supply chain management training kit v5.0

8/2/2019 Supply Chain Management Training Kit v5.0

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Agenda

Supply Chain Flows

What is Supply Chain and SupplyChain Management

Why is SCM

SCM Evolution

Supply Chain Decision

Process View of a Supply Chain

Emerging Trends in Semiconductor & SCM help

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2

A supply chain is a network of facilities that procure rawmaterials, transform them into intermediate goods and thenfinal products, and deliver the products to customers through adistribution system (Lee and Billington )

A supply chain is a network of facilities and distribution options that

performs the functions of procurement of materials, transformation of

these materials into intermediate and finished products, and the

distribution of these finished products to customers.

(Ganeshan and Harrison 19)



3

Supply chain management deals with the management of materials, information and financial flows in a networkconsisting of suppliers, manufacturers, distributors, andcustomers (Stanford Supply Chain Forum, 1999)

The definition -American professional association (APICS)

³Supply Chain Management encompasses the planning and

management of all activities involved in sourcing, procurement,

conversion, and logistics management activities. Importantly, it also

includes coordination and collaboration with channel partners, which can

be suppliers, intermediaries, third-party service providers, and customers´



4

upstream

downstream



5

Design Source Negotiate Buy Make Move Store Service Fulfill Sell Market



Agenda

Supply Chain Flows


Why is SCM

SCM Evolution




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7

Excess Inventory costs

Excess freight charges

Lost sales / Stock outages

Wasted time and energyExtra staff

Customer dissatisfaction

Capital costs

Real Estate Costs

Manufacturing Costs

Globalization



` Core Organizational Priorities Cost reduction

Organizational growth and survival

Creation of new markets

Improved customer service

Reduced cycle time

Increased inventory turnover

` Key problems with current SCs Un-integrated operations inside own organizations

Weak IT infrastructure outside own organizations Differing operating practices between own organization and vendors/

customers

Impact of global players on the industry

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` Lack of Supply Chain integration Generally very few firms have either tightly coupled or completely loosely

defined supply chain relationships.

Push Pull strategy is therefore common.

Greater degree of coupling with suppliers compared with retailers anddistributors.

` Lack of penetration of IT Systems in SC operations CBS are mostly used for financial and accounting purposes. Purchasing

and sales functions come next. The use is rather low for logistics andwarehousing functions.

Use of e- mail is very common to communicate with other organizations.

Use of EDI is rather low.

9



Agenda

Supply Chain Flows


Why is SCM

SCM Evolution




10



11

1950

Inbound/

outbound

Inventoryflow

1970

Materialrequirement

Planning

1980

JIT

1993

ActualSCM

2000

Advance

Planning,Webenabled

In-House

Manageable

Simple

Complex

Outsource

Globalization

SaaS



` The NET:

Predetermined pricing is replaced by auction based price bidding. Sourcing is becoming global as suppliers all over the world sell on the

NET.

Long term partnerships with vendors are replaced by deal basedrelationships.

Buyers compete with one another to secure the best and cheapestsuppliers.

` The STRATEGY : Increasing customization requires versatile suppliers.

Competitive strategy requires the supply chain has to be fast and flexible.

Firms in mature markets build long supply chains and brand the product.

Companies that compete on cost, pick suppliers on the basis of price.

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13

SupplyChain LogisticsSourcing

Procurement

SupplyNetwork

JIT Movement

Tracking Capability

Shipping Accuracy

Functions

E-ENVIRONMENT



Right products

Right quantities

Right place

Right moment

« at minimal cost.

The 4 R¶s of SCM

14



Agenda

Supply Chain Flows


Why is SCM

SCM Evolution




15



16

Customer

Information

Product

Funds



17

second-tier

suppliers

first-tier

suppliers

first-tier

customers

second-tier

customers

For Company A

Internal supply network

Immediate supply network

Total supply network

Company B

Company C

X

X

X

XX

Supply side Demand side

U p s t r e a m

D o w n s t r e a m



18

` Raw materials enter into a manufacturing organization via a supply

system and are transformed into finished goods.` Finished goods are then supplied to the consumers through a

distribution system.

` Several companies linked together in the process, each adding valueto the product as it moves through the supply chain.



19

Information Flow

Products or services usually flow fromsupplier to customer. Design and

demand information usually flow from

customer to supplier.



Agenda

Supply Chain Flows


Why is SCM

SCM Evolution




20



21

Supplier

Manufacture

Manufacture

Warehouse

Warehouse

Customer

Customer

Customer

Customer Where to acquire

materials

components?

Where to produce &assemble goods?

How muc h to produce?

When to produce?

What fleet size?

What vehicle routes?

What shipment size?

How muc h to ship?

When to ship?

What modes of transportation?

Where to store finished goods?

Where to store spare parts? How muc h to store?

How to retrieve from storage?

What markets to serve?

What level of service?

What level of service cost?



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Strategize location Produc tMix ««

Plan ProductionSupply Demand

Match«..

Execute Pick Pack ShipDeliver

Replenishments «..

Collaborate Monitor Control

Months

/ Years

Days/

Weeks

Hours/

Minutes



` Decisions about the structure of the SC and what processes each

stage will perform

`

` Strategic SC decisions

Facilities - Locations and capacities

Inventory made or stored at various locations

Transportation Modes

Information systems

` SC design must support strategic objectives

` SC design decisions are long-term and expensive to reverse ± must

take into account market uncertainty

23



` How do we achieve Corporate Strategic Goals

` Start with a forecast of demand in the coming year

`

` Planning/Policy 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 demand uncertainty, exchange rates, competition

over the time horizon

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` Time horizon is weekly or daily

` Decisions regarding individual customer orders

` SC structure 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

` Much less uncertainty (short time horizon)

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Agenda

Supply Chain Flows


Why is SCM

SCM Evolution




26



` 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

` P

ush/pull view: processes in a supply chain are divided into twocategories depending on whether they are executed in response to

a customer order (pull) or in anticipation of a customer order (push)

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28

Customer Order Cycle

Replenishment Cycle

Manufacturing Cycle

Procurement Cycle

Customer

Retailer

Distributor

Manufacturer

Supplier



` Each cycle occurs at the interface between two stages

` Customer order cycle (customer-retailer)

` Replenishment cycle (retailer-distributor)

` Manufacturing cycle (distributor-manufacturer)

` Procurement cycle (manufacturer-supplier)

` Cycle view defines processes involved, the owners of each process.

` Specifies the roles and responsibilities of each member and thedesired outcome of each process.

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` Involves all processes directly involved in receiving and filling the

customer¶s order

` Customer arrival

` Customer order entry

` Customer order fulfillment

` Customer order receiving

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31

Customer

Arrival

Customer

Order Entry

Customer

Order Receiving

Customer

Order Fulfillment



` All processes involved in replenishing retailer inventories (retailer is

now the customer)

` Retail order trigger

` Retail order entry

` Retail order fulfillment

` Retail order receiving

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33

Retail Order

Trigger

Retail Order

Entry

Retail Order

Receiving

Retail Order

Fulfillment



` 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 customer

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35

Order

Arrival

Production

Scheduling

Receiving

Manufacturing and

Shipping



` All processes necessary to ensure that materials are availableaccording 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 manufacturer¶s productionschedule

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37

Procurement,

Manufacturing and

Replenishment cycles

Customer Order

Cycle

Customer

Order Arrives

PUSH PROCESSES PULL PROCESSES



` A push / pull view of the Supply Chain categorizes processes based on

whether they are initiated in response to a customer order ( pull ) or inanticipation of a customer order ( push ). This view is very useful when

considering strategic decisions relating to supply chain design.

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Pull Process

Customer order

arrives

Push Process

Customer order

cycle

Replenishment,

ManufacturingProcurement

cycles

Manufacturer

Supplier

Customer



39

Pull Process

Push Process

Customer order&

manufacturing

cycle

Procurement

cycle

Customer order

arrives

Customer

Manufacturer ( Dell )

Supplier

Dell Company Supply Chain



` Supply chain processes fall into push or pull depending on times of

execution and customer demand

` Pull: execution is initiated in response to a customer order (reactive) ±

Made or Assembled to Order

` Push: execution is initiated in anticipation of customer orders

(speculative) ± Made or Assemble to Stock

` Push/pull boundary separates push processes from pull processes

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` P/P are strategic decisions of SC design ± a global view of how SCprocesses relate to customer orders

` Can combine the push/pull and cycle views

` The relative proportion of push and pull processes often impact

supply chain performance

41



` Production decisions based on long-term forecasts

` Ordering decisions based on inventory & forecasts

` What are the problems with push strategies?

Inability to meet changing demand patterns

Obsolescence

The bullwhip effect:

x Excessive inventory

x Excessive production variability

x Poor service levels Hard to predict production capacity or transportation capacity

42



` Production is demand driven

Production and distribution coordinated with true customer demand Firms respond to specific orders

` Pull Strategies result in: Reduced lead times (better anticipation)

Decreased inventory levels at retailers and manufacturers

Decreased system variability

Better response to changing markets

` But: Harder to leverage economies of scale

Doesn

t work in all cases

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44

Push Strategy Pull Strategy

Raw

Materials

End

Customer

Push-

Pull

Boundary

Supply chain time line



`

A shift from a Push System... Production decisions are based on forecast

` «to a Push-Pull System Initial portion of the supply chain is replenished

based on long-term forecastsx For example, parts inventory may be replenished based on

forecasts

Final supply chain stages based on actualcustomer demand.x For example, assembly may based on actual orders.

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` Build to Stock

Forecast demand

Buys components

Assembles computers

Observes demand andmeets demand if possible.

` A traditional push system

` Build to order

Forecast demand

Buys components

Observes demand

Assembles computers Meets demand

` A push-pull system

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47

Pull Push

Pull

Push

Demanduncertainty

Delivery cost

Unit price

L H

H

L

Economies

of Scale

IComputers IIFurniture

IV

Books & CDs

III

Grocery



` Higher demand uncertainty suggests pull

` Higher importance of economies of scale suggests push

` High uncertainty/ EOS not important such as the computer industry

implies pull

` Low uncertainty/ EOS important such as groceries implies push

Demand is stable

Transportation cost reduction is critical

Pull would not be appropriate here.

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` Low uncertainty but low value of economies of scale (high volumebooks and CDs)

Either push strategies or push/pull strategies might be mostappropriate

` High uncertainty and high value of economies of scale For example, the furniture industry

How can production be pull but delivery push?

Is this a ³pull-push´ system?

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Push Pull

Objective Minimize cost Maximize service level

Complexity High Low

Focus Resource allocation Responsiveness

Lead time Long Short

Processes Supply chain planning Order fulfillment

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` The push section:

Uncertainty is relatively low

Economies of scale important

Long lead times

Complex supply chain structures:

` Thus

Management based on forecasts is appropriate

Focus is on cost minimization

Achieved by effective resource utilization ± supply chain

optimization

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` The pull section:

High uncertainty

Simple supply chain structure

Short lead times

` Thus

Reacting to realized demand is important Focus on service level

Flexible and responsive approaches

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` The push section requires:

Supply chain planning

Long term strategies

` The pull section requires:

Order fulfillment processes Customer relationship management

` Buffer inventory at the boundaries:

The output of the tactical planning process

The input to the order fulfillment process.

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Agenda

Supply Chain Flows

What is Supply Chain and Supply

Chain Management

Why is SCM

SCM Evolution



Emerging Trends i & SCM help

55



56

Increased levels of outsourcing

± Multiple levels of outsourcing

Increased focus on customer intimacy

± Proliferation of VMI/SMI/CMI programs

Increased focus on Tactical and Business planning

± Higher value add planning processes Increased focus on the complete value chain

± More collaboration between strategic customers and suppliers

Demand shaping based on business strategy, manufacturing constraints,

and inventory

± Demand creation based on intelligent pricing tied to availability Increased focus on CRD performance improvement

± To maintain/increase market share

Tighter coupling between planning and execution

± Exception based intervention in execution of plans



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Maximize

capacity/equipment

utilization across business

divisions.

Optimize profits based on

product mix.

Increased outsourcing.

Extensive Capital

Investment

Strategic Corporate

Planning.

Good procurement

system

Profit Optimization.

Issue Industry Response

Instant response to requests.

Perfect delivery.Increasing customer

demands

Shrinking product life

cycles

Shorter lead times andfaster time to market.

Reduce excess/obsolete

Inventory.

Integrated Planning &

Fulfillment.

Interactive delivery

quoting.

Inventory planning.

SCM systems can do



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Demand variabilityIncreased forecast

accuracy

Carefully managed

response buffers

Intense competition Global penetration

Cost effective

operations

Customer satisfaction

Integrated Value Chain

Planning.

Integrated Value Chain

Planning.

Customer Program

Management.

Issue Industry Response SCM Systems Can Do

Long manufacturingcycle times

Strategic positioning of

inventory along the

supply chain

Inventory planning.



Design and validate your supply chain strategy before youdeploy ± define scope and scale

Collaborate on demand and gain consensus for the mostaccurate forecast ± execution

Collaborate, optimize, monitor and control, production, inventory,distribution and transportation simultaneously across multipleenterprises ± global optimization

Execute, monitor, and review your SCM performance carefullywith predefined KPI and objectives ± operations evaluation

supply chain management training kit v5.0

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