Supply Chain Management: A Managerial and Technical View

1
Supply Chain ManagementA Managerial and
Technical View

• Ahmed Al-Yahya
• James Chandler
• Ryan Oglesby

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Introduction

• What is a supply chain?
• Raw materials ? Delivered goods/services
• What is Supply Chain Management (SCM)?
• SCM models
• SCM problems
• Traditional SCM

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SCM Strategic Model

• Strategic network optimization
• Strategic partnership with suppliers
• Product design coordination
• Information technology infrastructure
• Where? What? To make or buy
• Align organization strategy with supply strategy

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SCM Tactical Model

• Sourcing contract
• Production decisions
• Inventory decision
• Transportations strategy
• Benchmarking of all operations vs. competitors or
  historical
• Milestone payments

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SCM Operational Model

• Daily production and distribution planning
• Production scheduling for each manufacturing
  facility in the supply chain
• Demand planning and forecasting
• Source planning
• Inbound operations
• Production operations
• Outbound operation
• Order promising

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SCM Problems

• Distribution Network configuration
• Distribution Strategy
• Information
• Inventory Management
• Cash-Flow

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Traditional SCM

• Activates and operations that take place across
  the supply chain were managed independently.
• The different aspects of SCM (purchasing
  inventory, manufacturing, marketing,
  distribution, sales force) rarely coordinated
  with each other.
• Technology was not optimized in communication
  between supply chain partners.

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Current Supply Chain Communication Methods

• Email 88
• Fax 73
• Telephone 62
• Traditional Mail 59
• (from July 2006 IDC Survey)

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SCM Software

• Why?
• Organize communications.
• Track data (demand, supply, manufacturing status,
  logistics, distribution).
• Share data with supply chain partners.
• Get rid of Microsoft Excel!

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SCM Products

• Visibility Tools
• Planning Tools
• Collaboration Tools
• Control Tools

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Visibility Tools

• Summary
• Provides a clear view of the supply chain.
• Without visibility, an organization cannot plan
  and react to changes.
• Results
• Greater access to information about inventory,
  orders, shipments, and invoices.
• Enhanced communication.
• Customer Order Management
• Product Information Management
• Merchandise Planning/Reporting

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Planning Tools

• Summary
• Demand-driven.
• Constraint-based.
• Designed to improve sales and operations planning
  and factory planning.
• Helps to manage risk.
• Forecasting
• Profiling
• Materials Management
• Promotions Management

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Collaboration Tools

• Summary
• Enables an extended supply chain to operate as a
  single entity.
• Financial Planning
• Business Process Integration
• Supply Management

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Control Tools

• Summary
• Monitor and manage systems.
• Execute specified actions.
• Continually improve and develop processes.
• Improve decision-making.
• Planning/Buying Control
• Forcasting Control
• Customer Ordering Control
• Product Control
• Collaboration Control

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Companies and Costs

• Companies
• E2open
• GXS
• Inovis
• Sterling Commerce
• i2

• Standards Used
• EDI
• RosettaNet
• XML

Costs 200 thousand ? 500 million Integration
Length 9 Months ? 6 Years
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ERP and SCM

• Many SCM applications are reliant upon the kind
  of information that is stored in ERP software.
• SCM systems benefit from having a single source
  to go to for up-to-date information.
• Most ERP vendors have SCM modules.
• It's important to pay attention to the software's
  ability to integrate with the Internet and with
  ERP applications because the Internet will drive
  demand for integrated information.

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Web-based SCM Systems

• Blend traditional network capabilities with
  hosted supply chain software and back-office
  integration services.
• Buyers are now able to quickly adjust order
  amounts to match updated forecasts and then
  modify supplier shipment data before it becomes a
  problem in the back-office.
• Uses
• forecasting, generating orders, demand and supply
  synchronization, logistics visibility

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Web-based SCM Systems Advantages

• Elimination of manual processes.
• More accurate, timely view of demand and order
  management data.
• Focus on development and system enhancement.
• Hosted front-end has the ability to communicate
  with the different communications protocols found
  in todays supply chains

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Web-based SCM SystemsWorries

• Data security
• Integration
• Downtime
• Customization

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Forecasting Demand

• Understanding customer demand is key to any
  manufacturer to make and keep sufficient
  inventory so customer orders can be correctly
  met.
• Needs good information.
• Rely on historical data.

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A Demand Forecasting Disaster Nike

• The Plan
• Cut the manufacturing cycle for a sneaker down
  from nine months to six to match Nikes
  manufacturing cycle to its retailers ordering
  schedule.
• How?
• Use demand-driven SCM algorithms.
• When?
• 1998 - 2006

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Timeline to Disaster

• Pre 1998 Centralization.
• 1998 Globalization and fragmentation.
• 2000 Integration problems with predictive demand
  applications and other SCM software.
• And then ..
• software glitches.

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Timeline to Disaster cont.

• 2000 Demand prediction glitches affect factory
  orders.
• Too many orders for Air Garnetts.
• Orders for Air Jordans were lost or deleted.
• 2000 Develop workarounds.
• Weekly manual reloading of data.
• Build databases to bypass portions, and custom
  bridges were constructed to enable integration.

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Supply Chain Collaboration

• Wal-Mart and Procter Gamble
• PG is connected to Wal-Mart's distribution
  centers
• Automatic alerts are sent to PG to ship
  additional products when products get low
• PG monitors the shelves through real-time
  satellite link-ups
• System saves PG time so that it can afford to
  give Wal-Mart "low, everyday prices"

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Road Blocks

• Problems
• Gaining trust from your suppliers and partners
• Internal resistances to change
• Initial forecasting mistakes

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Road Blocks cont.

• Solutions
• Convince supply chain partner to collaborate with
  you
• Convince the people in the company to use the
  system
• Prepare the forecasters for initial naiveté of
  the system

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The Future
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Globalization

• Advantages
• Manufacturing is cheaper because of low labor
  costs
• Technology capable of tracking shipments
  throughout the world is improving
• Its possible to get many of the benefits of
  just-in-time inventory while paying low foreign
  prices

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Globalization cont.

• Disadvantages
• Real-time data sharing with foreign factories is
  difficult to set up
• There will be delays due to the distance of
  travel
• The technology needed is still pretty expensive
  and the infrastructure may not be in place
• There isn't a piece of technology out there that
  can make up for the whim of a Chinese Customs
  official

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RFID

• Advantages
• Can record whatever information someone wishes to
  program it with
• Can be read automatically by electronic readers
• Have the potential to add a substantial amount of
  visibility into the extended supply chain
• RFID technology is going to generate mountains of
  data about the supply chain

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RFID cont.

• Disadvantages
• The cost of building the infrastructure
• The lack of agreed-upon industry standards

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Conclusions

• Advantages
• JIT Inventory
• Manufacturers can track product levels
• Lower costs
• Sharing data
• Forecasting
• Greater supply chain visibility
• Less guessing

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Conclusions cont.

• Disadvantages
• No complete package that is right for every
  company
• Possibility of inaccurate forecast
• If employees manually manage the system, it will
  provide an incomplete picture of the companys
  supply chain
• Companies are reluctant to share information
• Systems often tightly integrate a limited few
  suppliers and trading partners

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Questions?
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References

• http//www.cio.com/article/40940/
• http//en.wikipedia.org/wiki/Supply_chain_manageme
  nt
• http//lcm.csa.iisc.ernet.in/scm/supply_chain_intr
  o.html
• http//supply-chain-systems.com/
• http//www.i2.com/solution_library/
• http//www.cio.com/article/32334/
• http//www.cio.com/article/25784/