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Slides of a portion in Management of production systems taught at NIT CalicutTRANSCRIPT
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12/29/12
Suppliers
Manufacturers
Warehouses & Distribution Centers
Customers
Material Costs
Transportation Costs Manufacturing Costs
Transportation Costs Inventory Costs
Transportation Costs
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The Supply Chain Another ViewPlan Source Make Deliver Buy
Suppliers
Manufacturers
Warehouses & Distribution Centers
Customers
Material Costs
Transportation Transportation Costs Transportation Costs Manufacturing Costs Inventory Costs Costs
12/29/12
What Is Supply Chain Management (SCM)?Plan Make Buy Source Deliver
A set of approaches used to efficiently integrate
Suppliers Manufacturers Warehouses Distribution centers
So that the product is produced and distributed
In the right quantities To the right locations And at the right time
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System-wide costs are minimized and
Why Is SCM Difficult?Plan Source Make Deliver Buy
Uncertainty is inherent to every supply chain
Travel times Breakdowns of machines and vehicles Weather, natural catastrophe, war Local politics, labor conditions, border issues
The complexity of the problem to globally optimize a supply chain is significant
Minimize internal costs Minimize uncertainty Deal with remaining uncertainty
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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 request Value is correlated to supply chain profitability (difference between revenue generated from the 12/29/12 customer and the overall cost across
The Objective of a Supply Chain
Supply chain incurs costs (information, storage, transportation, components, assembly, etc.) Supply chain profitability is total profit to be shared across all stages of the supply chain Supply chain success should be measured by total supply chain profitability, not profits at an 12/29/12 individual stage
The Objective of a Supply Chain
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 of flows between and among supply chain stages to maximize total supply chain 12/29/12 profitability
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 and what 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 objectives12/29/12
Supply chain design decisions are long-term and expensive to reverse must take into account
Supply Chain Planning
Definition of a set of policies that govern short-term operations Fixed by the supply configuration from previous phase Starts 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, 12/29/12
Supply Chain Operation
Time horizon is weekly or daily Decisions regarding individual customer orders Supply chain configuration is fixed and operating policies are determined Goal 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, allocate an order to a particular shipment, set delivery schedules, place replenishment orders 12/29/12
Process View of a Supply Chain
Cycle view: processes in a supply chain are divided into a series of cycles, each performed at the interfaces between two successive supply chain stages Push/pull view: processes in a supply chain are divided into two categories depending on whether they are executed in response to a customer order (pull) or in 12/29/12
Cycle View of Supply ChainsCustomer Order Cycle Replenishment Cycle
Custom er Retail er Distribut or Manufactur er Suppli er
Manufacturing Cycle Procurement Cycle12/29/12
Each cycle occurs at the interface between two successive stages Customer order cycle (customer-retailer) Replenishment cycle (retailer-distributor) Manufacturing cycle (distributormanufacturer) Procurement cycle (manufacturer-supplier) Cycle view clearly defines processes involved and the owners of each process. Specifies the roles and responsibilities of 12/29/12 each member and the desired outcome of
Cycle View of a Supply Chain
Customer Order Cycle
Involves all processes directly involved in receiving and filling the customers order Customer arrival Customer order entry Customer order fulfillment Customer order receiving12/29/12
Replenishment Cycle
All processes involved in replenishing retailer inventories (retailer is now the customer) Retail order trigger Retail order entry Retail order fulfillment Retail order receiving12/29/12
Manufacturing Cycle
All processes involved in replenishing distributor (or retailer) inventory Order arrival from the distributor, retailer, or customer Production scheduling Manufacturing and shipping Receiving at the distributor, retailer, or customer12/29/12
Procurement Cycle
All processes necessary to ensure that materials are available for manufacturing to occur according to schedule Manufacturer orders components from suppliers to replenish component inventories However, component orders can be determined precisely from production schedules (different from retailer/distributor orders that are based on uncertain customer demand) Important that suppliers be linked to the manufacturers production schedule 12/29/12
Push/Pull View of Supply ChainsProcureme Manufacturing nt, and Replenishment cyclesCustomer Order Cyc le
PUSH PROCESSES Custom er Order Arrives
PULL PROCESSES
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Push/Pull View of Supply 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 customer order (reactive) Push: execution is initiated in anticipation of customer orders (speculative)12/29/12
Push/pull boundary separates push
Push/Pull View of Supply Chain Processes
Useful in considering strategic decisions relating to supply chain design more 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)
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The relative proportion of push and pull processes can have an impact on supply chain performance
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 phases and what is the significance of each? What is the goal of a supply chain and what is the impact of supply 12/29/12 chain decisions on the success of the
Element
Traditional management Supply chain management
(1)Inventory management approach (2)Total cost approach (3)Time horizon
Independent efforts inventories Minimize firm costs
Joint reduction of channel Channel-wide cost efficiencies
Short term
Long term
(4)Amount of information sharing and monitoring (5)Amount of coordination between levels in of multiple levels in the channel (6)Joint planning (7)Compatibility of corporate philosophies
Limited to needs of current As required for planning and transaction monitoring processes Multiple contacts
Single contact for the transaction between channel pairs
firms and levels of channel
Transaction-based Not relevant
Ongoing Compatibility at least for key relationships Small to increase
12/29/12 (8)Breadth of supplier base Large to increase competition coordination
Achieving a strategic fit
Strategic fit means that both the competitive and supply chain strategy must fit together. i.e. both the competitive and supply chain strategies have aligned goals. It refers to consistency between the customer priorities that the competitive strategy hopes of satisfy and the supply chain capabilities that 12/29/12 supply chain aims to build the
How strategic fit is achieved
Understanding the customer and supply chain uncertainty
The quantity of the product needed in each lot The response time that customers are willing to tolerate The variety of products needed The service level required The price of the product
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Drivers of Supply Chain
Facilities Inventory Transportation Information Sourcing Pricing12/29/12
Decision areas of SCM
There are four major decision areas in 1) location, 2) production, 3) inventory, and 4) transportation (distribution),
and There are both strategic and 12/29/12 operational elements in each of these
Facility PlanningModule edit Click to III Master subtitle style Session 17
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Facility LocationClick to edit Master subtitle style
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