Supply Chain Management
Consists of firms collaborating to leverage strategic positioning, and to improve operating efficiency
Supply Chain Strategy
Is a channel and business organizational arrangement, based on acknowledge dependency, and collaboration
Logistics
-The work required to move and geographically position inventory
-Order Management
-Inventory
-Transportation
-Warehousing
-Material Handling
-Packaging
Integrative managements creates
-Economic value
-Lowest cost
- Economicies of scale
- Product/service creation
-Market Value
-Attractive assortment
- Economy-of-scope effectiveness
-Relevancy value
-Customization
-Segmental diversity
-Product/service positions
Concepts Necessary for Achieving Integrated Management
-Lowest total process cost is the focus of integrated management
-Differs from lowest cost of each function in the process
-Collaboration of operating information, technology and risk has been
encouraged by national legislation to keep US-based firms competitive
-Enterprise extension includes expanded managerial influence and control
beyond traditional ownership boundaries of a single enterprise
-Integrated service providers (ISP) provide a range of logistics
services to accommodate customers, ranging from order entry to product
delivery
Supply Chain Information System Functionality
Strategic planning: Formulaiton of strategic alliance, Develop and refine capabilities and Customer service analysis
Decision analysis: Vehichle routing and scheduling, inventory levels and
mangement, Network/facility locations and integration and Vertical
integration Vs. Third party
Management control: Financial measurement, Customer service measurement, Productivity measurement and quality measurement.
Transaction system: Order management, Inventory assignment, Order
selection, Shipping, Pricing and invoicing and customer inquiry.
More Opportunities Exist for Improvements at Higher Levels of Functionality
Strategic planning can be high risk and has extensive options but creates a competitive advantage.
Decision analysis has significant user expense, effectiveness driven
activity focus but identifies and evaluates competitive alternatives.
Management control creates Performance control systems, feedback for
performance evaluation and proactive direction for users but measures
competitive capability and addition of improvement areas.
Transaction systems have high hardware and systems costs, structured
training and effeciency-driven focus but creates a competitive
qualifacation.
ERP
-The backbone of most firm's logistical information systems
-Maintains an integrated database of current and historical data
-Processes most (if not all) transactions across all business functions
-Most common / widely used ERP software packages;
-SAP
-Oracle
-Example transactions include
-Order entry and order management
-Inventory assignment
-Shipping and receiving
Enterprise Integration and Administration Modules
Enterprise integration and admin branches off to (General admin, Accounts Recievable, Financial inventory, General ledger, Human resourches)
Effecient
Supply chain and process are designed to minimize cost.
-Predictable supply and low cost
-Low cost production and highly utilized capacity
-High inventory turns
-Ideal for FUNCTIONAL products
Responsive
Supply chain designed to respond quickly to market demands
-Fast response
-Minimal stockouts
-Need flexible capacity (volume)
-inventory of parts
-minimize lead times
-Need to have a variety of products
-Ideal for INNOVATIVE products
Anticpatory business model
Forceast ->Buy materials ->Maufacture->Warehouse->Sell->Deliver (This is a push or Make-to-Stock model)
Responsive business model
Sell->Buy components and materials->Manufacture->Deliver
(This is a pull or Make-to-order) Responds to actual demand
Manufacturing (or Form) Postponement
-Manufacturing one order at a time
-Base modular construction of product
-No customization until the exact customer specs and financial commitment is received
-Objective is to maintain products in an uncommitted status as long as possible
-Balances economy of scale with responsiveness
-Can build a sufficient quantity of "ready to customize" basic units
-Requires a lot of forethought during product design
Example of Manufacturing Postponement
Keeping all the car panels a base color (white or gray) until the order is received, then painting to the color ordered
Geographic (or Logistics) Postponement
-Build or stock a full-line inventory at one or a few strategic locations
-Forward deployment of inventory is postponed until customer orders are received
-Once orders received, specific item is expedited to the local distributor
-Advantages are manufacturing economies of scale along with responsiveness to customer
-Often used for critical, high cost parts and assemblies (e.g. engines)
Example of Geographic Postponement
Keeping full inventory in a central warehouse and releasing customer orders to local distributors or direct shipping to customer
Combined Postponement
-Keeping the basic products centralized and performing the customization at the destination distributor
-Historical example - Autos
-Installing dealer options like sound systems, GPS, sun roofs on new cars purchased
-Contemporary example - Computers
-Dell Computers, doing final assembly or packaging additional system
options like printers, digital cameras at a distribution center
Barriers to Implementing Responsive Systems
Need for publicly held corporations to maintain planned quarterly profits
-Expectations of continued financial results often
drive promotional and pricing strategies to "load the
channel" with inventory, i.e., "Channel Stuffing"
Need to establish collaborative relationships
-Most business managers do not have training or
experience in development of collaborative
arrangements
Cash-to-Cash Conversion
- the time required to convert raw material or inventory purchases into sales revenue
Dwell Time Minimization
- dwell time is the ratio of time that an assets sits idle to the time required to satisfy its supply chain mission
Globalization Offers Firms Several Attractive Opportunities
Demand exceeds local supply
-90% of global demand is not fully satisfied by local
supply
Strategic sourcing
-Identifying and matching the sources of raw
materials and components to manufacturers and
distributors
Offshoring
-Moving manufacturing and distribution operations
to countries with favorable labor costs and tax laws
Significant Differences for Global Logistics
Distance of typical order-to-delivery operations is significantly longer compared to domestic business.
Documentation requirements for business transactions is significantly
more complex. A typical cross-border shipment now involves....
Accurately completing and filing about 35 documents
Compliance with > 600 laws & 500 trade agreements which are constantly changing.
Interfacing with about 25 parties, including customs, carriers, freight forwarders, government agencies, etc.
Operations must deal with significant Diversity in work practices and local operating environments.
How consumers demand products and services must accommodate cultural variations.
Globalization
- Expanding the Supply Chain.
International, mature and emerging markets have become a part of the
overall business growth strategy for many companies.
-Breadth - foreign manufacturing, office & retail sites, foreign suppliers & customers
-Depth - second and third tier 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
Benefits of Actively Managing the Supply Chain
Improved customer service
Increased revenue
Lower costs
Better asset utilization
Reduced uncertainty throughout the supply chain
Elimination of rush (unplanned) activities
Minimize delays / shorter lead-times
Lower inventory levels throughout the supply chain
Adds customer value / retain customers
Ability to effectively respond to disruptions and conflicts
Organizations that benefit the most are those with large inventories,
large numbers of suppliers, complex products, and large purchasing
budgets because they have the most to gain or lose.