Supply Chain Management Section 1
Flashcard maker : Lily Taylor
Refers to activities that occur within the purview of a single organization.
Focuses on activities such as: Procurement / Purchasing, Sourcing, Inventory Management, Warehousing, Distribution (order fulfillment, pick / pack & ship)
Supply Chain Management
Refers to networks of independent companies that work together and coordinate their actions to deliver a product(s) or service(s) to market for the benefit of all companies in the network (i.e., collaboration and coordination).
Goal of Supply Chain Management
To increase Customer Service while simultaneously reducing both Inventory Investment and Operating Expenses.
Supply Chain Management delivers value by
managing the processes of all of those otherwise independent trading partners so that they collaborate with one another in an efficient, effective and cost conscious way.
Supply Chain Management Challenge
Balancing demand (working capital/capital investment) and supply (cost of goods sold/operating expenses).
Basic Supply Chain Model
Plan –> Source –> Make –> Deliver <–> Return
Typical Supply Chain
Material Supplier (Tier 2) –> Intermediate Supplier (Tier 1) –> Manufacturer (Finished Product) –> Wholesaler & Distributor (Tier 1) –> Retail Customer (Tier 2) –> End Consumers
1950’s ; 1960’s
U.S. manufacturers focused on mass production techniques as their principal cost reduction and productivity improvement strategies.
1960’s ; 1970’s
Introduction of new computer technology lead to development of Materials Requirements Planning (MRP) and Manufacturing Resource Planning (MRPII) to coordinate inventory management and improve internal communication.
1980’s ; 1990’s
Intense global competition led U.S. manufacturers to adopt: Supply Chain Management (SCM), Just-In-Time (JIT), Total Quality Management (TQM), Business Process Reengineering (BPR).
2000’s and Beyond
Companies will focus on relationships, sustainability, and social responsibility. Companies will focus on improving supply chain capabilities with initiatives such as: Third-party service providers (3PLs), Integrating logistics, Using transportation to facilitate rapid response.
A company gained synergy as a vertically integrated firm encompassing the ownership and coordination of several supply chain activities. Organizational cultures emphasized short-term, company focused performance.
A company in a supply chain focuses activities in its area of specialization and enters into voluntary and trust-based relationships with supplier and customer firms. “Outsourcing non-core competencies”
The Foundations of Supply Chain Management
Supply Management, Operations Management, Logistics ; Transportation, Integration
(Purchasing/Sourcing) – Supply base rationalization, supplier relationship management, partnerships and alliances, ethics and sustainability.
Forecasting, demand management, material and operations planning, lean systems, Six Sigma quality systems.
Logistics ; Transportation
Warehousing, transportation management, customer relationship management, network design, international trade, sustainability, service response logistics.
Enabling systems, risk and security management, performance measurement.
Supply Management (Supplier Evaluation, Supplier Certification), Strategic Partnerships, Ethics and Sustainability.
Determining supplier capabilities.
Third party or internal certification to assure product quality and service requirements.
Successful and trusting relationships with top-performing suppliers.
Ethics and Sustainability
Recognizing suppliers’ impact on reputation and carbon footprint.
Demand Management, linking buyers and suppliers, Lean Systems.
Match demand to available capacity.
Improve the flow of materials to reduce inventory levels.
Transportation Management, Customer Relationship Management, Network Design.
Trade off decisions between cost & timing of delivery / customer service via trucks, rail, water & air.
Customer Relationship Management
Strategies to ensure deliveries, resolve complaints, improve communications, & determine service requirements.
Creating distribution networks based on trade off decisions between cost & sophistication of distribution system.
Supply Chain Performance Measurement
Crucial for firms to know if procedures are working.
Supply Chain Process Integration, Supply Chain Performance Measurement.
Supply Chain Process Integration
When supply chain participants work for common goals. Requires intrafirm functional integration. Based on efforts to change attitudes & adversarial relationships.
Basic Supply Chain Capabilities Models
Efficient and Responsive
Supply Chain and processes are designed to minimize cost. Characteristics: For predictable supply and low cost, low cost production and highly utilized capacity, high inventory turns, ideal for functional products.
Staples that people buy everywhere. Don’t change much over time. Stable predictable demand.
Steps for building an Efficient Model
Understand the requirements of your customers. Define core competencies and the roles your company will play to serve your customers. Develop supply chain capabilities to support the roles your company has chosen.
Supply Chain designed to respond quickly to market demand. Characteristics: Fast response, minimal stock outs, need flexible capacity (volume), inventory of parts, minimize lead time, need to have a variety of products available for customers when they want to buy, ideal for innovative products.
Rapidly changing, Very short life-cycle products, Great variety, Very unpredictable demand.
Anticipatory Business Model (Push Model)
Forecast –> Buy Components –> Manufacture –> Warehouse –> Sell –> Deliver
Producing stock on the basis of anticipated demand. Demand forecasting can be done via a variety of sophisticated techniques. Used by 95% of businesses.
Responsive Business Model (Pull Model)
Sell –> Buy Components and Materials –> Manufacture –> Deliver
Producing stock in response to actual demand. Used by 5% if businesses.
Inventory to satisfy demand in the immediate time period. Sales/Demand ; replenishment driven. Based on EOQ/MOQ (balance of inventory and order/production costs).
Buffer demand variability, buffer supply variability, ensures desired customer service level.
For major disruptive event in supply, major business opportunity for sales.
Inventory in transit, inventory held by wholesalers, distributors, and customers.
Maintenance, Repair and operating (MRO) Inventory
Not directly related to product creation.
Importance of Supply Chain Management
Cost savings and better coordination of resources are two main reasons to employ Supply Chain Management.
Collaborative Planning, Forecasting, and Replenishment (CPFR)
activities reduce the Bullwhip Effect and lead to better customer service, lower inventory costs, improved quality, reduced cycle time, better production methods, and other benefits.
Slight demand variability is magnified as information moves back upstream. It refers to a trend of larger and larger swings in inventory in response to changes in demand, as one looks at companies further back in the supply chain of a product.
Who benefits from Supply Chain Management?
Firms with: large inventories, large number of suppliers, complex products, customers with large purchasing budgets.
How do companies benefit from Supply Chain Management?
Lower purchasing and inventory costs, improved quality, higher levels of customer service.
Direct suppliers and direct customers.
Indirect suppliers (i.e., supplier’s suppliers) and indirect customers (i.e., customer’s customers).
Current Trends in SCM
Globalization, Flexibility and Responsiveness, Cost Reduction and Continuous Improvement, Sustainability and “Greening” the Supply Chain.
Expanding the Supply Chain. International, mature and emerging markets have become a part of the overall business growth strategy for many companies.
Supply Chain Breadth
Foreign manufacturing, office ; retail sites, foreign suppliers ; customers.
Flexibility ; Responsiveness
Firms will increasingly need to be more flexible and responsive to customer needs adapting to unexpected changes and circumstances. Necessitating closer integration and collaboration.
Cost Reduction and Continuous Improvement
Reducing purchasing costs, waste, excess inventory, non-value added activities. Improving demand planning. Increased outsourcing of non-core competencies.
Sustainability and “Greening” the Supply Chain
Customers increasingly prefer products that are made and sourced in ‘the right way’; minimizing business’ social, economic and environmental impact on society and enhancing positive effects. Large majority (75%) of U.S. consumers influenced by a firm’s environmental friendliness reputation.