Supply Chain Collaboration

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Supply Chain Collaboration

• Frank Davis

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What is a Supply Chain?

• Inbound
• How many suppliers?
• How many tiers?
• How many carriers?
• Outbound
• How many carriers?
• How many channel members?
• How does the supply chain coordinate
• Information
• Product flow
• How do you do this an minimize inventory
  (investment)?

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What was Sichuan Toyota Bus Plant Supply Chain

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How did Toyota Do It?

• Trains are dispatched when they have 100 cars
• Trains do not follow schedules
• Each train has racks with enough parts for days
  production
• Each day racks are emptied and recycled
• Each day new racks are received for scheduled
  production

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Sichuan Bus Company

• How much inventory in plant?
• How do they minimize inventory?
• How do they process purchase orders?
• How do they receive supplies?
• What are lead times between Shanghai and Chengdu?
  
• 5 days
• How did they reduce rail transit time?

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Review (cont.)

• Lead times between Tianjin and Chengdu? 6 days
• Why were rail times so variable?
• What kinds of racks does Toyota use? How many
  units on a racks? How does this implement
  Kanban?
• How do they control parts arrival at Rail yard?

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Consider Steps Just to Place Order

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Supply Chain Collaboration Challenge

• Everyone can be more efficient if given time to
  plan.
• How do you give each channel member more time and
  more accurate information
• How do you coordinate activities?
• How do you eliminate waste time (muda)?
• How do you avoid hockey stick effect?

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How does WalMart do it?

• POS data capture
• Notify supplier as soon as SKU is sold.
• Ship replenishment stock
• If TL
• ship directly to store
• If LTL,
• ship to consolidation center
• Consolidate onto TL
• Haul to distribution center
• Cross dock to local delivery units
• Milk runs to local stores 2 or more times per
  week

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Inventory requirements depend upon demand rate
and time

• What if WalMart had major promotions?
• Can small volume suppliers link into this system?
  
• Swiss army knives? How?
• Why does WalMart have everyday low prices?
• Why does WalMart have regional distribution
  centers?

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What is Vendor Managed Inventory?

• Vendor can manage a category of product such as
  health items, jewelry, etc.
• May carry their own products plus competitors
  products.
• Sales can be transmitted to suppliers and they
  determine when to resupply.
• Suppliers computer has suppliers inventory
  maximum, tracks sales rate, knows reorder point,
  time required to get product on shelves. Keep
  shelves full.
• Suppliers simply resupply on regular basis
• Rack jobber
• Familiar with milk, beer, soda, frito lay,

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Small Shop
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Restocking small shops
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What happens if store has many promotions and
sales?

• Impossible to forecast because of retailers
  action
• Sales will probably require more inventory and
  more frequent replenishment
• Collaborative Planning, Forecasting and
  Replenishment (CPFR)
• Supplier forecast demand for each SKU based on
  history
• Retailer forecast demand for each SKU based on
  plans
• If forecast agree, restock according to forecast
• If forecast disagree, communicate to resolve
  differences
• How can retail keep from revealing competitors
  actions?

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Tiers Levels in a supply chain

• Identify a supply chain and describe one of the
  tiers.
• How far back should the forecast (communication)
  be shared?
• Efficient consumer response in grocery industry
  share throughout the tiers
• 30 billion in savings

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• What about manufacting?

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Dell Direct

• Have customers place orders on-line
• Schedule production when order received and paid
  for
• Forecast market for rolling 13 week period and
  send to suppliers each Monday
• Each Supplier makes commitment next day
  (feedback)
• Next week is certain, ability to change increases
  into the future
• Use web to make offers to clear receipts
• Use Service Logistics Center to receive shipments
• Every two hours send requirements list to SLC
• Every two hours use up parts just received
• Dell never has more than two hours inventory
• SLC averages 10 days inventory

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Bose Involve Suppliers in Planning

• Suppliers expected to be at weekly production
  planning meetings
• Bose never expects to place order or address
  quality issues again

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Principles 1- Supply Chains Compete

• Supply chains compete not firms
• Individual firms, such as transportation, may
  participate in multiple supply chains
• Standards, such as UPC, make it easier for firms
  to move in and out of supply chains

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Principle 2 Supply Chains Create Value for
Final Customer

• Customers go where they receive what they want
  when the want it at a price they perceive as
  fair.
• Supply chains must provide what customer want
• Toyota based on Kaizen (continuous improvement)
  to remove muda (waste)
• Any activity that does not provide customer value
  should be eliminated
• Inventory counts
• Reordering
• Maintaining inventory
• Invoicing

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Principle 3 Firms should buy Ends not Means

• Why buy products?
• Retailers want shelves full when customer arrive
• Manufacturers want production line feed stocks
• What is most cost effective way to do this?

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Principle 4 Give Suppliers Maximum Advance
Notice of Need

• Let supplier know as soon as you do what your
  needs will be.
• Manufacturing
• 13 week rolling forecast
• Participate in production scheduling meetings
• Retailing
• POS data if you use every day low prices
• Collaborative Planning Forecasting and
  Replenishment (CPFR) if retailer has promotions
• Vendor Managed Inventory Let vendor manage
  store shelves judge them based on return/linear
  foot of shelf space
• Let all tiers in on forecast efficient consumer
  response

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Principle 5 Pay for Desired Result

• Pay for what is sold
• Pay for input in each unit manufactured
• Eliminate need to check and verify each other
• If
• inventory become short find out where it is
  going
• Otherwise
• Keep selling and keep producing

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Principle 6 Cooperation Requires Communication

• WalMart Approach

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Communication (cont)

• Bose Example

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Communication (cont)

• CPFR Example
• VICS WEB SITE

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Principle 7 Meet Need with Minimum of Handling
and Cost

• Cross Docking
• Minimize wasted transportation
• Receive stock sell
• Receive move to production line

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Principle 8 Supply Chain members are not
competitors

• Need to make sure it is profitable for each
  member of supply chain
• It does not matter who performs a task, but how
  can the task be performed most cost effective
• Members of chain need to communicate to
  coordinate activities throughout the chain
• Would a member of the supply chain ever help
  supplier improve their processes?