Supply Chain Management Supply Chain Management

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<ul><li> 1. Syllabus <ul><li>Class 1 (Jan 5):chap 1; chap 2, case study </li></ul></li></ul><ul><li>Class 2: (Jan 12) No Class </li></ul><ul><li>Class 3: (Jan 19) Chap 6, Chap 8 </li></ul><ul><li>Class 4: (Jan 26) chap 10, chap 11, Chap 17(Take home exam) </li></ul><ul><li>Class 5: (Feb 2) Chap 5, Chap 7 </li></ul><ul><li>Class 6: (Feb 9) Chap 9, Chap 12, 14 </li></ul><ul><li>Class 7: (Feb 16) Chap 15, Reverse Logistics need The Forklifts Have Nothing To Do! Available in the Lewis and Clark Bookstore </li></ul><ul><li>Class 8: (Feb 23) Cabelas Tour </li></ul><ul><li>Class 9: (Mar 2) Chap 13; Chap 16, Chap 4 (take home exam) </li></ul><ul><li>Other requirements:</li></ul><ul><li>-&gt; visit Harley-Davidson Plant in Kansas City to see operations management in practice and write a 3-5 page paper comparing the class slides and readings to the Harley operations </li></ul><ul><li> -&gt;Home Work</li></ul><p> 2. Supply Chain Management 3. Supply Chain Management</p> <ul><li>First appearance Financial Times</li></ul><ul><li>Importance -</li></ul><ul><li>-&gt;Inventory ~ 14% of GDP </li></ul><ul><li>-&gt;GDP ~ $12 trillion </li></ul><ul><li>-&gt;Warehousing/Trans ~ 9% of GDP </li></ul><ul><li>-&gt;Rule of Thumb - $12 increase in sales to = $1 savings in Supply Chain </li></ul><ul><li>1982 Peter Drucker last frontier </li></ul><ul><li>Supply Chain problems can cause 11% drop in stock price </li></ul><ul><li>Customer perception of company </li></ul><p> 4. SCOR Reference: 5. Supply Chain </p> <ul><li>All activities associated with the flow and transformation of goods and services from raw materials to the end user, the customer </li></ul><ul><li>A sequence of business activities from suppliers through customers that provide the products, services, and information to achieve customer satisfaction </li></ul><p> 6. Supply Chain </p> <ul><li> The global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash. </li></ul><ul><li>APICS Dictionary, 10th ed. </li></ul><p> 7. Supply Chain Management </p> <ul><li>Synchronization of activities required to achieve maximum competitive benefits </li></ul><ul><li>Coordination, cooperation, and communication </li></ul><ul><li>Rapid flow of information </li></ul><ul><li>Vertical integration </li></ul><p> 8. Supply Chain Uncertainty </p> <ul><li>Forecasting, lead times, batch ordering, price fluctuations, and inflated orders contribute to variability </li></ul><ul><li>Inventory is a form of insurance </li></ul><ul><li>Distorted information is one of the main causes of uncertainty Bullwhip effect </li></ul><p> 9. Information in theSupply Chain </p> <ul><li>Centralized coordination of information flows </li></ul><ul><li>Integration of transportation, distribution, ordering, and production </li></ul><ul><li>Direct access to domestic and global transportation and distribution channels </li></ul><ul><li>Locating and tracking the movement of every item in the supply chain -RFID </li></ul><p> 10. Information in theSupply Chain </p> <ul><li>Consolidation of purchasing from all suppliers </li></ul><ul><li>Intercompany and intracompany information access </li></ul><ul><li>Electronic Data Interchange </li></ul><ul><li>Data acquisition at the point of origin and point of sale </li></ul><ul><li>Instantaneous updating of inventory levels </li></ul><ul><li>Visibility</li></ul><p> 11. Electronic Business </p> <ul><li>Replacement of physical processes with electronic ones </li></ul><ul><li>Cost and price reductions </li></ul><ul><li>Reduction or elimination of intermediaries </li></ul><ul><li>Shortening transaction times for ordering and delivery </li></ul><ul><li>Wider presence and increased visibility </li></ul><p>In Theory: 12. Electronic Business </p> <ul><li>Greater choices and more information for customers </li></ul><ul><li>Improved service </li></ul><ul><li>Collection and analysis of customer data and preferences </li></ul><ul><li>Virtual companies with lower prices </li></ul><ul><li>Leveling the playing field for smaller companies </li></ul><ul><li>Gain global access to markets &amp; customers </li></ul><p> 13. Electronic Data Interchange </p> <ul><li>Computer-to-computer exchange of business documents in a standard format </li></ul><ul><li>Quick access, better customer service, less paperwork, better communication, increased productivity, improved tracing and expediting, improves billing and cost efficiency </li></ul><p> 14. Bar Codes </p> <ul><li>Computer readable codes attached to items flowing through the supply chain </li></ul><ul><li>Generates point-of-sale data which is useful for determining sales trends, ordering, production scheduling, and deliver plans </li></ul><p>12345678 15. IT Issues </p> <ul><li>Increased benefits and sophistication come with increased costs </li></ul><ul><li>Efficient web sites do not necessarily mean the rest of the supply chain will be as efficient </li></ul><ul><li>Security problems are very real camera phones, cell phones, thumb drives </li></ul><ul><li>Collaboration and trust are important elements that may be new to business relationships </li></ul><p> 16. Suppliers </p> <ul><li>Purchased materials account for about half of manufacturing costs </li></ul><ul><li>Materials, parts, and service must be delivered on time, of high quality, and low cost </li></ul><ul><li>Suppliers should be integrated into their customers supply chains </li></ul><ul><li>Partnerships should be established </li></ul><ul><li>On-demand delivery (JIT) is a frequent requirement - what is JIT and does it work? </li></ul><p> 17. Sourcing </p> <ul><li>Relationship between customers and suppliers focuses on collaboration and cooperation </li></ul><ul><li>Outsourcing has become a long-term strategic decision </li></ul><ul><li>Organizations focus on core competencies </li></ul><ul><li>Single-sourcing isincreasingly a partof supplier relations </li></ul><p>How does single source differ from sole source? 18. E-Procurement </p> <ul><li>Business-to-business commerce conducted on the Internet </li></ul><ul><li>Benefits include lower transaction costs, lower prices, reduce clerical labor costs, and faster ordering and delivery times </li></ul><ul><li>Currently used more for indirect goods </li></ul><ul><li>E-Marketplaces service industry-specific companies and suppliers </li></ul><p> 19. Distribution </p> <ul><li>The actual movement of products and materials between locations </li></ul><ul><li>Handling of materials and products at receiving docks, storing products, packaging, and shipping </li></ul><ul><li>Often called logistics </li></ul><ul><li>Driving force todayis speed </li></ul><ul><li>Particularly importantfor Internet dot-coms </li></ul><p> 20. Distribution Centersand Warehousing </p> <ul><li>DCs are some of the largest business facilities in the United States </li></ul><ul><li>Trend is for more frequent orders in smaller quantities </li></ul><ul><li>Flow-through facilities and automated material handling </li></ul><ul><li>Final assembly and product configuration(postponement)may be done at the DC </li></ul><p> 21. Warehouse Management Systems </p> <ul><li>Highly automated systems </li></ul><ul><li>A good system will control item slotting, pick lists, packing, and shipping </li></ul><ul><li>Most newer systems include transportation management (load management/configuration), order management, yard management, labor management, warehouse optimization </li></ul><p> 22. Vendor-Managed Inventory </p> <ul><li>Not a new concept same process used by bread deliveries to stores for decades </li></ul><ul><li>Reduces need for warehousing </li></ul><ul><li>Increased speed, reduced errors, and improved service </li></ul><ul><li>Onus is on the supplier to keep the shelves full or assembly lines running </li></ul><ul><li>variation of JIT </li></ul><ul><li>Proctor&amp;Gamble - Wal-Mart </li></ul><ul><li>DLA moving from a manager of supplies to a manager of suppliers </li></ul><ul><li>Direct Vendor Deliveries loss of visibility </li></ul><p> 23. Collaborative Distribution and Outsourcing </p> <ul><li>Collaborative planning, forecasting, and replenishment (CPFR) started by Nabisco </li></ul><ul><li>Allows suppliers to know what is really needed and when </li></ul><ul><li>Electronic-based exchange of data and information </li></ul><ul><li>Significant decrease in inventory levels and more efficient logistics - maybe not! </li></ul><ul><li>Companies work together for benefit of all of the supply chain </li></ul><p> 24. Transportation </p> <ul><li>Common methods are railroads, trucking, water, air, intermodal, package carriers, and pipelines </li></ul><p> 25. Railroads </p> <ul><li>150,000 miles in US </li></ul><ul><li>Low cost, high-volume </li></ul><ul><li>Improving flexibility </li></ul><ul><li><ul><li>intermodal service </li></ul></li></ul><ul><li><ul><li>double stacking </li></ul></li></ul><p>Complaints: slow, inflexible, large loads Advantages: large/bulky loads, intermodal 26. Award-Winning Service Recognition United Parcel Service 99.5% failure free, damage free and on-time rating from United Parcel Service every year since 1995 Wal-Mart Stores, Inc. Carrier of the Year 5 years in a row Target Only rail carrier to receivethe Vice Presidents Award American Honda Motor Company Premier Partner 4 consecutive years Toyotas North American Parts and Logistics Division (NAPLD) Rail Carrier of the Year 3 consecutive years KIA Carrier of the Year Schneider Carrier of the Year 3 consecutive years Federal Express Only rail carrier to receive outstanding supplier award - 2 years in a row 27. </p> <ul><li>Most used mode in US -75% of total freight (not total weight) </li></ul><ul><li>Flexible, small loads </li></ul><ul><li>Consolidation,Internet load match sites </li></ul><ul><li>Single sourcing reduces number of trucking firms serving a company </li></ul><ul><li>Truck load (TL) vs. Less Than Truck Load (LTL) </li></ul><p>Trucking 28. Air </p> <ul><li>Rapidly growing segment of transportation industry </li></ul><ul><li>Lightweight, small items </li></ul><ul><li>Quick, reliable, expensive (relatively expensive depending on costs of not getting item there) </li></ul><ul><li>Major airlines and US Postal Service, UPS, FedEx, DHL </li></ul><p> 29. Package Carriers </p> <ul><li>FedEx, UPS, US Postal Service, DHL </li></ul><ul><li>Significant growth driven bye-businesses and the move to smaller shipments and consumer desire to have it NOW </li></ul><ul><li>Use several modesof transportation </li></ul><ul><li>Expensive - relative!! </li></ul><ul><li>Fast and reliable - relative!! </li></ul><ul><li>Innovative use of technologies in some cases </li></ul><ul><li>Online tracking some better than others </li></ul><p> 30. Intermodal </p> <ul><li>Combination of several modes of transportation </li></ul><ul><li>Most common are truck/rail/truck and truck/water/rail/truck </li></ul><ul><li>Enabled by the use of containers the development of the 20 and 40 foot containers significantly changed the face of shipping </li></ul><ul><li>~2% of all US cargo via intermodal </li></ul><p> 31. Water </p> <ul><li>One of oldest means of transport </li></ul><ul><li>Low-cost, high-volume, slow (relative) </li></ul><ul><li>Security - sheer volume - millions of containers annually </li></ul><ul><li>Bulky, heavy and/or large items </li></ul><ul><li>Standardized shipping containers improve service </li></ul><ul><li>The most common form of international shipping </li></ul><p> 32. Pipelines </p> <ul><li>Primarily for oil &amp; refined oil products </li></ul><ul><li>Slurry lines carry coal or kaolin </li></ul><ul><li>High initial capital investment </li></ul><ul><li>Low operating costs </li></ul><ul><li>Can cross difficult terrain </li></ul><p> 33. Global Supply Chain </p> <ul><li>Free trade &amp; global opportunities </li></ul><ul><li>Nations form trading groups </li></ul><ul><li>No tariffs or duties </li></ul><ul><li>Freely transportgoods across borders </li></ul><ul><li>Security!! </li></ul><p> 34. Global Supply Chain Problems </p> <ul><li>National and regional differences </li></ul><ul><li>Customs, business practices, and regulations </li></ul><ul><li>Foreign markets arenot homogeneous </li></ul><ul><li>Quality can be amajor issue </li></ul><p> 35. Security</p> <ul><li>~ 10+ million containers annually </li></ul><ul><li>Customs-Trade Partnership Against Terrorism (C-TPAT) </li></ul><ul><li>Port Security SAFE Ports Act; Scanning of all Containers </li></ul><ul><li>Cost - $2 billion closing of major port </li></ul><ul><li>66% of all goods into US comes through 20 major ports </li></ul><ul><li>44% through LA/Long Beach </li></ul><ul><li>Cost of attack on major port estimated at $20 Billion </li></ul><p> 36. 37. 38. 39. 40. Chapter 11 Forecasting 41. Forecasting Survey </p> <ul><li>How far into the future do you typically project when trying to forecast the health of your industry? less than 4 months 3% 4-6 months 12% 7-12 months 28% &gt; 12 months 57% </li></ul><p>Fortune Council survey, Nov 2005 42. Indices to forecast health of industry </p> <ul><li>Consumer price index51% </li></ul><ul><li>Consumer Confidence index 44% </li></ul><ul><li>Durable goods orders 20% </li></ul><ul><li>Gross Domestic Product 35% </li></ul><ul><li>Manufacturing and trade inventoriesand sales 27% </li></ul><ul><li>Price of oil/barrel 34% </li></ul><ul><li>Strength of US $ 46% </li></ul><ul><li>Unemployment rate 53% </li></ul><ul><li>Interest rates/fed funds 59% </li></ul><p>Fortune Council survey, Nov 2005 43. Forecasting Importance </p> <ul><li>Improving customer demand forecasting and sharing the information downstream will allow more efficient scheduling and inventory management </li></ul><ul><li>Boeing, 1997: $2.6 billion write down due to raw material shortages, internal and supplier parts shortagesWall Street Journal,Oct 23, 1987 </li></ul><p> 44. Forecasting Importance </p> <ul><li> Second Quarter sales at US Surgical Corporation decline 25%, resulting in a $22 mil lossattributed to larger than anticipated inventories on shelves of hospitals. US Surgical Quarterly, Jul 1993 </li></ul><ul><li> IBM sells out new Aetna PC; shortage may cost millions in potential revenue.Wall Street Journal,Oct 7, 1994 </li></ul><p> 45. Principles of Forecasting </p> <ul><li>Forecasts are usually wrong </li></ul><ul><li>every forecast should include an estimate of error </li></ul><ul><li>Forecasts are more accurate for families or groups </li></ul><ul><li>Forecasts are more accurate for nearer periods. </li></ul><p> 46. Important Factors to Improve Forecasting </p> <ul><li>Record Data in the same terms as needed in the forecast production data for production forecasts; time periods </li></ul><ul><li>Record circumstances related to the data </li></ul><ul><li>Record the demand separately for different customer groups </li></ul><p> 47. Forecast Techniques </p> <ul><li>Extrinsic Techniques projections based on indicators that relate to products examples </li></ul><ul><li>Intrinsic historical data used to forecast (most common) </li></ul><p> 48. Forecasting </p> <ul><li>Forecasting errors can increase the total cost of ownership for a product - inventory carrying costs </li></ul><ul><li>- obsolete inventory - lack of sufficient inventory - quality of products due to acceptingmarginal products to preventstockout </li></ul><p> 49. Forecasting </p> <ul><li>Essential for smooth operations of business organizations </li></ul><ul><li>Estimates of the occurrence, timing, or magnitude of uncertain future events </li></ul><ul><li>Costs of forecasting:excess labor; excess materials; expediting costs; lost revenues </li></ul><p> 50. Forecasting </p> <ul><li>Predicting future events </li></ul><ul><li>Usually demand behaviorover a time frame </li></ul><ul><li>Qualitative methods </li></ul><ul><li><ul><li>Based on subjective methods </li></ul></li></ul><ul><li>Quantitative methods </li></ul><ul><li><ul><li>Based on mathematical formulas </li></ul></li></ul><p> 51. Impact of Just-in-Time on Forecasting </p> <ul><li>Just in time as a inventory method </li></ul><ul><li>Just in time as a Continuous process improvement program </li></ul><ul><li>Just in time -one on the shelf </li></ul><ul><li>Usage factors</li></ul><ul><li>Single order vs. Case order </li></ul><p> 52. Strategic Role of Forecasting </p> <ul><li>Focus on supply chain management </li></ul><ul><li><ul><li>Short term role of product demand </li></ul></li></ul><ul><li><ul><li>Long term role of new products, processes, and technologies </li></ul></li></ul><ul><li>Focus on Total Quality Management </li></ul><ul><li><ul><li>Satisfy customer demand </li></ul></li></ul><ul><li><ul><li>Uninterrupted product flow with no defective items </li></ul></li></ul><ul><li>Necessary for strategic planning </li></ul><p> 53. Strategic Role of Forecasting </p> <ul><li>Focus on supply chain management </li></ul><ul><li><ul><li>Short term role of product demand </li></ul></li></ul><ul><li><ul><li>Long term role of new products, processes, and technologies </li></ul></li></ul><ul><li>Focus on Total Quality Management </li></ul><ul><li><ul><li>Satisfy customer demand </li></ul></li></ul><ul><li><ul><li>Uninterrupted product flow with no defective items </li></ul></li></ul><ul><li>Necessary for strategic planning </li></ul><p> 54. Total Quality Management </p> <ul><li>Management approach to long term success through customer satisfaction </li></ul><ul><li>Total Quality Control - process of creating and producing quality goods and services that meet the expectations of the customer </li></ul><ul><li>quality - conformance to requirements or fitness for use </li></ul><p> 55. Trumpet of Doom </p> <ul><li>As forecast horizon increases, so does the forecasting error (i.e., accuracy decreases) shorten horizon by shortening of cycles or flow times </li></ul><ul><li>Law of Large Numbers as volume increases, relative variability decreases forecasting error is smaller: goal forecast at aggregate levels; collaborate; standardize parts</li></ul><ul><li>Volume and activity increase at end of reporting periods Krispy Kreme </li></ul><p> 56. Components of Forecasting Demand </p> <ul><li>Time Frame </li></ul><ul><li><ul><li>Short-range, medium-range, long-range </li></ul></li></ul><ul><li>Demand Behavior </li></ul><ul><li><ul><li>Trends, cycles, seasonal patterns, random </li></ul></li></ul><p> 57. Time Frame </p> <ul><li>Short-range to medium-range </li></ul><ul><li><ul><li>Daily, weekly monthly forecasts of sales data </li></ul></li></ul><ul><li><ul><li>Up to 2 years into the future </li></ul></li></ul><ul><li>Long-range </li></ul><ul><li><ul><li>Strategic planning of goals, products, markets </li></ul></li></ul><ul><li><ul><li>Planning beyond 2 years into the future </li></ul></li></ul><p> 58. Demand Behavior </p> <ul><li>Trend </li></ul><ul><li><ul><li>gradual, long-term up or down movement </li></ul></li></ul><ul><li>Cycle </li></ul><ul><li><ul><li>up &amp; down movement repeating over long time frame </li></ul></li></ul><ul><li>Seasonal pattern </li></ul><ul><li><ul><li>periodic oscillation in demand which repeats </li></ul></li></ul><ul><li>Random movements follow no pattern </li></ul><p> 59. Forms of Forecast Movement Figure 8.1 Time (a) Trend Time (d) Trend with seasonal patt</p>


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