1st Lesson PDF - Operations and Supply Chain Management

University of Kelaniya, Sri Lanka COMC 22344 – Operations and Supply Chain Management Mrs. K. S. H. Sarathchandra MBA in IT (sp) BA (UoM), BCom (sp) BT (UoK), Dip. in MA (CIMA UK) Lecturer Department of Commerce & Financial Management...

University of Kelaniya, Sri Lanka COMC 22344 – Operations and Supply Chain Management Mrs. K. S. H. Sarathchandra MBA in IT (sp) BA (UoM), BCom (sp) BT (UoK), Dip. in MA (CIMA UK) Lecturer Department of Commerce & Financial Management Department E-Mail of Commerce & Financial Management – [email protected] Introduction to Supply Chain Management 1 What Keeps the World Going? Behind every product, service & event there is a Supply Chain Logistics keeps Supply Chains running No Supply Chains no life! 2  Supply-chain management is the integration of the activities that procure materials and services, transform them into intermediate goods and the final product, and deliver them to customers Competition is no longer between companies; it is between supply chains Supply Chain Management is the set of activities and the network of organizations that make the journey between raw materials to the shipment of the final goods, a reality. The best way to understand what it does is torealize what happens when the world is devoid ofthem! 3 What is a Supply Chain? All stages involved, directly or indirectly, in fulfilling a customer request Includes manufacturers, suppliers, transporters, warehouses, retailers, and customers. Within each company, the supply chain includes all functions involved in fulfilling a customer request (product development, marketing, operations, distribution, finance, customer service). Examples: Fig. Detergent supply chain (Wal-Mart), Dell  Detergent supply chain (Wal-Mart) Customer wants P&G or other Jewel or third Jewel detergent and goes manufacturer party DC Supermarket to Jewel Chemical Plastic Tenneco manufacturer Producer Packaging (e.g. Oil Company) Chemical Paper Timber manufacturer Manufacturer Industry (e.g. Oil Company) Customer is an integral part of the supply chain. Includes movement of products from suppliers to manufacturers to distributors, but also includes movement of information, funds, and products in both directions. Probably more accurate to use the term “supply network” or “supply web”. Typical supply chain stages: customers, retailers, distributors, manufacturers, suppliers. All stages may not be present in all supply chains (e.g., no retailer or distributor for Dell)  Supply Chain Management What is Supply Chain Management? “The management of upstream and downstream relationships with suppliers and customer in order to deliver superior customer value at less cost to the supply chain as a whole.” Christopher, M. (2011) Source: By Entreprenovator, Marketing Strategy: Supply Chain Management, February 22, 2010. Supply Chain & Logistics Management Supply Chain Management vs Logistics Management Source: By Entreprenovator, Marketing Strategy: Supply Chain Management, February 22, 2010. Supply Chain Management – 8Rs The right Product At the right Customer In the right Quantity In the right Place At the right Time At the right Price At the right Quality In the right Way 7  bric Manufacture Manufactur Transportation OEM Distributor procurement WAREHOUSING Retailer n Cotton Manufacturer Nature Consumer Defining Supply Chain Management The term “supply chain management” arose in 1982 and came into widespread use in the 1990s. Prior to that time, businesses used terms such as “logistics” and “operations management” instead. “A supply chain consists of all stages involved, directly or indirectly, in fulfilling a customer request. The supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers, and customers themselves.” - Chopra and Meindl, 2001 Evolution of Supply Chain Management 10  Objective of Supply Chain Maximize overall value by increasing firm’s profitability/ revenue & reducing costs Customer Delight = f (Quality, Cost, Delivery) 13  Objective of Supply Chain Maximize overall value created. Supply chain value: difference between what the final product is worth to the customer and the effort the supply chain expends in filling the customer’s request. Value is correlated to supply chain profitability (difference between revenue generated from the customer and the overall cost across the supply chain) 13  Objective of Supply Chain Example: Dell receives $2000 from a customer for a computer (revenue) Supply chain incurs costs (information, storage, transportation, components, assembly, etc.) Difference between $2000 and the sum of all of these costs is the supply chain profit. Supply chain profitability is total profit to be shared across all stages of the supply chain Supply chain success should be measured by total supply chain profitability, not profits at an individual stage 13  Objective of Supply Chain Sources of supply chain revenue: the customer Sources of supply chain cost: flows of information, products, or funds between stages of the supply chain Supply chain management is the management of flows between and among supply chain stages to maximize total supply chain profitability 13 Flows in a Supply Chain Information Product Customer Funds Supply Chain Supply Chain Flows Material Flow Initial supplier Ultimate customer Information Flow There must be a good inter-organizational information provide the required information flow. Supply Chain Focus Traditional purchasing focuses on the flow of goods and information from the immediate supplier and immediate customer; SCM focuses on the flow of goods and information from initial supplier to ultimate customer.  Cereal Supply Chain Packaged Packaged Packaged Grain Cereal cereal cereal cereal Processing Grocery Farmer Packaging Distributor Customer facility store Paper board Corrugated Labels paper manufacturer Wood Label Material flow Lumbar manufacturers Information/fund flow company 14 Supply Chain is a Network 18  Supply Chain Goals Efficient supply chain management must result in tangible business improvements. It is characterized by a sharp focus on Revenue growth Better asset utilization Cost reduction 21 Supply Chains have become Global 22 23 How many countries does it take to make a coat? To make this jacket for the UK market, Hong Kong garment producer Li & Fung ordered materials from factories in five Countries and had them delivered to Thailand, where the jacket was stitched together. Using a network of web-‐sites, Li & Fung stays in touch with its worldwide suppliers and can compress the time it takes to get items into stores. China, the world’s largest producer of cotton Thailand, a leading exporter of imitation fur, ringed the made the liner Germany,which gave the hood world the snap fastener in the Taiwan, which specialises in making 1880s, sent the snaps material for outdoor clothing, produced Japan, the globe’s biggest producer of stainless steel for zippers, put its teeth in this zipper the shell and fleece  Ford’s Global Supply Chain Basildon Belfast Radiators, water Carburetors and Enfield pump assembly, Instruments, fuel enginecomponents distributors and water gauges, plugs Genk Treforest Bodypanels, Spark plug road wheels insulators Wülfrath Leamington Transmission parts, Foundry production of engine engine components components Dagenham Cologne Final assembly Die-‐cast transaxle casings, gear and engine Bordeaux components Transmissions Valencia Final Saarlouis Final assembly 42