Welcome to BBUS 3320: Supply Chain Management

Instructor: Dr. Avninder Gill
Thompson Rivers University Office: IB 2017 Phone: (250) 828-5155 Email: agill@tru.ca

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Instructor Introduction Class Introduction Course Outline Course Moodle

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Supply Chain Management
Module 1: SCM: Introduction & Strategy
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Learning Objectives
On completion of this module you should be able to: Define supply chain management & know its evolution. Identify various types of supply & demand chains. Understand the material & information flows. Understand the process, cyclic and push-pull view. Recognize supply chain risks, metrics and objective Understand hierarchy of supply chain decisions Understand supply chain strategy, responsiveness and efficiency and the efficiency and responsiveness balance. Recognize the major drivers in supply chain.

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manufacturers. A. to the right locations. Gill 5 5 . in the right condition and at the right time in order to minimize the system wide costs while satisfying the service level requirements. Dr.Definition: Supply Chain Management (SCM) Set of approaches utilized to efficiently integrate suppliers. warehouses and stores so that merchandise is produced and distributed in the right quantities.

TQM. Gill 6 6 .Historical Background Integration of SCM Capabilities SCM Formation/ Extensions JIT. BPR. Alliances Inventory Management/Cost Optimization Traditional Mass Manufacturing 1950s 1960s 1970s 1980s 1990s 2000s Beyond Dr. A.

Lean Manufacturing and Cellular Manufacturing.Evolution of Supply Chain Concept Firms strive to reduce costs of goods and services. TQM. Improvements occurred but the efforts were localized.GCC). Gill 7 7 . corporate reengineering and outsourcing (potential for cost savings). Strategic partnerships. these companies view themselves as a part of global supply chain network. A. Dr. To make these partnerships work.EU. Cost reduction attempted through Kanban. Trade agreements (NAFTA.

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Management 4% The grocery industry could save $30 billion by using effective logistics strategies Potential for improving responsiveness A box of cereal spends 104 days from factory to supermarket. Dr. Inventory 38%. Gill 9 9 . A new car spends 15 days from the factory to the dealership. companies spend more than $1 trillion in supply-related activities (10-15% of GDP) Transportation 58%.Importance of SC View Potential for cost savings (cost efficiency) U.S. A.

A. Gill 10 10 .Supply Chain Stages & Links Stages Suppliers Manufacturers Wholesale Distributors Retailers Customers Links Warehouses Transportation Dr.

A. Gill 11 11 .Transportation Distributors Transportation Retailers Factory Customers Transportation Suppliers/Comp Mfrs Warehousing Transportation Dr.

Supply Chain Stages Manufacturer Distributor Retailer Customer Manufacturer Distributor Retailer Customer Manufacturer Distributor Retailer Customer Dr. Gill 12 12 . A.

Supply Chain versus Demand Chain Distributor’s Supply & Demand Chains Tier 2 Suppliers Tier 1 Suppliers Producer Distributor Customer Producer’s Supply & Demand Chains Tier 2 Suppliers Tier 1 Suppliers Producer Distributor Customer Supply Chain Demand Chain Dr. A. Gill 13 13 .

A.Tier 1 Supplier’s Supply & Demand Chains Tier 2 Suppliers Tier 1 Suppliers Producer Distributor Customer Tier 2 Supplier’s Supply & Demand Chains Tier 2 Suppliers Tier 1 Suppliers Producer Distributor Customer Supply Chain Demand Chain Dr. Gill 14 14 .

Gill 15 15 . A.External versus Internal Supply Chains Suppliers Processing Distribution Customers Key: External Internal Supply Chain Supply Chain Dr.

Gill 16 16 . A.Internal Supply Chain Work centre Work centre Work centre Work centre Storage Storage Storage RECEIVING Shipping Dr.

A. Gill 17 17 .Material &SCM Definition Information Flows Material Flow Converter Converter Supplier Distributor End-User Supplier Source Distributor Retailer Consumers Value-Added Services Funds/Demand Flow Information Flow Reuse/Maintenance/After Sales Service Flow Dr.

Process View of a Supply Chain Cycle view Push-pull view Dr. A. Gill 18 18 .

Cycle View of Supply Chain Customer Customer Order Cycle Retailer Replenishment Cycle Distributor Manufacturing Cycle Manufacturer Procurement Cycle Supplier Dr. Gill 19 19 . A.

the desired outcome and this view is useful for developing information systems. Gill 20 20 .Cycle View of a Supply Chain Each cycle occurs at the interface between two successive SC stages Customer order cycle (customer-retailer) Replenishment cycle (retailer-distributor) Manufacturing cycle (distributor-manufacturer) Procurement cycle (manufacturer-supplier) Cycle view recognizes SC as four process cycles and assigns ownership for each cycle. Dr. A. specifies the roles and responsibilities of each.

Push-Pull View of Supply Chain Supply chain processes fall into two categories depending on the timing of their execution relative to customer order Pull: execution is initiated in response to a customer order (reactive) Push: execution is initiated in anticipation of customer orders (speculative) Dr. Gill 21 21 . A.

Push-Pull View of Supply Chain Procurement. A. Gill 22 22 . Manufacturing and Replenishment cycles Customer Order Cycle PUSH PROCESSES PULL PROCESSES Customer Order Arrives Dr.

A.Push-Pull View of Supply Chain The relative proportion of push and pull have an impact on supply chain performance Useful in considering strategic decisions relating to supply chain design such as level and direction of vertical integration Dr. Gill 23 23 .

Supply Chain Vertical Integration Vertical integration involves either taking on more of the supplier activities (backward) or taking on more of the distribution activities (forward) Backward vertical integration: a peanut butter manufacturer growing peanuts rather than buying Forward vertical integration: a peanut butter manufacturer marketing their peanut better directly to grocery stores Dr. A. Gill 24 24 .

A. factory shutdowns 1999 Taiwan earthquake Supply interruptions of HP. Gill 25 25 . Dell 2001 India (Gujarat state) earthquake Supply interruptions for apparel manufacturers Dr.Supply Chain Risks Natural versus Human-made August 2005 – Hurricane Katrina P&G coffee supplies from New Orleans had six month impact 2002 West Coast port strike Losses of $1B/day Store stock-outs.

Supply Chain Metrics How to assess. A.proportion of demand met from on-hand inventory Supply chain management cost Warranty cost as a percentage of revenue Total inventory days of supply Asset Utilization Dr. how well your supply chain is performing? SC metrics include: On-time delivery performance Lead time for order fulfillment Fill rate . Gill 26 26 .

A.The Objective of a Supply Chain Maximize overall value created Supply chain value: difference between what the final product is worth to the customer and the effort the supply chain expends in filling the customer’s request Value is correlated to supply chain profitability (difference between revenue generated from the customer and the overall cost across the supply chain) Dr. Gill 27 27 .

Hierarchy of Supply Chain Decisions Strategic. Operational . market allocation etc. Gill 28 28 .near term Allocate orders to inventory & shipment. Tactical and Operating Decisions Strategic or Design : Long term. A. location and capacity of facilities Product mix and markets to enter Forming strategic alliances Tactical or planning : Intermediate term. Set delivery dates etc. Determining the number. transportation mode choices Sub-contracting. fix the supply chain design configuration and impose system constraints on SC. Dr. Schedule vehicles and machines. impose policies on SC to govern next level of decisions Determining inventory levels Quality-related decisions Logistics decisions.

Supply Chain Strategy Dr. Gill 29 29 . A.

variety.Strategy Strategy: What each function tries to do particularly well. high prices. A. McMaster Carr: High variety. Competitive Strategy: A set of customer needs a company wishes to satisfy. Gill 30 30 . Walmart: High availability. next day delivery. low variety. Dell: High customization. low prices and reasonable quality. reasonable cost but 1-2 weeks delivery Dr.

competitive strategy. A firm may fail because of a lack of fit leads to conflicts during execution.Supply Chain Strategy Supply Chain Strategy: Ensuring the consistency and fit between customers needs that must be satisfied. A. Dr. and SC capabilities that must be developed. Therefore. is the essence of supply chain strategy. consistency and support between supply chain strategy. and other functional strategies is important. Gill 31 31 .

SC Responsiveness Supply chain responsiveness -. Gill 32 32 . A.ability to respond to wide ranges of quantities demanded meet short lead times handle a large variety of products build innovative products meet a high service level Responsiveness comes at a cost because the capacity needed to respond. Dr. has to be increased.

Gill 33 33 .Efficiency (Cost Efficiency) Supply chain efficiency: cost of making and delivering the product to the customer Increasing responsiveness results in higher costs that lower the efficiency Dr. A.

flexibility. quality Greater reliance on responsive (fast) modes Dr.Comparison of Efficient and Responsive Supply Chains Efficient Primary goal Product design strategy Pricing strategy Mfg strategy Inventory strategy Lead time Supplier selection strategy Transportation strategy Lowest cost Min product cost Lower margins High utilization Minimize inventory Reduce but not at expense of greater cost Cost and low quality Greater reliance on low cost modes Responsive Quick response Modularity Higher margins Capacity flexibility Buffer some inventory Aggressively reduce even if costs are significant Speed. Gill 34 34 . A.

Cost-Responsiveness Efficient Frontier Responsiveness High A B Low Cost High Low Dr. A. Gill 35 35 .

A.Functional versus Innovative Products Functional (Predictable) Product life cycle Contribution margin Product variety Forecast accuracy (margin of error) Average stockout rate Average forced markdown Delivery Lead time More than 2 years 5% to 20% Low (10 to 20 variants per category) 10% 1% to 2% Close to 0% 6 months to 1 year Innovative (unpredictable) 3 months to 1 years 20% to 60% High (often millions of variants per category 40% to 100% 10% to 40% 10% to 25% 1 day to 2 week Dr. Gill 36 36 .

Gill 37 37 . A.Efficiency-Responsiveness Framework Functional Product Efficient Supply Chain Responsive Supply Chain Innovative Products Match Mismatch Mismatch Match Dr.

or fabricated Production sites and storage sites Inventory Stock of goods. WIP etc. A. raw materials. inventory. Transportation Means to move inventory from point to point in a supply chain Combinations of transportation modes and routes Information Data and analysis regarding demand. available capacities throughout the supply chain Sourcing Places to source materials and services Dr.Drivers of Supply Chain Performance Facilities Places where inventory is stored. Gill 38 38 . customer preferences. assembled.

Why Facilities are Drivers of SC ? Facilities Decisions regarding location and capacity of facilities affect the efficiency-responsiveness of SC. Centralization versus de-centralization. Gill 39 39 . Flow shop versus job-shops. Dr. Why Inventory is Driver of SC ? Inventory Changing inventory policy and levels can dramatically affect the efficiency-responsiveness of SC. A.

Why Transportation is Driver of SC ? Transportation Transportation mode choice and route selection has a large impact on the efficiency-responsiveness of SC. Air versus Ground Transportation. Dr. A. Why Sourcing is Driver of SC ? Sourcing Location and pricing of suppliers affects efficiency-responsiveness of SC. Best route normally makes it both efficient and responsive. Gill 40 40 . Why Information is Driver of SC ? Information Provides opportunities to make SC more efficient & responsive .

A.Summary of Supply Chain Drivers Driver Inventory Transportation Facilities Sourcing Information Efficiency Cost of holding Consolidation Centralization Pricing Responsiveness Availability Speed De-centralization Lead-times Information sharing benefits both Dr. Gill 41 41 .

Gill 42 42 . A.Drivers of Supply Chain Performance Competitive Strategy SC Strategy Efficiency Responsiveness Supply chain structure Inventory Transportation Facilities Information Drivers Dr.

) Dr. A.Supply Chain Management Course Map Information Module 2: Demand Management & Information sharing (Forecasting & Bull-whip Effect) Inventory Module 3: Inventory Management Facilities Module 4: Facility Location Module 5: Warehouse Management Transportation Module 6: Transportation Management (Modes. Best Routes etc. Gill 43 43 .