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Supply Chain Management

SCM

Week 1
Class #2
SUPPLY CHAIN
MANAGEMENT

Understanding the Supply Chain


Introducing the term Global SCM
GLOBAL SUPPLY CHAIN
MANAGEMENT

Simple Definition of GLOBAL


-Involving the entire world
-of, relating to, or involving the entire world : WORLDWIDE <a global system of
communication>; also : of or relating to a celestial body (as the moon)
-of, relating to, or applying to a whole (as a mathematical function or a computer
program): UNIVERSAL <a global search of a file>
GLOBAL SUPPLY CHAIN
MANAGEMENT

Economic Implications of Global Supply Chain Management?


-Global SC Managers
-Relocate key facilities: Cheap labour, tax incentives, other potential
benefits, savings in cost, more profit.
-Outsourcing
-Gains in the long run
-New markets, expanding operations
-Offshoring
-Global expansin
CLASS EXERCISE 1

In groups
Think of 5 companies that operate globally
The company name
The location of the headquarters
In which other countries does the Company operates?
Why? Benefits, Taxes, location, profit, cheap labour, costs,
expansin, market demand, technology, weather, other
DECISION PHASES OF A SUPPLY
CHAIN

1. Supply chain strategy or design


2. Supply chain planning
3. Supply chain operation
1. SUPPLY CHAIN STRATEGY
OR DESIGN

Decisions about the structure of the supply chain and what processes
each stage will perform.
Strategic supply chain decisions:
Locations (locally or offshore) and capacities of facilities.
Products to be made or stored at various locations.
Modes of transportation.
Information systems.
Supply chain design must support strategic objectives.
Supply chain design decisions are long-term and expensive to
reverse must take into account market uncertainty.
2. SUPPLY CHAIN PLANNING

Definition of a set of policies that govern short-term


operations.
Fixed by the supply configuration from previous phase.
Starts with a forecast of demand in the coming year.
2. SUPPLY CHAIN PLANNING

Planning decisions:
Which markets will be supplied from which locations.
Planned buildup of inventories.
Subcontracting, backup locations.
Inventory policies.
Timing and size of market promotions.
Must consider in planning decisions demand uncertainty,
exchange rates, competition over the time horizon.
3. SUPPLY CHAIN OPERATION

Time horizon is weekly or daily.


Decisions regarding individual customer orders.
Supply chain configuration is fixed and operating policies
are determined.
Goal is to implement the operating policies as effectively as
possible.
Allocate orders to inventory or production, set order due
dates, generate pick lists at a warehouse, allocate an order
to a particular shipment, set delivery schedules, place
replenishment orders.
Much less uncertainty (short time horizon).
CONTINUATION - CLASS EXERCISE 2

In the same groups


State the Supply Chain Strategy or design of one of the Companies
choosen in the previous exercise.
Difference the Short Term with the Long Term
HIERARCHICAL PLANNING
FRAMEWORK

-Material programs - Plant location - Physical distribution - Product program


Long term - Supplier selection - Production systems structure - Strategic sales
- Cooperation - Subcontractors - Transportation strategy planning

-- Personnel training -- Master production


-- Contracts -Scheduling -- Distribution -- Mid-term sales
Mid term -- Material Requirements -- Capacity planning planning planning
Planning

-- Personnel scheduling -- lot-sizing - Warehouse


- material ordering - operations replenishment -- Mid-term sales
Short term scheduling - Transportation planning planning
- shop floor control

EXECUTION

Flow of goods Information Feedback


DIFFERENTIATING FACTORS BY PLANNING LEVELS
Factor- Level Strategic Tactical Operational
Purpose Supply chain design, Planning resource utilization Operation scheduling and
resource acquisition execution

Implementation Policies, objectives, capital Budgets Schedules, procedures and


instruments investment reports

Planning horizon Long: 3-5 years Medium: 6-18 months Short: daily, weekly, monthly

Scope Broad Medium Short


corporate level plant level floor level
Level of Management Top Middle Low

Frequency of Low: every few years Medium: monthly or High: weekly, daily or as
re-planning quarterly required
Source of information Largely external External and internal Largely internal

Level of aggregation High Medium Low


- product data Product families Product groups individual products
- time years Month continuous
Degree of uncertainty High Medium Low

Degree of risk High Medium Low


CLASS EXERCISE 3

In groups
Think of 1 company that operates in different cities of Peru
The company name
The headquarters
In which cities?
Why? Benefits, Taxes, location, profit, cheap labour, costs,
expansion, market demand .
CLASS EXERCISE 4

In groups
Think of 1 peruvian company that operate Globally
The company name
The headquarters Per?
In which countries?
Why? Benefits, Taxes, location, profit, cheap labour, costs,
expansin, market demand .
PROCESS VIEW OF A SUPPLY CHAIN

Cycle view: processes in a supply chain are divided into a


series of cycles, each performed at the interfaces between
two sucessive supply chain stages.
Push/pull view: processes in a supply chain are divided
into two categories depending on whether they are
executed in response to a customer order (pull) or in
anticipation of a customer order (push).
CYCLE VIEW OF SUPPLY CHAINS

Customer
Customer Order Cycle

Retailer
Replenishment Cycle

Distributor

Manufacturing Cycle

Manufacturer
Procurement Cycle
Supplier
CYCLE VIEW OF A SUPPLY CHAIN

Each cycle occurs at the interface between two successive


stages.
Customer order cycle (customer-retailer).
Replenishment cycle (retailer-distributor).
Manufacturing cycle (distributor-manufacturer).
Procurement cycle (manufacturer-supplier).
Figure 1.3
Cycle view clearly defines processes involved and the owners
of each process. Specifies the roles and responsibilities of
each member and the desired outcome of each process.
PUSH/PULL VIEW OF
SUPPLY CHAINS
Procurement, Customer Order
Manufacturing and Cycle
Replenishment cycles

PUSH PROCESSES PULL PROCESSES


PUSH/PULL VIEW OF
SUPPLY CHAIN PROCESSES
Supply chain processes fall into one of two categories
depending on the timing of their execution relative to
customer demand.
Pull: execution is initiated in response to a customer order
(reactive).
Push: execution is initiated in anticipation of customer
orders (speculative).
Push/pull boundary separates push processes from pull
processes.
PUSH/PULL VIEW OF
SUPPLY CHAIN PROCESSES

Useful in considering strategic decisions relating to supply


chain design more global view of how supply chain
processes relate to customer orders.
Can combine the push/pull and cycle views
L.L. Bean (Figure 1.6)
Dell (Figure 1.7)
The relative proportion of push and pull processes can
have an impact on supply chain performance.
PRODUCTION STRATEGIES

Make to Stock - Push


Production is based on forecasted amounts for stocked
items
Make with Order - Pull
Production of a product is made for a customer order in
the quantity specified by the order
The importance of the push/pull view

The manufacture of paint requires


production of the base, mixing of
suitable colors and packing.
Until the 80s all was performed in
large factories and paint cans were
shipped to stores.
This qualified as push processes
as they were performed to a
forecast in anticipation to customer
demand
The importance of the push/pull view

So it was very difficult to match


supply with demand.
In the 90s, paint supply chains
were restructured such that mixing
of colors was done at retail stores
after customers place their orders.
Color mixing was shifted from the
push to the pull phase of the
supply chain.
CONTINUE - CLASS EXERCISE 5

In the same groups


Indicate which company use the Pull or Push views
Consider de companies mentioned in the previous exercises
SUPPLY CHAIN MACRO PROCESSES IN A FIRM

Supply chain processes discussed in the two views can be


classified into (Figure 1.8):
Customer Relationship Management (CRM)
Internal Supply Chain Management (ISCM)
Supplier Relationship Management (SRM)
Integration among the above three macro processes is
critical for effective and successful supply chain
management.
SUPPLY CHAN MACRO PROCESSES
All SC processes can be classified into three categories.

Supplier Firm Customer

CRM
SRM ISCM
Customer
Supplier Relationship Internal Supply Chain
Relationship
Management Management
Management
Source Strategic
Planning Market

Negotiate Demand Planning Sell

Buy Supply Planning CallCenter


Design Collaboration Fulfillment Order Management

Supply Collaboration Field Service

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ANALYSIS

Retailing in the United States is largely consolidated, with large


chains buying comsumer goods from manufacturers. This
consolidation give retailers sufficient scale. So the distributor does
little to reduce costs.
India has millions of small retail outlets. The small size of Indian retail
outlets limits the amount of inventory they can hold, thus requiring
frequent replenishment . The only way for a manufacturer to keep
transportation costs low is to bring full truckloads of product close to
the market and then distribute locally using milk runs with smaller
vehicles.
ANALYSIS
The pressence of an intermediary that can receive a full truckload
shipment, break bulk, and then make smaller deliveries to the
retailers is crucial if transportations costs are to be kept low.
SUMMARY OF LEARNING OBJECTIVES
What are the cycle and push/pull views of a supply chain?
How can supply chain macro processes be classified?
What are the three key supply chain decision phases and
what is the significance of each?
What is the goal of a supply chain and what is the impact of
supply chain decisions on the success of the firm?

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HOMEWORK - ANSWERS IN THE SAME GROUPS
AMAZON.COM
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? Are there
disadvantages?
Why does Amazon stock bestsellers while buying other titles from
distributors?
Does an Internet channel provide greater value to a bookseller like
Borders or to an Internet-only company like Amazon?
Should traditional booksellers like Borders integrate e-commerce into
their current supply?
For what products does the e-commerce channel offer the greatest
benefits? What characterizes these products?
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QUESTIONS??