BLT Exam 1
Structure of a Supply Chain
Suppliers (Tier 3 to tier 1) to Manufacturers to Customers (Tier 1 to Tier 3)
Who is the Customer
From perspective of the total supply chain: - End user of the product in a consumer market - Company is the customer in a business market From perspective of a specific firm within a supply chain: - Intermediate customer organizations exist between the firm and end users From perspective of a logistics manager: - Any delivery location. For example, consumer home's, retail / wholesale businesses, receiving docks of manufacturing plants and warehouses
Enterprise Integration and Administration
General Administration Accounts Receivable and Payable Financial Inventory Accounting General Ledger Human Resources
The Value of Logistics
Logistics is necessary to: Move goods and materials from suppliers to buyers (Inbound) Move goods and materials between sites (internal & external) Move finished goods to the customer (Outbound) Products have little value to the customer until they are moved to the customer's point of consumption - Products are delivered at the right time. - Products are delivered to the desired location
Logistics Labor Shortages
Logistics labor shortages will continue through 2019 and beyond. Wages will continue to rise due to demand. While the talent gap remains a significant challenge, solutions are starting to emerge. - Companies need to be more creative about how they recruit and retain workers. - Using a proactive and multi-faceted approach to recruiting and retention in tight labor markets. - Automating the recruiting process, from online applications, pre-hire testing, onboarding, and increasing the quantity and quality of applicants for positions. - Working closely with universities and colleges to promote the career opportunities available in supply chain management while helping prepare students to enter the industry
Integrating Logistics
Involves achieving the following 6 objectives simultaneously: 1) Responsiveness - Satisfy customer requirements in a timely manner. 2) Variance Reduction - The elimination of operations disruptions. 3) Inventory Reduction - Control asset commitment and turn velocity. 4) Shipment Consolidation - Reduce transportation costs through larger (and therefore fewer) shipments. 5) Quality - Continuous improvement towards zero defects. 6) Life Cycle Support - Cradle-to-cradle logistical support Logistical strategy is based on the relative importance placed on each objective
21st Century Supply Chains Continued
Consumers are increasingly price sensitive and less brand-loyal, resulting a permanent increase in supply chain volatility End-to-end supply chain cost optimization will remain critical in the future Risk and opportunity management should span the entire supply chain, including the supply chains of key partners Most existing supply chain organizations are not truly integrated or empowered - The lack of integration between product development and manufacturing functions are standing in the way of capturing the benefits of economic recovery
Enterprise Planning and Monitoring
Enterprise Planning and Monitoring modules facilitate the exchange of planning information Sales & Operations Planning (S&OP)- Senior management tool to run the business Supply Chain Compliance (Regulatory) Supply Chain Visibility and Event Management ("Control Towers")
Postponement Strategies
Manufacturing Postponement Assembly Postponement Packaging Postponement Labeling Postponement Time (or Geographic) Postponement Combined Postponement
Logistical Operating Arrangements
1) Single Channel Echelon Structured Logistics: - Echelon Structured Logistics means the flow of products typically proceeds through a common arrangement of firms and facilities as it moves from origin to final destination 2) Direct Delivery (Manufacturer to Customer) 3) Multi-channel Echelon Structured Logistics
Innovations and Technology in the Supply Chain
Augmented Reality Machine Learning Artificial Intelligence (AI) Internet of Things (IoT) Blockchain Everything as a Service (XaaS) Warehouse Robots Distributed Inventory
What is Logistics
It is 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 It includes the integration and management of the following activities: - Location Analysis - Customer Order Processing - Inventory Management - Warehousing - Material Handling - Packaging - Transportation - Customer Service
Major Logistical Functions
Order Processing Inventory Strategy Transportation Warehousing Materials Handling Packing Integrated through a network of facilities e.g., warehouses & distribution centers
Supply Chain Information System (SCIS) - Functionality
Transaction Systems Management Control Decision Analysis Strategic Planning
Overview of Customer Relationship Management
- Customer-focused marketing - Customer Service - Customer Satisfaction - Customer Success - Developing customer relationship management strategy
Basic Logistics System
1) Begins with a customer placing an order with the organization 2) A product is then either produced, or shipped from inventory to the customer. 3) As more products are sold, more raw materials must be acquired from suppliers, and more products produced to fill demand or replenish inventory. The way that the parts of this system are configured will determine how and when the customer receives the order The output of the logistics system is customer service The challenge for the logistics expert is to design a system that delivers a desired level of customer service at the lowest total cost. Cost-cutting, while important, must be balanced with the need to provide optimum levels of customer service and satisfaction
Financial Measurement of Time-Based Supply Chains
1) Cash-to-Cash Conversion - The time required to convert raw material or inventory purchases into sales revenue - A measure of how efficient your supply chain is at generating revenue - In manufacturing, a composite metric described as the average days required to turn the purchase of a dollar of raw materials into the collection of a dollar from customers for the sale of products or services - In simple terms, it is a calculation of the time between the outlay of cash and the recovery of the cash 2) Dwell Time - The ratio of time that an asset sits idle to the time required to satisfy its supply chain mission - For example, the ratio of the time a unit of inventory is in storage to the time that it is moving or otherwise contributing to achieving sales or operational objectives. Dwell Time Minimization - To reduce dwell time, firms collaborating in a supply chain need to be willing to eliminate duplicate and non-value-added work - Timely arrival and continuous inventory flow between supply chain partners reduces dwell. - A benefit of reducing dwell time and the associated logistics cost is the ability to reduce investment in inventory and related assets 3) Cash Spin - The potential benefits of reducing assets across a supply chain is referred to as cash spin. The concept is to reduce overall assets committed to supply chain performance. - Free up cash to use in R&D, M&A, Advertising & Promo, etc. - Such free capital can be reinvested in projects that might otherwise have been considered too risky. The benefits flowing from cash-to-cash conversion, reduced dwell time, and cash spin combine to increase the financial attractiveness of effective collaboration
Integrative Management Requires Simultaneous Achievement of 8 Processes
1) Demand Planning Responsiveness- The assessment of demand and strategic design to achieve maximum responsiveness to customer requirements 2) Customer Relationship Collaboration- The development and administration of relationships with customers to facilitate strategic info sharing, joint planning and integrated operations 3) Order Fulfillment/Service Delivery- The ability to execute superior and sustainable order-to-delivery performance and related essential services 4) Product/Service Development Launch- The participation in product service development and lean launch 5) Manufacturing Customization- The support of manufacturing strategy and facilitation of postponement throughout the supply chain 6) Supplier Relationship Collaboration- The development and administration of relationships with suppliers to facilitate strategic info sharing, joint planning and integrated operations 7) Life Cycle Support- The repair and support of products during their life cycle, including warranty, maintenance and repair 8) Reverse Logistics- The return and disposition of inventories in a cost-effective and secure manner
The 5 Functions of Logistical Work are Interrelated
1) Facility Network Strategy and Design: - Number - Location - Function - Ownership 2) Order Processing Order-to-Cash: - Receipt - Delivery - Invoicing - Collection 3) Inventory Strategy Customer Segmentation: - Product Profitability - Transportation Integr. - Time-Based Perf. - Competitive Perf. 4) Transportation Cost -vs- Total Cost Balance Speed & Cost Consistency: - Variability - Dependability - Service Quality 5) Warehousing, Material Handling, Packaging Dependent on other Logistics Areas: - Insourced -vs- Outsourced - Services Provided - Customization - Reverse Logistics
3 Areas of the Value-Added Logistic
1) Procurement is concerned with purchasing and arranging inbound movement of materials, parts, and/or finished inventory from suppliers into manufacturing or assembly plants, warehouses or retail stores. - Other terms associated with this activity are; Purchasing, Sourcing or Strategic Sourcing, Supply Management, Material Planning & Purchasing 2) Manufacturing Support concentrates on managing work-in-process inventory as it flows between stages of manufacturing in support of the Master Production Schedule (MPS) 3) Market Distribution - Dealing with the varied aspects of serving customers. The end objective of logistics is the movement of finished product to customers
Logistical Performance Cycles (i.e., Cumulative Lead Time)
1) Purchasing Cycle (Material Source and Lead Supplier (Tier1)) 2) Manufacturing Support Cycle (Manufacturing Plant) 3) Customer Accommodation Cycle (Distributors and Customer) Node - Transportation and Communication links
Basic Supply Chain Capabilities Models
1) Understand the requirements of your customers. 2) Define core competencies and the role your company will play to serve your customers. 3) Develop supply chain capabilities to support the role your company has chosen 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 Responsive - Supply Chain designed to respond quickly to market demand . - Excess capacity / Flexible processing - Inventory of parts - Short lead time (and quick changeovers) - Premium / expedited transportation - 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
Supply Chain Strategy
A channel and business organizational arrangement, based on acknowledged dependencies, and collaboration
Augmented Reality (AR)
AR offers numerous assistive technologies to facilitate the everyday work of employees, particularly in the areas of logistics, manufacturing, and warehousing. - Example, hands-free picking with AR, where wearable technology such as smart glasses, displays all relevant information in the user's field of sight exactly when they need it - This way, picking tasks and barcode scanning can be done simultaneously - Smart displays, glasses or simulators can significantly simplify and improve future tasks in the supply chain. AR can also be beneficial to customers when making purchases; it may enable them to view or test a product virtually, or to visit a virtual store. In the long run, this new consumer behavior will have an impact on the retail supply chain, with fewer items stored at the point of sale and faster shipping from local warehouses. Gartner predicts that by 2022, 70% of enterprises will be experimenting with immersive technologies, and 25% will have deployed to production
Distributed Inventory Continued
Any business can make use of Distributed Inventory, from retail to healthcare to field service operations - Moving inventory closer to the customer means it is possible to use regional carriers, metro area couriers and other delivery options that aren't cost-effective on multi-day moves. - Retailers can restock shelves in a matter of hours instead of days - B2B service organizations can have high priority parts available without waiting for shipping times. Typically, a 3PL is used to provide scalable, flexible space for the inventory, and to manage fulfillment operations. - However, some brick-and-mortar stores are even converting retail locations into fulfillment centers
Artificial Intelligence (AI)
Artificial intelligence is intelligence demonstrated by machines, in contrast to the natural intelligence displayed by humans AI has the ability to analyze the patterns of today's operations to predict the possible outcomes of tomorrow's scenarios. - This can be used to automate lower-level decision-making. - Managers can then concentrate on high-level decision making Masses of data are not only generated, but analyzed, linked and patterned. It is all about the knowledge that can be drawn from the data AI offers a wide range of applications in the supply chain. - Intelligent or autonomous technologies such as robots, drones, vehicles or appliances facilitate logistical coordination and organization in warehouses
What's Next for Supply Chain Management
As the supply chain continues to evolve, it's critical for companies to adapt to emerging technologies and strategies - The pace of change in supply chain management continues to accelerate, and it's only going to get faster - With the explosion of e-commerce, things are moving at internet speed in both the B2C and B2B markets Supply Chain Management has transformed from an often-overlooked cost center into a vital segment of operations that can be turned into a competitive advantage
Assembly Postponement
Assembly postponement is relevant for companies with modular product design. Having base materials in modules, and a flexible design, it is possible to construct various end-products from the modules in one kit Example: Customers buy IKEA furniture products in flat pack boxes and assemble the product themselves at home
How does Logistics Create Service Benefits
Availability - having inventory to consistently meet customer material or product requirements Operational Performance - The key performance indicator is the time required to deliver a customer's order - Key metrics for this area involve delivery speed and consistency. Flexibility - to handle unexpected customer demand/requests - Malfunction and recovery time - logistical failures and corrections Service Reliability - quality attributes of logistics - Key to quality is accurate measurement of availability and operational performance over time
Primary Logistics Activities
Basic functions that have to be performed in any logistics system. These activities are all interrelated, and a change in one will likely create a ripple effect of change throughout the entire system (Inventory, Facility Network, Communication and Information, Material Handling and Transportation)
Blockchain Technology
Blockchain, also known as a distributed ledger, is a shared database creating a permanent transaction record that can be changed only with the permission of the other members of the network. - Adapting Blockchain to track physical objects in the supply chain will require knowing who is adding information to the chain. Some of the first applications in the supply chain are targeted toward food and pharmaceutical safety, tracking items to their source in case of a recall or as an anti-counterfeiting measure. - It could be used to record any kind of exchange of value, smart contracts, payments and tracking. Blockchain could be used to certify the origin of products such as organic or non-GMO foods or conflict-free minerals. Initially, third-party service providers and very large enterprises will launch Blockchain services for their own supply chains. Eventually, it will increase the efficiency and transparency of the supply chains from warehousing to delivery to payments (Blockchain is expected to create $3.1T in business value by 2030)
What's Next for Supply Chain Management (3)
Chances are, the big picture will look similar to today's supply chain, but the details of how things get done will dramatically change - There won't be any excuse for not having real-time inventory and fulfillment information - Drones may be taking inventory in warehouses, and trucks may be self-driving to their destination, but it still comes down to getting the right product to the right place at the right time. Companies will have more options when it comes to warehouse management technology in the form of both WMS solutions and automated robots
Enterprise Operations
Customer Relationship Management Logistics (Finished Inventory Management, Order Processing, Warehouse Management, Transportation Management, Yard Management, Accounts Receivable Interface) Manufacturing Purchasing Inventory Deployment Enterprise Operations support day to day supply chain operations
Basic Principles of the Marketing Concept
Customer needs and requirements are more basic than just products and services being offered - Companies must create and match products to customer's needs Example: You as a consumer want to toast your bread for breakfast (i.e., your basic need). You really don't care how it gets toasted (i.e., your need is not for a toaster it is for toasted bread). The company selling toasters cannot loose sight of that basic need and focus only on making/selling the best toaster, to the exclusion of inventing a better way for consumers to get/make toasted bread Different customers (segments) have different needs and requirements. - A single company may serve multiple segments. Products and services become meaningful only when available and positioned from the customer's perspective - Logistics provides time and place utility Profit is more important than sales volume - Is the customer willing to pay for customization?
Global Logistics offers Unique Challenges
Distance of typical order-to-delivery operations is significantly longer for global logistics compared to domestic logistics. Documentation requirements for business transactions is significantly more complex. A typical cross-border shipment now involves: - Accurately completing and filing about 35 documents - Compliance with > 600 laws & 500 trade agreements which are constantly changing. - Interfacing with about 25 parties, including customs, carriers, freight forwarders, government agencies, etc. Global logistics operations must deal with significant diversity in work practices and various local operating environments. How consumers demand products and services must be set up to accommodate cultural variations
Distributed Inventory
Distributed Inventory means moving the product closer to the customer. - This strategy was prompted by the desire to speed up delivery for e-commerce business. Of all the factors currently shaping trends in supply chain and logistics, e-commerce continues to be one of the most influential. - Companies are shifting fulfillment from large regional warehouses to smaller, decentralized facilities strategically positioned near the customers. - The strategy involves keeping inventory in multiple distribution centers. - It reduces the time from a customer placing an order to the product being delivered while simultaneously reducing shipping costs. - This means higher customer satisfaction rates and higher sales numbers with shorter delivery lead time
Logistics Labor - Warehousing
Due to the fulfillment demands of the e-commerce boom, warehouses are finding it increasingly difficult to fill open warehouse jobs. The highly variable characteristics of today's e-commerce industry are causing retailers and distributors to seek out more adaptable and scalable solutions. Warehouses are increasing adoption of automation such as shuttle systems and autonomous mobile robots (AMR) to meet the requirements of direct-to-consumer fulfillment Warehouse automation is only a part of the solution to a company's fulfillment needs, and it is expected to only mitigate, not solve, the labor imbalance. - The labor shortage cannot be solved with automation in the short-run. Companies simply cannot retool quickly enough
Material Handling
Flow of Actions: 1) Classify the type of material (i.e., raw material, finished goods, etc.) 2) Handling requirements of the material (e.g., flammable, fragile, cold, etc.) 3) Cost ratio of material handling to material cost 4) Material default location, identification, and traceability Important Factors: - Material breakage - Theft - Cost of material handling - Number of handling occurrences Techniques: - Operations research - Material flow analysis - Computerized material retrieval systems - ASRS
Customer Service
Flow of Actions: 1) Contractual services offered to the customer 2) Type of customer service required for the product 3) Location of the service center 4) Service level at the service center 5) Cost of service -vs- replacement Important Factors: - Contractual requirements of customer service - Service quality - Reverse Logistics Techniques: - CRM - Call center / "800" number - Guarantees and warrantees - Annual maintenance contracts
Location Analysis
Flow of Actions: 1) Cost of inbound transportation of materials and outbound transportation of finished products. - Proximity to suppliers - Proximity to customers 2) Availability and type of land 3) Availability of secondary resources, infrastructure, etc. 4) Availability of desired manpower and labor costs 5) Governmental regulation and taxation Important Factors: - Cost of operations as a percentage of sales - Type and shelf life of product(s)
Packaging
Flow of Actions: 1) Determine material packaging requirements 2) Primary packaging 3) Secondary (and tertiary) packaging 4) Cost of packaging 5) Transportation requirements for packaging (e.g., vibration proof, water or moisture tight, etc.) Important Factors: - Protection of the product - Holding of the product - Communicating information - Customer requirements for packaging - Reverse logistics - Recycling of packaging materials - Cost of packaging Techniques: - Standardized packaging - Containerization - Recycling, reusable, eco-friendly packaging materials - Reusable packaging materials - Labeling / bar coding - RFID / GPS tracking
Warehousing
Flow of Actions: 1) Location of warehouse(s). 2) Inventory level at the warehouse 3) Storage requirement(s) of the product(s) 4) Packaging and repackaging requirement of the product(s) 5) Shelf life of the product(s) Important Factors: - Availability of space - Availability of material handling systems - Strategic location(s) - Packing and re-packing facilities - Information and associated services Techniques: - Third Party Logistics (3PL's) - Third Party Warehousing
Transportation
Flow of Actions: 1) Mode of transportation 2) Urgency of the product delivery to the customer 3) Speed of transportation 4) Ambient requirement of materials 5) Cost of transportation Important Factors: - Urgency of the product - Cost of product - Availability of material handling systems - Strategic location(s) - Packing and re-packing facilities - Information and associated services Techniques: - Containerized transportation - Intermodal transportation - Cross Docking - Direct shipment - Cold chain transportation
Inventory Management
Flow of Actions: 1) On hand inventory analysis 2) Communicating the quantity, quality, and timing of required material or finished products with the supply points. 3) Achieving the right quantity, right quality, and right time Important Factors: - Cost of materials - Lead time - Inventory control measures Techniques: - Forecasting using statistical tools - Fixed order interval system - Economic order quantity with ROP - Distribution Requirements Planning (DRP)
Customer Order Processing
Flow of Actions: 1) Receiving and vetting the customer order 2) Determining the delivery schedule - Evaluating the availability of inventory (and/or) - Evaluating production capabilities 3) Determining the shipping and delivery location(s) Important Factors: - Cost of order processing - Product specifications Techniques: - Electronic Data Interchange (EDI) - E-ERP or CPFR - Web portal
Achieving Integrated Management
Focus of integrated management is the lowest total process cost - This differs from lowest cost of each function in the process Collaboration of operating information, technology, and risk across the end-to-end supply chain. Includes expanded managerial influence and control beyond traditional ownership boundaries of a single enterprise Integrated service providers (ISP) offer a range of logistics services to accommodate customers, ranging from order entry to product delivery
Combined Postponement
In combination, manufacturing and time (or geographic) postponement involves keeping the basic products centralized and performing the final product customization at the Destination distributor, rather than at the manufacturing site Examples: Automobiles - Installing options like sound systems, GPS, roof racks, trailer hitches, sun roofs on new cars at the dealership. Computers - Packaging / bundling additional system options like printers, digital cameras, software, etc., along with the computer at a distribution center
Customer Perspectives of Value
Integration of the overall business process creates value - To explain the importance of integrated logistics management, it is useful to understand that customers have 3 perspectives of value: 1) Economic Value- Focus is on economies of scale in product and service creation, and striving to achieve the lowest total landed cost (Provided through the Procurement and Manufacturing Strategy) *Take-away: High quality at a low price* 2) Market Value- Focus on achieving economies of scope in product and/or service presentation - It is about presenting an attractive assortment of products at the right time and place to realize effectiveness *Take-away: Convenient product/service assortment and choice* (Provided through the Market and Distribution Strategy) 3) Relevancy Value - Means the right products and services (Market Value), at the right price (Economic Value), modified, sequenced, synchronized, and otherwise positioned in a manner that creates valuable segmental diversity (i.e., distinctiveness) *Take-away: A unique product/service bundle* (Provided through the Supply Chain Strategy)
Manufacturing Postponement Continued
It is hard to come across a company today that does not use this strategy at some level. Common ways companies do Postponement (or delayed differentiation) include: - Manufacturing one order at a time (i.e., pure make-to-order) - Base modular construction of a product, i.e., design the product as a set of interdependent units or 'modules' (assemble to order) - No customization until the exact customer specification and financial commitment is received (Engineer to Order) The objective is to maintain products in an uncommitted status as long as possible, while building a sufficient quantity of "ready to customize" basic units - This strategy balances economies of scale with responsiveness, but it requires a lot of forethought during product design
Labeling Postponement
Labeling postponement is when product differentiation takes place only by putting the labels on the package. This type of postponement is useful, when companies use different markets Examples: - Private labels of the retailers - Printing labels "best before" - Printing informative labels in the language of the country where product is going to be sold
Logistical Value Proposition
Logistical value proposition consists of a commitment to key customer expectations and requirements at a minimum cost The two elements of this value proposition are Service Benefit and Cost Minimization - Firms must make appropriate tradeoffs between service and cost for each of their key customers
Logistics Planning
Logistics planning attempts to answer the questions of what, when and how, and it takes place at three different levels: strategic, tactical, and operational. The major difference between them is the planning horizon - Strategic Planning is long-range where the time horizon is longer than one year - Tactical Planning involves an intermediate time horizon, usually less than a year - Operational Planning is short-range, with decision frequently made on an hourly or daily basis
Responsive Business Model (Pull Model)
Make-to-Order, Assemble-to-Order, Engineer-to-Order: Producing stock in response to actual demand Advantages: High levels of customer service through responsiveness and flexibility to meet uncertain customer demand . . (Pull models have short lead times, reduced dependency on forecasting, use short and flexible production runs, store very low inventories, reduce waste, provide opportunities for customization, and improve cash flow) Disadvantages: 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)
Anticipatory Business Model (Push Model)
Make-to-Stock: Producing stock on the basis of anticipated demand. Demand forecasting can be done via a variety of sophisticated techniques (Used by 95% of companies) Advantages: 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) Disadvantages: 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
Machine Learning
Many of the more innovative logistics technology enhancements have included Machine Learning and Artificial Intelligence, and it is expected that these will be applied much more extensively across the supply chain in 2019 and beyond Machine learning is the scientific study of algorithms and statistical models that computer systems use to perform a specific task without using explicit instructions, relying on patterns and inference instead - Machine learning is especially useful for large, dynamic data sets - Large amounts of data are more prevalent than ever in today's supply chains Machine learning is applicable to a wide-range of logistics technologies, including enhancing warehouse management systems, robotic vision systems, supply chain planning, supply chain visibility, and more
Globalization is Expanding the Supply Chain
Mature and emerging international markets have become a part of the overall business growth strategy for many companies. - Breadth - foreign manufacturing, office and retail sites, foreign suppliers and customers - Depth - second and third tier suppliers and customers Globalization offers attractive opportunities: - Demand Exceeds Local Supply - 90% of global demand is not fully satisfied by local supply. Global supply market offers more options. - Strategic Sourcing - Identifying and matching the sources of raw materials and components to manufacturers and distributors using the global market. - Offshoring - Moving manufacturing and distribution operations to countries with favorable labor costs and tax laws
Postponement is a Hyrid
Most inventory is produced and deployed based on forecasts or planned requirements, i.e., "Push Model". Postponement can help to minimize wrong inventory, expedited shipping costs and obsolete and markdown products. Postponement is a hybrid of "Push" and "Pull" Models designed to overcome the disadvantages of each. Early stages of product assembly are done in a push manner Final product assembly is done based on customer demand pull for specific product configurations
Warehouse Robots
Omni channel fulfillment, escalating labor costs, and increased access to process automation solutions are changing the way enterprises run their distribution and fulfillment centers Warehouse operations are growing more complex as customer orders become smaller, more numerous, and more varied in their composition - Throughput has to be faster, costs need to be lower and service quality must be of the highest standards to meet rising customer expectations. Autonomous Mobile Robots (AMR) were built to optimize the order picking and fulfillment process and they are particularly suitable for e-commerce. The ability of the current generation of robots to work alongside humans while performing low-value tasks that increase overall warehouse productivity is applicable across a broad range of industries
Manufacturing Postponement Examples
One of the first commercially viable examples of manufacturing postponement was mixing paint colors at retail stores to accommodate individual customer request Perfecting the in-store mixing process dramatically reduced the number of stock keeping units (SKUs) required at retail paint stores Rather than trying to maintain inventories of premixed color paint, in every possible texture and in various volume containers, retail stores stock a base paint and customize the color to accommodate specific orders
Packaging Postponement
Packaging postponement is when goods, that might be offered in different packages (size of package, etc.) are not packaged until the last moment. This practice allows for the storage of finished products unpacked, and minimize the risks of excessive stocks Example: Producing pharmaceutical drugs in bulk dosage form and delaying putting the drug into the final packaging configuration until shortly before the product is needed to support demand. - Can vary type of package, quantity count, etc.
Postponement
Postponement strategies provide the greatest opportunity for supply chain professionals to minimize the risks of stock outs and excess inventory by leaving the final configuration of a product to the last possible moment and moving those operations closer to the customer Postponement strategies and practices work to reduce the risk of a supply chain performance issue. The goal of postponement is to supply desirable products to customers at a relatively low cost and in a responsive way. Provides more options to customers without increasing costs
21st Century Supply Chains
Supply chain management has undergone a sea change in the 21st Century. Twenty years ago, the supply chain of a typical company would report to manufacturing, and be responsible mainly for inbound materials management and outbound shipping According to Supply & Demand Chain Executive magazine, today supply chain reports to manufacturing in only 6% of companies, while in 61% of companies, the head of supply chain position reports directly to the CEO, GM or president of the business
End-toEnd Supply Chain Management
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. All supply chains follow the basic model: - Plan, Source, Make, Deliver (Return)
Internet of Things (IoT)
The Internet of Things (IoT) concerns optimally networked devices that know exactly what they have to do and when. In the supply chain, these could be smart sensors on manufacturing floors in order to efficiently manage planned and predictive maintenance work - These sensors could also be used to closely monitor and track stock and the entire inventory. This could allow you to optimally plan your future production. In the future, the number of networked devices will increase enormously, boosting efficiency and productivity in supply chain. - The future of IoT is predicted to lead to a 15 percent productivity increase in the supply chain. - Gartner estimates the number of networked devices will be 25 billion in 2021. However, it is a trend that poses major risks. - The danger of a hacker attack increases with the number of connected devices. - Therefore, the security aspect will play a more important role in the future
Logistics Performance Cycle (i.e., Cumulative Lead Time)
The Logistics Performance Cycle (i.e., cumulative lead time) represents elements of work necessary to complete all of the logistics activities related to procurement, manufacturing, or customer accommodation. A performance cycle consists of the following elements 1) Input and Output Requirements - Input = Demand (e.g., orders) - Output = Level of actual performance 2) Inventory - Base stock (sometimes also referred to as cycle stock) - Safety stock (possibly even strategic stock in addition to safety stock) 3) Nodes or "links" in the logistics supply chain - It is dynamic (i.e., it is continuously changing / evolving) - It may involve singe or multiple firms
Enterprise Resource Planning (ERP)
The backbone of a company's logistical information system An integrated database of current and historical data Processes most (if not all) transactions across all business functions - Most common / widely used ERP software packages are SAP and Oracle Example transactions include: Order entry Order management Inventory assignment Receiving Shipping
What's Next for Supply Chain Management (4)
The capacity crunch will likely continue, forcing companies to find more ways to cut costs and avoid scaring off customers with rising prices One of the ways businesses might be able to save resources upfront is with cloud-based SCM - The cloud market will continue to grow as more businesses become less fearful. Businesses will have to find new ways to stay competitive. New technology will likely become popular to help implement distributed inventory, allowing smaller businesses to keep up with Amazon. The need for security within the supply chain will likely continue to be addressed as AI and IoT grow in ubiquity
Business Logistics
The coordination of projected requirement, procurement, physical movement, and storage of components, parts, raw materials, and semi-finished and finished goods, to achieve the optimal service level at a minimal cost
Everything as a Service (XaaS) Model
The market for cloud-based products is growing. Today, all types of supply chain tools, including warehouse and inventory management systems, transportation management systems and shipping systems can be accessed as a service. - You simply subscribe to it as service, paying for only what you need. XaaS helps mitigate concerns with speed of implementation, cost of upgrades, and the overall lifecycle of the software - For example, the acquisition cost of warehouse robots could be prohibitive for your business. But with Robotics as a Service (RaaS), you can scale up your services for peak times, and drop back when volumes return to normal. To some extent, the supply chain as a service is already available by working with 3PLs, and it's likely to become a more popular model in 2019 and beyond. - Companies realize the value of using experts to run their operations, allowing them to focus on their core competencies
What's Next for Supply Chain Management (2)
The supply chain is more diverse than ever before. - New technical innovations offer the opportunity to reduce this complexity - Transforming the supply chain from technology-enabled to technology-centric The enormously increasing complexity of markets as well as dynamically increasing customer requirements calls for trend-setting action from all industries. Companies will continue to concern themselves with ongoing trends in the areas of Artificial Intelligence (AI), the Internet of Things (IoT) and/or Blockchain
Time Postponement
Time postponement (a.k.a., Geographic or Logistics Postponement), refers to a situation, where a fully stocked inventory is maintained at one or only a few strategic locations Forward deployment of inventory is generally postponed until customer orders are received. When customer orders are received, the orders are either delivered directly to the customer, for example, from strategic warehousing locations or the specific items are expedited to the local distributor Advantages are manufacturing economies of scale along with responsiveness to customer - Often used for critical, high cost parts and assemblies
Total Time to Complete the Customer Delivery Cycle is Based on Each Task Within the Cycle
Total Performance Cycle (5 to 10 to 40 days) -Managerial Action - Expediting - Early or Late Order Transmission (1/2 to 1 to 3 days) - Phone/Mail - EDI - Internet Order Processing (1 to 2 to 4 days) - Workload - Automation - Credit Checks Order Selection (1 to 2 to 20 days) - Volume - Capacity - Equipment - Labor Order Transportation (2 to 4 to 10 days) - Type of Transport - Distance - Size of Shipment - Conditions Customer Delivery (1/2 to 1 to 3 days) - Delivery Appointments - Manpower - Equipment - Conditions
Logistics Models - Cost Minimization
Traditional Cost Model: Focused on achieving the lowest possible cost for each individual function of logistics - For example, transport the material the cheapest way possible Expected lowest cost based on decisions that were cheapest for individual functions Ignored the impact of cost decisions across logistics functions Total Cost Model: Focused on achieving the lowest total cost across all functions of logistics overall A cost decision in one function should consider impact to costs of all other logistics functions - For example, transporting material the cheapest way is likely slower than other choices. This requires an increase in storage cost to hold the material longer
Logistics Labor - Transportation
Transportation is an area with growing labor shortages due to the rapid growth in online shopping that is creating strong demand for delivery drivers. The industry is facing a record shortage with an estimated 50,000 more drivers needed to meet demand, according to the American Trucking Associations. The lack of available drivers is rippling through the supply chain, causing a bottleneck of goods that is delaying deliveries and prompting some companies to increase prices by as much as 20%. Driverless trucks are one proposed long-term solution to the problem, but there are more practical solutions: - Increased Pay - Flexible Schedules - Benefits, etc.
Manufactring Postponement
Where a standard or a base product is manufactured in sufficient quantities in order to realize economies of scale, while the finalization of some features of the product are delayed until after actual customer orders are received Benefits: - Inventories can be held at a generic level so that there will be fewer stock keeping variants and therefore less inventory in total - Flexibility is greater - same components, modules or platforms can be embodied in a variety of end products. - Forecasting is easier and more accurate at the generic level than it is at the finished item level
