Supply Chain Management
supply chains are_____ through various processes and technologies
enabled
forecast
estimate of future demand
SCM: 1950s & 60s
-1950s: origin of SCM -> limited to materials management and logistics -US manufacturers maintained large material inventories to keep production running -> focused on producing as much product as possible at the min cost -manufacturers internally focused : focused on mass production techniques to reduce cost and increase productivity -external collaboration and partnerships virtually nonexistent
sustainability and "greening" the supply chain
-Customers increasingly prefer products that are made and sourced in 'the right way' -> minimizing business' social, economic and environmental impact on society and enhancing positive effects. -Large majority (75%) of U.S. consumers influenced by a firm's environmental friendliness reputation
SCOR: Deliver
-Logistics phase -oversees planning and execution of the forward flow of goods and related information -coordinate the receipt of orders, develop a network of warehouses, pick carriers to transport products to customers, set up an invoicing system for payments, etc.
supply management elements
-Purchasing -supplier management -strategic partnerships -ethics and sustainability
supply chain cost optimization
-Reducing purchasing costs, waste, excess inventory, non-value added activities -Improving demand planning -Increased outsourcing of non-core competencies.
tier 1 supplier/customer
-an organization's immediate supplier vs an organization's immediate customer -some organizations can be both a supplier and a customer -it is important to identify tier 1 supplier/customer first to build a relationship
multiple supply chains
-any organization offering a product or service has a supply chain -supply chains can be simple or complex -everyone is involved in multiple supply chains
SCM: Today and Beyond
-companies focus on their own core competencies and outsource the rest -companies focus on: building relationships, sustainability, corporate social responsibility, improving supply chain capabilities
SCM: 1980s & 1990s & 2000s
-companies start incorporating supply chain partners into planning activities -Just in Time -Total Quality Management -Business Process Reengineering
SCM: new paradigm
-company focuses on its area of expertise and enters trust based relationships with suppliers and consumers -all participants benefit -boundaries are dynamic = extend end to end -supply chains also deal with reverse logistics
SCM: old paradigm
-company gained synergy as a vertically integrated firm encompassing the ownership and coordination of several supply chain activities -organizations emphasized short term, company focused performance
supply chain
-coordination of a network of independent organizations all involved in creating a desired product or service, and moving it from suppliers out to consumers, when and where they want it
Measures of success (examples)
-customer service -demand plan conformance -supply plan conformance -inventory plan conformance -cost of goods sold (COGS)
independent demand
-demand for an item that is unrelated to other items, such as a finished product, a spare part, or a service part -demand is FORECASATED
Globalization
-expanding the supply chain -international, mature, and emerging markets have become part of the overall business strategy for many companies -both breadth and depth of global operations
SCOR: Enable
-facilitate a company's ability to manage a supply chain -not a stage that occurs sequentially with the others -Examples:Supply Chain Systems and Network Operations , Systems Configuration Control, Interfaces, Gateways, Database Administration , Electronic Data Interchange (EDI), Telecommunications Services, Performance, Measurement, Contract Management, Business Rules, Standards, Training and Education
operations management elements
-forecasting & demand planning -planning systems -process management
qualitative forecasting
-generally used when data is limited, unavailable, or currently irrelevant -forecast depends on skill and experience of forecasters and available info
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 entire supply chain -lower inventory levels throughout the supply chain -ability to respond to disruptions and conflicts
strategic partnerships
successful and trusting relationships with top-performing suppliers
intense global competition led US manufacturers to adopt
supply chain management
SCOR model
Plan, Source, Make, Deliver, Return, Enable
main reason companies implement supply chain management
achieve cost savings and better coordinate resources
Demand-side shock absorber
inventory
intangible products
products that cannot be physically touched
improving supply chain capabilities
-increased use of third party logistic service providers -integrating logistics internally and with external trading partners -using transportation to facilitate rapid response and delivery
Total Quality Management
-management approach to long term success through customer satisfaction -based on the participation of all members in an organization in improving processes, goods, services, and the culture in which they work -everyone in the organization takes ownership for quality
risk management
-many companies have started shifting supply chain risk (such as holding inventory) upstream to their suppliers, and shipping finished product directly to customers -supply chain risk can only be mitigated by managing risk at every node of the supply chain
SCOR Model: Plan
-planning establishes the parameters within which the supply chain will operate -companies need a strategy for managing all of the resources necessary to create and deliver a product that meets consumer needs -includes: determination of marketing and distribution channels, promotions, quantities, timing, inventory and replenishment policies, and production policies
SCOR model: Source
-process of identifying the suppliers that provide the materials and services needed for the supply chain to deliver the finished products desired by the customers -identify reliable suppliers and build strong relationships with them -develop pricing, shipping, delivery, and payment processes with suppliers and create metrics for monitoring an improving the performance
SCOR: Return
-reverse logistics -planning and controlling the process of moving goods from the point of consumption back to the point of origin for repair, reclamation, re-manufacture, recycle, or disposal -create a responsive and flexible network for receiving defective and excess products back from their customers
SCOR: Make
-series of operations performed to convert materials into a product -finished product is manufactured, tested, packaged, and scheduled for delivery -quality management is the most important part of scm -most metric intensive portion of the supply chain: companies able to measure quality levels, production output, and worker productivity
scm in the service industry
-services generally cannot be produced in advance or inventoried -frequently the customer provides the tangible item that will receive the service -customers play a vital and more important role in the delivery aspect of the supply chain -service supply chain is more about managing the relationships between trading partners than it is about managing the chain of supply
integration elements
-supply chain process integration -supply chain risk assessment and mitigation -supply chain performance measurement
SCM demand-side challenges
-training and development -r&d requirements -independent demand -scheduled maintenance -sample requirements -safety stock -trade requirements
SCM supply-side challenges
-transportation -supplies and materials -labor -money -warehouse and storage space -quality control -lead time -production and inventory -equipment and facilities
logistics management elements
-transportation management -customer relationship management -network design
Supply Chain Process Integration
-when supply chain participants work for common goals -requires intra-firm functional integration -based on efforts to change attitudes and adversarial relatoinships
fundamentals of forecasting
1) Your forecast is most likely wrong 2) Simple forecast methodologies trump complex ones 3) A correct forecast does not prove your forecast method is correct 4) If you don't use the data regularly, trust it less when forecasting 5) All trends will eventually end 6) It's hard to eliminate bias, so most forecasts are biased 7) Technology is not the solution to better forecasting
five qualitative models
1. Personal Insight 2. Jury of Executive Opinion 3. Delphi Method 4. Sales Force Estimation 5. Customer Survey
two important considerations about a forecast:
1. forecast will be inaccurate but useful 2. forecast is the basis for most downstream supply chain decisions
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
Elements of SCM
1. operations management 2. supply management 3. logistics management 4. integration
two basic forecasting techniques:
1. qualitative: based on opinion and intuition 2. quantitative: uses mathematical models and historical data
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
SCM: 1950s & 60s pros and cons?
Advantages: -higher output and more productivity -reduced cycle times -lower in-process inventories Disadvantages: -high investment in facilities -overall cycle time limited by the slowest operation -breakdown of one machine will halt the entire production
Supply Chain Performance Measurement
Crucial for firms to know if procedures are working
who benefits the most from supply chains?
Firms with: -large inventories -large number of suppliers -complex products and/or large number of products -large purchasing budgets/expenditures
Step 1: Forecasting
Forecast is developed through data analysis and judgement -organizations must have a formal forecasting process to develop an agreed upon set of numbers that becomes the driver for demand planning
Business Process Reengineering
Fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in cost, quality, speed, and service
good vs bad forecasting
Good: can benefit a company by facilitating more effective planning =>reduced inventories, reduced costs, reduced stockouts, and improved customer service Bad: root cause for ineffective planning, everything based on the forecast will be bad => garbage in, garbage out
product and service flow
Involves movement of goods and services from suppliers to customers as well as handling customer service needs and product returns
payment flow
Transfer of monies among companies as payment for merchandise or services rendered (flows opposite to product and service flow)
forecasting
business function that estimates future demand for products so that they can be purchased or manufactured in appropriate quantities beforehand
ERP (Enterprise Resource Planning)
business process management software that allows an organization to use a system of integrated applications to manage the business and automate many back office functions related to technology, services and human resources
network design
creating distribution networks based on trade-off decisions between cost & sophistication of distribution system
benefits of a supply chain
delivers VALUE by managing the processes of all the otherwise independent trading partners so they collaborate with each other in the most efficient, effective, and cheap way
dependent demand
demand for an item that is directly related to other items or finished product, such as a component used in making a finished product -demand is CALCULATED
supplier evaluation
determining the current capabilities of suppliers
World class operational excellence begins with
effective supply chain planning and control techniques which: 1. provide a single set of numbers used to run the business 2. generate significant improvements in customer service, productivity, inventory and costs
warehouses
facilities that allow companies to store materials and finished products
supply side shock absorber
flexibility
____ and ______ are crucial components for customer satisfaction
forecasting and demand planning
general supply chain flow
from supplier to customer -information flow (both ways) -product and service flow (s to c) -payment flow (c to s) -returns flow (c to s)
Manufacturing Resource Planning (MRP II)
helps to improve internal communication and operations. (Manufacturers extended their processes to include their own finance, marketing, sales, research and development, etc. functions to bring all their expertise into the process.)
supplier management
improve performance through supplier evaluation and supplier certification
Goal of supply chain management
increase customer service while simultaneously reducing both inventory investment and operating expenses
Nodes in the supply chain are integrated through...
information and planning
SCM: 1960s & 70s
introduction of new computer technology led to the development of: Materials Requirement Planning (MRP) and Manufacturing Resource Planning (MRP II)
working capital
inventory investment
Forecasting and Demand Planning
key building blocks from which all supply chain planning activities are derived step 1: forecasting step 2: demand planning
planning systems
linking supply to demand via MRP and ERP systems
Step 2: Demand Planning
management and other experts within the company review the forecast to ensure that it is aligned with the company's strategy, business policies and business knowledge, and make adjustments if necessary
integration
managing all of the enabling systems necessary to facilitate all of the other operations
supply management
managing all of the supplies and suppliers that are needed to run a business
operations management:
managing internal resources
logistics management
managing the movement and storage of products and materials within the supply chain (forward and reverse)
forecasting & demand planning (op. mgmt. element)
match demand to available capacity
Materials Requirement Planning (MRP)
method of determining what materials and when they are needed to support the production plan
Cost of Goods Sold
operating costs
logistics
part of the supply chain that plans, implements, and controls the flow of goods from point of origin to the point of consumption (ie warehousing & distribution and transportation)
Just in Time
philosophy of manufacturing based on the planned elimination of all waste and continuous productivity improvement
All supply chains follow the basic model:
plan, source, make, deliver, return
A supply chain consists of....
raw material suppliers -> to intermediate suppliers -> to finished product manufacturers -> to wholesale and distributors -> retailers and consumers
Ethics and Sustainability
recognizing suppliers' impact on reputation and carbon footprint
purchasing
responsibility for procuring materials, supplies, and services
customer relationship management
strategies to ensure deliveries, resolve complaints, improve communications, & determine service requirements
what customers are actually paying for in the service industry is...
the labor and the intellectual property of the supplier
information flow
the movement of information along the supply chain
demand
the need for a particular product or service
demand planning
the process of combining statistical forecasting techniques and judgement to construct demand estimates for products or services
while services themselves are intangible...
they likely involve use of or work on a tangible item
supplier certification
third party or internal certification to assure product quality and service requirements
distribution
to receive, breakdown, repackage, and ship materials from a manufacturing location or to a customer
transportation management
trade-off decisions between cost & timing of delivery / customer service via trucks, rail, water & air
Nodes (or links) in the supply chain are connected by...
transportation and warehousing
Modes of transportation
truck, rail, air, pipeline, water intermodal = using a combination of any type
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
