16-1supply chain management william j. stevenson operations management 8 th edition
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16-1 Supply Chain Management
William J. Stevenson
Operations Management
8th edition
16-2 Supply Chain Management
CHAPTER16
Supply Chain Management
McGraw-Hill/IrwinOperations Management, Eighth Edition, by William J. StevensonCopyright © 2005 by The McGraw-Hill Companies, Inc. All rights
reserved.
16-3 Supply Chain Management
Supply Chain ManagementSupply Chain Management
Supply Chain: the sequence of organizations - their facilities, functions, and activities - that are involved in producing and delivering a product or service.
Sometimes referred to as Sometimes referred to as value chainsvalue chains
16-4 Supply Chain Management
Functions and ActivitiesFunctions and Activities
Forecasting Purchasing Inventory management Information management Quality assurance Scheduling Production and delivery Customer service
16-5 Supply Chain Management
Typical Supply ChainsTypical Supply Chains
Purchasing Receiving Storage Operations Storage
Production Distribution
16-6 Supply Chain Management
Typical Supply Chain for a ManufacturerTypical Supply Chain for a Manufacturer
Supplier
Supplier
Supplier
Storage} Mfg. Storage Dist. Retailer Customer
Figure 16.1a
16-7 Supply Chain Management
Supplier
Supplier
} Storage Service Customer
Typical Supply Chain for a ServiceTypical Supply Chain for a ServiceFigure 16.1b
16-8 Supply Chain Management
1. Improve operations
2. Increasing levels of outsourcing
3. Increasing transportation costs
4. Competitive pressures
5. Increasing globalization
6. Increasing importance of e-commerce
7. Complexity of supply chains
8. Manage inventories
Need for Supply Chain ManagementNeed for Supply Chain Management
16-9 Supply Chain Management
Bullwhip EffectBullwhip Effect
Tier 2Suppliers
Tier 1Suppliers
Producer Distributor Retailer FinalFinalCustomerCustomer
Amount ofAmount ofinventoryinventory=
Figure 16.3
16-10 Supply Chain Management
Benefits of Supply Chain ManagementBenefits of Supply Chain Management
Organization Benefit
Campbell Soup Doubled inventory turnover rate
Hewlett-Packard Cut supply costs 75%
Sport Obermeyer Doubled profits and increased sales 60%
National Bicycle Increased market share from 5% to 29%
Wal-Mart Largest and most profitable retailer in the world
16-11 Supply Chain Management
Benefits of Supply Chain ManagementBenefits of Supply Chain Management
Lower inventories Higher productivity Greater agility Shorter lead times Higher profits Greater customer loyalty
16-12 Supply Chain Management
Elements of Supply Chain ManagementElements of Supply Chain Management
Deciding how to best move and store materialsLogistics
Determining location of facilitiesLocation
Monitoring supplier quality, delivery, and relationsSuppliers
Evaluating suppliers and supporting operationsPurchasing
Meeting demand while managing inventory costsInventory
Controlling quality, scheduling workProcessing
Incorporating customer wants, mfg., and timeDesign
Predicting quantity and timing of demandForecasting
Determining what customers wantCustomers
Typical IssuesElement
Table 16.1
16-13 Supply Chain Management
Logistics Refers to the movement of materials and
information within a facility and to incoming and outgoing shipments of goods and materials in a supply chain
LogisticsLogistics
16-14 Supply Chain Management
LogisticsLogistics
• Movement within the facility
• Incoming and outgoing shipments
• Bar coding
• EDI
• Distribution
• JIT Deliveries
0
214800 232087768
16-15 Supply Chain Management
Materials MovementMaterials MovementFigure 16.4
RE
CE
IVIN
G
Storage
Workcenter
Work centerWork center
Storage
Workcenter
Storage
Shipping
16-16 Supply Chain Management
Distribution requirements planning (DRP) is a system for inventory management and distribution planning
Extends the concepts of MRPII
Distribution Requirements PlanningDistribution Requirements Planning
16-17 Supply Chain Management
Management uses DRP to plan and coordinate: Transportation Warehousing Workers Equipment Financial flows
Uses of DRPUses of DRP
16-18 Supply Chain Management
Electronic Data InterchangeElectronic Data Interchange
EDI – the direct transmission of interorganizational transactions, computer-to-computer, including purchase orders, shipping notices, and debit or credit memos.
16-19 Supply Chain Management
Increased productivity Reduction of paperwork Lead time and inventory reduction Facilitation of just-in-time systems Electronic transfer of funds Improved control of operations Reduction in clerical labor Increased accuracy
Electronic Data InterchangeElectronic Data Interchange
16-20 Supply Chain Management
Efficient consumer response (ECR) is a supply chain management initiative specific to the food industry Reflects companies’ efforts to achieve quick
response using EDI and bar codes
Efficient Consumer ResponseEfficient Consumer Response
16-21 Supply Chain Management
E-Commerce: the use of electronic technology to facilitate business transactions
Applications include Internet buying and selling E-mail Order and shipment tracking Electronic data interchange
E-CommerceE-Commerce
16-22 Supply Chain Management
Companies can: Have a global presence Improve competitiveness and quality Analyze customer interests Collect detailed information Shorten supply chain response times Realize substantial cost savings Create virtual companies Level the playing field for small companies
Advantages E-CommerceAdvantages E-Commerce
16-23 Supply Chain Management
Customer expectations
Order quickly -> fast delivery
Order fulfillment
Order rate often exceeds ability to fulfill it
Inventory holding
Outsourcing loss of control
Internal holding costs
Disadvantages of E-CommerceDisadvantages of E-Commerce
16-24 Supply Chain Management
Successful Supply ChainSuccessful Supply Chain
Trust among trading partners
Effective communications
Supply chain visibility
Event-management capability
The ability to detect and respond to unplanned events
Performance metrics
16-25 Supply Chain Management
SCOR MetricsSCOR Metrics
Perspective Metrics
Reliability On-time deliveryOrder fulfillment lead timeFill rate (fraction of demand met from stock)Perfect order fulfillment
Flexibility Supply chain response timeUpside production flexibility
Expenses Supply chain management costsWarranty cost as a percent of revenueValue added per employee
Assets/utilization Total inventory days of supplyCash-to-cash cycle timeNet asset turns
Table 16.4
16-26 Supply Chain Management
1. Develop strategic objectives and tactics
2. Integrate and coordinate activities in the internal supply chain
3. Coordinate activities with suppliers with customers
4. Coordinate planning and execution across the supply chain
5. Form strategic partnerships
Creating an Effective Supply ChainCreating an Effective Supply Chain
16-27 Supply Chain Management
Supply Chain Performance DriversSupply Chain Performance Drivers
1. Quality
2. Cost
3. Flexibility
4. Velocity
5. Customer service
16-28 Supply Chain Management
VelocityVelocity
Inventory velocity
The rate at which inventory(material) goes through the supply chain
Information velocity
The rate at which information is communicated in a supply chain
16-29 Supply Chain Management
Barriers to integration of organizations
Getting top management on board
Dealing with trade-offs
Small businesses
Variability and uncertainty
Long lead times
ChallengesChallenges
16-30 Supply Chain Management
1. Lot-size-inventory Bullwhip effect
2. Inventory-transportation costs Cross-docking
3. Lead time-transportation costs
4. Product variety-inventory Delayed differentiation
5. Cost-customer service Disintermediation
Trade-offsTrade-offs
16-31 Supply Chain Management
Supply Chain Benefits and DrawbacksSupply Chain Benefits and Drawbacks
Problem PotentialImprovement
Benefits PossibleDrawbacks
Large inventories
Smaller, more frequent deliveries
Reduced holding costs
Traffic congestionIncreased costs
Long lead times
Delayed differentiationDisintermediation
Quick response May not be feasibleMay need absorb functions
Large number of parts
Modular Fewer partsSimpler ordering
Less variety
CostQuality
Outsourcing Reduced cost, higher quality
Loss of control
Variability Shorter lead times, better forecasts
Able to match supply and demand
Less variety
Table 16.5
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