Intro to Supply Chain Ch 1 Spring 2020 - William McLaury Rutgers University, Supply Chain Chapter 1

Measures of Success

Customer Service, Demand Plan Conformance, Supply Plan conformance, Inventory Plan Conformance, COGS

involved

Customers are also much ___________________in the delivery of services than they are in the supply of a physical product. While the service itself is not tangible, it likely involves use of or work on a tangible item.

Sustainability and "Greening" 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.

Inventory (Shock Absorber)

Demand side

Basic Supply Chain Capabilities Model --> EFFICIENT

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 1. Understand the needs of your customers 2. Define core competencies and the roles your company will play to serve your customers 3. Develop supply chain capabilities to support the roles your company has chosen

Flexibility and Responsiveness

Firms will increasingly need to be more flexible and responsive to customer needs adapting to unexpected changes and circumstances. Necessitating closer integration and collaboration

Who benefits the MOST from SCM

Firms with: 1. Large inventories 2. Large number of suppliers 3. Complex products and/or large number of products 4. Large purchasing budgets / expenditures NOTE: That is NOT to say that smaller companies don't benefit from supply chain management as well, just that larger companies with more suppliers and more complex product portfolios generally benefit more.

Benefits of SCM

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 supply chain Lower inventory levels throughout the supply chain Ability to effectively respond to disruptions and conflicts

What is the Bullwhip Effect?

An observed phenomenon in forecast-driven distribution channels. It refers to a trend of larger and larger swings in inventory in response to changes in demand, as one looks at companies further back in the supply chain of a product. (demand variability is magnified as information moves back upstream)

Logistics and Transportation Elements

- Transportation Management --> trade off decisions between cost and timing of delivery/ customer service via trucks, rail, water, and air - Customer Relationship Management --> strategies to ensure deliveries, resolve complaints, improve communications and determine service requirements - Network Design--> creating distribution networks based on trade off decisions between cost and sophistication of distribution system

What is the goal of supply chain management?

- increase customer service WHILE SIMULTANEOUSLY reducing both inventory investment and operating expenses

in the 1950's manufacturers focused

- on mass production techniques as their principals cost reduction and productivity improvement strategies

Supply chain management old paradigm

-A company gained synergy as a vertically integrated firm encompassing the ownership and coordination of several supply chain activities. -Organizational cultures emphasized short-term, company focused performance.

Collaborative Planning, Forecasting, and Replenishment (CPFR)

-BUSINESS PRACTICE that combines the intelligence of multiple trading partners who SHARE their plans, forecasts, and delivery schedules with one another in an effort to ensure a smooth flow of goods and services across a supply chain. - Provides a plethora of benefits but requires a fundamental change in the way that buyers and sellers work together. -The real value of CPFR comes from the sharing of forecasts among firms, rather than firms relying on sophisticated algorithms and forecasting models to estimate demand.

In line with this goal, the two main reasons that companies implement Supply Chain Management are to: 1. 2.

1. Achieve cost savings 2. Better coordinate resources

The 2 main reasons that firms implement Supply Chain Management are to

1. Achieve cost savings 2. Better coordinate resources

The Goals of Supply Chain Management: 1. Increase_______ 2. Reducing_______________ and _____________

1. customer service (customer satisfaction) 2. inventory investment, operating expenses (costs)

1. Enabling processes ________ a company's ability to _manage the supply chain and are spread throughout every stage. 2. Is this stage sequential with the others?

1. facilitate, manage the supply chain 2. no

Supply chains exist in organizations that are: 1. 2. 3.

1. large or small 2. public or private 3. for-profit or not-for profit

Each trading partner has to _______, ________, ________, and _______ their part of the supply in order to satisfy the underlying demand for the product or service.

PLAN, SOURCE, MAKE, and DELIVER

Supply chains follow the basic model

Plan --> Source --> Make --> Deliver --> <-- Return - Most supply chains are enabled through various types of processes and technology

Logistics is the part of supply chain that

Plans, implements, and controls the flow of storage of goods, from point of origin to point of consumption

Basic Supply Chain Capabilities Model --> RESPONSIVE

Responsive - Supply Chain designed to respond quickly to market demand -Fast response -Minimal stock outs -Need flexible capacity (volume) -Inventory of parts -Minimize lead time -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

This phase involves not only identifying reliable suppliers but also _______________ with those suppliers.

building a strong relationship

You must "supply" your ______ for automotive repair service

car

The supply _______ is only as strong as its weakest link

chain

You must "supply" your ______ for dry cleaning service

clothes

but Supply Chain Management is actually much more than that . . . It is the ________ of a _________ of otherwise ___________ creating a desired _______ or _________, and moving it from suppliers, through manufacturing, and out to customers when and where they want it.

coordination, network, independent trading partners, product, service

Most supply chains are ________ through various types of processes and technologies.

enabled

Supply chains are generally described as spanning from

end-to-end, from your suppliers-suppliers on one end, through your internal operations, and out to your customers-customers on the other end

Supply Chain Management is the _____________ of any business.

execution process

Many services require the use of ___________ which are tangible elements that are used along with the service provided.

facilitating goods

You must "supply" your _______ for tax preparation service

financial data

As this process quite literally _____________________ of products to the market, supply chain managers have to create a responsive and flexible network for receiving defective and excess products back from their customers, and also supporting customers who have questions and problems

goes against the normal outbound flow

Sourcing is the process of _____________that provide the materials and services needed for the supply chain to deliver the finished product(s) desired by the customer(s).

identifying the suppliers

Service firms offer ___________, meaning products that cannot be physically touched

intangible products

While the service itself is not tangible, __________________________________________.

it frequently involves work on a tangible item provided by the customer

What customers are actually paying for in the service industry is the _______ and the ________ of the service provider.

labor, intellectual property

All supply chain _______ are interconnected and a disruption with one will likely impact all

links

Deliver, also known as the _________ phase, this is the part of supply chain management that oversees the planning and execution of the ___________ and related information between various points in the supply chain to ____________.

logistics, forward flow of goods, meet customer requirements

Make or manufacturing is the series of operations performed to convert _____________________.

materials into a finished product

Products and Services are created from _______, _______, _______, __________, ________, and ________

materials, equipment, labor, time, money, other resources

Customers are also much ______________ in the delivery of services than they are in the supply of a physical product.

more directly involved

Supply Chain Management refers to a _____________ that work together and coordinate their actions to deliver a product(s) or service(s) to market for the _____________________ in the network (i.e., collaboration and coordination).

network of independent companies, benefit of all companies

Planning establishes the _________ within which the supply chain will operate.

parameters

Service products cannot generally be _______________.

produced and consumed simultaneously

Services are typically ________________, and in almost every service offering, the service cannot start until the customer arrives and actively participates.

produced and consumed simultaneously

Any organization, anywhere in the world, offering a _________ or a _________ has a supply chain

product, service

The service supply chain is more about managing the ________ between the trading partners than it is about managing ____________.

relationships, the chain of supply

Return, also known as _________, this is the part of supply chain management that deals with planning and controlling the process of _______ specifically from the point of consumption _________ for repair, reclamation, remanufacture, recycling, or disposal.

reverse logistics, moving goods, back to the point of origin

Logistics refers to activities that occur within the purview of a ____________.

single organization

Supply chains are generally described as ___________, i.e., from your suppliers-suppliers on one end, through your internal operations, and out to your customers-customers on the other end.

spanning from end-to-end

Companies need a _________ for managing all of the resources necessary to address how a product or service will be created and delivered to meet the needs of their customers.

strategy

From __________: Raw Material, Intermediate, and/or Finished Material Suppliers To ____________: Finished Product Manufacturers (Internal and/or External) To ____________: Wholesalers, Distributors, Retailers and/or Consumers

suppliers, manufacturers, customers

Producing and delivering products and services requires ________, ________, and ________; all of which make up a supply chain.

suppliers, manufacturers, customers

Supply Chain Management creates _______ by managing the processes of all of those independent trading partners... so that they can_______ with one another in an ______, ________, and _________ way. .

value, collaborate; efficient, effective, cost conscious

New paradigm

- A company in a supply chain focuses activities in its' area of specialization and enters into voluntary and trust-based relationships with supplier and customer firms. "Outsourcing non-core competencies" -All participants in the supply chain benefit. -Boundaries are dynamic and extend from "the firm's suppliers' suppliers to its customers' customers (i.e., "end-to-end") -Supply chains also deal with reverse logistics to handle product returns, warranty repairs, and recycling.

Supply Chain - SCOR (Supply Chain Operations Reference) Model

- Each trading partner has to PLAN, SOURCE, MAKE, and DELIVER their part of the supply in order to satisfy the underlying demand for the product or service. - Supply Chain Management facilitates that process.

Disdvantages of 1950's manufacturers

- High investment in facilities - Overall cycle time is limited by the slowest operations - Breakdown of one machine will stop an entire production line

Advantages of 1950's manufacturers

- Higher output and more productivity - Reduced cycle times - lower in-process inventories

Supply Chain is

- Supply Chain Management is more than buying raw materials, manufacturing or assembling to create the finished product. - The way business gets done. It is the execution process for any business. - The coordination of a network of independent organizations all involved in creating a desired product or service, and moving it from suppliers out to customers, when and where they want it. - delivers VALUE by managing the processes of all those otherwise independent trading partners so that they COLLABORATE with one another in an efficient, effective, and cost conscious way

What is the difference between Logistics and Supply Chain Management?

- Supply Chain Management refers to a network of independent companies that work together and coordinate their actions to deliver a product or service to the market for the benefit of all companies in the network - SCM acknowledges all traditional logistics activities and also includes aspects of activities such as: marketing, new product development, finance, and customer service - Logistics refers to activities that occur within the purview of a SINGLE organization - Logistics traditionally focuses on activities such as: Inventory Management, Warehousing, and Distribution

Integration Elements

- Supply Chain Process Integration 1. When supply chain participants work common goals 2. requires intra-firm function integration 3. Based on efforts to change attitiudes and adversarial relationships - Supply Chain Performance 1. Crucial for firms to know if procedures are working

Facts about the Bullwhip Effect

-Because customer demand is rarely perfectly stable, businesses must forecast demand to properly position inventory and other resources. -Forecasts are based on statistics, and they are rarely 100% accurate. -Because forecast errors are a given, companies often carry an inventory buffer called safety stock. -Moving back across the supply chain from the end-consumer(s) to raw material supplier(s), each supply chain participant has a greater observed variation in demand and thus greater need for safety stock. -In periods of rising demand, down-stream participants increase orders. -In periods of falling demand, orders decrease or stop, and inventory accumulates. -The effect is that variations are amplified as one moves upstream in the supply chain (i.e., further back from the end customer/consumer).

Collaborative Planning, Forecasting and Replenishment can significantly reduce the Bullwhip effect and lead to:

-Better customer service -Lower inventory costs -Improved quality -Reduced cycle time -Better production methods -Other benefits

Inventory stock type and levels (Safety Stock)

-Buffer demand variability (Forecast -Accuracy) -Buffer supply variability (On-Time Delivery) -Ensure desired Customer Service Level - The level of safety stock is dependent on the reliability of demand (forecast) and supply

Operations Management Elements

-Demand Management--> matched demand to available capacity - Linking buyers and suppliers via MRP and ERP systems - Use Lean Systems to improve the flow of materials to reduce inventory levels - Employ Six Sigma to improve quality compliance among suppliers

Order, Information, Product, and Funds Flow

-Information flows both ways between trading partners. -Purchase Orders flow from the consumer to the manufacturer & from manufacturer to supplier. -Materials & Products flow from the supplier to the manufacturer & from manufacturer to customer. -Funds (i.e., payments) flow from the consumers to the manufacturer & from manufacturer to supplier.

Inventory stock type and levels (Cycle Stock)

-Inventory to satisfy demand in the immediate time period -Sales/Demand and replenishment driven -Based on EOQ/MOQ (balance of inventory and order/production costs)

Inventory stock type and levels (Anticipation/Strategic Stock)

-Major disruptive event in supply -Major business opportunity for sales -Life cycle stock: seasonal, launch, bridging, etc.

Modes of Transportation

-Motor - Rail - Air - Water - Pipeline (some are inter-modal by using a combo of any other modes of transportation for a single shipment)

Operational Excellence begins with effective planning and control techniques which:

-Provides a single set of numbers used to run the business. -Generates significant improvements in customer service, productivity, inventory and costs.

Supply Management Elements (purchasing/sourcing)

-Supplier management improves performance through 1. supplier evaluation (determining supplier capabilities) 2. supplier certification (third party of internal certification to assure product quality and service requirements) - Strategic partnerships --> successful trusting relationships with top-performing suppliers -Ethics and sustainability --> recognizing suppliers' impact on reputation and carbon footprint

Companies will focus on improving supply chain capabilities with initiatives such as:

-Using Third-Party Service providers (3PLs) -Integrating logistics -Using transportation to facilitate rapid response

Consulting Companies, Financial Institutions, Insurance Companies, etc. also have a supply chain. They create and deliver __________________ through their human resource talent and expertise, to a wide range of ________ in a multitude of industries domestically and internationally.

-advisory services, accounting, tax and insurance services (i.e., their products) -clients (i.e. their customers)

-1950s: Manufactures were ____________________ on maximizing their own internal operations. -The focus was on ______________ techniques as their principal _____________ and _____________________ strategies. -External collaboration and partnerships were virtually _________.

-internally focused -mass production, cost reduction, productivity investment -nonexistent

Companies in the 2000's and beyond companies will focus on

-relationships, sustainability, and social responsibility -

has multiple supply chains, including the supply chain that produces the __________ that we create through our educational programs, who are then __________ to fill their human resource needs.

-student talent (i.e., our products) -acquired by companies (i.e., our customers)

Current Trends in SCM

1. Globalization 2. Flexibility and Responsiveness 3. Cost Reduction and Continuous Improvement 4. Sustainability and "Greening" the Supply Chain

Traditional logistics focuses on activities such as:

1. Inventory Management 2. Warehousing (material handling and storage) 3. Distribution (order fulfillment, pick, pack & ship) 4. Transportation

SCM acknowledges all of traditional logistics activities and also includes aspects of activities such as:

1. Marketing 2. New Product Development 3. Finance 4. Customer Service (order-to-cash process)

Proper SCM is a balancing act in which you

1. Prepare for risks 2. Respond to changes 3. Maintain low costs, and 4. Create high product integrity

Firms implementing/ Using Supply Chain Management

1. Start with First Tier key suppliers and customers. 2. Move next to First Tier non-key suppliers and customers 3. Then integrate Second Tier suppliers and customers. (Note: only the elite few companies ever actually get to this level) First Tier = direct suppliers and direct customers Second Tier = indirect suppliers (i.e., your supplier's suppliers) and indirect customers (i.e., your customer's customers)

Supply Chain Management

1. Starts with understanding the flow 2. Integrates all partners within the end-to-end supply chain 3. Is conducted thru definition process 4. Delivers value to the customer

Collaborate

2. .... So that they can _____________ with one another in an efficient, effective and cost-conscious way

Globalization

Expanding the Supply Chain. International, mature and emerging markets have become a part of the overall business growth strategy for many companies. Breadth - foreign manufacturing, office & retail sites, foreign suppliers & customers Depth - second and third tier suppliers & customers

Warehousing and Distribution

Facilities that allow companies to store materials and finished products AND receive, breakdown, repackage, and ship materials out to a manufacturing location or to a customer

Nodes

Links in the supply chain that are connected by transportation and warehousing, and integrated through information and planning

Materials Requirement Planning

MRP

Manufacturing Resources Planning

MRPII

Reducing the Bullwhip Effect

Means the reduction of safety stocks and associated costs within and across the trading partners in a supply chain

Pull or Make-to-Order Business Model

Producing stock in response to actual demand 1. Sell 2. Buy components and materials 3. Manufacture 4. Deliver

Push or Make-to-Stock Business Model

Producing stock on the basis of anticipated demand. Demand forecasting can be done via a variety of sophisticated techniques. 1. Forecast 2. Buy components and materials 3. Manufacture 4. Warehouse 5. Sell 6. Deliver

_____________ is an important aspect of the manufacturing process.

Quality management

Flow of SCM consists of the FLOW OF PRODUCTS from

Raw materials --> Intermediate Suppliers --> Finished product manufacturers --> Wholesalers and Distributors --> Retailers and Consumers

Cost Reduction and Continuous Improvement

Reducing purchasing costs, waste, excess inventory, non-value added activities. Improving demand planning. Increased outsourcing of non-core competencies.

Basic Supply Chain Planning and Execution

Sales Forecasting Aggregate Demand/Supply Planning Production Planning and Scheduling Procurement Planning Suppliers Delivery to Production Production and Packaging Delivery to Distribution Channels Delivery to Customer

Intangible products

Service firms offer ________________, meaning products that cannot be physically touched.

Acronyms to remember

Supply Chain Management (SCM) Just-In-Time (JIT) Total Quality Management (TQM) Business Process Reengineering (BPR)

Value

Supply Chain Management creates ___________ by managing the process of all those independent trading partners.

The foundations of supply chain management

Supply Management--> Supply base rationalization, supplier relationship management, partnerships and alliances, ethics and sustainability Operations Management --> Forecasting, demand management, material and operations planning, lean systems, Six Sigma quality systems Logistics and Transportation --> Warehousing, transportation management, customer relationship management, network design, international trade, sustainability, service response logistics Integration --> Enabling systems, risk and security management, performance measurement

Flexbilitiy (Shock Absorber)

Supply Side

Managing relationships between trading partners

The service supply chain is more about managing the relationships between the trading partners than it is about managing the chain of supply.

Labor and intellectual property

What customers are actually paying for in the service industry is the _______and the __________________of the service provider.