Chapter 15- SUpply chain management

Distribution strategy

Centralized or decentralized distribution? Use 3-PL?

Demand Variability

Control safety stock against demand variation.

Being agile

means that a supply chain is flexible enough to be able to respond fairly quickly to unpredictable changes or circumstances, such as supplier production or quality issues, weather disruptions, changing demand (volume of demand or customer preferences), transporting issues, and political issues

Product and service flow

movement of goods and services from suppliers to customers as well as handling customer service needs and product returns

Develop event-response capability:

the ability to detect and respond to unplanned events such as delayed shipment or a warehouse running low.

Supply Chain Management (SCM)

the strategic coordination of business functions within a business organization and throughout its supply chain

Know your suppliers

use Value Stream Mapping

strategic sourcing

Creating an effective supply chain begins with

Near-sourcing

Using nearby suppliers shortens the supply chain, - Reduce transportation time, cost, inventory, and the risk of disruptions - Increase responsiveness218. Responsibilities in SCM

Bullwhip Effect

Variations in demand at the consumer end coupled with periodic ordering and reaction to shortages tend to ripple backward through a supply chain, causing inventories to oscillate in increasingly larger swings (variation)

Vendor-Managed Inventory (VMI)

Vendors track goods shipped to distributors and retail outlets, and monitor retail supplies, enabling the vendors to replenish inventories when supplies are low.

VMI

___ lets companies reduce overhead by shifting responsibility to vendors for owning, managing, and replenishing inventory to vendors. • Not only do assets decrease, the amount of working capital needed to operate a business also decreases. • However, it forces vendors to take all the costs for inventory holding costs and responsibilities of stockout . Partnership deterioration in some respects

lean supply chains

_____ _______ ______ can increase supply chain risk and may necessitate increased inventories to offset those risks.

Integrating IT; Real-time

_____-____ data can enhance strategic planning and help businesses to control costs, measure quality and productivity, respond quickly to problems, and improve supply chain operations. • This is why ERP systems are so important for supply chain management.

supplier relationships

__________ relationships are a critical component of supply chain management

Procurement

a strategic process to streamline an organization's operations to ethically purchase quality goods and services from suppliers to realize business

Strategic sourcing

a systematic process for analyzing procurement process to ... .- lower costs by reducing waste and non-value-added activities - increase profits, reduce risks, and improve supplier performance

Collaboration and joint planning

and coordination are keys to supply chain success.

Effective supply chains

are critical to the success of business organizations.

Risk avoidance

avoid suppliers under issues

GPS navigation

continues to be a valuable asset for deliveries, both to customers and to businesses, guiding drivers or autonomous vehicles to the right location.

Risk reduction

deal with reliable suppliers

Functions and activities include

forecasting ,purchasing, inventory management, information management, quality assurance, scheduling, production, distribution, delivery, and customer service.

Cloud-based software

helps companies plan efficient routes and delivery schedules. Reduce driving time and fuel costs Avoid traffic congestion and road closures Detect aggressive drivers

Facilities

include warehouses, factories, processing centers, distribution centers, retail outlets, and offices.

The purpose of SCM is

integrating supply and demand management

Flow management

is an important aspect of SCM.

Logistics management (LM)

is the process of maintaining flow and storage of goods in an organization

connect ledgers across an organization's supply chain

A blockchain can _____ _____ ________ an _____________'s supply chain to improve the accuracy and efficiency of tracking products, eliminating a manual process

Responsive/agile

A flexible supply chain that has the ability to quickly respond to changes and adapt to supply chain disruptions

Closed-loop supply chain

A manufacturer controls both the forward and reverse shipment of product.

Radio frequency identification (RFID)

A technology that uses radio waves to identify objects wirelessly.

all aspects of the chain

Achieving an effective supply chain requires integration of

Supply chain strategy alignment

Aligning supply and distribution strategies with organizational strategy

1) Monitoring, (2) Notifying, (3) Simulating,(4) Measuring long-term impact of unplanned events

An event management system should have four capabilities:

Legal: Being knowledgeable about laws and regulations of the countries where supply chains exist. Obeying laws and operating to conform to regulations • Economic: Supplying products and services to meet demand as efficiently as possible • Ethical: Conducting business in accordance with society's moral standards

Aspects of responsibilities in SCM are generally:

Capacity planning

Assessing long-term capacity needs, including when and how much will be needed and the degree of flexibility to incorporate.

- Lower prices may result from lower labor costs - The ability of the organization to focus on its core strengths - Permits the conversion of some fixed costs to variable costs - It can free up capital to address other needs - Some risks can be shifted to the supplier - The ability to take advantage of a supplier's expertise - Makes it easier to expand outside of the home country • However, it is coming back due to the risks of

Benefits of Outsourcing are

track stolen products, or track items with specific qualities.

Blockchains also enable companies to build anti-counterfeit databases, ________ ____ _____ or track items with specific qualities

greater transparency and trust among supply chain partners.

Blockchains will provide

Network configuration

Determining suppliers, warehouses, production/operationsfacilities, and distribution centers

strategic importance

Development of supply chains should be accorded

planning for demand and managing supply,i nventory replenishment, production, warehousing, transportation, and centralizing transaction data.

ERP encompasses SCM activities such as

Lean supply chain

Eliminating non-value-added activities to create an efficient, low-cost supply chain.

Managing risks

For some businesses, the supply chain is a major source of risk, so it is essential to adopt procedures for managing risks.

Engineer-to-Order (ETO)

Full customization according to customer specifications; large-scale construction projects, custom homebuilding

Know your suppliers Provide supply chain visibility Develop event-response capability

Key elements of successful risk management include:

Traffic management

Handles schedules and decisions on shipping method and times, taking into account: - Costs of shipping alternatives - Government regulations - Needs of the organization (quantities, timing) - Shipping delays or disruptions(e.g., highway construction, truckers' strikes)

Strategic buffering of inventory Inventory and safety stock management • Clear information sharing ERP, Kanban • Inventory replenishment based on needs JIT

How to reduce the bullwhip effect?

Uncertainty and risk reduction

Identifying potential sources of risk and deciding the amount of risk that is acceptable.

Loss of control of sensitive information

If suppliers divulge sensitive information to competitors, it can weaken a firm's competitive position

a systems view

In that regard, a ______ _____ of the supply chain is essential.

Green Supply Chain Management (GSCM)

Increasing responsibility, regulations, and pressure on the sustainable supply chain. This may involve redesigning products and services, reducing packaging, near-sourcing to reduce pollution from transportation, choosing "green" suppliers, and implementing end-of-life programs.

Decentralized Purchasing

Individual departments or separate locations handle their own purchasing • Individual departments know their needs better than the purchasing center • Quicker response time • Dealing with local suppliers may save money

Information technology

Integrating systems and processes throughout the supply chain to share information, including forecasts, inventory status, tracking of shipments, and events.

Risk management

Involves (1) identifying risks, (2) assessing their likelihood of occurring and (3) their potential impact and then (4) developing strategies for addressing those risks.

Financial flow

Involves credit terms, payments, and consignment and title ownership arrangements

Quality issues

It disrupts supplies and leads to product recalls, liability claims, and negative publicity.

Strategic sourcing

It emphasizes total cost that includes storage costs, repair costs, disposal costs, and sustainability costs in addition to purchase price

Measuring supply chain ROI (Return on Investment)

It enables managers to incorporate economics into outsourcing and otherdecisions, giving them a rational basis for managing their supply chains.

Logistics

It includes management of inbound and outbound transportation, material handling, warehousing, inventory, order fulfillment and distribution, third-party logistics, and reverse logistics (the return of goods from customers

- Movements within a facility - Incoming and outgoing shipments - Getting to the right location - Tracking goods via RFID - Third-party logistics (3-PL)

Logistics includes:

Products and services

Making decisions on product and services selection and design.

lean operations and six sigma

Many businesses are employing principles of_________ and _______ ________ methodology to improve supply chain performance

Scheduling: Short-term scheduling of operations and distribution. • Receiving: Management of inbound deliveries from suppliers. • Transforming: Conversion of inputs into outputs. • Order fulfilling: Linking production resources and/or inventory to specific customer orders. • Managing inventory: Maintenance and replenishment activities. • Shipping: Management of outbound deliveries to distribution centers and/or customers. • Information sharing: Exchange of information with supply chain partners. • Controlling: Control of quality, inventory, and other key variables and implementing corrective action, including variation reduction, when necessary.

Operational Responsibilities

Traffic management

Overseeing the shipment of incoming and outgoing goods

Strategic partnerships

Partnership choices, level of partnering, degree of formality.

Assemble to Order (ATO)

Produce parts or modules in advance and assemble them after a customer order is received; computer's CPU or storage configurations

Make-to-Stock (MTS)

Produce products based on a forecast; products on store shelves or warehouses; Amazon fulfillment service

Make-to-Order (MTO)

Produce products for the customer's specifications based on a standard design; aircraft manufacturers, floor plans of home builders, car paint colors.

Centralized Purchasing

Purchasing is handled by one special department • Lower prices by combining orders (quantity discounts) • Better service and closer attention from suppliers • Assign certain categories of items to specialists

- Loss of jobs - Loss of control - Lower productivity - Loss of business knowledge - Increased transportation costs - Language and cultural differences - Inflexibility due to longer lead times - Knowledge transfer and intellectual property concerns - Increased effort required to manage the supply chain

Risks of Outsourcing

Responsive/agile Lean supply chain Near-sourcing

SCM strategies

Bullwhip effect results in inventory variability

Shortages and surpluses occur throughout the chain Higher costs and lower customer satisfaction Quality problems (example: a long period of food storage)

Risk avoidance Risk reduction Risk sharing with partners

Strategies for addressing risk include:

Supply chain risks

Supply chain disruption - Natural disasters - Supplier problems

Forecasting: Prepare and evaluate forecasts. • Sourcing: Choose suppliers and some make-or-buy decisions. • Operations planning: Coordinate the external supply chain and internal operations. • Managing inventory: Jointly decide with suppliers where in the supply chain to store the various types of inventory (raw materials, semi-finished goods, finished goods). • Transportation planning: Match capacity with demand .• Collaborating: Work with supply chain partners to coordinate plans.

Tactical Responsibilities

Mix of Centralized and Decentralized Purchasing

Take advantage of both centralization and decentralization • Decentralized: handle small or rush orders • Centralized: handle high-volume or high-value items for which discounts are applicable or specialists can provide better service than local buyers or departments.

sequence

The __________ is from raw materials to the final customers

match supply to demand

The goal of SCM is to match _______ to _______ as effectively and efficiently as possible.

Logistics

The movement of materials, services, cash, and information in a supply chain. • Materials include all items used in a process; raw materials, work in process (WIP),fuels, equipment, parts, tools, lubricants, office supplies, and more

Third-party logistics (3-PL)

The outsourcing of logistics management

Logistics

The part of a supply chain involved with the flow of goods, services, cash, and information

Reverse Logistics

The process of transporting returned items

Order fulfillment

The processes involved from receiving customer orders to shipping them off to the customer, plus all related supporting processes.

Supply chain; value

The sequence of organizations, facilities, functions, and activities that are involved in producing and delivering a product or service. Also referred to as _____ chains.

Inventory Velocity

The speed at which goods move through a supply chain.

Location, Inventory velocity, and demand variability

Three key important aspects of inventories in the supply chain

Product and service flow Information Flow Financial Flow

Three types of flow management for SCM are:

- Measuring supply chain Return on Investment (ROI) - "Greening" the supply chain - Re-evaluating outsourcing- Integrating IT - Adopting lean principles - Managing risks - Adopting blockchain technology - Establishing transparency - Adopting new delivery method

Trends affecting supply chain design and management:

Provide supply chain visibility

share real time status of inventory and shipment

Blockchains

shared ledgers where all transactions are recorded securely in real-time and are incapable of being altered or deleted.

Information flow

sharing forecasts and sales data, transmitting orders, tracking shipments, and updating order status

Risk sharing with partners

spread the risk by contractual arrangement