Supply Chain Management

1
Supply Chain Management

• Mid-Semester Review

2
Review

• Definition of supply chain
• Decision phases of supply chain
• Strategic, planning operational
• Supply chain cycle times
• Customer order cycle, replenishment cycle,
  manufacturing cycle, and procurement cycle
• Impact on customer, retailer, distributor,
  manufacturing, and suppliers
• Cycle view varies from company to company

3
Weeks in Review

• Strategic scope
• Intracompany/intraoperational
• Intracompany/intrafunctional
• Intracompany/interfunctional
• Intercompany/interfunctional
• Supply Chain Challenges
• Achieving global optimization
• Managing uncertainty

4
Weeks in Review

• Prerequisites to effective supply chain
  management
• Top management support and commitment
• Quest for excellence
• Effective/efficient communication
• Relationship vs. exchange
• Team. Partnerships alliances
• Examples

5
Weeks in ReviewDrivers of Supply Chain
Performance
6
Weeks in ReviewConsiderations for Supply Chain
Drivers
7
Flows in a Supply Chain
Product
Information
Customer
Funds
Supply Chain
8
Supply Chain Enablers

• Organizational Infrastructure
• Information Technology
• Strategic Alliance
• Human Resource Management

9
Supply Chain Enablers
10
Organizational Infrastructure

• Coherent business strategy that aligns business
  units towards same goals 32
• Formal process-flow methodologies to enable the
  SCM improvements 15
• People committed to and responsible for
  cross-functional processes 14
• Right process metrics identified to guide
  operating units performance toward strategic
  organizational SCM objective - 13

11
Weeks in ReviewFunctional vs. Innovative
Products
12
Weeks in ReviewPhysically Efficient vs.
Market-Responsive
13
Efficiency-Responsiveness Framework of Supply
Chain
Functional Product
Innovative Products
EfficientSupply Chain
Responsive Supply Chain
14
Zone of strategic fit in supply chain
Responsive Supply Chain
Responsiveness Spectrum
Zone of Strategic Fit
Efficient Supply Chain
Implied Uncertainty Spectrum
Uncertain Demand
Certain Demand
15
Supply Chain Strategies

• Push-Based Supply Chain
• Pull-Based Supply Chain
• Push-Pull Supply Chain

16
Push-Pull Supply Chains
The Supply Chain Time Line
Customers
Suppliers
17
Locating the Push-Pull Boundary
18
What is the Best Strategy?

19
E-Fulfillment Requires a New Logistics
Infrastructure
20
Distribution Strategies
21
E-business Opportunities

• Reduce Facility Costs
• Eliminate retail/distributor sites
• Reduce Inventory Costs
• Apply the risk-pooling concept
• Centralized stocking
• Postponement of product differentiation
• Use Dynamic Pricing Strategies to Improve Supply
  Chain Performance

22
E-business Opportunities

• Supply Chain Visibility
• Reduction in the Bullwhip Effect
• Reduction in Inventory
• Improved service level
• Better utilization of Resources
• Improve supply chain performance
• Provide key performance measures
• Identify and alert when violations occur
• Allow planning based on global supply chain data

23
Logistics Design Decisions

• Determine the appropriate number of warehouses
• Determine the location of each warehouse
• Determine the size of each warehouse
• Allocate space for products in each warehouse
• Determine which products customers will receive
  from each warehouse

24
Logistics Design Decisions

• Determine the appropriate number of warehouses
• Determine the location of each warehouse
• Determine the size of each warehouse
• Allocate space for products in each warehouse
• Determine which products customers will receive
  from each warehouse

25
Decision Classifications

• Strategic Planning Decisions that typically
  involve major capital investments and have a long
  term effect
• 1. Determination of the number, location and
  size of new plants, distribution centers and
  warehouses
• 2. Acquisition of new production equipment and
  the design of working centers within each plant
• 3. Design of transportation facilities,
  communications equipment, data processing means,
  etc.

26
Decision Classifications

• Tactical Planning Effective allocation of
  manufacturing and distribution resources over a
  period of several months
• 1. Work-force size
• 2. Inventory policies
• 3. Definition of the distribution channels
• 4. Selection of transportation and
  trans-shipment alternatives

27
Decision Classifications

• Operational Control Includes day-to-day
  operational decisions
• 1. The assignment of customer orders to
  individual machines
• 2. Dispatching, expediting and processing orders
• 3. Vehicle scheduling

28
Performance Measures

• What you measure is what you get
• Performance measures strongly affect the behavior
  of managers and employees
• Tailor your performance measures to fit companys
  mission and strategy
• Over-reliance of a single measure might be
  detrimental to companys long-term survivability

29
The Balanced Scorecard Framework
Financial Perspective
Internal Business Perspective
How do we look to shareholders?
GOALS MEASURES
GOALS MEASURES
What must we excel at?
Customer Perspective
Innovation Learning Perspective
How do customers see us?
GOALS MEASURES
GOALS MEASURES
Can we continue to improve and create value?
30
Framework for Supply Chain Performance Metrics
Business Strategy
Supply Chain Strategy
Supply Chain Objectives
Financial metrics
Customer Service Metrics
Operational Metrics
31
Supply Chain Performance Framework
Customer Service Metrics
Goals Measures
Operational Metrics
Financial Metrics
Goals Measures
Goals Measures
32
Efficiency Frontier of a Single Product Line
10
Weeks of Supply
Company B
0
Company A
80
100
Fill Rate
33
Critical Factors in SC Performance Metrics

• Establish performance objectives with customers
  in mind
• Consider using order windows as the basis for
  order fulfillment metrics
• Reflect reliability issues in the metrics they
  choose
• Implement metrics consistently throughout the
  supply chain
• Aggregate results as they move up the chain

34
Critical Factors in SC Performance Metrics
(contd)

• Apply process control techniques to the business
  process
• Avoid pitting players in the systems against one
  another
• Collect only data you really intend to use
• Communicate the actions and rational to everyone

35
Bullwhip Effect

• Increasing propagation of variability upstream
  through the supply chain

36
Increasing Variability Upstream the Supply Chain
Bullwhip Effect
37
Impact of the Bullwhip Effect
38
What are the Causes.

• Demand forecasting
• Min-max inventory level
• Order-up-to level
• orders increase more than forecasts
• Long cycle times
• Long lead times magnify this effect
• Impact on safety stock
• Product life cycle
• Batch ordering
• Volume transportation discount

39
What are the Causes.

• Price fluctuation
• Promotional sales
• Forward buying
• Inflated orders
• Orders placed increase during shortage periods
• IBM Aptiva orders increased by 2-3 times when
  retailers thought that IBM would be out of stock
  over Christmas

40
Ways to Cope with the Bullwhip Effect

• Reducing uncertainty
• Centralizing demand information
• Bullwhip inherent in use of various forecasting
  techniques
• Reducing variability
• Use of EDLP strategy (Payless)

41
Ways to Cope with the Bullwhip Effect (contd)

• Lead time reduction
• Order lead time (time to produce and ship)
• Information lead time (time to process order)
• Efficient network distribution design
• Strategic partnership
• Vendor managed inventory (VMI)
• Sharing of customer information
• Collaborative forecasting

42
Presentations/Case Studies/Game

• Accenture 3G Wireless communication
• Army Logistics Operations
• Payless ShoeSource Supply Chain
• Seven Eleven Japan
• Li Fung Internet
• Beer Game