Supply Chain Management Systems PDF

Supply Chain Management Systems Enterprise Systems Application Dr. Nourhan Hamdi Lecture 7 [email protected] What is Supply Chain? What is a Supply Chain?  – Supply chain is the network of services, material, and information flow th...

Supply Chain Management Systems Enterprise Systems Application Dr. Nourhan Hamdi Lecture 7 [email protected] What is Supply Chain? What is a Supply Chain?  – Supply chain is the network of services, material, and information flow that link a What is a firm’s customer relations, order fulfillment, Supply Chain? and supplier relations processes to those of its suppliers and customers.  –Supply chain management (SCM) is the coordination of a business’ entire production flow, from sourcing raw materials to delivering a finished item. What is SCM?  – Michael E. Porter: – “A business value chain consists of a series of processes or activities conducted by the company to add value to the existing product or Significance service and to provide a competitive advantage in the market.” of SCM – Companies need to understand their supply chain and build the strategy such that its competitive strategy and supply chain strategy are aligned. Significance of SCM Porter's Value Chain divides a company's activities into two categories: Primary Activities: These are directly involved in the creation and delivery of a product or service and include: Outbound Logistics: Inbound Logistics: Operations: Marketing and Sales: Service: Providing Distributing finished Receiving and storing Transforming inputs Promoting and selling post-sale support to products to raw materials. into final products. products. customers. customers. Support Activities: These assist primary activities and include: Firm Infrastructure: Technology Human Resource Organizational Procurement: Acquiring Development: Research Management: structure, management, resources and materials. and development, Recruiting, training, and and administrative innovation. managing employees. systems.  – Corporations are striving to focus on core competencies and become more flexible and reduced their ownership of raw materials sources and distribution channels. Significance – All the functions of a company’s supply chain contribute to its success or failure and they all need of SCM to work together to ensure success. – To achieve strategic fit, a company must ensure that its supply chain capabilities support its ability to satisfy the targeted customer segments.  – The global supply chain is a complex network of suppliers, manufacturers, distributors, retailers, wholesalers and customers. – Effective SCM is about optimizing this network to ensure that everything gets where it needs to be, when it needs to be there and as smoothly as possible. Effective SCM – It includes obtaining the necessary components, manufacturing the product, storing it, transporting it and getting it to customers. – Effective supply chain management minimizes costs, waste and time in the production cycle. It directly impacts profitability and allows businesses to gain a competitive advantage in today's global marketplace. – Alexander the Great once famously said: – “My logisticians are a humorless lot… for they know if my campaign fails, they are the first ones I will slay”. – And while this example may be extreme, it illustrates how important supply chains have always been to human civilization. – Efficient and resilient supply chain management tools and practices are an essential component to any company’s survival and success.  Supply Chain Logistics – The supply chain – Logistics is a subset of the encompasses the entire end- supply chain that focuses on to-end process involved in the efficient transportation producing and delivering a and storage of goods. Terminologies product to the end customer. – It deals specifically with – It includes all the stages that planning, executing, and take a product from raw controlling the movement materials to the final product, and storage of goods from covering procurement, one location to another (e.g., production, distribution, from the warehouse to the and sales. retailer). Key Differences Between Supply Chain and Logistics  Facilities Information SCM Drivers Inventory Transportation Facilities – Facilities are the places in the supply chain network where product is manufactured, stored, or shipped. – The two major types of facilities are production sites (plants) and storage sites (warehouses). – A company needs to decide how many suppliers, manufacturing facilities, distribution centers, and warehouses to have. Inventory – Inventory is the raw materials, work in process, and finished goods that belong to the company. – A successful inventory management policy is to achieve that right balance of responsiveness and efficiency. Transportation – Transportation moves the product between different stages in a supply chain. – The type of transportation a company uses also affects the inventory and facility locations in the supply chain.  –Information consists of data and analysis concerning facilities, inventory, transportation, and Information customers throughout the supply chain.  Product Flow - The product flow includes the movement of goods from a supplier to a customer, as well as any customer returns or service needs. The finance Flow - The financial flow consists of SCM Flow credit terms, payment schedules, and consignment and title ownership arrangements. Information Flow - The information flow involves transmitting orders and updating the status of delivery.  SCM System Components SCM Flow  SCM System Components Supply Planning This involves developing and establishing a supply chain strategy based on customer demand and company inventory for a product. Most companies make use of certain analytical tools to match supply with demand and develop a course of action. Sourcing/Procuring Raw Materials Identifying suppliers that can provide the raw materials and services required to manufacture the product. Establishing a system to monitor and manage supplier relationships and productivity. SCM Flow This includes processes like ordering, receiving, managing inventory, and authorizing supplier payments. Manufacturing Transforming the raw material into the final product. This stage includes production, assembly, testing and packaging of final product. Delivery and Logistics Coordinating with customers in scheduling and dispatching deliveries, invoicing customers, and receiving payments. Processing Returns Establishing a system to take back unwanted or defective products from customers. The firm may also return excess or expired raw materials back to the vendors or suppliers.  – ERP focus is on providing an integrated transaction processing that enhances organizational performance by increasing information consistency and transaction efficiency. – SCM, on the other hand, are aimed at providing a higher level SCM and ERP of business planning and decision support functionality for effective coordination and execution of inter-organizational business processes. – Modern technologies have revolutionized the way business is carried on and SCM and ERP are no exceptions. The Role of ERP in SCM  – To stay competitive, enlightened companies have strived to achieve greater coordination and collaboration among supply chain partners. – Information integration refers to the sharing of information among members of the supply chain. SCM – Planning synchronization refers to the joint design and Integration execution of plans for product introduction, forecasting, and replenishment. – Workflow coordination refers to streamlined and automated workflow activities between supply chain partners. Dimension Elements Benefits Information Information sharing and transparency Reduced bullwhip effect Integration Direct and real-time accessibility Early problem detection Faster response Trust building Synchronized Collaborative planning, forecasting, Reduced bullwhip effect Planning and replenishment Lower cost Joint design Optimized capacity utilization Improved service SCM Integration Dimensions  Upstream Supply Chain Downstream Supply Chain – refers to activities, processes, – refers to activities, processes, Classification or interactions closer to the raw material source or the or interactions that move toward the end customer, or of Supply beginning of the supply the end of the supply chain. chain. Chains – In an upstream flow, a – In the downstream flow, the company focuses on company looks towards its distributing its products to suppliers or the origins of the customers, including raw materials it needs to wholesalers, retailers, and produce goods. ultimately end consumers. This figure illustrates the major entities in Nike’s supply chain and the flow of information upstream and downstream to coordinate the activities involved in buying, making, and moving a product.  – The bullwhip effect is a phenomenon in supply chain management where small fluctuations in demand at the consumer level cause increasingly larger fluctuations in demand as What is a you move up the supply chain, from retailers to Bullwhip Effect wholesalers, manufacturers, and suppliers. in SCM? – This effect can lead to inefficiencies like excessive inventory, stockouts, longer lead times, and increased costs. Inaccurate information can cause minor fluctuations in demand for a product to be amplified as one moves further back in the supply chain. Minor fluctuations in retail sales for a product can create excess inventory for distributors, manufacturers, and suppliers. Demand Forecasting: Over-reliance on past demand data without real-time consumer insights can lead to inaccurate forecasts. Order Batching: Placing large, infrequent orders instead of small, frequent ones causes variability in demand. Causes of the Bullwhip Price Fluctuations: Promotions, discounts, or price changes can create artificial spikes in demand, leading to Effect overordering. Lack of Communication: When each stage in the supply chain operates independently, they may not have visibility into real consumer demand.  1. Improve Demand Forecasting: Using data analytics, machine learning, and real-time consumer insights can help provide a more accurate forecast of demand. 2. Enhance Communication: Sharing demand information among all supply chain participants, How to avoid often through supply chain integration or collaborative planning, can reduce distortions. the Bullwhip Effect 3. Reduce Order Batching: Using smaller, more frequent orders instead of large ones helps smooth demand variability. 4. Stabilize Prices: Avoiding frequent price changes or promotions can help create more consistent demand. Push- Versus Pull-Based Supply Chain Models A comprehensive Integrated View MATCH SUPPLY TO DEMAND REDUCE INVENTORY LEVELS IMPROVE DELIVERY SERVICE SPEED PRODUCT TIME TO MARKET Business value of SCM systems USE ASSETS MORE REDUCED SUPPLY CHAIN INCREASE SALES EFFECTIVELY COSTS LEAD TO INCREASED PROFITABILITY