Module 14

July 28, 2014

Supply Chain Management

Supply Chain Management

What is it?

Why is it important?

What is a supply chain?

Examples of companies doing well at SCM

What is Supply Chain Management (SCM)?

process of planning, implementing, and

controlling the flow/storage of goods and

information from point of origin to point of

consumption

Why is SCM important?

Estimated that the grocery industry could save

$30 billion (10% of operating cost) by using

effective logistics and supply chain strategies

How long does a typical box of cereal spend

from factory to sale?

A typical car spend from factory to dealership?

104 days

15 days

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

Why is SCM important?

What is a Supply Chain?

All stages involved, directly or indirectly, in fulfilling

a customer request

Includes all functions involved at each stage

product development, marketing, operations,

distribution, finance, customer service,…

suppliers manufacturers warehouses retailers customers

transporters

Primary purposes:

- satisfy customer

- generate profit

Example

Lowes Retailers

Example

Lowes

Milk distributor

Bread distributor

Dry goods

distributor

Retailers

Distributors

Lowes

Milk distributor

Bread distributor

Dry goods

distributor

Kraft P&G General

Mills

Retailers

Distributors

Manufacturers

Lowes

Milk distributor

Bread distributor

Dry goods

distributor

Kraft P&G General

Mills

Sugar supplier

Rice supplier

Wheat supplier

Retailers

Distributors

Manufacturers

Suppliers

Lowes

Milk distributor

Bread distributor

Dry goods

distributor

Kraft P&G General

Mills

Sugar supplier

Rice supplier

Wheat supplier

Customer Customer Customer Customers

Retailers

Distributors

Manufacturers

Suppliers

Lowes

Milk distributor

Bread distributor

Dry goods

distributor

Kraft P&G General

Mills

Sugar supplier

Rice supplier

Wheat supplier

Customer Customer Customer Customers

Retailers

Distributors

Manufacturers

Suppliers

Lowes

Milk distributor

Bread distributor

Dry goods

distributor

Kraft P&G General

Mills

Sugar supplier

Rice supplier

Wheat supplier

Customer Customer Customer Customers

Retailers

Distributors

Manufacturers

Suppliers

Milk distributor

Wheat supplier

2

Customer

Bread distributor

Dairy

Customer

Milk Distributor

1

Kraft General

Mills

Customer

Dry goods

distributor

Chemical

supplier

2

Chemical

supplier

1

Obviously Lowes corp. has more than one store…

Lowes

Milk Distributor

1

Bread distributor

Dry goods

distributor

Kraft P&G General

Mills

Sugar supplier

Rice supplier

Wheat supplier

1

Customer Customer Customer Customers

Retailers

Distributors

Manufacturers

Suppliers

Lowes

Milk distributor

Bread Distributor

2

Wheat supplier

2

Customer Customer

Lowes

Bread Distributor

1

Dairy

Customer Customer

Lowes

Milk Distributor

1

Dry goods

Distributor

1

Kraft General

Mills

Customer Customer

Dry goods

Distributor

2

Chemical

supplier

2

Chemical

supplier

1

…

What happens at the interfaces?

Lowes

Milk Distributor

1

Dry goods

distributor

Kraft P&G General

Mills

Sugar supplier

Rice supplier

Wheat supplier

1

Customer Customer Customers

Retailers

Distributors

Manufacturers

Suppliers

Lowes

Bread Distributor

2

Wheat supplier

2

Customer Customer

Lowes

Bread Distributor

1

Dairy

Customer Customer

Lowes

Milk Distributor

1

Dry goods

Distributor

1

Kraft General

Mills

Customer Customer

Dry goods

Distributor

2

Chemical

supplier

2

Chemical

supplier

1

…

What happens at the interfaces?

Lowes

Dry goods

distributor

General

Mills

Wheat supplier

1

Customer Customer Customer

Milk Distributor

1

Kraft General

Mills

Dry goods

Distributor

2

What happens at the interfaces?

arrival

order entry order fulfillment

order receipt

Lowes

Dry goods

distributor

General

Mills

Wheat supplier

1

Customer Customer Customer

Milk Distributor

1

Kraft General

Mills

Dry goods

Distributor

2

What happens at the interfaces?

arrival

order entry order fulfillment

order receipt

order trigger

order entry order fulfillment

order receipt

Lowes

Dry goods

distributor

General

Mills

Wheat supplier

1

Customer Customer Customer

Milk Distributor

1

Kraft General

Mills

Dry goods

Distributor

2

What happens at the interfaces?

arrival

order entry order fulfillment

order receipt

order trigger

order entry order fulfillment

order receipt

order trigger

order entry order fulfillment

order receipt

Lowes

Dry goods

distributor

General

Mills

Wheat supplier

1

Customer Customer Customer

Milk Distributor

1

Kraft General

Mills

Dry goods

Distributor

2

What happens at the interfaces?

arrival

order entry order fulfillment

order receipt

order trigger

order entry order fulfillment

order receipt

order trigger

order entry order fulfillment

order receipt

order trigger

order entry order fulfillment

order receipt

Supply Chain Processes: Push/Pull

Push: execution is initiated in anticipation of

customer orders (speculative)

Pull: execution is initiated in response to a

customer order (reactive)

Lowes

Dry goods

distributor

General

Mills

Wheat supplier

1

Customer Customer Customer

Milk Distributor

1

Kraft General

Mills

Dry goods

Distributor

2

Push/Pull?

arrival

order entry order fulfillment

order receipt

order trigger

order entry order fulfillment

order receipt

order trigger

order entry order fulfillment

order receipt

order trigger

order entry order fulfillment

order receipt

PUSH

PULL

Retailer

Dry goods

distributor

General

Mills

Supplier

Customer Customer Customer

Milk Distributor

1

Kraft Manuf.

Distributor

How is this different from Dell (historically)?

General

Mills

Supplier

Customer Customer Customer

Kraft Manuf.

How is this different from Dell (historically)?

PUSH

PULL

Supply Chains

Supply chains will differ from organization to

organization…

…but the general network structure remains

Let’s look at some more examples…

Example: Multi-national Companies…

US Suppliers

Off Shore Suppliers

US Factory

Singapore Factory

US DC

European DC

Asia/Pacific DC

Americas Demand

European Demand

Asia/Pacific Demand Kit Suppliers

(or Retailer)

(or manufacturer)

Companies who are doing well at

managing their supply chains

Wal-mart

Amazon

Toyota

Dell

Postponement

flexible plants

inventory

technology and coordination

What is postponement?

Benetton makes colorful sweaters

Knitting

Dyeing

Which should they do first?

What does Dell do??

Neither way is “right” or “wrong”…

Efficiency

Responsiveness

Which method allows a

firm to be more responsive?

Drivers of Supply Chain

Performance

Efficiency Responsiveness

Inventory Transportation Facilities Information

Drivers of Supply Chain

Performance

Efficiency Responsiveness

Inventory Transportation Facilities Information

not much

avoid holding costs

cheap

try to consolidate

few dedicated

try to consolidate leveraged

Drivers of Supply Chain

Performance

Efficiency Responsiveness

Inventory Transportation Facilities Information

available

to avoid stock-out fast

many

closer to customer leveraged

Implementation?

Drivers of Supply Chain

Performance

Efficiency Responsiveness

Inventory Transportation Facilities Information

available

to avoid stock-out fast

many

closer to customer leveraged

Implementation?

“clustering”

Drivers of Supply Chain

Performance

Efficiency Responsiveness

Inventory Transportation Facilities Information

available

to avoid stock-out fast

many

closer to customer leveraged

clustering + combined

delivery system

“clustering”

Drivers of Supply Chain

Performance

Efficiency Responsiveness

Inventory Transportation Facilities Information

available

to avoid stock-out fast

many

closer to customer leveraged

Implementation?

clustering + combined

delivery system

“clustering”

Drivers of Supply Chain

Performance

Efficiency Responsiveness

Inventory Transportation Facilities Information

available

to avoid stock-out fast

many

closer to customer leveraged

clustering + combined

delivery system

“clustering”

daily deliveries

Drivers of Supply Chain

Performance

Efficiency Responsiveness

Inventory Transportation Facilities Information

available

to avoid stock-out fast

many

closer to customer leveraged

Implementation?

clustering + combined

delivery system

“clustering”

daily deliveries

Drivers of Supply Chain

Performance

Efficiency Responsiveness

Inventory Transportation Facilities Information

available

to avoid stock-out fast

many

closer to customer leveraged

daily deliveries

clustering + combined

delivery system

“clustering”

info. systems

Driver Efficiency Responsiveness

Inventory Cost of holding Availability

Transportation Consolidation Speed

Facilities Consolidation /

Dedicated

Proximity /

Flexibility

Information What information is best suited for

each objective

Leveraged

Summary (Performance

Drivers)

What information is best suited to each objective?

Supply Chain for Multiple Products

• Many companies produce products with

different implied demand uncertainty

• Two options:

1. Separate supply chains for each product type

2. Single supply chain that balances efficiency

and responsiveness for the portfolio of

products

Summary

• Definition

• Stages

• Drivers