SCM 421

4 Transportation Classifications

1. Common carriers -offer transportation services to all shippers at published rates between designated locations without discrimination •Schneider, Yellow Freight, Union Pacific, American Airlines 2. Contract carriers - not bound to serve the general public. Contract carriers serve specific customers under contractual agreements. •Schneider, Yellow Freight, Union Pacific, American Airlines 3. Exempt carriers -exempt from particular regulation of services and rates if they transport certain exempt products like produce, livestock, coal 4. Private carrier -not subject to economic regulation and typically transports goods for the company owning the carrier. •Wal-Mart, Nestle

3 Challenges of SCM

1. Conflicting Objectives 2. Complexity 3. Variability

8 Critical Imperatives for Business Success/Survival

1. Differentiation: strong, differential vale proposition 2. Responsiveness: ability to sense and respond to customer and marketplace changes 3. Efficiency: cost structures and business processes must be adapted in a flexible manner to maintain productivity and minimize risk 4. Discover areas beyond products to reduce cost and create competitive advantage 5. Shorter product life cycles 6. Higher customer expectations: deliver more customer value in new ways and become more flexible in responding to demand changes 7. Reduce costs 8. Global business environment - competitors and suppliers

8 Key Functions of SCM: Intra-Organizational and Cross-Enterprise

1. Engineering/Product Development 2. Marketing 3. Sourcing/Purchasing - Suppliers 4. Production/Operations 5. Logistics/Distribution 6. Customer 7. Integration 8. Product Lifecycle Management - end of life

3 Logistical Drivers

1. Facilities 2. Inventory 3. Transportation

Top 3 US Ports 2014

1. Los Angeles, CA (8.34 million) 2. Long Beach, CA 3. Newark, New York

3 Factors that influence the structure of the Distribution Channel

1. Market Coverage •Intensive, selective, or exclusive distribution •Global, regional, local? •Examples? 2. Product Characteristics •Example: High-value, technical, or perishable •Examples? 3. Customer Service •Speed, reliability, etc. •Examples?

3 Types of Postponement

1. Pull postponement •Performed during the manufacturing process 2.Logistics postponement •Performed at the DC or retailer 3.Form postponement - Platforming •Involves composition of product/product design

Top 3 Global Ports 2014

1. Shanghai, China (35.29 million) 2. Singapore 3. Shenzen, China

3 Advantages of ERP

1. Single database and common software infrastructure to integrate financial, production, human resource, supply, and customer information 2. Enables efficiencies within the supply chain via visibility...supply chain visibility leads to reductions of the bullwhip effect, for example 3. Standardizes processes and eliminates redundant resources while increasing productivity

4 Strategies to Satisfy Customers in target market

1. Standardized Strategy 2. Customized Strategy 3. Niche 4. Micro-Marketing Strategy

3 Key functions of Distribution Centers (DCs)

1. Storage 2. Order fulfillment 3. Product Customization

3 Disadvantages of ERP

1. Substantial capital investment is required - hundreds of millions of dollars to implement (Cargill - $330M year to implement) 2. Difficult to customize - software is designed around a specific business model based on specific business processes 3. Integration and/or compatibility with business partners can be challenging

8 "World Class" Performance Metrics

1. Total SCM costs: operating costs, orders process cost; purchase and manage inventories, information systems, etc. 2. Cash-to-cash cycle time: Average number of days between paying for materials and getting paid for product 3. Upside production flexibility: average time required to provide an unplanned 20% increase in production 4. Delivery performance to request: % of orders fulfilled on (not before or after) requested delivery date 5. Perfect order fulfillment performance: % of orders that arrive on time, complete, and damage free 6. Demand forecast accuracy: difference between forecasted and actual demand 7. Time to value: total elapsed time between a new product receiving its budget and the time it achieves break-even with all development and launch spending •Time to market or time to volume 8. Return on new product development and launch: contribution margin over costs (sales training, marketing, promotions, and channel priming)

6 Primary Functions of Logistics/Distribution

1. Transportation 2. Storage and materials handling, i.e.: Distribution Centers (DCs) 3. Order/Customer fulfillment 4. Inventory management 5. Network design 6. Packaging

Before a firm can begin to design, manage and improve its supply chain, it must understand its business strategy by answering these 3 questions

1. What is our business and/or industry? 2. Who are our customers? 3. What do customers demand?

5 Methods to manage complexity

1.Conduct a "Model T analysis" 2. Raise hurdle rate 3. Postponement 4. Institutionalize simplicity in decision- making 5. Stay balanced ex. Heinz, Strabucks, Navistar

8 Steps to a Servitized Supply Chain

1.Determine value-drivers and service level for each customer segment 2.Identify supply chain design required to achieve outcomes for each segment 3.Determine supply chain network design that is required 4.Evaluate information requirements, systems and reporting, to ensure services are profitable 5.Determine "cost-to-serve" based on service offering and supply chain design requirements 6.Identify trade-offs between cost and revenue for providing combinations of service 7.Verify customer-segmentation analysis based on profitability projections 8.Ongoing monitoring

3 Keys to Complexity Management

1.Market (and marketing) awareness of complexity impacts •Customer confusion / exhaustion about features •Feature costs consumer not willing to bear •Costs/benefits of adding features 2.Supplier management •Supplier buy-in and involvement in designing common components 3.Product commonality - redefining design and supply chain relationships to capture the value of commonality •Manufacturing processes (postponement) •Distribution functions (postponement) •Supplier relationships •Marketing and product development

Supply chains must deliver varying degrees of 6 outcomes

1.cost (traditional) 2.responsiveness (time) 3.security 4.sustainability 5.resilience 6.innovation -Depends on customers needs

Postponement

Delaying the timing of customization (features, functions, identities) until key customer data is known •Takes advantage of the rules of forecasting -Forecasts are always wrong -The longer the forecast horizon the less accurate the forecast -Aggregate forecasts are more accurate

Dependent Demand

Describes the internal demand for parts based on the demand of the final product in which the parts are used. Subassemblies, components, and raw materials are examples of dependent demand items

Omni-Channel

End customer fulfillment achieved through a combination of direct and indirect approaches

Performance Standards and Variances

Establishing standards for comparison purposes is valuable, but should be developed and managed to avoid sub-optimization •Employees do whatever it takes to reach the goal •Shoddy work or potentially "cooking the books" •Pressure to meet metrics, resulting in decisions that may not be in the long-term best interests of the organization

Foreign/Free Trade Zones (FTZs)

FTZs allow companies to bring goods into the site where they can store, manufacture, assemble, repack, test, and repair in a tariff-free zone before exporting and/or delivering to final customer •Kansas City, MO •Manaus, Brazil •Shanghai, China

Why are forecasts always wrong?

Forecasts are incorrect and difficult to formulate due to variability throughout the supply chain

Indirect Channels

Intermediaries (wholesalers and retailers) sell to final customers

Functional Products

Low profit margins with relatively stable demands and high levels of competition •Strategies based on stable supply at lowest cost

How should a firm choose the optimal mode of transportation?

Mode selection can be dictated by the nature of the product, but beyond that, cost and service level considerations are key

Product Customization

Postponement = customizing products based on demand

Where does complexity start?

Product line

Pull Postponement

Push supply chain: Manufacture products based on long-term forecasts and then "push" the products through the supply chain Pull supply chain: Manufacture products based on actual customer demand -products are "pulled" through the supply chain •Decoupling point = point at which the product becomes customized •Manufacture products up to the decoupling point based on aggregate forecast/risk pooling of common components (push) •Manufacture final product based on a closer view of customer demand (pull) -Works well for many products - clothing, electronics, cars, windows, houses -Not appropriate for low value, commodity products

Order fulfillment

Receiving, assembling, shipping, and delivering a customer order = fulfillment

Logistics Postponement

Redesign of processes so that customization occurs at the DC or retailer Examples: GoPro cameras, HP printers

Form Postponement

Redesign product structure using common components, modules, processes Examples: Harley-Davidson, Ford, Honda, Toyota

3. Sourcing/Purchasing

Supplier selection Supplier alliance/strategic partnerships Supplier management Strategic sourcing Outsourcing

IT systems are critical

Systems - architecture that fits with the organizational structure and objectives and enable data extraction and utilization •ERP systems (SAP and Oracle) •Electronic Data Interchange (EDI) •Customer Relationship Management (CRM) •Warehouse/Transportation Management Systems (WMS/TMS) •Tableau •Web-based dashboards

Complexity Management

The collective set of decisions, supporting processes, and initiatives pertaining to determining and implementing the most effective product portfolio (i.e., mix of product variants, feature sets, component choices, etc.)

Independent Demand

The demand for final products has a demand pattern affected by trends, seasonal patterns, and general market conditions

Distribution Channels

The path by which products and services are passed from the manufacturer to the final customer •Includes intermediary firms such as wholesalers, distributors, and retailers

Standardized Strategy

all customers are viewed in the same way; products developed for the average customer SCM impact •Mass production with minimal product customization •Cost/economies of scale advantages

Servitization Strategy

bundled product-service packages

Performance variance

difference between standard and actual performance •Describing every variance is not productive, due to the fact that "common" variability is present in every process •Look for system changes/patterns and special causes

Customized Strategy

different versions of the product are developed for various, broader segments SCM impact •Customization adds complexity •Production, suppliers, distribution considerations •Higher costs

Supply chains are caught between

diversified products and cost savings

Balanced scorecard metrics typically include

financial, operating, and customer metrics LINKS examples Financial •Net income as % of revenue •Return on assets •Total profit Operational •Inventory turns •Order fill rate •Procurement + manufacturing expense as % of revenue •Marketing expense as % of revenue Customer •Customer satisfaction •Market share

Role of Information Technology in Supple Chain

fundamental to the evolution of supply chain management and facilitates a effective supply chain, provides the basis for decision making, and it must be: •Accurate •Accessible in a timely manner •Relevant (the right kind of information) •Provide supply chain visibility

Customer service or "service levels"

greatly impact supply chain design and execution •Time •Dependability •Communications •Convenience •Operations - packaging, delivery configuration, handling, technology, etc. •Support - training, warranty, etc

Value of the ERP exists

if decision making is improved, and the extent to which ERP enables integration across the supply chain to enable efficiencies and coordination

Logistics Service Providers

intermediaries that facilitate use of the transportation alternatives •Freight forwarders -consolidate shipments to fill trucks or rail cars. •Transportation brokers -handle transportation requirements of shippers. Legally authorized to act as agents on shippers behalf. •Integrated logistics service providers (3PLs - FedEx, UPS, Maresk, etc.)

Marketing

is responsible for linking the organization to its customers and is generally concerned with the "downstream" part of the supply chain The impact of marketing on a company is immense and brings the voice of the customer into strategic and tactical decisions of the company •Marketing generally focuses on four categories: product, price, place, promotion - all of which directly impact SCM •Customers are highly empowered -Purchases from business to business (B2B) -Purchases are made by an individual consumer (B2C) •The central focus of SCM is to create value for the customer •Marketing must understand what the customer perceives as value, not only in the product but in customer service levels •Marketing must also understand the trade-offs between product characteristics and assortment, service levels, and pricing

Increased commonality means

less complexity

Micro-Marketing Strategy

product is designed to meet the needs of an individual customer; sometimes called one-to -one marketing SCM impact •High degree of customization and service •Different channel considerations •Cost advantages and disadvantages

Commonality

reuse of components within the product portfolio

Niche Strategy

targets only one segment of the overall market with very precise products

Reverse logistics

the process of moving products back into the supply chain - returns and recycling

Benchmarking

understand industry best practices and benchmark against

Complexity

uniqueness or diversity within the product portfolio

Understanding scope, criticality, and core competencies

• Scope = degree of supplier responsibility •Criticality = importance of task/activities to the focal company •Core competencies = Differentiation points (Why customers buy our product)

Performance Metrics

• are typically structured in tiers or levels •must be meaningful and understood and agreed upon by users •should be developed as a "system" so that relationships between metrics can be understood - processes don't exist in a vacuum •should not sub-optimize the supply chain •should be visible and communicated to members of the supply chain and/or organization

Enterprise Resource Planning (ERP) systems

•An umbrella software system that links a variety of business processes: production and inventory, purchasing, logistics, HR, finance, accounting/payables/receivables, customer relationship management and supplier relationship management •ERP utilizes a centralized and shared database system to tie the entire organization together •Enables the exchange of information directly with suppliers, customers, and within the organization, leading to greater efficiency across the supply chain •SAP and Oracle are the leading ERP software providers

Intermodal Transportation

•Combinations of the various transportation modes •Highly utilized and efficient way of transporting product -Trailer-on-flatcar (TOFC), container-on-flatcar (COFC) -Containers can be placed on board ocean ships and airliners

Why is complexity so hard to manage and control?

•Compete for shelf space, market share, counter competitors •Disconnect between marketing and operations functions •Perceived as an "easy" way to increase revenues

What are the problems associated with too much complexity?

•Confused consumers •Brand dilution •High costs

Radio Frequency Identification (RFID)

•Electronic devices that consist of a small chip and an antenna used to transmit the identity (in the form of a unique serial number) of an object or person wirelessly, using radio waves •Serves the same purpose as a bar code or a magnetic strip on the back of a credit card. Devices will work within a few feet (up to 20 feet for high-frequency devices) of the scanner •Enables greater inventory visibility and thus the potential to lower costs (labor efficiency, less inventory, fewer markdowns, others) and increase responsiveness to demand

Air Carriers

•Expensive relative to other modes but also faster •Light, high-value goods that need to travel quickly •Helps eliminating the risk of variability in any supply chain, regardless of value of the product being shipped •Half of the goods transported by air are carried by freight -only airlines such as FedEx and UPS; passenger airlines also carry freight

"Traditional" Performance Measures

•Financial statements and traditional cost-based information by themselves do not reflect the underlying performance of the organization •Decisions made solely to maximize [quarterly] performance may not necessarily reflect an organization's underlying performance •Financial performance measures are critical but they must be understood as a "system," i.e.: in context of the business' strategy

Ship/Water Carriers

•Inexpensive but slow and inflexible •Bulky, heavy, high volume, could be high or low value products •Include inland waterway, coastal and inter-coastal

Pipelines

•Limited in variety of product •Materials hauled in a liquid or gaseous state- petroleum products

5 Results of (more) accurate forecasts

•Lower inventories •Reduced costs •Fewer stock-outs or obsolescence •Smoother production plans •Improved customer service

Rail Carriers

•Most favorable when the distance is long and for heavy, bulky, lower value products •Relatively slow and inflexible compared to other mode •Railroads have begun purchasing and/or partnering with motor carriers to offer point-to-point pickup and delivery known as trailer-on-flatcar (TOFC) •TOFC allows a trailer to be loaded from the train on to a truck and moved to its destination more quickly

Trucks/Motor Carriers

•Most flexible mode of transportation and accounts for over 80% of freight •Trucks compete with rail and air for short-to medium hauls •Carries both high and low value products -Less-than-truckload (LTL) carriers/shipments or truck-load (TL) carriers/shipment •LTL are small shipments or a collection of shipments from a variety of customers and have a higher cost structure •TL are large shipments typically from one customer and have a lower cost structure -Specialized carriers transport liquid petroleum, automobiles, building materials, and other specialized items -Disruptive carriers: Uber? Amazon?

Storage

•Strategically located in the supply chain network to store products to achieve optimal cost and service levels •Perform a specific role in production, i.e.: JIT parts/component delivery to manufacturing plant •Sorting and coordination of products -"break bulk" and cross-docking

3 places where inventory is held?

•Suppliers and manufacturers •Warehouses and DCs •Retailers

What is the "Innovation Fulcrum?

•The point at which the number of products strikes the right balance between customer satisfaction and operating complexity •Goal is to find right balance between complexity and innovation

Direct Channels or E-Commerce/Internet Channel

•Transaction is directly from the producer to end-user or final customer •Generally refers to the Internet/eCommerce channel but not always

1. Transportation

•Transportation is one of the most critical parts of the supply chain •Products have little value until they are moved to the customer's point of consumption •Transportation is both upstream and downstream -Move purchased goods from suppliers to manufacturing -Move finished goods to the DC and/or customer

Bullwhip effect

• Variability increases up the supply chain • Retailer demand is generally the least variable - fluctuations increase greatly at each level of distribution • Causes high levels of inventory and potential obsolescence in the supply chain

Qualitative Forecasting Methods

Generally used when data are limited, unavailable, or not currently relevant. Forecast depends on skill and experience and available information.

7. Integration

Interorganizational relationships: coordination/integration processes within the firm and with the business partners Trust Information technology Performance measures

Inventory Management

Managing inventory (an output of forecasting and planning) is a difficult and complex task, but it plays a critical role in supply chain management

How to Manage Outsourcing?

Outsourcing strategy must fit the circumstances, which can change •Building flexibility into supply chain network because the business environment is constantly evolving •Return to the fundamental strategy questions -In what kind of business/industry are we? -Who are our customers? -What do customers demand? •Understanding scope, criticality, and core competencies

Procurement

Primarily tactical processes involved in obtaining merchandise, capital equipment, raw materials, services, or maintenance, repair, and operating (MRO) supplies •Ensure uninterrupted flows of materials or finished goods •Work closely with engineering and strategic suppliers; involve suppliers in new product design and development

Forecasting

Provide an estimate of future demand • Must effectively match supply and demand to achieve optimal levels of cost and customer service. • Service level measure/metric typically used is called "fill rate"

Innovation Outcome

Provide new ways of producing, delivering or distributing products

8. Product Lifecycle Management and "end of life"

Recycle and/or disposal Reverse logistics

Sourcing

Selecting the firm's supply base to acquire its materials, services, supplies, and equipment •"Upstream" part of the organization •One of the most value-enhancing functions in the organization

Aggregate Planning/Sales and Operation Planning (S&OP)

Strategic/long-range •1+ years •Translates annual business and marketing plans and demand forecasts into a production plan for all products •Involves the construction of facilities and major equipment purchase related to capacity •Aggregate Production Plan (APP) Tactical/intermediate •6 - 18 months •Product types within a product family - quantities and timing •Master Production Schedule (MPS) Operational/short-range •Days and weeks •Components and parts to support the tactical plans - detailed requirements to build products •Materials Requirement Planning (MRP

2. Complexity

Supply chains are dynamic and constantly evolving -multiple products, new and more customized products -multiple and global facilities/networks and suppliers -multiple distribution channels -multiple customers

4. Alliance Development

• A formalized collaborative relationship that recognizes the interdependence of the companies. • May include investments that increase a supplier's capabilities • Shared benefits, costs, investment; continuous improvement; information sharing

2. Collaborative Supplier Selection and Evaluation Process

• Supplier selection is conducted by a cross-functional team of sourcing, engineering, marketing, and manufacturing • Specific evaluation criteria and minimum performance expectations...which become strategic goals for the supplier

3. Early Supplier Involvement (ESI)

• Suppliers are key partners in new product development • Suppliers are part of the engineering and design team • "Design for manufacturing" or "design for supply chain"

3 Overriding Business Goals

1. Customers drive the decisions/actions of supply chains 2. Differentiate products/services from competitors (responsiveness is the key determinant) 3. Generate profits and extract some of the value created for shareholders (contribute to and reinvest profits)

1. Competitive Priorities

cost, time, innovation, quality, service

2. Technological

-nature of product and how it is produced -intellectual property requirements

4. Political

-political system -legal system

5. Infrastructure

-site/land availability -labor availability, productivity and skill -language, culture -airports, highways, rail -risk and recovery from disruption

3 Ways outsourcing can reduce costs?

1. Aggregation (economies of scale) •Capacity •Inventory •Transportation •Warehousing •Procurement 2. Lower costs of capital, materials, labor, facilities 3. Higher quality = fewer defects

3 Key Components to Manufacturing

1. Agility and Responsiveness • Proximity to demand - regionalization, re-shoring - Existing or new market access - Proximity to sales channels - Proximity to R&D • Postponement of variability - Platforming • Centers of excellence - Best practice centers - Coordination and communication 2. Digital Factory (Technology) • Robotics, smart machines, additive manufacturing 3. Knowledge workers • High-skilled, technical, strategy, supply chain

1. Supply Base Reduction (Supply Rationalization) 4 Benefits

1. Buyer-supplier partnerships are easier to manage 2. Closer and more frequent interaction between buyer and supplier 3. Reduced cost (economies of scale) 4. Increases levels of quality and delivery reliability

5 Components of Foundational Framework to ensure supply chain network design supports business strategy:

1. Competitive priorities 2. Technological 3. Macroeconomic 4. Political 5. Infrastructure

3 Key Activities of SCM

1. Coordination: coordinating the movement of goods, services, information and cash up and down the supply chain 2. Information Sharing: marketing plans, point of sale data, supply capability, delivery information, inventory levels, invoicing, ect. 3. Collaboration: jointly planning and executing business decisions both within the firm and between supply chain partners

5 Elements of Supply Chain Network

1. Facilities- number, size and location of manufacturing centers, DCs, and retailers/customers 2. Transportation 3. Suppliers 4. Inventory- raw materials and finished product that flow between the facilities 5. Information- demand and supply data

3 Principles of forecasting

1. Forecasts are always wrong 2. The longer the forecast horizon the less accurate the forecast 3. Aggregate forecasts are generally more accurate

"Outcome Driven Supply Chains" Article 5 Main Takeaways

1. Goal is to arrive at a blend that differentiates a supply chain from its competitors and customers find attractive 2. Blending outcomes means making trade-offs 3. When blending outcomes, it is important for at least one of them to stand out 4. Blending outcomes complicates the performance measurement process 5. The same or similar outcomes may be achieved by following different paths

4 Ways outsourcing can increase customer value?

1. Higher product quality = customer satisfaction 2. Lower prices for customers 3. Enables greater product flexibility and variety 4. Innovation, expertise, and faster time to market

3 Fundamental Questions in determining the supply base

1. How to select and qualify suppliers? 2. How many suppliers? 3 .Make or buy...in-house or outsource?

3 Cross-functional Drivers

1. Information 2. Sourcing 3. Pricing

"The Future of Manufacturing" Article 5 Takeaways

1. Manufacturers of the future will have to move away from today's exclusive focus on efficiency and pay closer attention to fulfilling customer needs 2. The era of offshoring facilities to remote low cost location is drawing to a close. Labor cost advantages are diminishing in importance as the primary driver of new manufacturing decisions 3. Effectively responding to customer demand will need to become a major capability for manufacturers 4. Just as the digital economy is revolutionizing every aspect of life and business, so the factory will be digitally infused, providing tightly interconnected information and production flows 5. Plant-floor workers' knowledge and their ability to learn quickly and adapt to new technologies will represent an essential source of competitiveness for manufacturers in the future

3 Examples of Production Location Strategies

1. Offshore facility: low cost investment and labor costs 2. Contributor facility: regional facility using government incentives, low exchange risk, taxes, and logistics costs to serve regional markets 3. Lead facility: source of product and process innovation and competitive advantage of the entire organization

2 Outsourcing Risks

1. Operational Risks •Underestimate total cost (or over-estimate cost savings) -Production/Development, Logistics/Transportation -Lead times and Inventory -Labor •Lost of internal capability/expertise = innovation •Business complexity -Loss of control and visibility - supply continuity, subcontracting, quality, etc. -Import/export requirements -Regulation, safety, and other legal issues 2. Market Risks •Diminished visibility and control of supply chain -First tier suppliers; second tier; third tier... -Quality problems - minor or life-threatening -Brand erosion -Consumer backlash

2. Marketing (the 4 P's)

1. Product Development 2. Pricing 3. Promotions-demand generation, demand shaping, demand management 4. Place- channels of distribution/marketing channels

2 Forecasting Techniques

1. Qualitative forecasting: is based on opinion and intuition 2. Quantitative forecasting: uses mathematical models and historical data to make forecasts

Four broad categories of inventory

1. Raw materials -unprocessed purchase inputs. 2. Work-in-process(WIP) - partially processed materials/products 3. Finished goods -products ready for shipment. 4. Maintenance, repair & operating(MRO)- materials used when producing but not directly related to the product

"More US Retailers Probe Indian Supplier of Egyptian Cotton" Article 3 Takeaways

1. Summary: Big US retailers entangled in controversy over Indian supplier (Welspun) supplying phony Egyptian cotton 2. example of outsourcing difficulties in policing global complex supply chain where large retailers assemble a sprawling network of suppliers in developing countries to produce their goods at a cheaper cost 3. tangled networks make it tough to assess blame when things go wrong

Boeing Case Study: 4 Takeaways

1. Summary: Boeing outsourced about 80% of its production to hundreds of suppliers all around the world and gave them the freedom to design the parts 2. Extreme outsourcing strategy intended to speed up process and take development risk off its books and focus on application of parts 3. Extreme outsourcing resulted in inefficient communication, loss of design control and loss of logistical control--culminating into large financial penalties 4. To mitigate outsourcing issues Boeing acquired some manufacturing operations and sent managers to monitor

"Delphi, Mobileye Join Forces to Develop Self-Drive System" Article 3 Takeways

1. Summary: Pair partnering up to design fully autonomous driving product to speed up process in race to supply technology 2. Use in-house expertise and able to pool the investment as well as the technology and execution risk 3. Example of Alliance development

"VW supplier clash stops output at Six Plants" Article 2 Takeaways

1. Summary: VW halted its production due to dispute with German supplier due to unethical scandal 2. Lack of Early Supplier Involvement showed lack of loyalty to supplier resulting in large financial loss

5 Strategic Sourcing Strategies

1. Supply base reduction 2. Collaborative supplier selection and evaluation process 3. Early Supplier Involvement (ESI) 4. Alliance development 5. Outsourcing

2 Quantitative Methods

1. Time series forecasting - based on the assumption that the future is an extension of the past. Historical data is used to predict future demand. -Time series models are the most frequently used among all the forecasting models. 2. Associative forecasting - assumes that one or more factors (independent variables) predict future demand.

4 Strategies to decrease the bullwhip effect

1.Centralize demand planning: Eliminate or reduce multiple forecasts at each level of the supply chain 2.Reduce variability •Pricing strategies •Fewer SKUs •Postponement strategies 3.Reduce lead time •Delivery lead times •Order lead time •Information lead time 4.Strategic partnerships - VMI, CPFR

What are 3 ways to improve/reduce working capital needs for inventory?

1.Improve cash flow - what is the company's terms for days payable (suppliers) and days receivable (customers)? 2.Supply chain finance programs •Incentives that are mutually beneficial; reduces sub- optimization of entire supply chain •"Order to Pay" (O2P) software systems allow for more efficient management of cash and financing •See Figure 3 in article - the value of extending payment terms 3.When managing a supply chain it's critical to understand the financial dynamics, including the trade-offs (ie: inventory vs. service levels; network development vs. inventory)

4 qualitative models used are:

1.Jury of executive opinion 2.Delphi method 3.Sales force composite 4.Consumer survey

1. Engineering/Product Development

Cross-functional design teams Market focused

4. Manufacturing/Operations

Demand/supply management Capacity Management Inventory Management Manufacturing Quality

What is a value chain?

Each activity that occurs in the process of producing and delivering a product or service to the final customer should add value, whether through minimizing cost or adding service

Strategic Sourcing

Evaluating and selecting suppliers to acquire materials, services, supplies, and equipment based on a long-term, strategic framework

Capacity Planning

Excess or insufficient capacity can be very detrimental to a firm in terms of excess cost or lost revenue Resource Requirement Planning manages whether resources are capable of satisfying the demand •Labor •Machines

What is Supply Chain Management?

The design, integration and management of the flows of products, information, and funds from original suppliers to the final customer AND ensuring that products are available at the right quantities, in the right locations and at the right time while minimizing system-wide costs and satisfying customer service level requirements -enables success/survival: companies do not compete, supply chains compete

What is a supply chain?

The network of all entities involved in producing and delivering a finished product or service to the final customer

5. Distribution/Logistics

Transportation Distribution Centers (DCs) Inventory management Order/Customer fulfillment Network design

3. Variability

Uncertainty is inherent in every business and process -matching supply and demand -forecasts are always wrong -multiple sources of variability

6. Customer

Variety/choices Customization High quality High service levels Cost Ethics and/or environmental responsibility

3. Macroeconomic

World Trade Organization & Regional Trade Agreements -WTO, EU, NAFTA Government taxes and incentives -low tax districts -labor requirements -content requirements Current stability -stability -exchange rate

B2B2C "business to business to consumer"

emerging e-commerce model the combines B2B and B2C for a complete product or service transaction -goal is to create a mutually beneficial relationship b/w suppliers of goods and services and online retailers -expanding digital footprint

Sustainability Outcome

involves environmentally responsible supply chains that eliminate waste, reduce pollution and contribute in a positive manner to improving quality of environment through Eco-friendly processes, sub assemblies and finished goods

COST OUTCOME

is a combination of monetary cost (the primary performance criterion) and delivery and quality (Secondary criterion)

5. Outsourcing

any supply chain function being performed by a third party that the company could control in-house -one of the most important supply chain issues facing a firm - The decision to outsource balances reduced cost benefits with customer value - Off-shoring: is when a company maintains control of a function but moves it off-shore

1. Conflicting Objectives

between all members of supply chain in all functions of SCM

Resilience Outcome

ensures that the supply chain can recover quickly and cost-effectively from disruptions caused by external factors (ie. natural disasters, social factors, medical emergencies, economic setbacks, or technological failures)

Safety stock

exists at all levels, primarily at raw materials and finished goods, to protect against stock outs due to unexpected fluctuations in supply and demand

Innovative Products

high profit margins with variable demand, Short product life cycles, product line complexity •Strategies based on supplier quality, speed, and flexibility

Security Outcome

implies that the supply chains products will not be contaminated or otherwise unsafe ex. food products from China and tainted generic drugs from India

Responsiveness Outcome

is the ability to change quickly in terms of volume, mix or location as a function of changing conditions

Logistics

is the coordination of all activities involved in moving and positioning inventory across the supply chain •Time utility: products are delivered at the right time •Place utility: products are delivered to the desired location •Quantity utility: products are delivered at the right quantities

Merchant Buyers

purchase goods for resale -ie. wholesalers and retailers

Industrial Buyers

purchase raw materials, services, capital equipment, ect. -Direct Materials: components used to make finished goods -Indirect Materials: goods used to support the operation of a firm

order qualifiers based on type of product

quality and service

2. How many suppliers to use?

single source vs. multi-sourcing

Network decisions are

strategic because they have longer-term impact and can be capital intensive

Manufacturing

the process of turning inputs (raw materials, components, ingredients, etc.) into a finished product; it is critical and often complex part of the supply chain •Globalization dramatically changed manufacturing strategy, and the function became a non-core part of business, resulting in the outsourcing trend over the past~20 years •Today, the manufacturing function is experiencing a renaissance due to a number of factors, but the strategic and tactical landscape has changed. -Economic development and innovation -"Consumerization of manufacturing - B2B2C" -"Third Industrial Revolution" -Mass outsourcing and lack of investment in facilities, technology, and labor are challenges

1. How to select and qualify suppliers?

•Competitive bidding or negotiation •Legal and ethical requirements •Request for proposal (RFP) or request for quote (RFQ) process •Selecting suppliers is complex and should be based on multiple criteria Qualities •Technical capabilities •Ability or willingness to collaborate •Quality •Cost - unit cost or total cost of ownership (TCO) •Reliability •Responsiveness •Capacity •IT systems/Communication capability •Location •Service

Sales & Operation Planning (S&OP)

•Integration of marketing/sales plans with the supply chain to enable greater efficiencies, ensure sufficient capacity/resources, and increase customer value •Cross-functional teams that include marketing/sales, manufacturing, sourcing/suppliers, finance, and channel partners (when applicable) that meet at least once/month •Teams reconcile supply, demand, and new product introductions at the detail and aggregate levels and link to financial objectives of the organization/shareholders •Three key inputs: 1.Marketing: products, regions, promotions 2.Operational: capacity, materials (suppliers) 3.Finance: revenue, profitability, growth goals (publicly held companies)

5 reasons why inventory is necessary?

•Meet unexpected changes in demand •Supply/supplier uncertainty •Lead time coverage •Economies of scale benefits •Meet customer service requirements

5 Reasons favoring a single supplier

•No other available suppliers •Establish a collaborative relationship •Reduce variability - quality, service, etc. •Lower cost and/or economies of scale •Product or process is high value or high intellectual property

Inventory Management Conflicting objectives and trade- offs

•Production Size and Inventory -Produce large quantities vs inventory costs •Inventory and Transportation Costs -Inventory cost vs truckload transportation •Product Variety and Inventory -High # of SKUs vs inventory cost

Suppliers have become a valuable strategic component of companies because of their ability to...

•Reduce costs and delivery cycle times •Improve quality and long-term financial performance •Reduce high costs of globalization and materials •Deliver more innovative products more frequently

4 Reasons favoring multiple suppliers

•Reduce or spread risk of supply interruption •Capacity needs/flexibility •Create competition •Sourcing policy requirements - small business, women/minority, etc

But...the availability of accurate and timely data can greatly improve the way the supply chain is designed and managed and result in

•Reduce variability •Improved forecasts •Enable coordination •Enable lead time reduction

What are 4 outcomes of inaccurate forecasting

•Stock outs •High inventory costs - obsolescence, too much inventory •Lost revenue for retailer and manufacturer •Lost brand loyalty

Components of Time Series

•Trend variations: either increasing or decreasing •Cyclical variations: wavelike movements that are longer than a year •Seasonal variations: show peaks and valleys that repeat over a consistent intervals •Random variations: due to unexpected or unpredictable events

What 10 factors impact inventory policy?

•Value of product •Number of products •Type of product -continuous demand or seasonal? •Product lifecycle •Cost - ordering and holding costs •Service level requirement •Customer demand •Replenishment lead time •Length of planning horizon •Network design (relates to lead time)