Intro to Supply Chain Chapter 1

supply chain management flow (broad)

--> 1. Starts with understanding the flow --> 2. Integrates all partners within the end-to-end supply chain --> 3. Is conducted through defined processes -->

Disadvantages of Pull or Make-to-Order

-Every order is basically a rush order, and any problems will lead to customer dissatisfaction. -Pull models are highly dependent on customer relationship. They have a reduced ability to take advantage of economies of scale. Fast, responsive, flexible, robust and integrated systems and processes are a must for this model to work. Resource issues will have a significant and immediate impact on throughput and customer satisfaction.

Advantages of Pull or Make-to-Order

-High levels of customer service through responsiveness and flexibility to meet uncertain customer demand. -Pull models have short lead times, reduce dependency on forecasting, use short and flexible production runs, store very low inventories, reduce waste, provide opportunities for customization, and improve cash flow.

Advantages of Push or Make to Stock

-If the manufacturer creates a good forecast and supply plan, the product is immediately available to ship to the customer on demand from the existing finished product inventory in the warehouse. -Manufacturers also have the opportunity to plan resources better or with more flexibility, and can maximize the utilization of resources at the lowest cost

the difference in the supply chain for a service rather than a physical product

-Service products cannot generally be produced in advance or inventoried, and frequently the customer of a service provides the tangible item that will receive the service, i.e. a car for automotive repair, hair for a haircut, carpets for cleaning. -Customers play a vital and more involved role in the delivery aspect of the service supply chain than they do in the supply chain for a physical/tangible product.

Supply chain in the 1950s and 1960s

-Supply chain management goes back to the 1950's when the discipline was limited to materials management and logistics. -U.S. manufacturers maintained large material inventories to keep production running. The entire focus was on how to produce as much product as possible at the lowest possible cost. -Manufactures were internally focused on maximizing their own internal operations. The focus was on mass production techniques as their principal cost reduction and productivity improvement strategies -External collaboration and partnerships were virtually nonexistent.

transportation activities

-air -rail -water -truck -pipeline

Efficient-Supply Chain

-and processes are designed to minimize cost - Predictable supply and low cost -Low cost production and highly utilized capacity -High inventory turns -Ideal for _Functional Products__: >Staples that people buy everywhere >Don't change much over time >Stable predictable demand

Companies will continue to focus on

-building relationships -sustainability -corporate social responsibility (CSR) -improving supply chain capabilities

Responsive-Supply Chain

-designed to respond quickly to market demand -Fast response -Minimal stock outs -Need flexible capacity (volume) -Inventory of parts -Minimize lead time -Need to have a variety of products available for customers when they want to buy -Ideal for Innovative Products >Rapidly changing >Very short life-cycle products >Great variety >Very unpredictable demand

Goal of supply chain management

-increase customer service -reducing both inventory investment and operating expenses

different types of flow in supply chain

-information flow -product and service flow -payment flow -returns flow

2 Basic Supply Chain Capability Models

1) Efficient -supply chain 2) Responsive-supply chain

Supply Chain Elements

1) Purchasing 2) Supplier Management 3) Strategic Partnerships 4) Ethics and Sustainability

Integration elements:

1) Supply Chain Process Integration 2)Supply Chain Risk Assessment and Mitigation 3) Supply Chain Performance Measurement

Logistics Management elements

1) Transportation management 2) Customer Relationship Management 3) Network Design

Current Trends in SCM

1)Globalization 2)Demand Volatility and Forecast Inaccuracy 3)Supply Chain Cost Optimization 4)Risk Management 5)Sustainability and "Greening" the Supply Chain

Two main reasons that companies implement Supply Chain Management are to:

1. achieve cost savings 2. better coordinate resources

Old paradigm

A company gained synergy as a vertically integrated firm encompassing the ownership and coordination of several supply chain activities. Organizational cultures emphasized *****short-term, company focused performance*****.

New paradigm

A company in a supply chain focuses activities in its' area of specialization and enters into voluntary and trust-based relationships with supplier and customer firms. *****"Outsourcing non-core competencies"***** -All participants in the supply chain benefit. -Boundaries are dynamic and extend from "the firm's suppliers' suppliers to its customers' customers (i.e., "end-to-end") -Supply chains also deal with reverse logistics to handle product returns, warranty repairs, and recycling.

The advantages and drawbacks of this internal focus were:

Advantages: -Higher output and more productivity -reduced cycle times -lower in process inventories Disadvantages: -high investment facilities -overall cycle time limited by the slowest operation -breakdown of one machine will stop an entire production line

Today and Beyond

Companies are focusing on their own core competencies, outsourcing those things that are not their core competencies, using the expertise of their trading partners

Globalization

Expanding the Supply Chain. International, mature and emerging markets have become a part of the overall business growth strategy for many companies. Both breadth and depth of global operations.

Demand Volatility and Forecast Inaccuracy

Firms will increasingly need to be more flexible and responsive to customer needs, adapting to unexpected changes and circumstances. Necessitating closer integration and collaboration

Who benefits the most from supply chain management?

Firms with: Large inventories Large number of suppliers Complex products and/or large number of products Large purchasing budgets / expenditures

Disadvantages of Push or Make to Stock

High inventories (and capital tied up in inventory), long lead-times, dependency on forecasting, forecasting error creates non-value adding time, inefficiencies, obsolescence, shortages, and additional cost.

Benefits of Supply Chain Management

Improved customer service Increased revenue Lower costs Better asset utilization Adds customer value / retain customers Minimize delays / shorter lead-times Elimination of rush (unplanned) activities Reduced uncertainty throughout the supply chain Lower inventory levels throughout the supply chain Ability to effectively respond to disruptions and conflicts

1980's, 1990's & 2000's

Instead of focusing only internally, companies started to look beyond their "four walls" and incorporate their supply chain partners into their planning activities. "External Collaboration"

1960s and 70s

Introduction of new computer technologies lead to development of: -Materials Requirements Planning (MRP) -Manufacturing Resource Planning (MRPII)

Integration

Managing all of the enabling systems necessary to facilitate the complete integration of the operations, supply, and logistics functions outlined above -Enabling Systems -Supply Chain Risk and Security Management -Performance Measurement -Project Management

Logistics Management

Managing all of the movement and storage of products and materials within the supply chain, whether the flow is forward or reverse -Warehousing & Distribution -Transportation -International Trade Management -Customer Relationship Management -Service Response Logistics

Supply Management

Managing all of the supplies and suppliers that are needed to run the business -Purchasing Management -Strategic Sourcing -Supplier Relationship Management

Operations Management

Managing internal resources -Forecasting and Demand Planning -Planning Systems -Inventory Management -Process Management

Risk Management

Many companies have started shifting supply chain risks such as holding inventory, upstream to their suppliers, and shipping finished products to customers immediately after production. Supply chain risks can only be effectively mitigated by managing risk at each node in the supply chain.

Foundations of Supply Chain Management

OSLI -Operations Management -Supply Management -Logistics Management -Integration

SCOR Model

P.S.M.D.R.E. 1. Plan: Planning establishes the parameters within which the supply chain will operate. 2. Source: This phase involves not only identifying reliable suppliers but also building a strong relationship with those suppliers. 3. Make: Make or manufacturing is the series of operations performed to convert materials into a finished product. 4. Deliver: Deliver, also known as the logistics phase, this is the part of supply chain management that oversees the planning and execution of the forward flow of goods and related information between various points in the supply chain to meet customer requirements. 5. Return: also known as reverse logistics, this is the part of supply chain management that deals with planning and controlling the process of moving goods specifically from the point of consumption back to the point of origin for repair, reclamation, re-manufacture, recycling, or disposal. 6. Enable: Enabling processes facilitate a company's ability to manage the supply chain and are spread throughout every stage.

Pull or Make-to-Order

Producing stock in response to actual demand

Push or Make-to-Stock

Producing stock on the basis of anticipated demand. Demand forecasting can be done via a variety of sophisticated techniques.

Supply Chain Cost Optimization

Reducing purchasing costs, waste, excess inventory, non-value added activities. Improving demand planning. Increased outsourcing of non-core competencies.

Intense global competition led U.S. manufacturers to adopt:

Supply Chain Management (SCM) - In the early 1980s, the term Supply Chain Management was coined by Dr. Wolfgang Partsch and his team at Booz, Allen & Hamilton

spanning from end-to-end

Supply chains are generally described as spanning from end-to-end, i.e., from your suppliers-suppliers on one end, through your internal operations, and out to your customers-customers on the other end.

backorder

The manufacturer cannot continue production of the finished product due to the material shortage, and therefore, cannot ship finished product out to customers against their open orders

stockout

The manufacturer temporarily stops all suppliers from supplying materials. No inventory available throughout the distribution channels in the market

Total Quality Management

a management approach to long-term success through customer satisfaction based on the participation of all members of an organization in improving processes, goods, services, and the culture in which they work. Everyone in the organization has to take ownership for quality.

Material Requirements Planning (MRP)

a method of determining what materials are needed and when they are needed to support the production plan.

Just-in-Time

a philosophy of manufacturing based on the planned elimination of all waste and continuous productivity improvement.

Business Process Reengineering

a procedure that involves the fundamental rethinking and radical redesign of business processes to achieve dramatic organizational improvements in such critical measures of performance as cost, quality, service, and speed.

Network Design

creating distribution networks based on tradeoff decisions between cost & sophistication of distribution system.

manufacturers

finished product manufacturers

Manufacturing Resource Planning (MRP II)

helps to improve internal communication and operations

Supplier Management

improve performance through -Supplier evaluation (determining supplier capabilities) -Supplier certification (third party or internal certification to assure product quality and service requirements)

service firms offer

intangible products. Customers are actually paying for the labor and intellectual property of the service provider.

Supply Chain Management

is the coordination of a network of otherwise independent organizations all involved in creating a desired product or service, and moving it from suppliers, through manufacturing, and out to customers when and where they want it.

supply chain is only as good as

its weakest link

Planning Systems

linking supply to demand via MRP and ERP systems

supply chain is facilitated through the use of

logistics

difference between logistics and supply chain management

logistics: refers to the activities that occur within the purview of a single organization activities include: inventory management, warehousing, distribution, and transportation supply chain management: refers to a network of independent companies that work together and coordinate their actions to deliver a product(s) or service(s) to market for the benefit of all companies in the network activities: marketing, new product development, finance, customer service

Forecasting & Demand Planning

match demand to available capacity

products and services are made from

materials, equipment, labor, time, money, and other resources

suppliers

raw material, intermediate, and/or finished material suppliers

Ethics and Sustainability

recognizing suppliers' impact on reputation and carbon footprint

Purchasing

responsibility for procuring materials, supplies, and services

supply chain disruptions

scenario 1: a supplier has a problem and cannot deliver a key material to a manufacturer as planned scenario 2: the manufacturer cannot continue production of the finished product due to the material shortage, and therefore, cannot ship finished product out to customers against their open orders

Customer Relationship Management

strategies to ensure deliveries, resolve complaints, improve communications, & determine service requirements.

Strategic Partnerships

successful and trusting relationships with top-performing suppliers

a supply chain is made up of these three nodes/links

suppliers, manufacturers, and consumers

logistics

that part of supply chain management that plans, implements, and controls the flow and storage of goods, from point of origin to point of consumption

most metric-intensive portion of the supply chain

the Make stage of the SCOR model

supply chain

the global network used to deliver products and services from raw materials to customers through an engineered flow of information, physical distribution, and cash. In simpler terms, it is everything that happens to a product on the journey from "concept to consumer."

Sourcing

the process of identifying the suppliers that provide the materials and services needed for the supply chain to deliver the finished product(s) desired by the customer(s).

It is important to identify your Tier 1 suppliers and customers because

these are the partners with whom you will want to build a relationship and share information first

Transportation Management

tradeoff decisions between cost & timing of delivery / customer service via truck, rail, air, pipeline & water.

Process Management

using LEAN Manufacturing to improve the flow of materials to reduce inventory levels, and using Six Sigma to improve quality compliance across all suppliers (internal and external)

nodes or links in the supply chain are connected by

warehousing (i.e., storage activities) and transportation (i.e., movement activities)

customers

wholesalers, distributors, retailers, and/or consumers