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1---What is Supply Chain Management

Supply Chain Management is primarily concerned with the efficient integration of suppliers, factories, warehouses and stores so that merchandise is produced and distributed in the right quantities, to the right locations and at the right time, and so as to minimize total system cost subject to satisfying service requirements.

Simchi-Levi

SCM
The term “supply chain management” was coined by Keith Oliver, a Booz Allen Hamilton executive in 1982 (Information Week, 2003).

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Supply Chain: Manufacturing Example 7 .

Supply Chain: Manufacturing Example 8 .

Supply Chain: Service Example 9 .

Supply Chain: Service Example 10 .

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and raw materials suppliers Horizontal: Business arrangements between firms that occupy “parallel” positions in the supply chain (e.g. consortium of carriers and shippers working to reduce empty truck movement) . manufacturers. distributors.Supply Chain Relationships Types of Relationships Vertical: The traditional linkages between firms in the supply chain such as retailers. two ocean carriers that share ship capacity) Full Collaboration: Business arrangements between firms that occupy both vertical and parallel positions in the supply chain (e.g.

with limited commitment Collaborative: Two or more business organizations cooperate to drive better long term combined results Strategic: Represents deep and long term commitments among supply chain partners.Range of supply chain relationships Transactional: Both parties are at “arm’s length”. Firms willingly modify their business objectives and practices to help achieve shared long-term goals and objectives .

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Supply Chain Drivers .

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Supply and Demand Network .

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re duce of the reliance on forecasts and reduce or eliminate of the WIP Buffers . . Advantages of shifting the OPP backwards are among others increase of the degree of product customisation . Basically the actions before the OPP are forecast driven and the actions after the OPP customer order Driven . Shifting the OPP forward reduce the delivery lead time to customers and increase the manufacturing efficiency .Order penetration point The position of the of the order penetration point (OPP) is an important strategic question.

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A framework for managing the supply chain • Key issue 1 What are the management implications of integrating the supply chain? .

A framework for managing the supply chain 6 Develop measurement system for supply chain performance 4 Pilot new supply chain solutions 5 Organize for supply chain performance 1 Develop a supply chain strategy 2 Gather supply chain information 3 Develop effective partnerships and alliances .

A framework for managing the supply chain • Develop a supply chain strategy – – – – – – – Customer service requirements Plant and distribution center network design Inventory management Outsourcing and third-party logistics relationships Business processes Organizational design and training requirements Performance metrics and goals .

customers and employees • Selection of scope and environment.A framework for managing the supply chain • Pilot new supply chain solutions – Successful supply chain improvement including • Involvement of key stakeholders. suppliers. focusing on avoiding risk • Identification of the key questions that the pilot must answer .

A framework for managing the supply chain • Develop measurement systems for supply chain performance – On time in full. inbound – Internal defect rates – New product introduction rate – Cost reduction – Stock turns – Order to delivery lead time – Fiscal flexibility . outbound – On time in full.

fast delivery. many package types.Why so Difficult to Match Supply and Demand? • • • • • • Uncertainty in demand and/or supply Changing customer requirements Decreasing product life cycles Fragmentation of supply chain ownership Conflicting objectives in the supply chain Conflicting objectives even within a single firm – Marketing/Sales wants: more FGI inventory. low depot costs. depots at factory. low distribution costs. small # of SKUs. latest ship date. stable distribution plan . decrease changeovers. special wishes/promotions – Production wants: bigger batch size. stable production plan – Distribution wants: full truckload.

everyone has to guess what is going on downstream. • Guessing wrong leads to too much or too little inventory: – If too much. . 41 .The Bullwhip Effect • If information isn’t shared. – If too little. firms demand a rush order & order more than usual to avoid being caught short in the future (leading suppliers to think demand has risen). firms hold off buying more until inventories fall (leading suppliers to think demand has fallen).

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The Bull whip effect .

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. due to information distortion and lack of coordination.The effect of lack of coordination on performance • • • • • • • • • Manufacturing cost  Inventory cost  Replenishment lead time  Transportation cost  Labor cost for shipping and receiving  Level of product availability  Relationships across the supply chain #@#*&@*! Profitability  Remark: All of the above essentially result from the increased variability experienced by certain parts of the supply chain.

Information Flow in Supply Chains .

shippers and other businesses around the world. instantaneously .Information Technology: A Supply Chain Enabler • Information links all aspects of supply chain • E-business – replacement of physical business processes with electronic ones • ERP Systems • Bar code and point-of-sale – data creates an instantaneous computer record of a sale • Radio frequency identification (RFID) – technology can send product data from an item to a reader via radio waves • Electronic data interchange (EDI) – a computer-to-computer exchange of business documents • Internet – allows companies to communicate with suppliers. customers.

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… . but often break down when confronted by a sudden surge in demand. Here’s how the system works for Proctor & Gamble’s Pampers.Radio Frequency Tags Radio Frequency Tags: Keeping the Shelves Stocked Supply chains work smoothly when sales are steady. Radio frequency ID (or RFID) tags can change that by providing real-time information about what’s happening on store shelves.

SAP Advanced Planner and Optimizer(APO) SAP APO has 5 key modules Demand Planning Supply Network Planning Core Interface(R3 to APO) Manufacturing Planning Global Available to promise .