mba iind sem pom chapter 11 scm

8/14/2019 MBA IInd SEM POM Chapter 11 SCM

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Supply Chain Management


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Learning ObjectivesLearning Objectives

Explain what a supply chain is.

Explain the need to manage a supply chain and

the potential benefits of doing so.

Explain the increasing importance of outsourcing. State the objective of supply chain management.

List the elements of supply chain management.

Identify the strategic, tactical, and operations

issues in supply chain management.

Describe the bullwhip effect and the reasons why

it occurs.


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Learning ObjectivesLearning Objectives

Explain the value of strategic partnering.

Discuss the critical importance of information

exchange across a supply chain.

Outline the key steps, and potential challenges, increating an effective supply chain.

Explain the importance of the purchasing function

in business organizations.

Describe the responsibilities of purchasing.

Explain the term value analysis.

Identify several guidelines for ethical behavior in

purchasing.


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Supply Chain ManagementSupply Chain Management

Supply Chain: the sequence of

organizations - their facilities,

functions, and activities - that are

involved in producing and deliveringa product or service.

Sometimes referred to asSometimes referred to as value chainsvalue chains


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Warehouses

Factories

Processing centers

Distribution centers

Retail outlets

Offices

FacilitiesFacilities


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Functions and ActivitiesFunctions and Activities

Forecasting Purchasing

Inventory management

Information management

Quality assurance

Scheduling

Production and delivery

Customer service


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Typical Supply ChainsTypical Supply Chains

PurchasingReceiving Storage Operations Storage

Production Distribution


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Supplier

Supplier

Storage Service Customer

Typical Supply Chain for aTypical Supply Chain for a

ServiceService


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1.Improve operations2.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 ChainNeed for Supply Chain

ManagementManagement


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Bullwhip EffectBullwhip Effect

Final CustomerInitial

Supplier

Demand

Inventory oscillations become progressively

larger looking backward through the supply chain


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Benefits of Supply ChainBenefits of Supply Chain


Largest and most profitable retailer in the

world

Wal-Mart

Increased market share from 5% to 29%National Bicycle

Doubled profits and increased sales 60%Sport Obermeyer

Cut supply costs 75%Hewlett-Packard

Doubled inventory turnover rateCampbell Soup

BenefitOrganization


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Benefits of Supply Chain ManagementBenefits of Supply Chain Management

Lower inventories Higher productivity

Greater agility

Shorter lead times Higher profits

Greater customer loyalty

Integrates separate organizations into a

cohesive operating system


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Global Supply ChainsGlobal Supply Chains

Increasing more complex Language

Culture

Currency fluctuations

Political

Transportation costs

Local capabilities Finance and economics

Environmental

El f S l Ch i


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Elements of Supply ChainElements of Supply Chain


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 workProcessingIncorporating customer wants, mfg., and timeDesign

Predicting quantity and timing of demandForecasting

Determining what customers wantCustomers

Typical IssuesElement


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Strategic or OperationalStrategic or Operational

Two types of decisions in supply chainmanagement

Strategic design and policy

Operational day-today activities Major decisions areas

Location

Production Inventory

Distribution


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Logistics

Refers to the movement of materials and

information within a facility and to incoming

and outgoing shipments of goods andmaterials in a supply chain

LogisticsLogistics


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LogisticsLogistics

Movement within the facility

Incoming and outgoing shipments

Bar coding EDI

Distribution

JIT Deliveries 214800 232087768


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Materials MovementMaterials Movement

RECEIVING

Storage

Work

center

Work center Work center

Storage

Work

center

Storage

Shipping


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Distribution requirements planning(DRP) is a system for inventory

management and distribution planning

Distribution RequirementsDistribution Requirements

PlanningPlanning


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Management uses DRP to plan and

coordinate:

Transportation

Warehousing

Workers

Equipment

Financial flows

Uses of DRPUses of DRP


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E-Business: the use of electronictechnology to facilitate business

transactions

Applications include Internet buying and selling

E-mail

Order and shipment tracking Electronic data interchange

E-BusinessE-Business


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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-BusinessAdvantages E-Business


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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-BusinessDisadvantages of E-Business


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Reverse LogisticsReverse Logistics

Reverse logistics the backward flow ofgoods returned to the supply chain

Processing returned goods

Sorting, examining/testing, restocking, repairing

Reconditioning, recycling, disposing

Gatekeeping screening goods to prevent

incorrect acceptance of goods Avoidance finding ways to minimize the

number of items that are returned


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Effective Supply ChainEffective Supply Chain

Requires linking the market, distributionchannels processes, and suppliers

Supply chain should enable members to:

Share forecasts

Determine the status of orders in real time

Access inventory data of partners


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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


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RFID TechnologyRFID Technology

Used to track goods in supply chain

RFID tag attached to object

Similar to bar codes but uses radio

frequency to transmit product information toreceiver

RFID eliminates need for manual counting

and bar code scanning


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CPFRCPFR

Collaborative Planning, Forecasting, andReplenishment

Focuses on information sharing among

trading partners

Forecasts can be frozen and then

converted into a shipping plan

Eliminates typical order processing


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CPFR ProcessCPFR Process

Step 1 Front-end agreement

Step 2 Joint business plan

Steps 3-5 Sales forecast

Steps 6-8 Order forecast collaboration

Step 9 Order generation/deliveryexecution


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CPFR ResultsCPFR Results

Nabisco and Wegmans 50% increase in category sales

Wal-mart and Sara Lee

14% reduction in store-level inventory

32% increase in sales

Kimberly-Clark and Kmart

Increased category sales that exceeded

market growth

C ti Eff ti S lC ti Eff ti S l


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1.Develop strategic objectives and tactics2.Integrate and coordinate activities in the

internal supply chain

3.Coordinate activities with suppliers with

customers

4.Coordinate planning and executionacross the supply chain

5.Form strategic partnerships

Creating an Effective SupplyCreating an Effective Supply

ChainChain


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Supply Chain Performance DriversSupply Chain Performance Drivers

1.Quality2.Cost

3.Flexibility

4.Velocity

5.Customer service


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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


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Barriers to integration of organizations Getting top management on board

Dealing with trade-offs

Small businesses

Variability and uncertainty

Long lead times

ChallengesChallenges


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1.Lot-size-inventory Bullwhip effect

2. Inventory-transportation costs

Cross-docking3.Lead time-transportation costs

4.Product variety-inventory

Delayed differentiation5.Cost-customer service

Disintermediation

Trade-offsTrade-offs


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Bullwhip effect Inventories are progressively larger moving

backward through the supply chain

Cross-docking Goods arriving at a warehouse from a

supplier are unloaded from the suppliers

truck and loaded onto outbound trucks Avoids warehouse storage


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Delayed differentiation Production of standard components and

subassemblies, which are held until late in

the process to add differentiating features

Disintermediation

Reducing one or more steps in a supply

chain by cutting out one or moreintermediaries


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Supply Chain IssuesSupply Chain Issues

Quality control

Production planning and

control

Inventory policies

Purchasing policies

Production policiesTransportation

policies

Quality policies

Design of the

supply chain,

partnering

Operating IssuesTactical IssuesStrategicIssues

Supply Chain Benefits andSupply Chain Benefits and


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Supply Chain Benefits andSupply Chain Benefits and

DrawbacksDrawbacks

Less varietyAble to match

supply and

demand

Shorter lead times,

better forecasts

Variability

Loss of controlReduced cost,higher quality

OutsourcingCostQuality

Less varietyFewer parts

Simpler ordering

ModularLarge

number of

parts

May not befeasible

May need absorb

functions

Quick responseDelayeddifferentiation

Disintermediation

Long leadtimes

Traffic congestion

Increased costs

Reduced holding

costs

Smaller, more

frequent deliveries

Large

inventories

PossibleDrawbacks

BenefitsPotentialImprovemen

t

Problem


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Purchasingis responsible for obtainingthe materials, parts, and supplies and

services needed to produce a product

or provide a service. Purchasing cycle: Series of steps that

begin with a request for purchase and

end with notification of shipmentreceived in satisfactory condition.

PurchasingPurchasing


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Develop and implement purchasingplans for products and services that

support operations strategies

Goal of PurchasingGoal of Purchasing


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Identifying sources of supply

Negotiating contracts

Maintaining a database of suppliers

Obtaining goods and services

Managing supplies

Duties of PurchasingDuties of Purchasing


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Purchasing InterfacesPurchasing Interfaces

Purchasing

Legal

AccountingOperations

Data

processing

Design

ReceivingSuppliers


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Purchasing CyclePurchasing Cycle

1.Requisition received

2.Supplier selected

3.Order is placed

4.Monitor orders

5.Receive orders


LegalLegal

AccountingAccountingOperationsOperations

DataData

process-process-inging

DesignDesign

ReceivingReceiving

SuppliersSuppliers


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Centralized vs DecentralizedCentralized vs Decentralized


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Centralized purchasing

Purchasing is handled by one special

department

Decentralized purchasing

Individual departments or separate

locations handle their own purchasing

requirements

Centralized vs DecentralizedCentralized vs Decentralized


S


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Choosing suppliers

Evaluating sources of supply

Supplier audits

Supplier certification

Supplier relationships Supplier partnerships

SuppliersSuppliers


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Quality and quality assurance

Flexibility

Location

Price

Factors in Choosing a SupplierFactors in Choosing a Supplier



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Product or service changes

Reputation and financial stability

Lead times and on-time delivery

Other accounts


(contd)(contd)

E l ti S f S lE l ti S f S l


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Evaluating Sources of SupplyEvaluating Sources of Supply

Vendor analysis: Evaluating thesources of supply in terms of price,

quality, reputation, and service

E l i S f S lE l ti S f S l


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Vendor analysis - evaluating thesources of supply in terms of Price

Quality Services

Location

Inventory policy

Flexibility

Evaluating Sources of SupplyEvaluating Sources of Supply

S li P tSupplier as a Partner


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Supplier as a PartnerSupplier as a Partner

Nearness is

important

Widely dispersedLocation

Relatively highRelatively lowFlexibility

HighMay be lowVolume of business

At the source;vendor certifiedMay be unreliable;buyer inspectsQuality

HighLowOpenness

HighMay not be highReliability

Moderately importantMajor considerationLow price

Long-termMay be briefLength of

relationship

One or a fewManyNumber of suppliers

PartnerAdversaryAspect

S li P t hiS li P t hi


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Ideas from suppliers could lead to improvedcompetitiveness1.Reduce cost of making the purchase

2.Reduce transportation costs

3.Reduce production costs

4.Improve product quality

5.Improve product design

6.Reduce time to market

7.Improve customer satisfaction8.Reduce inventory costs

9.Introduce new products or services

Supplier PartnershipsSupplier Partnerships

Critical Iss esCritical Issues


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Critical IssuesCritical Issues

Strategic importance Cost

Quality

Agility

Customer service

Competitive advantage

Technology management Benefits

Risks



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Purchasing function Increased outsourcing

Increased conversion to lean production

Just-in-time deliveries Globalization

mba iind sem pom chapter 11 scm

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