[CHAPTER 1] 21st-Century Supply Chains
Supply Chain Information Systems (SCIS) [Functionality] top-down => 1. Strategic Planning - strategy evaluation
Strategic alliance formulation Development and refinement of capabilities and opportunities Focused/profit-based customer service analysis
Necessary components to achieve Integrated Management
collaboration of operating information, tech, and risk across the end-to-end supply chain 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
Enterprise Planing and Monitoring
facilitate the exchange of planning information => Sales & Operations Planning (S&OP) senior management tool to run business => Supply Chain Compliance regulatory => Supply Chain Visibility and Event Management "control towers"
3 Customer Perspectives of Value => Economic Value
focus is on Economies of Scale in product and service creation, and striving to achieve the lowest total landed cost take-away: High quality at a Low price provided through the Procurement and Manufacturing Strategy
3 Customer Perspectives of Value => Market Value
focus on achieving Economies of Scope in product and/or service presentation => 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
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 => can be used to record any kind of exchange of value, smart contracts, payments, and tracking => could be used to certify the origin of products such as organic or non-GMO foods or conflict-free minerals
6 Types of Postponement Strategies => Assembly Postponement
for companies with modular product design; possible to construct various end-products from the modules in one kit ex. IKEA furnitures
What's Next for SCM? => capacity crunch will likely continue, which will
force companies to find more ways to cut costs, and avoid scaring off customers with rising prices => one way to save resources upfront is with cloud-based SCM => cloud market will continue to crow as more businesses become less fearful
Globalization is Expanding the Supply Chain => Breadth
foreign manufacturing, office and retail sites, foreign suppliers and customers
Supply Chain consists of the flow of products and materials
from SUPPLIERS to MANUFACTURERS to CUSTOMERS
6 Types of Postponement Strategies => Time (Geographic or Logistics) Postponement
fully stocked inventory is maintained at a one or only a few strategic locations => forward deployment of inventory is generally postponed until customer orders are received => manufacturing economies of scale along with responsiveness to customer => often used for critical, high cost parts and assemblies
6 Types of Postponement Strategies => Packaging Postponement
goods that might be offered in different packages (size, etc) are not packaged until the last moment => allows for storage of finished products unpacked, and minimize the risks of excessive stocks ex. 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
Primary Logistic Activities => Material Handling
handling methods handling materials packaging
Anticipatory or PUSH Model => Make-to-Stock [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
Responsive or PULL Model [Advantages] => Make-to-Order, => Assemble-to-Order, => Engineer-to-Order
high levels of customer service through responsiveness and flexibility to meet uncertain customer demand => short lead times, reduced dependency on forecasting, use short and flexible production runs, store very few inventories, reduce waste, provide opportunities for customization, and improve cash flow
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 customer demand pull for specific product configs
Opportunities of Globalization => Strategic Sourcing
identifying and matching the sources of raw materials and components to manufacturers and distributors using the global market
Anticipatory or PUSH Model => Make-to-Stock [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
Primary Logistic Activities => Transportation
inbound/outbound mode selection carrier selection
the benefits from cash-to-cash conversion, reduced dwell time, and cash spin combine to
increase the financial attractiveness of effective collaboration
in 21st Century Supply Chains, consumers are
increasingly price sensitive and less brand-loyal, resulting in a permanent increase in supply chain volatility
Integration Management
integration of the overall business process to create value
Artificial Intelligence (AI)
intelligence demonstrated by machines, in contrast to the natural intelligence displayed by humans => has the ability to analyze the patterns of today's operations to predict the possible outcomes of tomorrow's scenarios => can be used to automate lower-level decision-making => mass data generated, analyzed, linked, and patterned; all about the knowledge that can be drawn from the data
6 Types of Postponement Strategies [Benefits] => Manufacturing Postponement
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, models or platform 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
Distributed Inventory => moving inventory closer to the customer means
it is now 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 org can have high priority parts available without waiting for shipping times
6 Types of Postponement Strategies => Combined Postponement
manufacturing and time (or geographic) postponement in combination involves => keeping the best products centralized and performing the final product customization at the destination distributor, rather than at the manufacturing site ex. automobiles, computers
Postponement can help to
minimize wrong inventory, expedited shipping costs and obsolete and markdown products
Opportunities of Globalization => Offshoring
moving manufacturing and distribution operations to countries with favorable labor costs and tax laws
Distributed Inventory
moving the product closer to the customers => want to speed up delivery for e-commerce business => companies are shifting fulfillment form large regional warehouses to smaller, decentralized facilities strategically positioned near the customers => inventory kept in multiple distribution centers => reduces time from order placement to delivery of product, while reducing shipping costs => higher customer satisfaction rates and higher sales numbers with shorter delivery lead time
most existing supply chain organizations are
not truly integrated or empowered => lack of integration between product development and manufacturing functions are standing in the way of capturing the benefits of economic recovery
What's Next for SCM? => new tech innovations
offer the opportunity to reduce complexity transform supply chain from tech-enabled to tech-centric 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, Internet of Tings, and Blockchain
Augmented Reality (AR)
offers numerous assistive tech to facilitate the everyday work of employees, particularly areas of logistics, manufacturing, and warehousing ex. hands-free picking, smart displays, glasses or simulators
Examples of transactions in ERP include
order entry order management inventory assignment receiving shipping
8 Processes Required for Integrative Management => Product/Service Development Launch
participation in product service development and lean launch
All supply chains follow the basic model
plan, source, make, deliver, return
Financial Measurement of Time-Based Supply Chains 3. Cash Spin
potential benefits of reducing assets across a supply chain => reduce overall assets committed to supply chain performance => free up cash to use in R&D, M&A, Advertising, and Promo, etc. => such free capital can be reinvested in projects that might otherwise have been considered too risky
Responsive or PULL Model => Make-to-Order, => Assemble-to-Order, => Engineer-to-Order
producing stock in response to actual demand
Anticipatory or PUSH Model => Make-to-Stock
producing stock on the basis of anticipated demand
6 Types of Postponement Strategies => Labeling Postponement
product differentiation takes place only by putting the labels on the package => useful when companies use different markets ex. private labels of the retailers, printing labels "best before", printing informative labels in the language of the country is going to be sold
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 closer to the customer
Primary Logistic Activities => Inventory
purchasing ordering policies stock levels
Financial Measurement of Time-Based Supply Chains 2. Dwell Time
ratio of time that an asset sits idle to the time required to satisfy its supply chain mission => ex. 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
8 Processes Required for Integrative Management => Life Cycle Support
repair and support of products during their life cycle, including warranty, maintenance, and repair
Adapting Blockchain to track physical objects in the supply chain will
require knowing who is adding info to the chain
8 Processes Required for Integrative Management => Reverse Logistics
return and disposition of inventories in a cost-effective and secure manner
3 Customer Perspectives of Value => Relevancy Value
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 (distinctiveness) take-away: unique product/service Bundle provided through the Supply Chain Strategy
Machine Learning
scientific study of algorithms and statistical models that computer systems use to perform a specific task without using explicit commands, relying on patterns and inference => especially useful for large, dynamic data sets => large data more prevalent than ever => applicable to wide-range of logistics tech, including enhancing warehouse management systems, robotic vision systems, supply chain planning, supply chain visibility, and more
Globalization is Expanding the Supply Chain => Depth
second and third tier suppliers and customers
in 21st Century Supply Chains, Risk and Opportunity Management
should span the entire supply chain, including the supply chains of key partners
6 Types of Postponement Strategies => Manufacturing Postponement
standard or a base product is manufactured in sufficient quantities for economies of scale, while the finalization of some features of the product are delayed until after actual customer orders are received => objective is to maintain products in an uncommitted status as long as possible, while building a sufficient quantity of "ready to customize" basic units => balances economies of scale with responsiveness, but it requires a lot of forethought during product design ex. stocking base paint and customize the color to accommodate specific orders in a paint store
Basic Supply Chain Capabilities => Efficient
supply chain and processes are designed to minimize costs => predictable supply and low cost => low cost production and highly utilized capacity => high inventory turns => ideal for functional products ex. staples, stable product demand, don't evolve much over time
Basic Supply Chain Capabilities => Responsive
supply chain designed to respond quickly to market demand => excess capacity/flexible processing => inventory of parts => premium/expedited transportation => need to have a variety of products available for customers when they want to buy => ideal for innovative products that are rapidly changing, very short life-cycle products, great variety, very unpredictable demand
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
8 Processes Required for Integrative Management => Manufacturing Customization
support of manufacturing strategy and facilitation of postponement throughout the supply chain
8 Processes Required for Integrative Management => Demand Planning Responsiveness
the assessment of demand and strategic design to achieve maximum responsiveness to customer requirements
Primary Logistics Activities are
the basic functions that need 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
Business Logistics (analogous to Supply Chain Management)
the coordination of projected requirement, procurement, physical movement, and storage of components, parts, raw materials, and semi-finished and finished goods to achieve the optimum service level at minimal cost
the focus of Integrated Management is
the lowest TOTAL process cost => this is different from lowest cost of EACH function in the process
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 were built to optimize the order picking and fulfillment process and they're particularly suitable for e-commerce
Financial Measurement of Time-Based Supply Chains 1. Cash-to-Cash Conversion
time required to convert raw material or inventory purchases into sales revenue => measure of how efficient supply chain is at generating rev => calculation of the time between the outlay of cash and the recovery of the cash
challenge for the logistics expert is
to design a system that delivers a desired level of customer service at the lowest cost => cost cutting must be balanced with the need to provide optimum levels of customer services and satisfaction
Financial Measurement of Time-Based Supply Chains 2. Dwell Time => Minimization
to reduce dwell time, firms need to be willing to eliminate duplicate and non-value-added work timely arrival and continuous inventory flow between supply chain partners reduces dwell benefit of reducing dwell time and the associated logistics cost is the ability to reduce investment in inventory and related assets
Logistics Labor Shortages
wages will continue to rise due to demand => companies need to be more creative about how they recruit and retain workers => proactive and multi-faceted approach to recruiting and retention in tight labor markets => automating to recruiting process => working with universities to promote career opportunities
Primary Logistic Activities => Facility Network
warehouse planning warehouse management site selection
Logistics Labor => Warehousing
warehouses are finding it increasingly difficult to fill open warehouse jobs => highly variable e-commerce industry is 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 requirements => warehouse automation is expected to only mitigate, not solve, the labor imbalance => labor shortage cannot be solved with automation in the short-run; companies cannot retool quickly enough
How the basic logistics system is configured
will determine how and when the customer receives the order
What's Next for SCM? => the need for security within the supply chain
will likely continue to be addressed as AI and IoT grow in ubiquity
What's Next for SCM? => details of how things get done will dramatically change
won't be any excuses for not having real-time inventory and fulfillment information drones, self-driving trucks, right product to the right place at the right time at a much faster rate more options when it comes to warehouse management technology in the form of both WMS solutions and automated robots
Innovations and Tech in Supply Chain
1. Augmented Reality 2. Machine Learning 3. Artificial Intelligence (AI) 4. Internet of Things (IoT) 5. Blockchain 6. Everything as a Service (XaaS) 7. Warehouse Robots 8. Distributed Inventory
The Basic Logistics System
1. Begins with a customer placing an order 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
6 Types of Postponement Strategies
1. Manufacturing 2. Assembly 3. Packaging 4. Labeling 5. Time (or Geographic) 6. Combined
Basic Supply Chain Capabilities Models to
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
21st Century Supply Chains
20 years ago, the supply chain of a typical company would report to manufacturing, and be responsible mainly for inbound materials management and outbound shipping 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
Opportunities of Globalization => Demand Exceeds Local Supply
90% of global demand is not fully satisfied by local supply; global supply market offers more options
Transportations is an area with growing labor shortages due to the rapid growth in e-commerce
=> record shortage of truck drivers 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, but more practical solutions are: increased pay, flexible schedules, benefits
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 fast in both B2C and B2B markets => supply chain management has transformed from an often overlooked const center into a vital segment of operations that can be turned into a competitive advantage
Supply Chain Information Systems (SCIS) FRAMEWORK
Enterprise Resource Planning (ERP) Enterprise Integration and Administration Enterprise Planning and Monitoring Enterprise Operations Financial and Operations Reporting
Supply Chain Information Systems (SCIS) [Functionality] top-down => 3. Management Control - reporting
Financial Measurement: Cost Asset Management Customer Service measurement Productivity Measurement Quality Measurement
Enterprise Operations => Logistics
Finished Inventory Management (FIM) Order Processing (OPS) Warehouse Management (WMS) Transportation Management (TMS) Yard Management (YMS) Accounts Receivable Interface
Enterprise Integration and Administration
General Administration Accounts Receivable and Payable Financial Inventory Accounting General Ledger Human Resources
Supply Chain Strategy is a
channel and business organizational arrangement, based on acknowledged dependencies, and collaboration
6 Types of Postponement Strategies [Example] => Time (Geographic or Logistics) Postponement
"hub-and-spoke" warehouse network => centralized warehouse holds most of the inventor; linked to a series of smaller decentralized and geographically dispersed warehouses (spokes) which hold only a small amount of inventory to support their local area in the immediate time frame => hub feeds spokes with needed inventory => operating costs lower because spokes are smaller than in a purely decentralized model => inventory lower than in a purely decentralized model as all of the safety stock is held centrally => less total safety stock required as all the risk and uncertainty is managed centrally
3 Customer Perspectives of Value
Economic Value Market Value Relevancy Value
Enterprise Resource Planning (ERP)
backbone of a company's logistical information system integrated database of current and historical data processes most (if not all) transactions across all business functions most common/widely used ERP softwares are SAP and Oracle
Supply Chain Information Systems (SCIS) [Functionality] top-down => 4. Transaction System - day to day information flows
Order management Inventory Assignment Order Selection Shipping Pricing and Invoicing Customer Inquiry
Supply Chain Information Systems (SCIS) [Functionality] top-down => 2. Decision Analysis - analytical tools
Vehicle routing and scheduling Inventory levels and management Network/Facility location and integration Vertical integration vs. third-party/outsourcing
Supply Chain Information Systems (SCIS) [Characteristics & Justification] => 2. Decision Analysis
[Characteristics] Analysis/evaluation Significant user expense and training Effectiveness-driven activity focus [Justification] Identification and evaluation of competitive alternatives
Supply Chain Information Systems (SCIS) [Characteristics & Justification] => 1. Strategic Planning
[Characteristics] High Risk Extensive Options [Justification] Competitive Advantage
Supply Chain Information Systems (SCIS) [Characteristics & Justification] => 4. Transaction Systems
[Characteristics] High hardware and software systems cost Structured training for a large number of users Efficiency-driven activity focus [Justification] Competitive qualification
Supply Chain Information Systems (SCIS) [Characteristics & Justification] => 3. Management Control
[Characteristics] Performance control systems Feedback for performance evaluation Proactive direction to users [Justification] Measurement of competitive capability and addition of potential improvement areas
Every link in the Supply Chain is
a customer of their Suppliers and a Supplier to their Customers
AI offerse
a wide range of applications in the supply chain ex. intelligent or autonomous tech such as robots, drones, vehicles or appliances facilitate logistical coordination and organization in warehouse
8 Processes Required for Integrative Management => Order Fulfillment/Service Delivery
ability to execute superior and sustainable order-to-delivery performance and related essential services
Blockchain Tech
aka distributed ledger, a shared database creating a permanent transaction record that can be changed only with the permission of the other members of the network
Everything as a Services (Xaas) Model
all types of supply chain tools, including warehouse and inventory management systems and shipping systems can be accessed as a service => you subscribe to it as a service, paying for only what you need => helps mitigate concerns with speed of implementation, cost of upgrades, and the overall lifecycle of the software => companies realize the value of using experts to run their operations allowing them to focus on their core competencies
Internet of Things (IoT)
concerns optimally networked devices that know exactly what they have to do and when => ex. smart sensors on manufacturing floors to closely monitor and track stock and the entire inventory; optimally plan future production => predicted to lead to a 15 percent productivity increase => number of networked devices estimated to be 25 million => danger of hacker attack increases, security aspect will be major role
in 21st Century Supply Chains, end-to-end supply chain
cost optimization will remain critical in the future
the output of the logistics system is
customer service
AR can also be beneficial to
customers when making purchases; may enable customers to view or test a product virtually, or to visit a virtual store => in the long run, this new customer 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
Primary Logistic Activities => Communication & Information
demand forecasting production scheduling order processing
8 Processes Required for Integrative Management => Customer Relationship Collaboration
development and administration of relationships with customers to facilitate strategic information sharing, joint planning, and integrated operations
8 Processes Required for Integrative Management => Supplier Relationship Collaboration
development and administration of relationships with suppliers to facilitate strategic information sharing, joint planning, and integrated operations
Challenges for Global Logistics
distance of typical order-to-delivery operations is significantly longer for global logistics compared to domestics document requirements are significantly more complex 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
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
Responsive or PULL Model [Disadvantages] => Make-to-Order, => Assemble-to-Order, => Engineer-to-Order
every order is basically a rush order, and any problems will lead to customer dissatisfaction => highly dependent on customer relationship; 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