1、Supply Chain Management Introduction,Outline,What is supply chain management? A supply chain strategy framework Components of a SCM Major obstacles and common problemsSeven Eleven Japan,Traditional View: Supply Chains in the Economy (1990, 1996),Freight Transportation $352, $455 B Transportation man
2、ager in charge Transportation software Inventory Expense $221, $311 B Inventory manager in charge Inventory software Administrative Expense $27, $31 BLogistics related activity 11%, 10.5% of GNP,$898 B spent domestically for SC activities in 1998. $1,160 B of inventory in the US economy in the early
3、 2000s.,Transportation and inventory managers,Traditional View: Cost breakdown of a manufactured good,Profit 10% Supply Chain Cost 20% Marketing Cost 25% Manufacturing Cost 45%,Effort spent for supply chain activities are invisible to the customers.,What can Supply Chain Management do?,Estimated tha
4、t the grocery industry could save $30 billion (10% of operating cost) by using effective logistics and supply chain strategies A typical box of cereal spends 104 days from factory to sale A typical car spends 15 days from factory to dealership Faster turnaround of the goods is better? Laura Ashley (
5、retailer of women and children clothes) turns its inventory 10 times a year five times faster than 3 years ago inventory is emptied 10 times a year, or an item spends about 12/10 months in the inventory. To be responsive, it relocated its main warehouse next to FedEx hub in Memphis, TE.National Semi
6、conductor used air transportation and closed 6 warehouses, 34% increase in sales and 47% decrease in delivery lead time.,Magnitude of Supply Chain Management,Compaq estimates it lost $0.5 B to $1 B in sales in 1995 because laptops were not available when and where neededP&G (Proctor&Gamble) estimate
7、s it saved retail customers $65 M (in 18 months) by collaboration resulting in a better match of supply and demand When the 1 gig processor was introduced by AMD (Advanced Micro Devices), the price of the 800 meg processor dropped by 30%,Importance of SCM understood by some,AMR Research: “The bigges
8、t issue enterprises face today is intelligent visibility of their supply chains-both upstream and down“ Forrester Research: “Companies need to sense and proactively respond to unanticipated variations in supply and demand by adopting emerging technologies such as intelligent agents. To boost their o
9、perational agility, firms need to transform their static supply chains into adaptive supply networks” Gartner Group: “By 2004, 90% of enterprises that fail to apply supply-chain management technology and processes to increase their agility will lose their status as preferred suppliers” Open ended st
10、atement. Agility can be increased continuously.,Top 25 Supply Chains,AMR research http:/ publishes reports on supply chains and other issues.The Top 25 supply chains report comes out in Novembers.The table on the right-hand side is from The Second Annual Supply Chain Top 25 prepared by Kevin Riley a
11、nd Released in November 2005.,SCM Generated Value,Minimizing supply chain costs while keeping a reasonable service levelcustomer satisfaction/quality/on time delivery, etc.This is how SCM contributes to the bottom lineSCM is not strictly a cost reduction paradigm!,A picture is better than 1000 words
12、! How many words would be better than 3 pictures?,- A supply chain consists of,- aims to Match Supply and Demand, profitably for products and services,- achieves,Detergent supply chain:,Customer wants detergent,Albertsons Supermarket,Third party DC,P&G or other manufacturer,Plastic cup Producer,Chem
13、ical manufacturer (e.g. Oil Company),Tenneco Packaging,Paper Manufacturer,Timber Industry,Chemical manufacturer (e.g. Oil Company),Flows in a Supply Chain,Customer,Material,Information,Funds,The flows resemble a chain reaction.,Supplier,SCM in a Supply Network,Supply Chain Management (SCM) is concer
14、ned with the management and control of the flows of material, information, and finances in supply chains.,The task of SCM is to design, plan, and execute the activities at the different stages so as to provide the desired levels of service to supply chain customers profitably,Importance of Supply Ch
15、ain Management,In 2000, the US companies spent $1 trillion (10% of GNP) on supply-related activities (movement, storage, and control of products across supply chains). Source: State of Logistics Report,Eliminating inefficiencies in supply chains can save millions of $.,Supply,Sources: plants vendors
16、 ports,Regional Warehouses: stocking points,Field Warehouses: stocking points,Customers, demand centers sinks,Purchase,Inventory,Transportation,Inventory,A Generic Supply Chain,Cycle View of Supply Chains,Push vs Pull System,What instigates the movement of the work in the system?In Push systems, wor
17、k release is based on downstream demand forecasts Keeps inventory to meet actual demand Acts proactively e.g. Making generic job application resumes today (e.g.: exempli gratia)In Pull systems, work release is based on actual demand or the actual status of the downstream customers May cause long del
18、ivery lead times Acts reactively e.g. Making a specific resume for a company after talking to the recruiter,Push/Pull View of Supply Chains,Procurement,Manufacturing and,Replenishment cycles,Customer Order,Cycle,Customer,Order Arrives Push-Pull boundary,PUSH PROCESSES,PULL PROCESSES,Examples of Supp
19、ly Chains,Dell / Compaq Dell buys some components for a product from its suppliers after that product is purchased by a customer. Extreme case of a pull process Zara, Spains answer to Italys Benetton Sells apparel with a short design-to-sale cycle, avoids markdowns. Toyota / GM / Volkswagen, in the
20、course notes McMaster Carr / W.W. Grainger, sell auto parts Amazon / Barnes and Noble Frozen food industry/Fast food industry/5 star restaurants Internet shopping: Webvan / Peapod,SCM Strategy,Mission-Strategy-Tactics-Decisions,Mission, Mission statement The reason for existence of an organizationSt
21、rategy A plan for achieving organizational goals Tactics The actions taken to accomplish strategies Operational decisions Day to day decisions to support tactics,Life Strategy for Ted,Ted is an undergrad. He would like to have a career in business, have a good job, and earn enough income to live com
22、fortablyMission: Live a good life Goal: Successful career, good income Strategy: Obtain a masters degree Tactics: Select a college and a concentration Operations: Register, buy books, take courses, study, graduate, get a job,Linking SC and Business Strategy,Finance, Accounting, Information Technolog
23、y, Human Resources,Competitive (Business) Strategy,Product Development Strategy Portfolio of products Timing of product introductions,Marketing Strategy -Frequent discounts -Coupons,Supply Chain Strategy,Strategies: Product Development,It relates to Technologies for future operations (via patents) a
24、nd Set of products/services Be the technology leader IBM workstations Offer many products Dell computers Offer products for locals Tatas Nano at $2500=100000 rupees Production at Singur, West Bengal, India; l x w x h=3.1 x 1.5 x 1.6 meters; Top speed: 105km/hr; Engine volume 623 cc; Mileage 50 miles
25、/gallon; Annual sales target 200,000.,Strategies,Marketing and sales strategy relates to positioning, pricing and promotion of products/services e.g. Never offer more than 40% discount e.g. EDLP = every day low price At Wal-Mart e.g. Demand smoothing via coupons BestBuySupply chain management strate
26、gy relates to procurement, transportation, storage and delivery e.g. Never use more than 1 supplier for every input e.g. Never expedite orders just because they are late e.g. Always use domestic suppliers within the sales season not in advance.,Fitting the SC to the customer or vice versa?,Understan
27、d the customer Wishes Understand the Capabilities of your SCMatch the Wishes with the CapabilitiesChallenge: How to meet extensive Wishes with limited Capabilities?,Achieving Strategic Fit: Consistent SCM and Competitive strategies,Fit SC to the customerUnderstanding the Customer Range of demand, pi
28、zza hut stable Production lot size, seasonal products Response time, organ transplantation Service level, product availability Product variety Innovation Accommodating poor quality,Implied (Demand) Uncertainty for SC Implied trouble for SC,Contributors to Implied Demand Uncertainty,Low,High,Price,Re
29、sponsiveness,Customer Need,Implied Demand Uncertainty,Commodities Detergent Long lead time steel,Customized products High Fashion Clothing Emergency steel, for maintenance/replacement,Short lead times, product variety, distribution channel variety, high rate of innovation and high customer service l
30、evels all increase the Implied Demand Uncertainty,Understanding the Supply Chain: Cost-Responsiveness Tradeoff,High,Low,Low,High,Responsiveness (in time, high service level and product variety),Cost in $,Efficiency frontier,Inefficient,Fix responsiveness,Impossible,Inefficiency Region,Why decreasing
31、 slope (concave) for the efficiency frontier?,Achieving Strategic Fit: Wishes vs. Capabilities,Implied uncertainty spectrum,Responsive (high cost) supply chain,Efficient (low cost) supply chain,Certain demand,Uncertain demand,Responsivenesspectrum,Zone of Strategic Fit,Lunch buffet ,Gourmet dinner ,
32、Loosing the strategic fit: Webvan,Webvan started a merger with HomeGrocer in Sept 2000 and completed in May 2001. Declared bankruptcy in July 2001. Why? “Webvan was so behemoth that could deliver anything to anyone anywhere that it lost sight of a more mundane task: pleasing grocery customers day af
33、ter day”. Short to midterm cash mismanagement. Venture capital of $1.2 B run out. Merger costs: duplicated work force, integration of technology, realignment of facilities. Peapod has the same business model but more focused in terms of service and locations. It actually survives with its parent com
34、pany Royal Aholds (Dutch Retailer) cash. Delivers now at a fee of $6.95 within a day.,Top 10 Retailers Reported in 2008 First 4,Source 10 Retailers Reported in 2008 First 5-10,Big retailers Strategy,Wal-Mart: Efficiency Target: More quality and service Carrefour: International, ambianceK-Mart: Conf
35、used. Squeezed between Target and Wal-Mart Reliance on coupon sales Do coupons stabilize or destabilize a Supply chain? K-Mart and Sears merged in November 2004. Now called Sears Holdings. K-Mart gets cash Sears gets presence outside malls,Other Factors,Multiple products in a SC. Multiple customers
36、for a given product Separate supply chains or Tailored supply chains e.g. Barnes and Noble: Retailing and/or e-tailing Product and/or customer classes e.g. UTD library loans books for 6 months (2 weeks) to faculty (students) Customer segmentation by pricing Competitors: more, faster and global UTD o
37、nline programs compete globally Product life cycle (shortening) SCM strategy moves toward efficiency and low implied uncertainty as products age e.g. Air travel is becoming more efficient e.g. Southwest airlines lead the drive for efficiency e.g. Airbus announced A380 accommodating 555-800 people on
38、 Jan 17, 2005. e.g. Flat screen TV producer of AU Optronics of Taiwan was looking for ways to make its SC more efficient in June 2004. Replacement sales Selling to replace broken units. e.g. AC replacement is about 50% of the market. Macroeconomic factors for visibility Forecasting Home Depot sales
39、from S&P 500 price index. Positive correlation is detected.,Achieving Strategic Fit over a Lifecycle,Responsive (high cost) supply chain,Efficient (low cost) supply chain,Certain demand,Uncertain demand,Zone of Strategic Fit,Integration,Integration is the central theme in SCM Building synergies by i
40、ntegrating business functions, departments and companies,Strategic Scope,Suppliers,Manufacturer,Distributor,Retailer,Customer,Competitive Strategy,Product Dev. Strategy,Supply Chain Strategy,Marketing Strategy,Supply Chain Drivers and Obstacles,Drivers of Supply Chain Performance,Efficiency,Responsi
41、veness,Inventory,Transportation,Facilities,Information,Supply chain structure,Logistical Drivers,How to achieve,Sourcing,Pricing,Cross- Functional Drivers,1. Inventory,Convenience: Cycle inventory No customer buys eggs one by one Unstable demand: Seasonal inventory Bathing suits Xmas toys and comput
42、er sales Randomness: Safety inventory 20% more syllabi than the class size were available in the first class Compaqs loss in 95 Pipeline inventory Work in process or transit,Littles law,Long run averages = Expected values I = R . T I=Pipeline inventory; R=output per time=throughput; T=delay time=flo
43、w timeFlow time? Thruput? Pipeline (work in process) Inventory?,10/minute,Spend 1 minute,2. Transportation,Air Truck Rail Ship Pipeline Electronic,3. Facilities,Production Flexible vs. Dedicated Flexibility costs Production: Remember BMW: “a sports car disguised as a sedan” Service: Can your instruc
44、tor teach music as well as SCM? Sports: A playmaker who shoots well is rare. Inventory-like operations: Receiving, Prepackaging, Storing, Picking, Packaging, Sorting, Accumulating, Shipping Job Lot Storage: Need more space. Reticle storage in fabs. Crossdocking: Wal-Mart,4. Information,Role in the s
45、upply chain The connection between the various stages in the supply chain Crucial to daily operation of each stage in a supply chain E.g., production scheduling, inventory levels Role in the competitive strategy Allows supply chain to become more efficient and more responsive at the same time (reduc
46、es the need for a trade-off) Information technology Andersen Windows Wood window manufacturer, whose customers can choose from a library of 50,000 designs or create their own. Customer orders automatically sent to the factory.,Characteristics of the Good Information,Strategy,Analytical Models,$,Info
47、rmation Accurate? Accessible? Up-to-date? In the Correct form? If not, database restricted ability. How difficult is it to import data into SAP?,Quality of Information,Information drives the decisions: Good information means good decisions IT helps: MRP, ERP, SAP, EDI Relevant information? How to us
48、e information?,Information Technology in a Supply Chain: Legacy Systems,Information Technology in a Supply Chain: ERP Systems,Supplier,Customer,Retailer,Distributor,Manufacturer,Strategic,Planning,Operational,ERP,Potential,ERP,Potential,ERP,Information Technology in a Supply Chain: Analytical Applic
49、ations,Supplier,Customer,Retailer,Distributor,Manufacturer,Strategic,Planning,Operational,Supplier,Apps,SCM,MES,Dem Plan,Transport execution &,WMS,APS,Transport & Inventory,Planning,CRM/SFA,ERP Systems,Wider focus Push (MRP) versus Pull (demand information transmitted quickly throughout the supply chain) Real-time information Coordination and Information sharingTransactional IT Expensive and difficult to implement About 25% of ERP installations are cancelled within a year About 70% of ERP installations go over the budget,
