Professional Documents
Culture Documents
ch01 Fall2011
ch01 Fall2011
ch01 Fall2011
IE 753 - Chp. 1
1-1
IE 753 - Chp. 1
1-2
Plastic Producer
Tenneco Packaging
Paper Manufacturer
Timber Industry
IE 753 - Chp. 1
1-3
Customer
Funds
IE 753 - Chp. 1
1-4
Supplier
Manufacturer
Wholesaler/ Distributer
Retailer
Customer
Supplier
Manufacturer
Wholesaler/ Distributer
Retailer
Customer
IE 753 - Chp. 1
1-6
Dell Computer
Customer Dells web site assembly plant Dells suppliers Dell
Web site provides the customer with information regarding pricing, product variety and product availability. Customer can enter the order, pay for the product and check the status of the order
IE 753 - Chp. 1 Assist. Prof. F. Uney-Yuksektepe 1-7
Supply chain design decisions are long-term and expensive to reverse must take into account market uncertainty
IE 753 - Chp. 1 Assist. Prof. F. Uney-Yuksektepe 1-12
Must consider in planning decisions demand uncertainty, exchange rates, competition over the time horizon
IE 753 - Chp. 1 Assist. Prof. F. Uney-Yuksektepe 1-14
Retailer
Replenishment Cycle
Distributor
Manufacturing Cycle
Manufacturer
Procurement Cycle
Supplier
IE 753 - Chp. 1 Assist. Prof. F. Uney-Yuksektepe 1-17
Cycle view clearly defines processes involved and the owners of each process. Useful considering operational decisions because it specifies the roles and responsibilities of each member of the supply chain and the desired outcome of each process.
IE 753 - Chp. 1 Assist. Prof. F. Uney-Yuksektepe 1-18
IE 753 - Chp. 1
1-19
Replenishment Cycle
All processes involved in replenishing retailer inventories (retailer is now the customer)
Retail order trigger Retail order entry Retail order fulfillment Retail order receiving
IE 753 - Chp. 1
1-20
Manufacturing Cycle
All processes involved in replenishing distributor (or retailer) inventory
Order arrival from the distributor, retailer, or customer Production scheduling Manufacturing and shipping Receiving at the distributor, retailer, or customer
IE 753 - Chp. 1 Assist. Prof. F. Uney-Yuksektepe 1-21
Procurement Cycle
All processes necessary to ensure that materials are available for manufacturing to occur according to schedule Manufacturer orders components from suppliers to replenish component inventories However, component orders can be determined precisely from production schedules (different from retailer / distributor orders that are based on uncertain customer demand)
IE 753 - Chp. 1 Assist. Prof. F. Uney-Yuksektepe 1-22
PUSH PROCESSES
PULL PROCESSES
IE 753 - Chp. 1
1-25
Integration among the above three macro processes is critical for effective and successful supply chain management
IE 753 - Chp. 1 Assist. Prof. F. Uney-Yuksektepe 1-26
IE 753 - Chp. 1
1-27
IE 753 - Chp. 1
1-28
Gateway
Manufacturer of PCs, founded in 1985 Started as a direct sales manufacturer with no retail In 1996, it was one of the first PC manufacturers to start selling PCs online. In 1999, it had 3 plants in US, one in Ireland, one in Malaysia. In the late 1990s, it introduced an aggressive strategy of opening Gateway retail stores throughout the US. By 2002, it had ~280 retail stores in the US. Avoid carrying any finished-goods inventory in retail stores. Simply uses these stores for customers to try the PCs and help in deciding on the right configuration to purchase. When customers placed their order, PCs were manufactured IE 753 - Chp. 1 Assist. Prof. F. Uney-Yuksektepe 1-29 to order and shipped from one of the assembly plants.
Gateway
Initially, investors rewarded Gateway for this strategy and raised the stock price to more than $80 per share in late 1999s. By November 2002, Gateway shares had dropped to less than $4 and lose a significant amount of money. Plants in Salt Lake City, Ireland and Malaysia were shut. By 2004, it had closed all its retail outlets and reduced the number of configurations offered to customers. In August 2007, Taiwans Acer purchased Gateway for a price of $710 million. By 2008, Gateway computers were sold through over ten different retail outlets including Best Buy and Circuit City.
IE 753 - Chp. 1
1-30
Gateway
Why did Gateway have multiple production facilities in the US? What advantage or disadvantages does increasing the number of production facilities offer? How does Gateway decide which production facility will produce and ship a customer order? What factors did Gateway consider when deciding which plants to close? Why did Gateway choose not to carry any finishedproduct inventory at its retail stores?
IE 753 - Chp. 1
1-31
Gateway
Should a firm with an investment in retail stores carry any finished-goods inventory? What are the characteristics of products that are most suitable to be carried in finished-goods inventory? What characterizes products that are best manufactured to order? Is the Dell model of selling directly without retail stores always less expensive than a supply chain with retail stores? What are the supply chain implications of Gateways decision to offer fewer configurations?
IE 753 - Chp. 1 Assist. Prof. F. Uney-Yuksektepe 1-32
Zara
Chain of fashion stores owned by Inditex, Spains largest apparel manufacturer and retailer. In 2007 sales of about 9.5 million Euros from more than 3600 retail outlets in 68 countries. In 2007, company opened about two new stores for each day. With a volatile customer demand, Zara has grown rapidly with a strategy to be highly responsive to changing trends with affordable prices. Design-to-sales cycle times in the apparel industry have traditionally averaged more than six months, Zara has achieved cycle times of four to six weeks.
IE 753 - Chp. 1 Assist. Prof. F. Uney-Yuksektepe 1-33
Zara
Thus, Zaras products on display match customer preferences much more closely than the competition. As a result, Zara sells most of its products at full price and has about half the markdowns in its stores compared to the competition. Zara manufactures its apparel using a combination of flexible and quick sources in Europe and low cost sources in Asia. This contrasts with most apparel manufacturers, who have moved most of their manufacturing in Asia. ~%40 of the manufacturing capacity is owned by Inditex and the rest is outsourced.
IE 753 - Chp. 1 Assist. Prof. F. Uney-Yuksektepe 1-34
Zara
More than 40% of its finished-goods purchases and most of its in-house production occur after the sales season starts. For a typical retailer this amount is less than %20. The responsiveness and the postponement of decisions until after trends are known allow Zara to reduce inventories and forecast error. Zara has also invested heavily in information technology to ensure that the latest sales data are available to derive replenishment and production decisions.
IE 753 - Chp. 1
1-35
Zara
In 2007 8 distribution centers located in Spain serve for all over the world Averaged delivery time 24 hours for European stores, up to a maximum of 40 hours for stores in America or Asia Shipments from the DCs to stores were made several times a week allows inventory to closely match customer demand In 2007 globally 627 million garments are distributed
IE 753 - Chp. 1
1-36
Zara
What advantage does Zara gain against the competition by having a very responsive supply chain? Why has Inditex chosen to have both in-house manufacturing and outsourced manufacturing? Why has Inditex maintained manufacturing capacity in Europe even though manufacturing in Asia is much cheaper? Why does Zara source products with uncertain demand from local manufacturers and products with predictable demand from Asian manufacturers? What advantage does Zara gain from replenishing its stores multiple times a week compared to a less frequent schedule? How does the frequency of replenishment affect the design of its distribution system? What information infrastructure does Zara need in order to operate its production, distribution, and retail network effectively?
IE 753 - Chp. 1 Assist. Prof. F. Uney-Yuksektepe 1-37
Amazon
Amazon. Com sells books, music and other items over the internet Based in Seattle, fills all orders using books purchased from a distributor in respond to customer orders Different than traditional bookstore, which usually purchases directly from publishers and stocks book in anticipation of customer orders. In 2008 8 warehouses in the U.S. and 15 warehouses in the rest of the world Uses U.S. postal service, UPS and FedEx to send books to customers Expand the set of products toys, apparel, electronics, jewelry and shoes.
IE 753 - Chp. 1 Assist. Prof. F. Uney-Yuksektepe 1-38
Amazon
Has been profitable since 2003. Several bricks-and-mortar players (such as Borders and Barnes & Noble) have also started selling using the internet channel. Borders used Amazon BarnesandNoble.com initially a separate company (Original strategy) Barnes & Noble the retail and online supply chains shares warehousing and transportation to some extent Departure from the companys original strategy
IE 753 - Chp. 1
1-39
Amazon
Why is Amazon building more warehouses as it grows? How many warehouses should it have and where should they be located? What advantages does selling books via the internet provide over a traditional bookstore? Are there any disadvantages to selling via the internet? Should Amazon stock every book it sells? What advantage can bricks-and-mortar players derive from setting up an online channel? How should they use the two channels to gain maximum advantage? For what products does the e-commerce channel offer the geratest advantage? What characterizes these products?
IE 753 - Chp. 1 Assist. Prof. F. Uney-Yuksektepe 1-40