Ch11_Supply Chain Management.pptx

Supply Chain Management 11 PowerPoint presentation to accompany Heizer, Render, Munson Operations Management, Thirteenth Edition, Global Edition Principles of Operations Management, Eleventh Edition Po...

Supply Chain Management 11 PowerPoint presentation to accompany Heizer, Render, Munson Operations Management, Thirteenth Edition, Global Edition Principles of Operations Management, Eleventh Edition PowerPoint slides by Jeff Heyl Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 1  Red Lobster's Supply Chain ► World's largest seafood restaurant company ► Serves 140 million meals annually from over 700 restaurants ► A winning operations strategy requires a winning supply chain ► Committed to seafood sustainability Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 2  Red Lobster's Supply Chain ▶ Sources food from five continents and thousands of suppliers ▶ Supply chains incorporate supplier qualification, product tracking, independent audits, and just-in-time delivery Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 3  Learning Objectives When you complete this chapter you should be able to: 11.1 Explain the strategic importance of the supply chain 11.2 Identify six sourcing strategies 11.3 Explain issues and opportunities in the supply chain 11.4 Describe the steps in supplier selection Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 4  Learning Objectives When you complete this chapter you should be able to: 11.5 Explain major issues in logistics management 11.6 Compute percentage of assets committed to inventory and inventory turnover Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 5  Supply-Chain Management The objective of supply chain management is to structure the supply chain to maximize its competitive advantage and benefits to the ultimate consumer Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 6  A Supply Chain for Beer Figure 11.1 Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 7  The Supply Chain’s Strategic Importance ▶ The coordination of all supply chain activities, starting with raw materials and ending with a satisfied customer ▶ Includes suppliers, manufacturers and/or service providers, distributors, wholesalers, retailers, and final customers Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 8  The Supply Chain’s Strategic Importance ▶ Large portion of sales dollars spent on purchases ▶ Supplier relationships increasingly integrated and long term ▶ Improve innovation, speed design, reduce costs ▶ Managing supplier relationships has added emphasis Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 9  Sourcing Issues ▶ Make-or-buy decisions ▶ Choosing between obtaining products and services externally as opposed to producing them internally ▶ Outsourcing ▶ Transfer traditional internal activities and resources to outside vendors ▶ Efficiency in specialization ▶ Focus on core competencies Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 10  Six Sourcing Strategies ▶ Many suppliers ▶ Few suppliers ▶ Vertical integration ▶ Joint ventures ▶ Keiretsu networks ▶ Virtual companies Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 11  Many Suppliers ▶ Commonly used for commodity products ▶ Purchasing is typically based on price ▶ Suppliers compete with one another ▶ Supplier is responsible for technology, expertise, forecasting, cost, quality, and delivery Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 12  Few Suppliers Buyer forms long term relationships with fewer suppliers Create value through economies of scale and learning curve improvements Suppliers more willing to participate in JIT programs and contribute design and technological expertise Cost of changing suppliers is huge Trade secrets and other alliances may be at risk Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 13  Developing the ability to Vertical produce goods or services Integration previously purchased Integration may be forward, towards the customer, or backward, towards suppliers Can improve cost, quality, delivery, and inventory but requires capital, managerial skills, and demand Risky in industries with rapid technological change Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 14 Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 15  Joint Ventures ▶ Formal collaboration ▶ Enhance skills ▶ Secure supply ▶ Reduce costs ▶ The challenge is to cooperate without diluting brand or conceding competitive advantage Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 16  Keiretsu Networks A middle ground between few suppliers and vertical integration Supplier becomes part of the company coalition Often provide financial support for suppliers through ownership or loans Members expect long-term relationships and provide technical expertise and stable deliveries May extend through several levels of the supply chain Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 17  Virtual Companies ▶ Rely on a variety of supplier relationships to provide services on demand ▶ Fluid organizational boundaries that allow the creation of unique enterprises to meet changing market demands ▶ Relationships may be short- or long-term ▶ Exceptionally lean performance, low capital investment, flexibility, and speed Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 18  Security and JIT ▶ Shipments get misrouted, stolen, damaged, or excessively delayed ▶ Technological innovations are improving security and inventory management ▶ Location, motion sensors, broken seals, temperature, radioactivity ▶ Tracking can help expedite shipments Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 19  Managing the Integrated Supply Chain ▶ Issues ▶ Local optimization can magnify fluctuations ▶ Incentives push merchandise into the supply chain for sales that have not occurred ▶ Large lots reduce shipping and production costs but increase inventory holding and do not reflect actual sales Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 20  Managing the Integrated o c cur s SupplyBChain ull w hi p e ffe c t rs are h e n o rd e e w h t h ▶ Issues re la ye d thr o u g it h a i n w p ly ch ng ▶ Local optimization can magnify su p ti on s in c re as i fluct ua fluctuations ch step at e a ▶ Incentives push merchandise into the supply chain for sales that have not occurred ▶ Large lots reduce shipping costs but increase inventory holding and do not reflect actual sales Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 21  Managing the Integrated Supply Chain ▶ Opportunities ▶ Accurate “pull” data, shared information ▶ Lot size reduction, shipping, discounts, reduced ordering costs ▶ Single stage control of replenishment ▶Single supply chain member responsible for ordering ▶ Vendor managed inventory (VMI) Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 22  Managing the Integrated Supply Chain ▶ Opportunities ▶ Collaborative planning, forecasting, and replenishment (CPFR) throughout the supply chain ▶ Blanket orders against which actual orders are released ▶ Standardization Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 23  Managing the Integrated Supply Chain ▶ Opportunities ▶ Postponement withholds modification as long as possible ▶ Electronic ordering and funds transfer speed transactions and reduce paperwork ▶ Drop shipping and special packaging bypasses the seller and reduces costs ▶ Blockchain aids tracking and verification Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 24  Building the Supply Base ▶ Supplier evaluation ▶ Finding potential suppliers ▶ Determine likelihood of their becoming good suppliers ▶ Supplier certification 1) Qualification 2) Education 3) Certification Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 25  Building the Supply Base ▶ Supplier development ▶ Integrate the supplier into the system ▶Quality requirements ▶Product specifications ▶Schedules and delivery ▶Procurement policies ▶Training ▶Engineering and production help ▶Information transfer procedures Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 26  Building the Supply Base ▶ Negotiation ▶ A significant element in purchasing ▶ Highly valued skills ▶Cost-based price model ▶ Supplier opens books ▶Market-based price model ▶ Based on published, auction, or indexed prices ▶Competitive bidding ▶ Common policy for many purchases ▶ Does not generally foster long-term relationships Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 27  Building the Supply Base ▶ Contracting ▶ Share risks, benefits, create incentives ▶ Centralized purchasing ▶ Leverage volume ▶ Develop specialized staff ▶ Develop supplier relationships ▶ Maintain professional control ▶ Devote resources to selection and negotiation ▶ Reduce duplication of tasks ▶ Promote standardization Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 28  Logistics Management ▶ Objective is to obtain efficient operations through the integration of all material acquisition, movement, and storage activities ▶ Is a frequent candidate for outsourcing ▶ Allows competitive advantage to be gained through reduced costs and improved customer service Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 29  Shipping Systems ▶ Trucking ▶ Moves the vast majority of manufactured goods ▶ Chief advantage is flexibility ▶ Railroads ▶ Capable of carrying large loads ▶ Containers and piggybacking have helped improve flexibility Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 30  Shipping Systems ▶ Airfreight ▶ Fast and flexible for light loads ▶ May be expensive ▶ Waterways ▶ Typically used for bulky, low-value cargo ▶ Used when shipping cost is more important than speed Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 31  Shipping Systems ▶ Pipelines ▶ Used for transporting oil, gas, and other chemical products ▶ Multimodal ▶ Combines shipping methods ▶ Common, especially in international shipments ▶ Aided by standardized containers Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 32  Third-Party Logistics (3PL) ▶ Outsourcing logistics can reduce inventory, costs, and improve delivery reliability and speed ▶ Coordinate supplier inventory with delivery services ▶ May provide warehousing, assembly, testing, shipping, customs Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 33  Distribution Management ▶ The outbound flow of products 1) Rapid response 2) Product choice 3) Service ▶ Increasing the number of facilities generally improves response time and customer satisfaction Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 34  Distribution Management ▶ Total costs are important ▶ Inventory costs ▶ Transportation costs ▶ Facility costs ▶ Total logistics costs Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 35  Distribution Management ▶ Facilities, packaging, and logistics ▶ Selection and development of dealers or retailers ▶ Downstream management is as important as upstream management Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 36  Institute for Supply Management Principles and Standards ▶ Promote and uphold responsibilities to one's employer; positive supplier and customer relationships; sustainability and social responsibility; protection of confidential and proprietary information; applicable laws, regulations, and trade agreements; and development of professional competence ▶ Avoid perceived impropriety; conflicts of interest; behaviors that negatively influence supply chain decisions; and improper reciprocal agreements Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 37  Establishing Sustainability in Supply Chains ▶ Return or reverse logistics ▶ Sending returned products back up the supply chain for resale, repair, reuse, remanufacture, recycling, or disposal ▶ Closed-loop supply chain ▶ Proactive design of a supply chain that tries to optimize all forward and reverse flows ▶ Prepares for returns prior to product introduction Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 38 Example of Closed-Loop Sup ply Chain Network Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 39  The SCOR Model ▶ Processes, metrics, and best practices Figure 11.4 Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 40  The SCOR Model SCOR Model Metrics to Help Firms Benchmark Performance TABLE 11.8 Against the Industry PERFORMANCE ATTRIBUTE SAMPLE METRIC CALCULATION Supply chain Perfect order fulfillment (Total perfect orders) / (Total number reliability of orders) Supply chain Average order (Sum of actual cycle times for all responsiveness fulfillment cycle time orders delivered) / (Total number of orders delivered) Supply chain agility Upside supply chain Time required to achieve an flexibility unplanned 20% increase in delivered quantities Supply chain costs Supply chain Cost to plan + Cost to source + Cost management costs to deliver + Cost to return Supply chain asset Cash-to-cash cycle Inventory days of supply + Days of management time receivables outstanding – Days of payables outstanding Copyright © 2020 Pearson Education Ltd. All Rights Reserved. 11 - 41