Laura Ashley turns its inventory 10 times a year, five

times faster than 3 years ago


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Supply Chain Management:The True Magnitude

Compaq estimates it lost $.5 billion to $1 billion in

sales in 1995 because laptops were not available when

and where needed

When the 1 gig processor was introduced by AMD,the price of the 800 mb processor dropped by 30%

P&G estimates it saved retail customers $65 million

by collaboration resulting in a better match of supply

and demand


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PROCESS VIEW OF A SUPPLY CHAIN

CYCLE VIEW : PROCESSES ARE DIVIDED INTO SERIESOF CYCLES, EACH PERFORMED AT THE INTERFACE

BETWEEN TWO SUCCESSIVE STAGES

PUSH-PULL VIEW : PROCESSES ARE DIVIDEDDEPENDING ON WHETHER THEY ARE EXECUTED IN

RESPONSE TO A CUSTOMER ORDER (PULL) OR IN

ANTICIPATION OF CUSTOMER ORDER (PUSH)

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Syarif Hidayat 2007


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Cycle View of a Supply Chain

Each cycle occurs at the interface between two successivestages

Customer order cycle (customer-retailer)

Replenishment cycle (retailer-distributor)

Manufacturing cycle (distributor-manufacturer)

Procurement cycle (manufacturer-supplier)

Figure 1.3

Cycle view clearly defines processes involved and theowners of each process. Specifies the roles and

responsibilities of each member and the desired outcome

of each process.


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CUSTOMER ORDER CYCLE

MANUFACTURING CYCLE

REPLENISHMENT CYCLE

PROCUREMENT CYCLE

STAGES CYCLES

CUSTOMER

RETAILER

DISTRIBUTOR

MANUFACTURER

SUPPLIER

CYCL

E

VIEW

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Syarif Hidayat 2007 Figure 1.3. Chopra-Meindl


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Customer order cycle

occurs at the customerretailer interface and includes all processes directly involved in

receiving and filling the customer order.

Interaction starts when customer order arrives or contact is initiated and ends when thecustomer receives the order.

Key goal of customer arrival : to facilitate the contact so that customer arrival turns into

customer order

Customer arrival

Customer order

fulfillment

Customer order

receiving

Customer order

entry

customer

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Syarif Hidayat 2007


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Key goal of customer arrival : to facilitate the contact so that

customer arrival turns into customer order

Objective of cust order entry : ensure quick and accurate process

of orders and communicate them to all affected processes

Objective of cust order fulfillment : get the correct and completeorders and by promised due date and the lowest possible costs

Objective of cust order receiving : get the correct orders to the

correct customer and invoice correctly

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Syarif Hidayat 2007


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Replenishment cycle

occurs at the retailerdistributor interface and includes all processes directly involved in

replenishing retailer inventory.

Interaction starts when a retailer places an order to replenish inventories to meet futuredemand and ends when the retailer receives the order.

Retail order trigger

Retail order

fulfillment

Retailr order

receiving

Retail order entry

Retailer

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Syarif Hidayat 2007


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Objective of retail order trigger : to maximize profitability by

balancing product availability and costs.

Objective of retail order entry : ensure quick and accurate process

of orders and convey them quickly to all affected processes

Objective of retail order fulfillment : get the correct andcomplete orders on time while minimizing costs

Objective of retailer order receiving : to update inventories and

displays quickly and accurately at the lowest costs

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Syarif Hidayat 2007


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Order arrival

Manufacturing and

shipping

Receiving

Production

scheduling

distributor

Manufacturing cycle

occurs at the distributor/manufacturer interface and includes all processes involved in

replenishing distributor (or retailer) inventory. The manufacturing cycle is triggered by

customer orders; replenishment orders from a retailer or distributor; or by the forecast of

customer demand and current product availability in the manufacturers finished product

warehouse.

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Key goal of order arrival : to facilitate the contact so that

customer arrival turns into customer order

Objective of production scheduling : ensure quick and accurate

process of orders and communicate them to all affected

processes

Objective of manufacturing and shipping : get the correct and

complete orders and by promised due date and the lowest

possible costs

Objective of receiving : get the correct orders to the correct

customer and invoice correctly

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Syarif Hidayat 2007


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Procurement cycle

occurs at the manufacturer supplier interface and includes all processes to ensure that

materials are available for manufacturing to occur according to schedule.

Order based on

Mfrs production

schedule or suppliers

stocking needs

Component

manufacturing &

shipping

Receiving at

manufacturer

Supplier production

scheduling

manufacturer

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Syarif Hidayat 2007


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PUSH-PULL VIEW

PullProcesses : execution is initiated in response to acustomer order

Push Processes : execution is initiated in anticipation of

customer order

Retailer or distributor orders are triggered by uncertain

customer demandsComponent orders can be determined precisely when the

production schedule has been decided

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Syarif Hidayat 2007


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Push/Pull View of Supply Chains

Procurement,Manufacturing andReplenishment cycles

Customer OrderCycle

CustomerOrder Arrives

PUSH PROCESSES PULL PROCESSES


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CUSTOMER ORDER CYCLE

REPLENISHMENT and

MANUFACTURING CYCLE

PROCUREMENT CYCLE

CUSTOMER

DISTRIBUTOR

MANUFACTURER

SUPPLIER

CUSTOMER ORDER ARRIVES

PULL

PROCESSESCustomer order

PUSH

PROCESSESReplenish, mfg,

procure

Make to stock

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Syarif Hidayat 2007


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CUSTOMER ORDER and

MANUFACTURING CYCLE

PROCUREMENT CYCLE

CUSTOMER

MANUFACTURER

SUPPLIER

CUSTOMER ORDER ARRIVES

PULL

PROCESSESCustomer order cycle

PUSH

PROCESSESProcurement cycle

Make to order

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Syarif Hidayat 2007


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Push/Pull View ofSupply Chain Processes

Supply chain processes fall into one of two categories

depending on the timing of their execution relative to

customer demand

Pull: execution is initiated in response to a customerorder (reactive)

Push: execution is initiated in anticipation of customer

orders (speculative)

Push/pull boundary separates push processes from

pull processes


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Push/Pull View ofSupply Chain Processes

Useful in considering strategic decisions relating to

supply chain designmore global view of how

supply chain processes relate to customer orders

Can combine the push/pull and cycle views L.L. Bean (Figure 1.6)

Dell (Figure 1.7)

The relative proportion of push and pull processes can

have an impact on supply chain performance

S C


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Supply Chain Macro Processes ina Firm

Supply chain processes discussed in the two views can

be classified into (Figure 1.8):

Customer Relationship Management (CRM)

Internal Supply Chain Management (ISCM) Supplier Relationship Management (SRM)

Integration among the above three macro processes is

critical for effective and successful supply chain

management


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Examples of Supply Chains

Gateway

Zara

McMaster Carr / W.W. Grainger

Toyota

Amazon / Borders / Barnes and Noble

Webvan / Peapod / Jewel

What are some key issues in these supply chains?


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7-Eleven

What factors influence decisions of opening and closing stores?Location of stores?

Why has 7-Eleven chosen off-site preparation of fresh food?

Why does 7-Eleven discourage direct store delivery from vendors?

Where are distribution centers located and how many stores does

each center serve? How are stores assigned to distribution centers?

Why does 7-Eleven combine fresh food shipments by temperature?

What point of sale data does 7-Eleven gather and what information

is made available to store managers? How should information

systems be structured?


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Summary of Learning Objectives

What are the cycle and push/pull views of a supply

chain?

How can supply chain macro processes be classified?

What are the three key supply chain decision phasesand what is the significance of each?

What is the goal of a supply chain and what is the

impact of supply chain decisions on the success of the

firm?


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Gateway: A Direct Sales Manufacturer

Why did Gateway have multiple production facilities in theUS? What advantages or disadvantages does this strategy offerrelative to Dell, which has one facility?

What factors did Gateway consider when deciding which plants

to close?Why does Gateway not carry any finished goods inventory at

its retail stores?

Should a firm with an investment in retail stores carry anyfinished goods inventory?

Is the Dell model of selling directly without any retail storesalways less expensive than a supply chain with retail stores?

What are the supply chain implications of Gateways decisionto offer fewer configurations?


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W.W. Grainger and McMaster Carr

How many DCs should there be and where should they belocated?

How should product stocking be managed at the DCs? Shouldall DCs carry all products?

What products should be carried in inventory and whatproducts should be left at the supplier?

What products should Grainger carry at a store?

How should markets be allocated to DCs?

How should replenishment of inventory be managed at variousstocking locations?

How should Web orders be handled?

What transportation modes should be used?


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Toyota

Where should plants be located, what degree offlexibility should each have, and what capacity shouldeach have?

Should plants be able to produce for all markets?

How should markets be allocated to plants?

What kind of flexibility should be built into thedistribution system?

How should this flexible investment be valued?What actions may be taken during product design to

facilitate this flexibility?

kul 1 chopra intro sept2011

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