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Supply Chain ManagementStrategy and Design

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Lecture Outline

The Management of Supply Chains Green Supply Chains Information Technology: A Supply Chain

Enabler Supply Chain Integration Supply Chain Management (SCM) Software

Measuring Supply Chain Performance

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Supply Chains

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All facilities, functions, and activities associatedwith flow and transformation of goods andservices from raw materials to customer, as wellas the associated information flows

An integrated group of processes to source, make, and deliver products


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The Supply Chain Figure10.1

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Supply Chain for Denim JeansFigure 10.2a

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Supply Chain for Denim Jeans (cont.)Figure 10.2b

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Supply Chain Processes

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Supply Chain for Service Providers

More difficult than manufacturing Does not focus on the flow of physical goods Focuses on human resources and support services More compact and less extended

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Value Chains

Value chain every step from raw materials to the eventual end user ultimate goal is delivery of maximum value to the end

user

Supply chain activities that get raw materials and subassemblies intomanufacturing operation

ultimate goal is same as that of value chain

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Value Chains

Demand chain increase value for any part or all of chain Terms are used interchangeably Value

creation of value for customer is important aspect ofsupply chain management

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Supply Chain Management (SCM)

Managing flow of information through supply chain inorder to attain the level of synchronization that willmake it more responsive to customer needs whilelowering costs

Keys to effective SCM information communication cooperation trust

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Supply ChainUncertainty and Inventory

Factors that contribute to uncertainty inaccurate demand forecasting long variable lead times late deliveries incomplete shipments product changes batch ordering price fluctuations and discounts

inflated orders

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Bullwhip Effect

Occurs when slight demand variability ismagnified as information moves backupstream

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Risk Pooling

Risks are aggregated to reduce the impact ofindividual risks Combine inventories from multiple locations into one Reduce parts and product variability, thereby reducing the

number of product components Create flexible capacity

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Green Supply Chains

Sustainability Meeting present needs without compromising

the ability of future generations to meet their

needs Sustaining human and social resources It can be cost effective and profitable Can provide impetus for product and process

innovations Impetus comes from downstream in the supply

chain and moves upstream to suppliers 10-16

S i bili d Q li


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Sustainability and QualityManagement

Reducing waste through quality programshelps achieve sustainability goals Improving fuel efficiency of vehicles

Telecommuting Eco-friendly packing materials Energy-efficient facilities

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Information Technology:A Supply Chain Enabler

Information links all aspects of supply chain E-business

replacement of physical business processes with electronic

ones Electronic data interchange (EDI)

a computer-to-computer exchange of business documents Bar code and point-of-sale

data creates an instantaneous computer record of a sale

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IT: Supply Chain Enabler

Radio frequency identification (RFID) technology can send product data from an item to a readervia radio waves

Internet allows companies to communicate with suppliers,

customers, shippers and other businesses around the worldinstantaneously

Build-to-order (BTO) direct-sell-to-customers model via the Internet; extensive

communication with suppliers and customer

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Supply Chain Enablers

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E B & S C


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E-Bus ness & Supp y C a nManagement

Savings due to lower transaction costs Reduction of intermediary roles Shorter supply chain response times Wider presence and increased visibility Greater choices & more info for customers Improved service Collection & analysis of huge amounts of customer data

& preferences Access to global markets, suppliers & distribution

channels

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Electronic Data Interchange

Computer-to-computer exchange of documentsin a standard format Purchasing, shipping and receiving

Improve customer service Reduce paperwork Increase productivity Improve billing and cost efficiency Reduce bullwhip effect through information

sharing10-22


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Bar Codes

Automated data collection system Bar code contains identifying information Provide instantaneous tracking information

Checkout scanners create point-of-sale data Update inventory records Identify trends Order material Schedule orders Plan deliveries

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R di F Id ifi i


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Radio Frequency Identification(RFID)

Use radio waves to transfer data from chip toa reader Provides complete visibility of product

location Continuous inventory monitoring Reduce labor to manage inventory Reduce inventory costs

RFID is not standardized yet Difficult to track between systems

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RFID Capabilities

10-25Copyright 2011 John Wiley & Sons, Inc.


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RFID Capabilities

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Supply Chain Integration

Share information among supply chain members Reduced bullwhip effect Early problem detection Faster response Builds trust and confidence

Collaborative planning, forecasting,replenishment, and design Reduced bullwhip effect Lower costs (material, logistics, operating, etc.) Higher capacity utilization Improved customer service levels

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Supply Chain Integration

Coordinated workflow, production andoperations, procurement Production efficiencies Fast response Improved service Quicker to market

Adopt new business models and technologies Penetration of new markets Creation of new products Improved efficiency Mass customization



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Collaborative Planning, Forecasting, andReplenishment (CPFR)

Two or more companies in a supply chain tosynchronize their demand forecasts into a single planto meet customer demand

Parties electronically exchange past sales trends point-of-sale data on-hand inventory scheduled promotions forecasts

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SCM Software

Enterprise resource planning (ERP) software that integrates the components of a

company by sharing and organizing informationand data

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M i g S l Ch i


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Measuring Supply ChainPerformance

Metrics used to measure supply chain performance

inveof valueaggregateAveragesold goodsof Cost

turnsInventory

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it e(uni)itemforinventor y(averageinvent of valueaggregateAverage

i

Inventory turnover

Total value (at cost) of inventory

Meas ring S ppl Chain


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Measuring Supply ChainPerformance

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Days of supply

Fill rate: fraction of orders filled by a distribution centerwithin a specific time period

dayssold)/(36goodsof (Cost

inveof valueaggregateAverage

supplyof Days

Computing Key Performance


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Computing Key PerformanceIndicators

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Process Control and SCOR

Process Control not only for manufacturing operations can be used in any processes of supply chain

Supply Chain Operations Reference (SCOR) a cross industry supply chain diagnostic tool

maintained by the Supply Chain Council



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SCOR Model Processes

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SCOR Performance Metrics

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