Supply chain management

1,[object Object],Basics of Supply Chain Management,[object Object]

2,[object Object],Definitions,[object Object]

3,[object Object],Suppliers,[object Object],Manufacturers,[object Object],Warehouses &,[object Object],Distribution Centers,[object Object],Customers,[object Object],Transportation,[object Object],Costs,[object Object],Transportation,[object Object],Costs,[object Object],Transportation,[object Object],Costs,[object Object],Material Costs,[object Object],Manufacturing Costs,[object Object],Inventory Costs,[object Object],What Is the Supply Chain? ,[object Object],Also referred to as the logistics network,[object Object],Suppliers, manufacturers, warehouses, distribution centers and retail outlets – “facilities”,[object Object],and the,[object Object],Raw materials,[object Object],Work-in-process (WIP) inventory,[object Object],Finished products,[object Object],that flow between the facilities,[object Object]

4,[object Object],Suppliers,[object Object],Manufacturers,[object Object],Warehouses &,[object Object],Distribution Centers,[object Object],Customers,[object Object],Transportation,[object Object],Costs,[object Object],Transportation,[object Object],Costs,[object Object],Transportation,[object Object],Costs,[object Object],Material Costs,[object Object],Inventory Costs,[object Object],Manufacturing Costs,[object Object],The Supply Chain,[object Object]

5,[object Object],Suppliers,[object Object],Manufacturers,[object Object],Warehouses &,[object Object],Distribution Centers,[object Object],Customers,[object Object],Transportation,[object Object],Costs,[object Object],Transportation,[object Object],Costs,[object Object],Transportation,[object Object],Costs,[object Object],Material Costs,[object Object],Manufacturing Costs,[object Object],Inventory Costs,[object Object],The Supply Chain – Another View,[object Object],Plan,[object Object], Source,[object Object], Make,[object Object], Deliver,[object Object], Buy,[object Object]

6,[object Object],Plan,[object Object], Source,[object Object], Make,[object Object], Deliver,[object Object], Buy,[object Object],What Is Supply Chain Management (SCM)? ,[object Object],A set of approaches used to efficiently integrate,[object Object],Suppliers,[object Object],Manufacturers,[object Object],Warehouses,[object Object],Distribution centers,[object Object],So that the product is produced and distributed,[object Object],In the right quantities,[object Object],To the right locations,[object Object],And at the right time,[object Object],System-wide costs are minimized and,[object Object],Service level requirements are satisfied ,[object Object]

7,[object Object],History of Supply Chain Management,[object Object],1960’s - Inventory Management Focus, Cost Control,[object Object],1970’s - MRP & BOM - Operations Planning,[object Object],1980’s - MRPII, JIT - Materials Management, Logistics,[object Object],1990’s - SCM - ERP - “Integrated” Purchasing, Financials, Manufacturing, Order Entry,[object Object],2000’s - Optimized “Value Network” with Real-Time Decision Support; Synchronized & Collaborative Extended Network,[object Object]

8,[object Object],Plan,[object Object], Source,[object Object], Make,[object Object], Deliver,[object Object], Buy,[object Object],Why Is SCM Difficult? ,[object Object],Uncertainty is inherent to every supply chain,[object Object],Travel times,[object Object],Breakdowns of machines and vehicles,[object Object],Weather, natural catastrophe, war,[object Object],Local politics, labor conditions, border issues,[object Object],The complexity of the problem to globally optimize a supply chain is significant,[object Object],Minimize internal costs,[object Object],Minimize uncertainty,[object Object],Deal with remaining uncertainty,[object Object]

9,[object Object],The Importance of Supply Chain Management ,[object Object],Dealing with uncertain environments – matching supply and demand,[object Object],Boeing announced a $2.6 billion write-off in 1997 due to “raw materials shortages, internal and supplier parts shortages and productivity inefficiencies”,[object Object],U.S Surgical Corporation announced a $22 million loss in 1993 due to “larger than anticipated inventories on the shelves of hospitals”,[object Object],IBM sold out its supply of its new Aptiva PC in 1994 costing it millions in potential revenue,[object Object],Hewlett-Packard and Dell found it difficult to obtain important components for its PC’s from Taiwanese suppliers in 1999 due to a massive earthquake,[object Object],U.S. firms spent $898 billion (10% of GDP) on supply-chain related activities in 1998,[object Object]

10,[object Object],The Importance of Supply Chain Management ,[object Object],Shorter product life cycles of high-technology products,[object Object],Less opportunity to accumulate historical data on customer demand,[object Object],Wide choice of competing products makes it difficult to predict demand,[object Object],The growth of technologies such as the Internet enable greater collaboration between supply chain trading partners,[object Object],If you don’t do it, your competitor will,[object Object],Major buyers such as Wal-Mart demand a level of “supply chain maturity” of its suppliers,[object Object],Availability of SCM technologies on the market,[object Object],Firms have access to multiple products (e.g., SAP, Baan, Oracle, JD Edwards) with which to integrate internal processes,[object Object]

11,[object Object],Multi-tier,[object Object],Suppliers,[object Object],Wholesale Distributors,[object Object],Consumers,[object Object],Manufacturer,[object Object],Retailers,[object Object],Sales,[object Object],Sales,[object Object],Sales,[object Object],Sales,[object Object],Time,[object Object],Time,[object Object],Time,[object Object],Time,[object Object],Bullwhip Effect,[object Object],Supply Chain Management and Uncertainty,[object Object],Inventory and back-order levels fluctuate considerably across the supply chain even when customer demand doesn’t vary,[object Object],The variability worsens as we travel “up” the supply chain,[object Object],Forecasting doesn’t help!,[object Object]

12,[object Object],Factors Contributing to the Bullwhip ,[object Object],Demand forecasting practices,[object Object],Min-max inventory management (reorder points to bring inventory up to predicted levels),[object Object],Lead time,[object Object],Longer lead times lead to greater variability in estimates of average demand, thus increasing variability and safety stock costs,[object Object],Batch ordering,[object Object],Peaks and valleys in orders,[object Object],Fixed ordering costs,[object Object],Impact of transportation costs (e.g., fuel costs),[object Object],Sales quotas,[object Object],Price fluctuations,[object Object],Promotion and discount policies,[object Object],Lack of centralized information,[object Object]

13,[object Object],Today’s Marketplace Requires: ,[object Object],Personalized content and services for their customers,[object Object],Collaborativeplanning with design partners, distributors, and suppliers,[object Object],Real-time commitments for design, production, inventory, and transportation capacity,[object Object],Flexiblelogistics options to ensure timely fulfillment,[object Object],Order tracking & reporting across multiple vendors and carriers,[object Object],Shared visibility for ,[object Object],trading partners,[object Object]

14,[object Object],Supply Chain Management – Key Issues,[object Object],Forecasts are never right,[object Object],Very unlikely that actual demand will exactly equal forecast demand,[object Object],The longer the forecast horizon, the worse the forecast,[object Object],A forecast for a year from now will never be as accurate as a forecast for 3 months from now,[object Object],Aggregate forecasts are more accurate,[object Object],A demand forecast for all CV therapeutics will be more accurate than a forecast for a specific CV-related product,[object Object],Nevertheless, forecasts (or plans, if you prefer) are important management tools when some methods are applied to reduce uncertainty,[object Object]

15,[object Object],Purchasing,[object Object],Manufacturing,[object Object],Distribution,[object Object],Customer Service/,[object Object],Sales,[object Object],Low pur-chase price,[object Object],Multiple vendors,[object Object],Few change- overs,[object Object],Stable schedules,[object Object],Long run lengths,[object Object],High inventories,[object Object],High service levels,[object Object],Regional stocks,[object Object],Low invent-ories,[object Object],Low trans-portation,[object Object],SOURCE,[object Object],MAKE,[object Object],DELIVER,[object Object],SELL,[object Object],Supply Chain Management – Key Issues,[object Object],Overcoming functional silos with conflicting goals,[object Object]

16,[object Object],Supply Chain Management – Key Issues,[object Object],Source: Simchi-Levi,[object Object]

17,[object Object],Supply Chain Management Operations Strategies,[object Object],Source: Simchi-Levi,[object Object]

18,[object Object],Supply Chain Management – Benefits,[object Object],A 1997 PRTM Integrated Supply Chain Benchmarking Survey of 331 firms found significant benefits to integrating the supply chain,[object Object],Source: Cohen & Roussel,[object Object]

19,[object Object],Supply Chain Imperatives for Success,[object Object],View the supply chain as a strategic asset and a differentiator,[object Object],Wal-Mart’s partnership with Proctor & Gamble to automatically replenish inventory,[object Object],Dell’s innovative direct-to-consumer sales and build-to-order manufacturing,[object Object],Create unique supply chain configurations that align with your company’s strategic objectives,[object Object],Operations strategy,[object Object],Outsourcing strategy,[object Object],Channel strategy,[object Object],Customer service strategy,[object Object],Asset network,[object Object],Reduce uncertainty,[object Object],Forecasting,[object Object],Collaboration,[object Object],Integration,[object Object],Supply chain configuration components,[object Object]

20,[object Object],Value of Informationand SCM,[object Object]

21,[object Object],Order Lead Time,[object Object],Delivery Lead Time,[object Object],Production Lead Time,[object Object],Information In The Supply Chain,[object Object],Plan,[object Object],Warehouses &,[object Object],Distribution Centers,[object Object],Retailer,[object Object],Suppliers,[object Object],Manufacturers,[object Object], Source,[object Object], Make,[object Object], Deliver,[object Object], Sell,[object Object],Each facility further away from actual customer demand must make forecasts of demand,[object Object],Lacking actual customer buying data, each facility bases its forecasts on ‘downstream’ orders, which are more variable than actual demand,[object Object],To accommodate variability, inventory levels are overstocked thus increasing inventory carrying costs,[object Object],It’s estimated that the typical pharmaceutical company supply chain carries over 100 days of product to accommodate uncertainty,[object Object]

22,[object Object],Taming the Bullwhip,[object Object],Four critical methods for reducing the Bullwhip effect:,[object Object],Reduce uncertainty in the supply chain,[object Object],Centralize demand information,[object Object],Keep each stage of the supply chain provided with up-to-date customer demand information,[object Object],More frequent planning (continuous real-time planning the goal) ,[object Object],Reduce variability in the supply chain,[object Object],Every-day-low-price strategies for stable demand patterns,[object Object],Reduce lead times,[object Object],Use cross-docking to reduce order lead times,[object Object],Use EDI techniques to reduce information lead times,[object Object],Eliminate the bullwhip through strategic partnerships,[object Object],Vendor-managed inventory (VMI),[object Object],Collaborative planning, forecasting and replenishment (CPFR),[object Object]

23,[object Object],Methods for Improving Forecasts,[object Object],Judgment Methods,[object Object],Market Research Analysis,[object Object],Panels of Experts,[object Object],[object Object]

Focus groupsAccurate,[object Object],Forecasts,[object Object],Time-Series Methods,[object Object],Causal Analysis,[object Object],[object Object]

Relies on data other than that being predicted

Economic data, commodity data, etc.,[object Object]

25,[object Object],Supply Chain Integration – Push Strategies,[object Object],Classical manufacturing supply chain strategy,[object Object],Manufacturing forecasts are long-range ,[object Object],Orders from retailers’ warehouses,[object Object],Longer response time to react to marketplace changes ,[object Object],Unable to meet changing demand patterns,[object Object],Supply chain inventory becomes obsolete as demand for certain products disappears,[object Object],Increased variability (Bullwhip effect) leading to:,[object Object],Large inventory safety stocks,[object Object],Larger and more variably sized production batches,[object Object],Unacceptable service levels,[object Object],Inventory obsolescence,[object Object],Inefficient use of production facilities (factories),[object Object],How is demand determined? Peak? Average? ,[object Object],How is transportation capacity determined?,[object Object],Examples: Auto industry, large appliances, others?,[object Object]

26,[object Object],Supply Chain Integration – Pull Strategies,[object Object],Production and distribution are demand-driven,[object Object],Coordinated with true customer demand,[object Object],None or little inventory held,[object Object],Only in response to specific orders,[object Object],Fast information flow mechanisms,[object Object],POS data,[object Object],Decreased lead times,[object Object],Decreased retailer inventory,[object Object],Decreased variability in the supply chain and especially at manufacturers,[object Object],Decreased manufacturer inventory,[object Object],More efficient use of resources,[object Object],More difficult to take advantage of scale opportunities,[object Object],Examples: Dell, Amazon,[object Object]

27,[object Object],Supply Chain Integration – Push/Pull Strategies,[object Object],Hybrid of “push” and “pull” strategies to overcome disadvantages of each,[object Object],Early stages of product assembly are done in a “push” manner,[object Object],Partial assembly of product based on aggregate demand forecasts (which are more accurate than individual product demand forecasts),[object Object],Uncertainty is reduced so safety stock inventory is lower,[object Object],Final product assembly is done based on customer demand for specific product configurations,[object Object],Supply chain timeline determines “push-pull boundary”,[object Object],Push-,[object Object],Pull,[object Object],Boundary,[object Object],“Generic” Product,[object Object],“Customized” Product,[object Object],Push Strategy,[object Object],Pull Strategy,[object Object],Raw,[object Object],Materials,[object Object],End,[object Object],Consumer,[object Object],Supply Chain Timeline,[object Object]

28,[object Object],Choosing Between Push/Pull Strategies,[object Object],Pull,[object Object],High,[object Object],Where do the following industries fit in this model:,[object Object], Automobile?,[object Object], Aircraft?,[object Object], Fashion?,[object Object], Petroleum refining?,[object Object], Pharmaceuticals?,[object Object], Biotechnology?,[object Object], Medical Devices?,[object Object],Industries where:,[object Object],[object Object]

Low economies of scaleIndustries where:,[object Object],[object Object]

Scale economies are LowComputer equipment,[object Object],Furniture,[object Object],Demand Uncertainty,[object Object],Industries where:,[object Object],[object Object]

Scale economies are HighIndustries where:,[object Object],[object Object]

Supply chain management

Supply chain management

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Supply chain management