October 16, 2001

1
Chapter 1 Discussion
2
Questions

• What is a supply Chain?
• Use Domino as an example
• What needs to be managed?
• Why?

3
Definitions

• ECF
• Boundary spanning
• Landed cost
• Risk sharing
• Alliances
• Reverse logistics
• Effective/efficiency
• Asset productivity
• Third Party
• Facilitator

4
From Physical Distribution to Supply Chain
Management
5
Physical Distribution Management

• Focus
• Transportation
• Inventory
• Packaging
• Warehousing
• Order Entry
• Situation
• Inventory every 300 miles (Inventory was
  inexpensive)
• LTL and TL carriers (plus two marginal carriers)
• Large number of wholesalers
• Wholesalers cost covered by difference in LTL
  and TL Rates
• Functional silosOrganizations very functional
  (sales, warehousing, accounts receivable, etc.)
• Tradeoff between options

6
Integrated Management - Logistics

• Catalyst
• Systems thinking
• Purchase cost or landed cost or total cost or
  life cycle cost
• Situation
• Organizational Changes
• coordination_meetings
• Systems Thinking
• Define scope
• Define parameters
• Define Input
• Define output
• Design System to optimize desired outcome
• Trade offs between options

7
Supply Chain Management

• Catalyst
• Vietnam War (21) Interest rates
• Oliver Williamson large percentage of non value
  added cost (overhead)
• Ohno at Toyota Lean Production
• Wal-Mart and PG Partnership
• Michael Hammer - Reengineering

8
Supply Chain Management (2)

• Situation
• Expanded the scope of study from the firm to
  include all suppliers and all customers
• Visualization
• Expanded Systems Thinking
• Pipeline (See Fig 1-3)
• Supply Chain Analogy (See Fig 1-4)
• Results
• Transportation and Inventory Cost have
  dramatically decreased over the last decade
• Few LTL carriers
• Growth of Parcel Services (FedEx, UPS, etc.)

9
Supply Chain Management (3)

• Beneficiaries
• Retail oriented firms
• Wal-Mart
• Auto Zone
• Walgreens
• Manufacturers
• Dell
• Emphasis Areas
• Demand Management
• Partnerships
• Reengineering
• Information Technology

10
Synchronize Processes with Information not
Inventory?

11
New Tradeoffs

• Reduce Transportation, Inventory and Increase
  Customer Service at same time.