SUPPLY CHAIN MANAGMENT

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SUPPLY CHAIN MANAGMENT

• Presented By
• Joseph Kweh Jr.
• Patrick Moriearty

Reference Chopra Meindl Supply Chain
Management Prentice Hall 2001
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Supply Chain Stages
Supply Chain encompasses all activities
associated with the flow
and transformation of materials and information
from the raw material
stage through to the end user.
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Objective Maximize Value Generated

• Maximize Firms Profitability

Profitability or Value generated worth
of the final product to the customer - the
effort (generally cost)
expended to fill the customers request.
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Key Supply Chain Decision Phases

• 1. Strategy or Design
• Strategic Decisions
• Location
• Capacity
• Products
• Modes
• Information System

• 2. Planning
• Markets supplied to
• Inventories
• Subcontracting
• Policies

• 3. Operation
• Configurations are fixed (policies defined)
• Time Horizon (daily/weekly)
• Production orders
• Due dates/ delivery schedules/ replenishment
  orders

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Process Views of a Supply Chain

• Cycle View

• Push/Pull View

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Cycle Process View
The supply chain processes are divided into
series of cycles, each performed at the
interface between two successive stages of
the supply chain
Stages
Cycles
Customer
Retailer
Distributor
Manufacturer
Supplier
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Cycle View Procurement
Stages
Cycles
occurs at the manufacturer / supplier interface
and includes all processes necessary to ensure
that materials are available for manufacturing to
occur according to schedule
Customer
Retailer
Distributor
Order based on production schedule or stocking
needs
Receiving at manufacturer
Manufacturer
Supplier
Component manufacturing and shipping
Supplier Production Scheduling
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Cycle View Manufacturing
Stages
Cycles
occurs at the distributor/ manufacturer
interface and includes all processes involved
in replenishing distributor inventory
Customer
Retailer
Distributor
Manufacturer
Supplier
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Cycle View Replenishment
Stages
Cycles
Customer
occurs at the retailer/distributor interface and
includes all processes involved in replenishing
retailer inventory
Retailer
Distributor
Manufacturer
Trigger
Order Fulfillment
Supplier
Order Entry
Order Receiving
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Cycle View Customer Order
Stages
Cycles
occurs at the customer/retailer interface and
includes all processes directly involved in
receiving and filling customer orders
Customer
Retailer
Distributor
Manufacturer
Order Entry
Customer Arrival
Supplier
Order Fulfillment
Order Receiving
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Push/Pull Process View

• The supply chain processes are divided into two
• categories depending if they were executed in
• response to, or in anticipation of customer
  orders
• This view is very useful when considering
• strategic decisions related to supply chain
• design
• This view forces global consideration of the
• supply chain process as it relates to customer
  
• orders

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Push/Pull View

• Pull (reactive process) Processes are initiated
  by customer orders
• Push (speculative process) Processes are
  initiated and
• performed in anticipation of
• customer orders

• Push/Pull Boundary separates push processes from
  pull processes
• Dell PC assembly is the Push/Pull Boundary
• All processes before PC assembly are
• Push processes
• All processes after (including assembly) are
• Pull Processes

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Achieving Strategic Fit
Strategic Fit Means that both the competitive
and supply chain strategies have the same goal.
Competitive Strategy Defines the set of
customer needs that it seeks to satisfy
through its products and services.
Supply Chain Strategy Determines the nature of
procurement of raw materials,
transportation of materials,
manufacturing of the product, and
distribution to the customer.
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Achieving Strategic Fit
Strategic Fit is achieved by

• Understanding the customer
• Lot sizes, response times,
• variety, service level, price, etc.

• Understanding the Supply Chain
• Responsiveness
• Efficiency
• Cost-responsiveness
• Efficient Frontier

Match supply chain responsiveness with the
implied demand uncertainty in the Zone of
Strategic fit.
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Achieving Strategic Fit

• Other Issues Affecting Strategic Fit
• Multiple Products and Customer Segments
• Product Life Cycle
• Competitive Changes Over Time

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Supply Chain Drivers

• To understand how companies improve their supply
  chain
• performance in terms of responsiveness and
  efficiency, We
• have four performance drivers
• Inventory
• Transportation
• Facilities
• Information

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Strategic Fit Obstacles

• Increasing variety of Parts
• Increase in Demanding Customers
• Decreasing Product Life Cycles
• Fragmentation of Supply Chain Ownership
• Difficulties Executing New Strategies
• Globalization

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Information Technologyin a Supply Chain

• Information Technology (IT)
• Consists of the hardware and software Used
• throughout the supply chain to gather and
• analyze information.
• Serves as the eyes and ears of management in
• a supply chain, capturing and delivering
  information
• necessary to make good decisions.

Managers must understand how information is
gathered and analyzed because having good
information is critical in a supply chains
success.
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Information Technologyin a Supply Chain

• Managers must have Global Information over the
  whole
• supply chain. The information must be accurate,
  accessible, and
• in the correct form.
• Suppliers information
• What can be purchased, at what price, with what
• lead time, and where they can be delivered.
• Manufacturers information
• What products can be made, how many, by what
  facilities,
• with what lead times, what tradeoffs,
  at what costs, in what batch sizes
• Distribution and retailing information
• What is to be transported where, in what
  quantity, by what mode,
• at what price
• Demand Information
• Who is buying what, at what price, where, and in
  what quantity

Software Firms SAP, Oracle, Peoplesoft
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Coordination in a supply chain

• Supply Chain Coordination
• Improves when all stages of the chain take
  actions that
• together increases profitability.
• Requires each stage of the chain to take into
  account the
• impact its actions have on the other stages.

• Bullwhip effect
• Fluctuations in orders increase as goods move up
  the
• supply chain, thus distorting demand
  information within
• the supply chain
• This results in a loss of supply chain
  coordination, a
• decrease in profits and product availability,
  and an increase
• in costs (manufacturing, inventory,
  transportation,etc.)

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Coordination Obstacles
Any factor that leads to either a local
optimization by the different stages of the
supply chain, or that increases variability and
information distortion within a supply chain, is
an obstacle to coordination.

• Incentive obstacles (local optimization)
• Information processing obstacles (distorted
  information)
• Operational obstacles (ordering in large batch
  sizes )
• Pricing obstacles (discounts that result in
  forward buying)
• Behavioral obstacles (local views instead of
  global views)

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Example

• Laser Beam Steerer

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Components
Lens Cover
Main Block
Lens - 2
Lens -1
Screws
Rail - 2
Rail - 1
Spring
Cover
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Bill of Materialfor Laser Beam Steerer
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Low Level Code Diagramfor Laser Beam Steerer
Low Level Code
0
Laser Beam Steerer
1
Cover
Main Block Assembly
2
Rail - 1
Rail - 2
Bungee
Actuators
Lens Assembly
3
Lens - 1
Lens - 2
Lens Cover
Gel
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Forecasted Demand Production LevelingFor
Laser Beam Steerer
24.26
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Partial Net Material Requirements Plan
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Make-or-Buy Decisions
Make-or-Buy Decision Choosing between producing
a component or a service in-house or purchasing
it from an outside source.
For most companies the percent revenue spent on
labor is going down, but the percent spent on
purchases is going up.
Source Heizer Render, Operations Management,
Sixth Ed., Prentice Hall, 2001
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Reasons for Making

• Lower production cost
• Unsuitable suppliers
• Assure adequate supply (quantity or delivery)
• Utilize surplus labor or facilities and make a
  marginal contribution
• Obtain desired quality

• Remove supplier collusion
• Obtain unique item that would entail a
  prohibitive commitment for a supplier
• Maintain organizational talents and protect
  personnel form a layoff
• Protect proprietary design or quality
• Increase or maintain size of the company
  (management preference)

Source Heizer Render, Operations Management,
Sixth Ed., Prentice Hall, 2001
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Reasons for Buying

• Lower acquisition cost
• Preserve supplier commitment
• Obtain technical or management ability
• Inadequate capacity
• Reduce inventory cost

• Ensure alternative sources
• Inadequate managerial or technical resources
• Reciprocity
• Item is protected by a patent or trade secret
• Frees management to deal with its primary business

Source Heizer Render, Operations Management,
Sixth Ed., Prentice Hall, 2001
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Make-or-BuyStep 1 Identify Criteria and
Weights Example Rail - 1
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Make-or-BuyStep 2 Analysis SuppliersExample
Rail - 1
All weights are on a 1-to-10 scale
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Make-or-BuyStep 3 Decision Example Rail - 1
Buy
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Make-or-BuyStep 4 Verify DecisionExample Rail
- 1
Do Suitable Suppliers Exist
NO
Make
Does Item Entail Prohibitive Supplier Commitment
NO
Make
Is Item Proprietary
Make
NO
Do the greater goal of the Company Benefit form
Internal Supply
NO
Make
YES
Buy
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Make-or-Buy for Laser Beam Steerer
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References
Baiman, Fischer Rajan Performance Measurement
and Design in Supply Chains Management Science,
Vol. 27, No. 1, January 2001 Chopra Meindl
Supply Chain Management Prentice Hall
2001 Cohen, Cull, Lee Willen Saturns
Supply-Chain Innovation High Value
in After-Sales Service Sloan Management Review,
Summer 2000 Handfield Nichols Introduction to
Supply Chain Management Prentice Hall,
1999 Heizer Render Operations Management
Sixth Ed., Prentice Hall, 2001 Mclovor
Humphreys A case-based reasoning approach to
the make or buy decision http//www.emerald-lib
rary.com, 2000 Spinda, Campanella Codeluppi
Make vs buy vs partnership in distributing Commod
ities a case study and a moethodology
http//www.emerald-library.com, 2000
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uestions ??