Supply Chain Management- CH 1,2,3 Thomas TTU

forces driving the rate of change
globalization , technology, organizational consolidation & power shift, the empowered customer, government policy and regulation
compression of time and distance (3 challenges: supply & demand risk because of terrorism and natural disaster, shorter product life cycles because of innovation and copying products, blurring of organizational boundaries because a Kellogs rep will work in the Wal Mart office
5 major emerging national economics; Brazil, Russia. India, China; developing nations so raising standard of living so they have more disposable income to buy products; “up and coming countries”
emerging markets; Vietnam, Indonesia, South Africa, Turkey, Argentina
facilitator of change;24/7 connectivity;real-time information; information overload is a challenge if it is not managed correctly; have to be able to make good decisions as you have technology information
organizational consolidation
80/20 rule, power=special treatment, Vendor Managed Inventory, POS, bullwhip effect
80/20 rule
80 percent of sales comes from 20% of customers or items
fast; low quantity; high cost
Slow; high quantity; low cost
landlocked; great accessibility; used in multi-modal transportation
relatively cheap; good for raw materials; good for 200+ mile distances; not accessible
most important part of the supply chain because they BUY
operations + marketing = ? ; managing relationships, risks, tradeoffs
focused on cost “doing things right”
focused on value “doing the right things”
Power Shift in Organizational Consolidation
Shift in power from Manufacturer to Retailer (but remember Customer ultimately has top power)
Vendor Managed Inventory (VMI)
ex: coke guys handles shelving, ordering, etc. ; they’re renting space and then retailer owns it when it is purchased
Point of Sale (POS)
when something is bought, that information goes all the way up the supply chain to manufacturer and supplier
Rainbow Pallet
Multiple products on one pallet instead of mass amount of one product
Bull Whip Effect
Result from a lack of communication and information (Retailer orders a little more than usual, Distributor orders even more than that, ultimately Supplier has a very large unnecessary order)
Empowered Customer
increased demands for an expanded variety of products & services; enlightened & educated customers; customers want orders to be perfect; demographic shifts = middle class is growing, retiring baby boomers, diversity based on culture so stores must have different products
Impact of Deregulation
Transportation industry, financial sector, communications industry (ultimately product price goes up because truck trips take longer so more expensive)
Most expensive thing you can ship
AIR! (empty trucks going back)
SCM flows
product, information, cash
everything from raw materials that you receive
distribution; everything from the you to toward the customer
Value Chain
Usually only one company (sometimes said when people actually mean Supply Chain which is 3+ companies)
lead time
number of days from when you place an order to when you receive it
best in class; retailer takes largest % of revenue so has to pay SC more per item when its sold of medians than BIC
Supply Chain Networks
where to expand
SCM Issues
Supply Chain networks; Cost & Value; Organizational Relationships ; Technology; SCM Security (how to deal with natural disaster preparation, etc); Technology; Complexity (Wal Mart SCM); Inventory Deployment; Information; Performance Measurement(expanding efficiency and effectiveness); Supply Chain Security(dealing with natural disasters); Transportation Management (large data set)
part of the SC process that plans, implements and controls the efficient effective flow and storage of goods and services from point of origin to point of consumption “plan, implement, and control the efficiency and effectiveness of SCM”
Seven R’s
RIGHT product, customer, quantity, condition, place, time, cost
4 Kinds of Logistics
Business, Military, Event, Service
Logistics is about evaluating _______
Relationship of the cost of lost sales to inventory cost
if you don’t have the inventory they want, it’s lost sales; not the most accurate because its hard to measure lost sales “the more inventory you have, the less lost sales you have”
general relationship of the cost of lost sales to transportation cost
“the more expensive and improved transportation is, the less the cost of lost sales”
Product dollar value to various logistics cost
“the lower the dollar value of the product, the less likely you are to spend money on good transportation”
Supply Chain Management
efficient and effective flow of products/materials, services, information, and financials from the supplier’s suppliers through the various intermediate entities out to the end user
Demand Management
make forecasts & planning for future “usually incorrect unless very established company”
Order Management & Customer Service
manages HOW and WHEN to make products (ex: when to make which cheerio flavor in the factory)
Inventory Management
How much of what, how much more needed, how to package it to and from the warehouse “safety stock or safety net”
Transportation Management
What kind of transportation to use, following government regulations, managing tradeoffs
Distribution Management
Distribution centers
Network design & Facility Locations
“the right location for the next store” and buying real estate for it; “the right location is all about transportation
Spatial Relationships
“it costs more to go further”; sometimes the cheaper product isn’t the best because of spatial costs that can increase that price
Logistics Utility
Place, Time, Quantity UTILITIES
Production Utility
Form Utility
Marketing Utility
Possession Utility
Trade initially driven by countries seeking materials and goods not available in their own land; civilization built around water areas which has food, water, easy means of transportation; Wealth of Nations
Driven by companies seeking goods and materials, labor, economies of scale, and markets; Industrial Revolution; realize they don’t have to be right by water
the significant characteristic is that is it being powered by individuals and smaller organizations; power of individual instead of just company; technology!
specialization of task
can be good but employees get bird because they’re making the same item continuously; economies and companies could improve their “wealth” by allowing specialization of tasks
Pros & Cons of expanding into new countries
pros- new market; cons- large learning curve
Pros of expanding business into countries
pros- already have relationship
Global Markets & Strategy have 4 important characteristics
standardization reduces complexity; global competition reduces the product life cycle; traditional organizational structures and business models frequently change; globalization introduces more volatility
Top US Trading Partners
Canada, China, Mexico, Japan, Germany
95% of international trade; very vulnerable area for terrorism and attacks; could be beneficial to not always go to the busiest ports because it could take longer even though they may know how to do it well; are like business, competition exists
Shipping Container
changed global Supply Chain completely to be more efficient; Malcolm McLean “Father of Containerization”; 1956- first container freighter carrying 58 containers; importance of box size standardization between countries
unit of measurement for containers; largest ship carries 9500 TEUs
Container Security Initiative (CSI)
58 operational CSI ports now prescreen 80% of container cargo that is to be imported into U.S.; used to prescreen containers before shipped; identify high risk containers; use X-Ray technology and gamma ray machines and radiation detection devices
Panama Canal
being enlarged to occupy more ships; fastest way to get through Americas
North American Free Trade Agreement
established free trade between US, Canada and Mexico; certain trade barriers still remain
cheap labor in Mexico, bad infrastructure, no complex ports
Foreign Freight Forwarders
combine smaller shipments into larger ones; consolidation
global intermediaries
help global companies not fail
airfreight forwarders
combine small shipments into large one using airplane
Non-vessell operating common carriers
common carriers find people to use containers when they’re not being used; only manage location not transportation of containers
export management companies/export trading companies
help you find buyers globally; help transition into other countries; “middle man”
customs house brokers
help companies get through customs as painlessly as possible
Transit sheds
provide temporary storage while the goods await the next portion of the journey
Public Warehouses
available for extended storage periods
bonded warehouses
operate under customs agency’s supervision and are used to store, repack, sort, or clean imported merchandise entered for warehousing without paying import duties while the foods are in storage
carrier provided; free storage until the vessel’s next departure date
Controllable Global Elements
customer service; inventory; packaging; transportation; warehousing and storage; other activities
Uncontrollable Global Elements
political and legal; economic; competition of companies; technology; social and cultural; geography (roads ,ports, airports, seasons)

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