Supply Chain Management Prelim
3 Basic Variables of Aggregate Planning
1. Amount of production capacity 2. Level of Utilization 3. Amount of inventory to carry
Designing of Products
1. Less material usage 2. Minimum Operations 3. Proper use of computational fluid dynamics
How can inbound and outbound logistics be improved?
1. Plan your inventory 2. Keep track of your orders 3. Choose the right transportation service
5 Major Supply Chain Drivers
1. Production 2. Inventory 3. Location 4. Transportation 5. Information
Approaches Use in Warehousing
1. Stock Keeping Unit Storage (SKU) 2. Job Lot Storage 3. Crossdocking
4 Major Variables of Forecast
1. Supply 2. Demand 3. Product Characteristics 4. Competitive Environment
Ø Individual orders, inventory and production
1. Supply Chain Operations
Ø Forecast, which market, location
1. Supply Chain Planning
Ø How to structure for next several years
1. Supply Chain Strategy/ Design
Inventory Management Focus, Cost Control
1960s
Ø MRP & OM, Operations Planning
1970s
Optimized "Value Network" with Real-Time Decision Support; Synchronized & Collaborative Extended Network for SCM.
2000s
Ø Purpose is to satisfy demand in a way that maximized profit for the company.
Aggregate Planning
Ø Can be defined as consolidating all the purchases happening in an organization and giving them to a single department that has complete control over all the procurement processes.
Centralized Purchasing
Ø Refers to the actions of a company and its competitors
Competitive Environment
Ø Effective procurement begins with an understanding of how much of what categories of products are being bought across the entire company as well as by each operating unit.
Consumption Management
Ø Contracts must be measured and managed. Because companies are narrowing their base of suppliers, the performance of each supplier that is chosen becomes more important.
Contract Management
Ø Contracts must be negotiated with individual vendors on the preferred vendors list.
Contract Negotiation
Ø Measures the ability of the supply chain to meet the expectation of its customers.
Customer Service
Effective supply chain management requires simultaneous improvements in both _____ and the ___________ of the companies in the supply chain."
Customer service levels, internal operating efficiencies
Ø Amount of inventory needed to satisfy demand for the product in the period between purchases of the product
Cycle Inventory
Ø Inventory required to meet product demand over the time period between placing orders for the product
Cycle Inventory
Ø With this model, purchasing control is granted to local branches or sites instead of being managed by a centralized unit. The branch/site managers have the authority to purchase items based on their branch's requirements.
Decentralized Purchasing
Ø Strongly affected by the decisions made concerning the modes of transportation that will be used.
Delivery Scheduling
Ø Refers to overall market demand for a group of related products or services.
Demand
Ø Measures the ability to respond to uncertainty in levels of product demand.
Demand Flexibility
Ø Becomes the basis for companies to plan their internal operations and to cooperate among each other to meet market demands
Demand Forecast
Ø System of procuring goods and services online using the internet/ computer systems.
E - procurement
Ø Places where inventory is stored, assembled, or fabricated
Facilities
Ø Happens within the constraints ser by decisions about facility locations and location is one of the five supply chain drivers.
Facility Management
Ø Concentrates on performing just a few operations such as only making a select group of parts or only doing assembly.
Functional Focus
Ø Moving materials into the organization from suppliers
Inboun/Inward Logistics
Ø Raw materials, WIP, finished goods within a supply chain
Inventory
Ø The aim is to reduce the cost of inventory as much as possible while still maintaining the service levels that customers require.
Inventory Management
Ø Once these decisions are made they determine the possible paths available for product to flow through for delivery to the final consumer.
Location
Ø Refers to the geographical site of supply chain facilities.
Location
Ø Function responsible for the flow of materials from suppliers into an organization, through operations within the organization, and then out to customers.
Logistics
Ø Optimized Truck loads Ø Direct shipment to the customer Ø Routing of distribution Ø Reverse logistics
Logistics
Ø Moving materials within the organization
Materials Management
Ø Deliveries that are routed to either bring products from a single originating location to multiple receiving locations
Milk Run Deliveries
Ø Process of passing order information from customers back through the supply chain from retailers to distributors to service providers and producers.
Order Management
Ø Relied on the use of the telephone and paper documents such as purchase orders, sales, orders, change orders, pick tickers, packing lists, and invoices
Order Management
o Executed in response to a customer order
PULL
Ø Mercury Free Ø Non-Toxic Ø PVC or DEHP Free Ø Recyclability
Packaging
Ø Price associated with goods and services provided by a firm to the supply chain
Pricing
Ø Include the features of a product that influence customer demand for the product.
Product Characteristics
Ø Aim is to design products with fewer parts, simple designs, and modular construction from generic sub-assemblies.
Product Design
Ø Encompasses a company and a supply chain's ability to continue to evolve along with the markets they serve.
Product Development
Ø Performs the range of different operations required to make a given product line from fabrication of different product parts to assembly of these parts
Product Focus
Ø Companies and entire supply chains can influence demand over time by using price.
Product Pricing
Ø Their aim is to maximize gross profit in peak demand periods and generate revenue to cover costs during low demand periods.
Product Pricing
Ø Achieving economies of scale in production Ø Lean manufacturing approach Ø Fuel efficient tools and machines Ø Selecting less carbon intensive energy sources
Production
Ø This activity includes the creation of master production schedules that consider plant capacities, workload balancing, quality control, and equipment maintenance.
Production
Ø Implementing green purchasing policies Ø Technical support to vendors to reduce the emissions Ø Guidelines for usage of less hazardous materials
Purchase
Ø Close behind availability was the requirement to buy goods and services at the lowest possible cost. The use of purchase price variances
Purchasing Cost
Ø Also known as "Reverse Logistics"
Return Processing
Ø Inventory the is held as a buffer against uncertainty
Safety Inventory
Ø Necessary to compensate for the uncertainty that exists in a supply chain
Safety Inventory
Ø Functions that are outsourced, like production, storage, management of information
Sourcing
Ø Process of collecting, cleansing, classifying and analyzing expenditure data with the purpose of decreasing procurement costs, improving efficiency, and monitoring controls, and compliance
Spend Analysis
Ø Maximizing value from company spend while decreasing costs, mitigating financial risk, and improving supplier relationships.
Spend Management
Ø Set of practices that ensure organizations make procurement and sourcing decisions in the interests of both the bottom line and company efficiency
Spend Management
Ø An assessment of a supplier's sustainability and capability to supply specific goods or services, before awarding a contract.
Supplier Appraisal
Ø Determined by the number of producers of a product and by the lead times that are associated with a product
Supply
Ø Air-freight and truck delivery are generally fast and reliable but they are expensive. Shipping by sea or rail is much less expensive but usually involves longer transit times and more uncertainty. This uncertainty must be compensated for by stocking higher levels of inventory.
Transportation
Ø Moving inventory from point to point in a supply chain
Transportation
Ø The value of these capabilities has to be considered in addition to simply the price of a vendor's product.
Vendor Selection
Ø Creating and approving purchase requisitions.
Web - based ERP
Ø Gathering and distributing procurement information through internet
e-Informing
Ø Used only for procuring indirect material e.g. maintenance and repairing concern
e-MRON
Ø Web sites where buyers and sellers come together to communicate, exchange ideas bid in auctions and buying and selling their product and services.
e-Market Sites
Ø Participating in auctioning to buy goods and services through internet
e-Reverse Auctioning
Ø Sending requests for information and quotations suppliers and receiving responses online
e-Tendering
"Customer service at its most basic level means consistently ________,__________,_________, for whatever reason."
high order fill rates, high on-time delivery rates, and a very low rate of products returned by customers
o Executed in anticipation of customer orders
Ø PUSH
Areas to Green the Supply Chain Ø Product Design
Ø Product Design Ø Production Ø Material Purchase Ø Packaging Ø Warehousing Ø Logistics & Revenue Logistics
Key Concepts of SCM
Ø Production Ø Inventory Ø Location Ø Transportation Ø Information
Ø MRPII, JIT, Materials Management, Logistics
1980s
Ø SCM, ERP, "Integrated" Purchasing Financials, Manufacturing, Order Entry
1990s
Ø Made from one originating location to one receiving location
Direct Deliveries
Ø Integrating environment thinking into supply chain management
Green Supply Chain Management
Ø Data and analysis, and sharing regarding inventory, transportation, facilities, cost, prices, supplier performance, demand forecast throughout the supply chain
Information
Ø Timely and accurate information holds the promise of better coordination and better decision making. With good information, people can make effective decisions about what to produce and how much, about where to locate inventory, and how best to transport it.
Information
Ø Refers to the ability of a company or supply chain to operate in such a way as to generate an appropriate level of profitability
Internal Efficiency
means that these organizations get an attractive rate of return on their investments in inventory and other assets and that they find ways to lower their operating and sales expenses."
Internal efficiency
Ø The primary purpose of inventory is to act as a buffer against uncertainty in the supply chain.
Inventory
Ø Set of techniques that are used to manage the inventory levels within different companies in a supply chain.
Inventory Management
Moving materials out to customers
Outbound/ Outwards Logistics
Ø Needed to build these products based on the technology available and product performance requirements
Product Design
Ø Allocates available capacity to the work that needs to be done.
Production Scheduling
Ø These activities are the routine activities related to issuing purchase orders for needed products.
Purchasing
Ø Most common circumstance are; wrong products delivered, products had damaged in transit, etc.
Return Processing
Ø Happens when a company or a supply chain with a fixed amount of productive capacity decides to produce and stockpile products in anticipation of future demand
Seasonal Inventory
Ø This is inventory that is built up in anticipation of predictable increases in demand that occur at certain times of the year
Seasonal Inventory
Ø All facilities, functions, activities, associated with flow and transformation of goods and services from raw materials to customer, as well as the associated information flows.
Supply Chain
Ø An integrated group of processes to "source,", "make," and "deliver" products.
Supply Chain
Ø Consist of all parties involved, directly or indirectly, in fulfilling a customer requirement.
Supply Chain
Ø Design - Planning - Execution - Control - Monitoring Ø Ensure effective flow of goods and information Ø Clusters of stores near the distribution center Ø Collaboration with suppliers Ø Active efforts to steer customer at real time Ø Centralized manufacturing Ø Worth of inventory Ø Manage cash flow Ø Should be flexible
Supply Chain Decisions
Ø Must cover a time period that encompasses the combined lead times of all the components that go into the creation of a final product
Supply Chain Forecasts
Management of the flow of goods
Supply Chain Management
Ø Based on forecasts that define which products will be required, what amount of these products will be called for, and when they will be needed
Supply Chain Management
Ø Defined as the "design, planning execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance.
Supply Chain Management
Ø Primarily concerned with the efficient integration of suppliers, factories, warehouses, and stores so that merchandise is produced and distributed in the right quantities, to the right location and at the right time, and so as to minimize total system cost subject to satisfying customer service requirements.
Supply Chain Management
Ø Set of approaches used to efficiently integrate suppliers, manufacturers, warehouses, distribution centers. So that the product is produced and distributed, in the right quantities, to the right locations, and at the right time.
Supply Chain Management
Ø Ship Ø Truck Ø Rail Ø Airplane Ø Pipelines Ø E- transport
Transportation
Ø Cycle View
Ø a. Customer Order, Replenishment, Manufacturing, Procurement
o Demand is strongly related to particular environmental or market factors.
Ø Causal Methods
Supply Chain Stages
Ø Component/ Raw Material Suppliers Ø Manufacturers Ø Wholesalers/ Distributors Ø Retailers Ø Customers
a. Clearly define the process involved and the owners of each process
Ø Cycle View
a. Process divided in to series of cycles. Each cycle occurs at the interface between two successive stages of the supply chain.
Ø Cycle View
a. Very useful when considering operational decisions because it specifies the roles and responsibilities of each member of supply chain and the desired outcome of each process.
Ø Cycle View
Logistical Drivers of Supply Chain Performance
Ø Facilities Ø Inventory Ø Transportation
Improvements by Green SCM
Ø Improves operation Ø Improves agility Ø Improves adaptability Promotes alignment
Goal/ Mission of Supply Chain Management
Ø Increase throughput while simultaneously reducing both inventory and operating expense.
Ø CROSS - FUNCTIONAL DRIVERS
Ø Information Ø Sourcing Ø Pricing
o Rely upon a person's intuition or subjective opinions about a market. These methods are most appropriate when there is little historical data to work with.
Ø Qualitative Methods
Benefits of SCM
Ø Reduces uncertainty and risks in the supply chain Ø Positively affects inventory, levels, cycle time, business processes and customer service. Ø Contributes to overall increase in profitability and competitive advantage.
Objectives of SCM
Ø Satisfy the customer needs. Ø Maximize the overall value generated Ø Increase supply chain surplus Ø High supply chain profitability
o Combinations of causal and time series methods to imitate the behavior of consumers under different circumstances.
Ø Simulation Methods
o Most common form of forecasting. They assume that historical patterns of demand are a good indicator of future demand.
Ø Time Series Method