Supply Chain Final
Cost advantage
that efficiency and productivity can be achieved leading to significantly reduced unit costs § The experience curve/ learning curve: big is beautiful, fixed costs to spread over greater volume
Downward pressure on price
that most markets are more price competitive today than they were a decade ago. § Prices continue to fall in many countries § there are new global competitors who have entered the marketplace supported by low-cost manufacturing bases
1. The time that it takes to convert a payment for raw materials into collection of revenue for the finished goods into which those raw materials were built is known as D cash to cash
D cash to cash
1. Firm expands globally and you decide which service makes you successful. Which type of benchmarking makes most sense D competitive
D competitive
1. What contributes to increased delays and variability of lead times in global chain
D complexity required for movement of goods between countries
1. If you were put in charge of reducing amount of non value added time in supply chain, where would be best place to focus your attention for largest gains
D decreasing amount of time finished products wait in warehouse before shipped to distribution center (regional stock)
1. Internally generated customer service and quality metrics accurately reflect the customers true perspective: Do you agree?
D disagree: customer servicer metrics should be jointly defined by the supplier and the customer
1. You have taken a job as manager of inbound flows of subcomponent products for a large US based electronics manufacturer. All of your products are in Asia-pacific and transported from Hong Kong to Long Beach and to your US based facility in NC by truck. What trend will affect your business the most over the next 5-10 years
D expansion of panama canal to accommodate the kind of vessels on which your product is shipped
1. College freshman taking first time diving class and high end pro diver come in to store. In order to deliver the most value to each of these customers
D focus on creating supply chains that deliver the specific form time and place utility that each customer segment is looking for, at a price that each segment is willing to pay
1. Mixing paint on site at Lowes D form postponement
D form postponement
Some Supply Chain Risks
Dependency on key suppliers Consolidation in supply markets 'Customer of choice' Intellectual property risk Supply delays / labor disputes Inbound quality Inventory risks Dangers of obsolescence
Some SC risks
Dependency on key suppliers Supply delays/labor disputes Inbound Quality Inventory risks Counter-fit products
1. Using traditional accounting tech, cost to serve that would report to financial community
E 70,000 (20% of total sales volume)
1. In figure above, the point where the inventory carrying costs curve and the order/setup cost curve cross represents which of the following
E EOQ
Ted patented new goggles so what questions should he answer before making decisions
E all the above
1. What is impact to SC configuration in the US of panama canal expansion
E it cuts the time and costs associated with shipping from pacific ports to Atlantic ports and vice versa
1. What is the major advantage of dells ordering and payment policies
E negative cash to cash cycle
1. Adding all cost associated with each of the activities in the squares yield
E total landed cost
Total cost of inventory includes which of the following
E. all above- capital costs, service costs, storage space costs, inventory risk costs
Reasons why companies move over seas
Earlier in the semester we introduced the idea of manufacturing jobs being shipped overseas due to the low cost of labor. Initially , it made sense for manufacturers to do this because there was such a large difference in labor costs, that the savings more than offset to costs of higher inventories, higher shipping costs, and the difficulty of managing a long pipeline due to physical separation and language/cultural barriers. That is changing as labor costs escalate in places like southeast asia. It requires even more thorough cost analysis to make sure this decisions are financially sustainable . Technology can help us manage some of the challenges - but as you will learn in future supply chain classes - distance still matters.
Economic Assessment
Economic Output and Growth Rate, Tax Rate, Labor Costs Population Foreign Direct Investment Exchange Rate Stability and Consumer Price Inflation Balance of Trade
Trends that change Supply Chain
Economic Protection AN increase in economic integration and free trade Global Competition Tax policy Technological advances
Resilience
Economic and political environments are subjected to disruption and unexpected shocks
Several major trends have led to major changes in companies' supply chains:
Economic protectionism An increase in economic integration and free trade Global competition Tax policy Technological advances
The EPIC Framework
Economy Politics Infrastructure Competency
China
Economy - rebalancing in favor of domestic consumption Capacity and labor skills - are needed in central and western zones to prevent uneven growth and instability
Who are some of a firm's stakeholders when making a financial decision? How about ones involving environmental or social issues?
Employees, communities they operate within, customers, suppliers, government
EAST ASIA: KEY TAKE-AWAYS
Entire Region Skilled labor scarcity - increasing Intellectual property protections - strong protections needed to combat piracy and counterfeiting
Video: social and responsible SC
Ethics, community relation, bad things like children workers, dangerous products and work environment. Bad deals, abusing employees, SCM must me knowledgeable about these problems
Direct product profitability
it attempts to identify all the costs that attach to a product or an order as it moves through the distribution channel. The importance to the supplier of DPP is based on the proposition that a key objective of customer service strategy is 'to reduce the customer's costs of ownership'
SC (re) engineering
its not good to only rely on one factory. More factories= less liability
Process Risk-
How resilient are our processes? Do we understand the source of variability in those processes, E.G. manufacturing? Where are the bottlenecks? How much additional capacity is still available if required?
Demand Risk-
How volatile is demand? Does the bullwhip effect cause demand amplification? Are there parallel interactions where the demand for another product affects the demand for ours?
Structure and Control-
If a company decides to move sourcing, production, and distribution across national boarders then a central- decision making team must be established.
Make
Improve energy efficiency Reduce waste rework and scrap Reduce/eliminate pollution and emission
5. Improve network visibility-
In a complex SC there needs to be a control tower to monitor the SC consistently
Greenhouse gases-
include carbon dioxide, methane, nitrous oxide and various fluorocarbons. Big concern for SC managers. Arise from industrial activities such as manufacturing , energy production, and transportation
The life cycle of a product, as defined by the system boundaries of our LCA methodology,
include the production of all raw and manufactured materials, conversion of those materials into finished products and co-products, processing of waste, product packaging, storage and transportation of products during distribution and retail, in-use emissions, disposal or recycling of the product, as well as immediate offset projects and any other innovative solutions of the company whose products are under assessment
1. Assumptions of the simple or naïve EOQ model include
A no variation in demand or lead time
1. As time horizon for planning supply chain activities ____, the accuracy of the planning ____
A is pulled closer to actual time (shortens), improves
1. Lean order fulfillment enables the EOQ point in the figure above to shift to the left by reducing
A order or setup costs
1. Risk concerned with the ability of operations to carry out planned activities
A process risk
Postponement
A product must not be assembled until the last possible point. The SCM must know which products are most popular in a specific location.
1. Referring to buyer and seller model above and teds example of replacing apple computer, apple contributes to the total order cycle time during which portion of the order cycle
A order/receipt processing to order shipment
1. Ted bought a new dishwasher at sears. Between placing order and it arriving, sears attached a black door to the dishwasher. How does sears benefit from postponement of this final step
A lower safety stock
1. This is not an issue that impacts global SC decisions for US firms
A passage of new US transportation spending legislation
1. Ted pulls from specific locations to using regional distribution center. This is using
A pooled demand
Triple Bottom Line Sustainability
(Social enrichment)-People (Ecological harmony)-Planet (Economic vitality)-Profit
Primary activities
(inbound logistics, operations, outbound logistics, marketing and sales, and service)
Support activities
(infrastructure, human resource management, technology development and procurement)
The approach to service segmentation suggested here follows a three-step process:
1 Identify the key components of customer service as seen by customers themselves. · 2 Establish the relative importance of those service components to customers. · 3 Identify 'clusters' of customers according to similarity of service preferences.
customer service could be examined under three headings:
1 Pre-transaction elements § 2 Transaction elements § 3 Post-transaction elements
o The role of cash flow in creating shareholder value
1 an acceleration of cash flows because risk and time adjustments reduce the value of later cash flows; § 2 an increase in the level of cash flows (e.g. higher revenues and/or lower costs, working capital and fixed investment); § 3 a reduction in risk associated with cash flows (e.g. through reduction in both volatility and vulnerability of future cash flows) and hence, indirectly, the firm's cost of capital; and § 4 the residual value of the business (long-term value can be enhanced, for example, by increasing the size of the customer base).
Why do firms go global to decrease costs?
1. Economies of scale/ focused manufacturing 2. Operating in lower cost regions 3. Low minimum wage
Why do firms go global to increase revenue?
1. Foreign market opportunities 2. May help level playing field
Why are SC increasingly vulnerable?
1. Global outsourcing- increasing number of hand-offs, not necessarily location 2. Lean operations- reduced inventory
Sources of supply chain complexity:
1. Network complexity—the more nodes and links that exist in a network, the more complex it becomes 2. Process complexity—innumerable processes extend lead-times and variability 3. Range complexity—tends to grow; decreases forecasting accuracy, increases variable costs 4. Product complexity—increases with number of unique parts 5. Customer complexity—too many non-standard or customized options for customers 6. Supplier complexity—too many suppliers adds costs; hard to manage relationships with many; increased transaction costs; too few suppliers is also dangerous 7. Organizational complexity—increases with mergers and globalization; silos 8. Information complexity—increased by the other complexities; difficulty moving data and lack of visibility can create bullwhip effect
TWO forces acting on the global supply chain that you might say are "equal and opposite_ are: (twin challenges)
1. Non-homogeneous world markets (lots of variety country to country or region to region) that drives a lot of complexity 2. The requirement for ever-better coordination to off set the costs brought by higher complexity
Purpose of dividing products and customers into 3 categories based on profitability
1. Purpose of dividing products and customers into 3 categories based on profitability B to enable him to serve his best customers at a higher level and promote his best products
New Industrial Revolution
1. Rapid Manufacturing 2. Advanced Robotics 3. Digitation of the SC
1. Which is a key success factor in an agile supply chain strategy
A a high degree of communication among supply chain members
1. Flat lines on graphs represents
A amount of time product spends waiting for value to be added
7 stages of managing SC risk
1. Understand the SC 2. Improve the SC 3. Identify the critical paths 4. Managing the critical paths 5. Improve Network Visibility 6. Establish a SC continuity team 7. Work with suppliers and CUSTS
80/20 rule
80 percent of the profits of the business come from 20 percent of the customers
1 Which value represents the total cost of this product from sourcing to sale
A 33600 (Direct COGS 20000 + Gross contribution 7000 + Distribution costs 4600 + other customer related costs 2000)
1. The EOQ model attempts to
A calculate the optimal amount of inventory to be reordered by balancing ordering costs with carrying costs
Barriers preventing form moving away from the old paradigm and toward the new paradigm include
A conventional organization structure focused on functional units
1. With regard to SC info flows, planning is performed in the ___ flows while order fulfillment occurs in the ____ flows
A coordination, operating
1. The best way to decrease SS is to
A decrease demand and supply variation
1. Ted starts to see some patterns, trends, and variation in customer service expectations, he should
A develop a set of service criteria that is meaningful to key customers
1. If ted realized he always lost money when selling to one segment of his current customer base, what is the best thing he could do regarding those customers in the future
A either provide lower levels of service to reduce their cost to serve, or raise the price at which he sells them
1. GM decides to outsource production to Eastern Europe to reduce costs. This increased lead times and disruptions. So, GM was forced to airship daily to facilities in the US at great expense. This is and example of what can happen when a firm
A fails to coordinate decisions across its global SC
1. A SC that utilized an agile order fulfillment technique will
A hold manufacturing until receiving actual customer orders
1. The strategic profit model can be used to illustrate the impact of logistics and supply chain mgmt. on ROA by
A illustrating how supply chain activities impact the components of net profit margin and asset turnover that lead to ROA ratio
1. What is one major issue that still exists in a lean fulfillment model
A inventory is still held in anticipation of customer orders
1. Lean order fulfillment differs from traditional order fulfillment in that lean utilizes
A smaller inventory deployment and shorter time between orders
1. Risk concerned with ability to replenish raw materials
A supply risks
1. UT CBA creates list of classes offered each semester. However, the options do not always meet student wants or needs. This is an example of
A the great divide between demand creation and fulfillment
1. Traditional cost accounting procedures allocate costs to customers based upon
A the percent of total sales represented by each customer
1. Zara's model utilizing short order cycles to position itself as a leader in the apparel industry is an example of
A time based competition
1. This is not a sound reason for a company to expand globally
A to decrease complexity by selling to emerging markets
1. Maintenance, disposal, returns mgmt., and training when calculating the true cost of a product/service, you are employing the concept of
A total cost of ownership
1. One major obstacle preventing supply chain managers from making improvements in the way SC deliver value is an excessive focus on
A unit cost
1. If ted moved sourcing for clothing products to Vietnam but kept domestic suppliers then this would be
A using redundancy to mitigate supply risk
1. Configuration
A where and in how many nations each value chain activity is performed
1. "Our global SC faces challenges of serving heterogeneous markets as well as coordinating operations to avoid higher costs" agree?
A yes, consumer preferences vary by country and high levels of coordination are required to mange the complexity in global SC
Supply chain oversight
All of you who will be going into a supply chain career will have oversight of some portion of some company's supply chain. We have talked about VISIBILITY ( having a view of your extended supply chain across the US and around the world - knowing where supplies and finished goods are and when they will be where you need them to be)
Supply Chain vulnerability can be defined as
An exposure to serious disturbance, arising from risks within the SC as well as risks external to the SC.
Example of Capacity constraints
An over the road carrier like Schneider or JB Hunt, has only a certain number of trucks, trailers, and drivers. It's a large number - but once that maximum capacity is hit they can't quickly increase it very much. And to be more granular - those same carriers have a finite amount of capacity in a given region or lane. They may have available capacity in the Pac NW, but if the immediate demand is in Florida - they can't respond.
Some reasons that companies outsource
Avoid exposing employees to unacceptable risks (safety) - right of way clearing Lack of capacity - and avoidance of capital investment ( fixed cost) need tissue manufacturing capacity for Costco PL Tissue, don't want to invest in machines Reduce exposure to legal or overall risks (essentially cost) Lack of expertise or strategic choice not to retain it (core competency) You are have a high-cost labor force, so instead of cutting wages, you outsource reduce (variable cost)
1. In the above eoq, what is the eoq amount
B 20 days worth inventory (day where triangle stops)
1. Not a trend in the global SCM
B Less complexity due to a decrease in cultural differences
1. You are SC manager at cellphone Inc. and part of your job is to make recommendations on fulfillment techniques for various products. Boss wants to know which products would be most appropriately serviced using lean technique. You tell him
B a basic phone with a high volume of predictable customer demand
1. Key characteristic of the traditional view of competition as being between companies (old paradigm)
B a transactional approach to SC partners dominated by a win lose mentality
1. What is one benefit of buyer seller collaboration in a synchronized supply chain
B demand and supply info is communicated and shared in near real time
1. Establishing a segmented customer service policy involves all of the following except
B establishing a standard customer service policy for all customers
1. This strategy is an example of using redundancy to mitigate risk
B establishing multiple inventory stockpiles
1. Offshore contract manufacturing, outsourced customer service, long lead times, supply chain disruptions, and greater complexity are all symptoms of
B extended global supply chains
1. This lowers risk of SC vulnerability due to disruption
B increasing SC flex
1. You are a divisional inventory manager at a company that has grown through 20 different smaller firms. You are completing an initial assessment of your inventory management principles. This benchmarking type makes most sense
B internal
1. SCM
B is the systematic coordination of purchasing, manufacturing mgmt., and distribution upstream with suppliers and downstream to customers
1. To this day, Stank continues to buy from LL bean. This represents a use of supply chain service to secure
B lifetime value of customer
1. Referring to above, what are some potential risks associated with each activity or "touch point" represented in the squares?
B longer lead times and greater lead time variation
1. A SC that utilized a traditional/anticipatory order and does not subscribe to lean principles will
B minimize costs by buying building shipping and storing in large lot sizes in anticipation of demand
1. Teds computer exploded. Order new one through UT and takes forever. If you were a supply chain manager at UT committed to changing process to optimize customer satisfaction at minimum additional cost, what you do first
B negotiate with apple to standardize pricing to all UT users, the give them immediate access to actual demand and hold them responsible for direct delivery
1. IT infrastructure provides a path for bi-directional info flow that enable firm to plan across all operational areas at same time. ERP form one critical part of the IT infrastructure. Its role is best represented as
B providing and org wide platform for collecting and disseminating data
1. HP postponed final assembly of printers by delaying insertion of power supplies until orders were received from individual country markets. The benefit of this is
B reduced SS requirements due to improved forecast accuracy
1. Supply chain mgmt. role is to
B satisfy demand by putting the product in customers hands at right time, right place, right quantity, and right price
1. Based on this scenario
B supply replenishment lead times and variance will likely increase
According to the Pareto or 80/20 rule shown above,
B the top 20% of products and customers by sales or profitability are considered the A category and should receive the highest levels of customer service
1. Which costs increase due to the trend toward global focused factories
B transportation costs
Concept of customer retention and lifetime value customer
B understanding the value of keeping existing customers happy and making them loyal customers
Logistics cost analysis
Because logistics management is a flow-oriented concept with the objective of integrating resources across a pipeline which extends from suppliers to final customers, it is desirable to have a means whereby costs and performance of that pipeline flow can be assessed
Video, Walmart and the blockchain
Block chain means that all systems speak with each other. This is safer more transparent and they are working with IBM. International Business Machines Corp. in July launched a blockchain enabled cloud platform designed to help companies track items through complex supply chains. That kind of rapid tractability and more or less instant visibility can help take action quicker when you have a serious recall like this one. It will take someone smarter than me - maybe one of you !- to implement these improvements - but while we''re on the topic of the future of supply chain - this is one to watch
1. Avg daily demand for a product is 5 units and avg lead-time for an order to arrive is 6 days. SS is 100 units and avg inventory is 150 units. What is the re order point for the product
C 130 units (Reorder point= LT x DD + SS= 6 x 5 +100= 130)
1. Around what percent of US firms do not have a SC risk mgmt. strategy
C 80%
1. Risk concerned with how products or services will sell in the future
C Demand risk
1. Time based competition is becoming standard in todays marketplace. Which one of the factors below is not contributing to this
C an increased level of product safety required in global markets
This metric focuses on total performance of a firms supply chain rather than on the performance of one function
C cash to cash
1. Risks includes items like IT system being attacked by malicious hacktivist group
C control risk
If your company is trying to determine what customers want, the best source of info is
C customers
1. As SC increase their degree of globalization, which of the following trade-offs occur: production costs tend to ____ whereas transportation costs tend to ____
C decrease, increase
1. Ted wants to improve profitability of shop. So he takes you to cool beans asks for advice, tell ted that the best place to start to improve profitability is to focus on
C determining the service levels different customers desire and are willing to pay for
1. A major driver of control risk across global SC is
C difficulty integration across multiple IT systems
1. Which economic utility is not the main reason why students buy textbooks on amazon
C form
1. Lean order fulfillment would be most appropriate for products with
C high volume, predictable sales, low relative product cost, long product life cycle
1. Which is not one of the three questions you should ask when making order fulfillment decisions
C how should we price the product
1. Selling shirts on game day but waits to put final score until game is over and then sells them to people coming out of stadium. This is an example of
C hybrid lean and agile
1. In the above eoq, manger wants to optimize fulfillment. As a SCM consultant, what will you suggest to manager
C lower cycle stock by reducing ordering/set up costs and lower safety stock by reducing demand and supply variance
1. The time that workers spend waiting in warehouse for shipments of finished goods to arrive is an example of
C non value added time
1. At its core, a SC risk profile asses the _____ and the _____
C probability of a risk occurring, the impact of that risk if it occurs
1. Two red flags that signal a mismatch between supply and demand. One of those red flags is
C the company uses performance measure that focus on the reduction of per unit cost and cost variance within each separate activity area in the supply chain
1. "One size fits all" model strategy is most appropriate for which if teds product lines
C white socks and t-shirts
Design
Choice of material for both product and packaging Physical characteristics of the product Focus on opportunities for re-use and recycling
Time based competition
Competition is becoming increasingly time-sensitive: 1. The product life cycle is shortening Stages: introduction, growth, maturity, saturation, decline 2. Customers' drive for reduced inventories (substitute responsiveness for inventory whenever possible) 3. Volatile markets making reliance on forecasts dangerous
The basis for competing in this new era will be:
Competitive advantage = Product excellence × Process excellence
Horizontal Organizations
Core organizational objective: Link demand and supply through Demand Supply Integration (DSI). Distinguishing characteristics of horizontal, market-facing organizations:
Challenges of Global SCM
Cost pressure Local and regional consumer preferences Coordination with global partner RISK!! Raw material scarcity Complex governmental rules and regulations Environment and sustainability
1. Assuming constant rate of demand, how many units of inventory will be left by the end of day 9 in this cycle
D 40 units
1. Assuming a constant rate of demand of 40 units per day, and a reorder point of 200 units of inventory, what is the avg lead time for receiving additional inventory
D 5 days (200= LT x 40)
1. Using activity based costs, what is more accurate cost to serve measure
D 85,000 (25% of take orders + 30% of fill orders + 10% of collections)
1. SS is considered to be twice as expensive as CS because
D CS often arrives late due to demand and supplier lead time variation
A deficiency of traditional supply chain performance measurements
D all above- bias toward heavy use of cost metrics, ignores customer perceptions of value received, focus on internal definitions of customer service
1. Start new company called crabman auto parts. Heard about agile order and are interested in it to decrease costs. Which best describes the strategy crabman auto parts should follow to take advantage of agile order fulfillment
D form strategic relationships with key customers and suppliers and synchronize information exchange with them to improve responsiveness and reliability
Ordering supplies twice per year versus four times per year can result in ____ due to ____
D higher inventory carrying costs, higher avg inventory levels
1. Ted buys 50 gallons of milk and 20 cartons of hot coco. Students pay for their drink then ted mixes milk and powder then gives it to them. What kind of fulfillment technique is ted employing
D hybrid lean and agile
Total cost mgmt.
D identify and minimize total supply chain costs rather than the costs of individual activities
1. Radio Systems Corporation outsourced to china. Tried to manage relationship with Chinese partners via office in Tennessee but did not work because of cultural barriers. In response, RSC setup office in Shenzhen and hired locals to manage relationship. This is an example of
D improving local coordination to mitigate supply risk
1. Based upon discussion and class materials, proper pipeline mgmt. entails
D improving visibility into demand and supply combined with faster order cycle time
1. Using focused factories is a global SCM strategy. What is a probable outcome of this strategy?
D increase in transportation cost and lead time
1. Ted is developing order strategy for breathing regulators that he sells in shop. Given that this product is high cost and highly customized, which strategy should ted use
D order regulators based on actual customer demand and work with suppliers to quickly configure and ship regulators directly to customer
1. In todays competitive business environment, the most successful firms focus mainly on improving customer satisfaction by
D passing on the lowest possible price to all customers
1. Walk in to ted shop, order custom diving mask, and expect delivery in 10 days. Two weeks later you call ted and ask where your mask is. Turns out order was shipped in 9 days but to wrong customer with same name in Nashville. What kind of value did ted fail to provide
D place
1. Improving network visibility is a key element of risk mgmt. this is an example
D providing immediate info about an inventory shortage to a downstream operation
1. The focused factory production design allows a firm to
D segment production of items to gain economies of scale
1. The strategic profit model is discussed in class demonstrates the following principle
D small improvements in supply chain activities can yield large improvements in ROA
1. What are two components that will soon need to be added to the total supply chain cost equation due to changing political and corporate environments
D sustainability cost and risk mgmt. cost
1. What is the purpose of conducting risk profile assessments?
D to determine the area of greatest vulnerability to and impact from disruption in the SC
1. To increase the volume of sales for a product, service a client in new market that is three time as far from your current distribution center as current markets. Although sales numbers go up, total overall cost might not improve because
D transportation and other distribution costs would likely increase
Fill in the blanks with the appropriate combination of words. As the time horizon for planning supply chain activities ________, the accuracy of the planning _______.
D. Is pulled closer to actual time (shortens), improves.
firm decides to outsource warehouse, what does it have the biggest impact on?
Fixed asset Cost
Lecture: Whats on the horizon?
Forecasts are always wrong, autonomous truck fleets
Postponement example-
HP for example uses mass production of printers without power supplies. They hold power supplies at 3 regional DCs, and delay final product configuration until the local market destination is know, and then add power supplies and power cables since that must be customized by region based on the local flavor of voltage and types of power outlets.
7. Work with suppliers and custs
Have contact with upstream and downstream cliental
What's a carbon footprint?
Have to look upstream, internally, and downstream Commonly known as a Lifecycle Assessment (LCA)
Key take away examples from Hong Kong, South Korea and Taiwan
Hong Kong Transportation and logistics - Attractive as a hub Japan Manufacturing and distribution capacity - supported by automation, will be directed toward Chinese consumption South Korea and Taiwan Outsourcing - Will increasingly export subcomponent products into China to exploit labor resources and domestic market
Supply Chain Redesign:
How can a company strategically re-design its supply chain over time to become more resilient and avoid or more easily mitigate future disruptions?
Control Risk-
How likely are disturbances and distortions to be caused by our own internal control systems? Do we have early warning systems in place? How timely is the data we use?
Global Sourcing
Increasing number of hand-offs, not necessarily location
Example of focused factory
Instead of replicating the manufacturing investment of Pull-Ups at multiple sites around the world that may have already been producing other Kimberly Clark products, we chose to service the globe from one plant. We focused our manufacturing technology in one spot, because we believed that we could do a better more consistent job of meeting consumer's expectations .
Mitigate through Redundancy
Inventory and capacity - Multiple facilities/ suppliers - Pooled demand Pooling- centralizing inventory allows you to keep fewer inventories and save money
Competitive Advantage
Is the ability to differentiate itself in the eye of the customer o Operate to a lower cost hence larger profit
Competence Assessment
Labor - Availability, Productivity, Relations Education Levels for Line and Staff Management Logistics, Customs and Security
When to use lean and agile
Lean works best in high volume, low variety and predictable environments. Agility is needed in less predictable environments where the demand for variety is high.
Political Assessment
Legal and Regulatory Framework Ease of Doing Business, Bureaucracy and Corruption Political Stability Country Risk
The lifetime value of a customer is calculated as follows:
Lifetime value = Average transaction value × Yearly frequency of purchase × Customer 'life expectancy'
The mission of logistics management
Link between the marketplace and the supply base The scope of logistics spans the organization, from the management of raw materials through the delivery of the final product
Supply Chain management is a wider concept than logistics
Logistics is planning orientation and framework that seeks to create a single plan for the flow of products/info through a business o Supply chain builds upon this and seeks to achieve linkage and coordination and customers, and the organization itself
Video: Global Supply Chain, the video compared the relocations of supply chains to that of a heart surgeon. What was the video trying to describe?
Moving to another country might look good at first, but in the end it might be more expensive and costly to the business. The SC of the business gets very complicated.
Network competition
NOW - we are in a business environment where not only companies compete - but all of their extended partners (or supply chain 3 PLs) and suppliers are competing against other companies and their extended chain of business partnerships. This has added to the complexity that supply chain managers face and has made it harder for networks to stay agile while delivering high levels of service that are cost effective.
Perfect order
On-time x in-full x error free = actual perfect order
U.S. Customs and Border Protection (CBP) - Overview
Operates under the Department of Homeland Security (DHS), In 2003, U.S. Customs Service merged with Border Patrol to form CBP,
Sustainability in supply chains
Patagonia Inc. built an $800 million outdoor apparel empire selling heavy-duty jackets, backpacks and long underwear at premium prices, winning a loyal customer base with vows to "build the best product" and "cause no unnecessary harm." In 2010, German animal-rights group Four Paws said it found evidence that farms supplying down feathers to Patagonia were force-feeding geese to fatten their livers for foie gras. In 2012, Patagonia discovered brokers were charging migrant workers thousands of dollars for job placement at the company's factories in Taiwan—a practice human-rights groups say is a form of slavery. And last summer, People for the Ethical Treatment of Animals posted a video online depicting grisly abuse of sheep at South American ranches that sold wool to Patagonia.
Manage Through Resilience
Postponement - Lean processes- speed and reliability - Improve visibility - Leverage supplier relationships- Suppliers will help there best customers first
Pro for postponement-
Postponement closes the lead time gap, it also reduces safety stock
Example of off shoring
Production Call centers Back office (accounting/legal work) Engineering design R&D
SOUTH ASIA: KEY TAKE-AWAYS
Protectionist mentality - Centuries of colonization caused deep suspicion of the private sector and foreign ownership; continued conflict between India and Pakistan FDI growth constrained - due to poor infrastructure, excessive bureaucracy, and corruption High skilled labor availability - Competent senior managers and skilled labor especially in India Innovative solutions - Demonstrates an ability to create innovative solutions to its unique supply chain challenges Bottom of the pyramid population - Huge opportunities for growth, but also presents challenges that require innovative solutions from private industries and multinational corporations
IT investments
Put synchronization and horizontal process integration together—combine IT systems and appropriate relationships to reduce order cycle times for delivery of the right product to satisfy demand; substitute information for inventory -THIS IS QR
Current Event, Samsung
Recall put SC oversight in the spotlight. There phone was blowing up which meant there were many failures in the SC "Companies looking to reduce costs by outsourcing much of their supply chain to countries with cheaper labor markets also run the risk of sacrificing quality" (again - you know this because you have taken BA 331) "Experts say that problems in the supply chain can be exacerbated when different departments within a corporation, and their suppliers, fail to communicate or coordinate effectively" (we could now substitute "BA331 Students" for the term "experts" )
Reasons company's outsource-
Reduce costs access to IT Free up resources
MIDDLE EAST & N. AFRICA KEY TAKE-AWAYS
Region Gateway for distribution - Imported finished goods into Middle East markets Establish logistics/transportation operations - To support trade both within the region as well as to utilize the central location of the region as a hub for global trade networks Opportunity - Link Saudi Arabian transportation network and logistics capabilities to UAE import and manufacturing facilities for efficient and effective access to Saudi Arabian population centers, and for redistribution to Kuwait, Iraq, and the Levant Egypt Special economic zones - Establish low skilled manufacturing facilities for export to MENA region (once political environment is stabilized!!) Israel skilled workforce - Establish R&D and high tech manufacturing in Israel, high availability of skilled, highly educated labor force, especially in engineering and technology
AUSTRALIA EPIC & TAKE-AWAYS
Regulatory environment - Most transparent and efficient in the world High political stability Sound legal framework Vast mineral resources (bauxite, iron ore, alumina, lead, manganese, coal, gold, silver, nickel, tin, zinc and uranium) Skilled workforce Proximity to Asia - Asian market demand Barriers to domestic trade - Large distances between major markets, traffic congestion in major metropolitan areas Labor disputes
How did the Fat Tire LCA affect the supply chain?
Removed cardboard dividers from 12 packs reduced 50 tons ($280,000/year) Decreased water usage by 3.9 to 3.5 gallons of water per gallon of beer produced Increased landfill diversion rate to 99.8% Installed CHP engine that burns waste biogas from Process Water Treatment Plant which generated about $60,000/year in electricity cost savings Improved wort cooler and whirlpool that saved 2.9hl of wort lost per brew. Saved substantial energy, water, and raw materials
Practical steps to improve transport intensity
Review product design and bill of materials Review sourcing strategy Review transport options Improve transport and utilization Use postponement strategies
Beyond the carbon footprint
SC decisions impact the resource of the SC footprint Design-->Source-->Make-->Deliver-->Return
Twin challenges continued... So the challenge for the supply chain is how to offer local markets variety they want, while still
So the challenge for the supply chain is how to offer local markets variety they want, while still gaining the advantage of standardized global production. And the other challenge like we discussed earlier in the semester is how do you get customers to pay for the added complexity that comes with variety?
SOUTHEAST ASIA KEY TAKE-AWAYS cont.
Strategic - located along the sea passage from the Middle Eastern/Mediterranean region to East Asia. Size - relatively smaller size compared to China and India Opportunities: formation of regional trade entity (AEC) Improving trade and openness with the rest of Asia (ASEAN) Challenges - Growing geo-political strain in South China Sea Building up a human talent pool Extreme diversity across the region
The overall results of the global EPIC analysis and the accompanying research lead to some key rules to guide global supply chain decision making:
Supply chain solutions that work in one region cannot simply be duplicated in another without a high risk of failure. Each region has unique characteristics that require a unique solution. Expanding business into new geographic areas will have consequences on the entire existing supply chain. The addition of new regional or local solutions will deeply affect the design and operation of the former structure. Supply chain leaders must acknowledge that no supply chain decision is static and permanent; rather, their job is to continuously reengineer the solutions they manage.
6. Establish a SC continuity team
Team that is committed to managing risks in the SC
What is a Life Cycle Assessment?
The accounting of material and energy flows during each stage of a product's life and the assessment of associated environmental impacts.
Service:
The availability, support and commitment provided to the customer.
Common barriers to SC integration
The cost of an order moving through the pipeline is not visible! People are interested in protecting and growing their own function.
Cost:
The customer's transaction costs including price and life cycle costs.
Quality:
The functionality, performance and technical specification of the offer.
SCM definition
The management of upstream and downstream relationships with suppliers and customers in order to deliver superior customer value at less cost to the supply chain as a whole § A network of connected and interdependent organizations mutually and co-operatively working together to control, manage and improve the flow of materials and information from suppliers to end users.
Global Shipment process example
The process shown here is one of many process flows that goods could actually take - this one is pretty straightforward. It goes from shipper or Consignor (in our example - the manufacturer of an automobile transmission) to the customer or Consignee ( in this example a Toyota assembly plant in Ontario Canada. We'll take a quick look at each of these exchanges. You have both physical movement of goods on a ship train or truck - and you also have various documentation steps that accompany the goods. In this slide - you see the shipping process in the middle and customs documentation processes (required to legally move goods out of one country and into another) on both ends of the move, I'm going to assign some estimates of the cost for each segment of the process - without being too scientific - we'll call it either "hundreds" or "thousands" of dollars. There may be multiple additional stops or exchanges along the way, depending on how much time there is before the sailing date of the vessel. Ideally - you would want it to go straight to the port - but there could be places along the way where a load might be held in storage for a while. There are also quite a few exchanges of documentation for customs clearance that we will not get into today. We'll just look at the physical move of the container
The concept of total cost analysis
The purpose of total cost analysis in this context is to identify the change in costs brought about by these decisions
Time:
The time taken to respond to customer requirements, e.g. delivery lead times
Defining customer service objectives
The whole purpose of supply chain management and logistics is to provide customers with the level and quality of service that they require and to do so at less cost to the total supply chain. o perfect order is achieved when the customer's service requirements are met in full. o The measure of service is therefore defined as the percentage of occasions on which the customer's requirements are met in full.
1. Another trend in globalized SC is moving manufacturing or services outside a firm's home country to achieve lower costs.
This is A offshoring
1. One trend in globalized supply chains is contracting manufacturing or services that are outside a firms core competencies to an external partner.
This is D outsourcing
Products being built and upgraded more swiftly.
This is the idea of time-based competition we covered in Chapter 6 and quick response in chapters 6 and 7
Con for postponement-
This only works for some products, pull-ups for example can not be shipped as white foam.
theory of constraints
a methodology for identifying the most important limiting factor (i.e. constraint) that stands in the way of achieving a goal and then systematically improving that constraint until it is no longer the limiting factor. In manufacturing, the constraint is often referred to as a bottleneck.
How to reduce non-value-added-time
Three things that add value: providing it in a form that customers want to consume it (form utility), having it available where someone wants to consume it (place utility), and having it available when someone wants to consume it (time utility)...the rest is NON value added (sitting around waiting for one of these)
Infrastructure Assessment
Transportation Utilities Telecommunications
NORTH/CENTRAL AMERICA KEY TAKE-AWAYS
United States Top global market - for finished goods distribution Manufacturing returning to some areas - although automation rules to limit labor cost impact UNCERTAINTY - TAXES, OUTLOOK FOR GLOBAL TRADE - TARIFFS, QUOTAS???... Canada A source for high end manufacturing - can reduce pipeline inventory and transportation costs to Canadian and northern US markets Sourcing raw materials - Canada is a prime location, particularly for energy Mexico Population - young and growing Infrastructure - growing Business competence - growing Violence and corruption - remains problematic Pacific ports - attractive option for inbounding subcomponents from Asian suppliers Costa Rica Prime location - for low skilled mass production and/or service operations Panama Prime location - for supply chain integration, assembly, and re-distribution operations
Example of inventory centralization (Pro)
Using an example from earlier in the semester: When a CATerpillar customer has a machine down, CAT guarantees 24 hour replacement parts delivery anywhere in world! The key to their marketing plan is not so much products - although they have great products , but the value of keeping equipment continuously operating . Because of their capability to achieve quick delivery - the customer had less equipment downtime.
How can value differentiation be gained?
Value segments: different groups within the total market have different benefits and importance · Take the car industry, Ford doesn't have such one model, it has many different ones with different value (ie four door vs two door) · Is a powerful means of achieving a defensible advantage? · Service: the process of developing relationships with customers through the provision of an augments offer o After-sales services, financial packages, technical support o Seeking high ground § Seeking to have cost advantage and value advantage § One thing is certain: there is no middle ground between cost leadership and services excellence
Responsiveness
Want short lead times § Flexibility and increasingly customized solutions § Agility is the ability to move quickly and to meet customer demand sooner § Demand driven not forecast driven § Needs to hear the voice of the market and interpret demand signals
UT SCM Premise on Globalization
We are moving away from obsessive focus on a single low cost global supply chain and towards a model that recognizes regional "pods" of matched demand & supply.
Capacity constraints
We havn't talked a lot about capacity - but every link in the supply chain - every asset and system has a finite capacity for handling volume. (remember the Theory of Constaints - it's aint just a theory in supply chain) Every one of you that continue to a SCM career will deal with capacity constraints frequently.
Quality Control -
We talked about manufacturing quality control way back in chapter 5 - A couple things we discussed were the Toyota Production System and W Edwards Demings influence on the Japanese post-WW2 and on the world thereafter. Deming said, "Improve quality constantly and forever - strive to reduce variation" We also talked about the need to have quality control in our business processes too.
LCA example from a company near and dear to many of your hearts (New Belgium Beer) had 3,188.8 g of CO2 from one 6-pack which made for a huge carbon footprint. They had to do a life cycle assessment.
Why Did/Do They Do It? - To decrease their carbon footprint per barrel as they grow - To be accountable for environmental impact throughout product lifecycle - To get data to focus our efforts to have the biggest impact
Structural Flexibility
ability of the SC to adapt or reconfigure its architecture in response to major changes on the demand side or the supply side.
Con of focused factory
added complexity for that one plant because we had many, many different packaging designs and counts to deal with. We also incurred higher shipping costs to distant markets in Europe and elsewhere.
Horizontal Organizations
also called Market-Facing organizations o Core organizational objective: Link demand and supply through Demand Supply Integration (DSI). o Distinguishing characteristics of horizontal, market-facing organizations: Organized around processes Flat and de-layered Built upon multi- functional teams Guided by market- based performance metric
(Vertical) Conventional Organization Structure
also called traditional, functional, vertical, silo o Generate orders and fulfill those orders without regard to cost. o The cost of an order moving through the pipeline is not visible. o People are interested in protecting and growing their own function.
Economic Order Quantity (EOQ)
balances the cost of holding inventory against the costs of placing replenishment orders; the problem is that it ignores variance -Balances fixed order costs against inventory carrying costs to determine least-costs order frequency to determine optimum order quantity
Companies lose money on a significant percentage of active customers
because they cannot identify the actual costs of selling to individual customers
Focused Factories
by limiting the range and mix of products manufactured in a single location the company can achieve considerable economies of scale.
Environment-
climate change, pollution, depletion of scarce resources
(Pro) for inventory centralization
consolidating inventory into fewer locations can substantially reduce the inventory requirement and the associated costs.
Centralization of Inventory
consolidating inventory into fewer locations can substantially reduce total inventory requirements, organizations have been closing nation warehouses and amalgamating them into Regional Distribution Center (RDC).
Value advantage
customers don't buy products, they buy benefits' § the importance of seeking to add additional values to our offering to make it out from competition
Quick Response (QR)—
demand is captured in as close to real-time and as close to the final consumer as possible; uses laser scanners (EPOS), bar coding, etc. -Shift away from the economies of scale model to economies of scope (smaller quantities over a wider range)
Improving the visibility of demand
demand penetration point is that it occurs at that point in the logistics chain where real demand meets the plan.
Return-
develop "reverse logistics" capabilities
Economy-
effect on peoples livelihoods and financial security; profitability of the business
Agile fulfillment
eliminate uncertainty by postponing form and/or time and place utility until order is received and then rapidly respond when order is received -Customer focus vs. product focus -Focus on postponement, agility, and speed Agile fulfillment is most closely tied to actual customer demand (rather than lean or anticipatory).
EID=
emotional intelligence and training
Resilient processes are
flexible and agile and able to change quickly
SCM system processes
flexible manufacturing systems (FMS), o new approaches to inventory based on materials requirements planning (MRP) o just-in-time (JIT) o perhaps most important of all, a sustained emphasis on total quality management (TQM). o logistics is therefore essentially an integrative concept that seeks to develop a system-wide view of the firm
Generally the effects of trade-offs are assessed in two ways:
from the point of view of their impact on total costs and § their impact on sales revenue
Con for inventory centralization
gains you make on the inventory side must off-set any losses on the Transportation side. This can take longer for a product to get to its final destination
Cost drivers and activity-based costing
growing dissatisfaction with conventional cost accounting § There is a general ignorance of the true costs of servicing different customer types/channels/market segments. § Costs are captured at too high a level of aggregation. § Full cost allocation still reigns supreme. § Conventional accounting systems are functional in their orientation rather than output oriented. § Companies understand product costs but not customer costs.
Synchronization
happens through shared information (demand data and forecasts, production schedules, new product launch details, and bill of material changes) Requires smaller shipments made more frequently to meet the precise time requirements of customers -Information facilitates responsiveness -Information enables consolidation (economies of scale)
1. Coordination
how dispersed activities, or activities performed in different nations are managed
The strategic profit model (DuPont Model) can be used to illustrate the impact of logistics and SC management on ROA by:
illustrating how SC activities impact the components of an income statement and balance sheet that lead to return on assets
Thinking global acting local
implementation of global pipeline control is highly dependent upon the ability of the organization to find the correct balance between control and local control.
Today's technology and management tools -
in chapter 7 , we talked about supply chain information flows and using that information flow to synchronize the supply chain and align processes
Source
location of suppliers can impact differently on a resource footprint Environmental implications of supply source Society and ethical issues
critical paths
management attention should be focused
Logistics Information-
management of information flows
Relationships
management of relationships across complex networks of companies that, whilst legally independent, are in reality interdependent.
Outsourcing in class example-
means giving a task or set of tasks to a supplier that your company has historically done themselves
Sustainability
meeting the needs of the present without compromising the ability of future generations to meet their own needs : achieving a balanced union of ecological harmony, social enrichment & economic vitality : a company cannot be truly sustainable without taking a supply chain approach to sustainability
Sustainability
meeting the needs of the present without compromising the ability of future generations to meet there own needs
Benefits of having an environmental friendly SC
mindshare of growing ethical consumer markets, attraction and retention of top talent, more sustainable growth
Adoption of lean practices, the move to outsourcing and a general tendency to reduce the size of inventory has made the SC
more vulnerable.
Identify the critical paths-
nodes and links. Nodes- represent entities or facilities such as suppliers, distributors, factories, and warehouses. Links- are how the nodes are connected; physical, technical, or financial.
Logistics and the bottom line
o 'The bottom line' has become the driving force which, perhaps erroneously, determines the direction of the company o Return on investment is the ratio between the net profit and the capital that was employed to produce that profit,
There are four stages in the implementation of an effective mission costing process:
o 1 Define the customer service segment o 2 Identify the factors that produce variations in the cost of service o 3 Identify the specific resources used to support customer segments o 4 Attribute activity costs by customer type or segment
The Great Divide—
on one side is the supply side (the upstream of procurement, converting raw materials into products, productivity/cost focus) and on the other is the demand side (sales and customer satisfaction focus)
Deliver
optimise network configuration minimize transport intensity reconsider transport modes
Lean fulfillment—
reduce uncertainty by managing demand and order cycle time variance Order small amounts of products, shorten lead-times. To optimize fulfillment, you must reduce safety stock and cycle stock -Lower cycle stock (inventory we carry to meet demand) by reducing average lead-time -Lower safety stock by reducing demand and lead time variance Avg. Inventory = (cycle stock/2) + Safety stock
Square root rule
reduction in total safety stock that can be expected through reducing the number of stock locations is a proportional to the square root of the number of stock locations before and after rationalization.
Society
reduction of poverty, improvement of working and living conditions
Reducing the transport intensity of SC
transport intensity measured by reflection of miles or km traveled per unit of product shipped
KPI's deal mainly with these 4 things
service quality, time, cost, and relationships
Quite simply, in today's marketplace the order-winning criteria are more likely to be ________ than _______.
service-based, product-based
1. Companies located in the commodity market quadrant (C) should try to do any of the following except
stay the same
Customer Service Management
suppliers tailor their service offerings to meet the requirements of individual customers.
Customers taking control
that the customer in today's marketplace is more demanding, not just of product quality, but also of service. § recognition that managing the logistics of service delivery on a consistent basis is the crucial source of differential advantage
Resilience-
the ability of a system to return to its original or desired state after being disturbed
Principles of logistics costing
the ability to focus upon the output of the distribution system, in essence the provision of customer service, and to identify the unique costs associated with that output.
Customer value can be defined quite simply as
the difference between the perceived benefits that flow from a purchase or a relationship and the total costs incurred.
Pro to focused factory
the efficiencies we gained by having all our manufacturing expertise in one place. We became very, very good at running very high machine speeds and doing so with very low waste and delay.
Decoupling point/ demand point penetration—
the point in the logistics supply chain where real demand meets the plan; downstream we can respond to customer demand
Logistics is the process of strategically managing
the procurement, movement and storage of materials, parts and finished inventory (and the related information flows) through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost-effective fulfilment of orders
The marketing and logistics interface
the right product in the right place at the right time' o power 6 of the brand has declined and customers are more willing to accept substitutes
What is customer service?
the role of customer service is to provide 'time and place utility' in the transfer of goods and services between buyer and seller
Customers are now more demanding, more sophisticated
the slow but inexorable transition towards 'commodity' type markets. By this is meant that increasingly the power of the 'brand' is diminishing as the technologies of competing products converge
The lead-time gap
the time it takes to procure, make and deliver the finished product to a customer is longer than the time the customer is prepared to wait for it.
Supply Chain Event Managers-
this is about the process of monitoring the planned sequence of activities along the supply chain and the reporting of any divergent from the plan.
Non-value adding time—
time the product sits waiting, being moved, inspected, or counted
Globalization of industry
to enable the potential benefits of global networks to be fully realized, a wider supply chain perspective must be adopted § in the global business materials and components are sourced worldwide and products may be manufactured offshore and sold in many different countries, perhaps with local customization.
Total Landed Cost
total cost of production for the product to get to the customer
Value-adding time—
total cycle time a product is actually being worked on (provides form, time, or place utility)
Impact of congestion
traffic, ships, railroads, ports, motorways increased global trade larger container ships, more containers JIT practices- smaller but more frequent movements
In order to create SC responsiveness to cust demands a firm should focus on what 2 primary capabilities?
visibility and velocity
Carbon and the SC-
volume of global trade has more then doubled
Giant ,complex networks of suppliers -
we talked about that fact that there can be many suppliers involved just to produce one product, that we need to have tight relationships with key suppliers, and that we should also strive to REDUCE complexity in our supply chains.
Environment risk-
where across the SC as a whole are we vulnerable to external forces?
Traditional Company Competition-
where businesses competed with each other as stand-alone entities one company against an other.
Reliability
§ Re-engineering the process that impact performance § Focus on process control § Reducing process variability
Goal of Supply chain
§ Reduce or eliminate the buffers of inventory that exist b/t organizations