Supply Chain Management PDF

Chapter 1 INTRODUCTION TO SUPPLY CHAIN MANAGEMENT 1. GENERALIZE SUPPLY CHAIN 2 GV: NGUYEN Thi Duc Nguyen 1 EVOLUTION OF SUPPLY CHAIN MANAGEMENT Further Refinement of SCM Capabilities SCM Formation/ Extensions JIT, TQM, BPR, Alliances Inventory Management/Cost Optimization Traditional Mass Man...

Chapter 1 INTRODUCTION TO SUPPLY CHAIN MANAGEMENT 1. GENERALIZE SUPPLY CHAIN 2 GV: NGUYEN Thi Duc Nguyen 1 EVOLUTION OF SUPPLY CHAIN MANAGEMENT Further Refinement of SCM Capabilities SCM Formation/ Extensions JIT, TQM, BPR, Alliances Inventory Management/Cost Optimization Traditional Mass Manufacturing 1950s 1960s 1970s 1980s 1990s 2000s Beyond WHAT IS A SUPPLY CHAIN? David Simchi-Levi et.al., 2009 Flow of products and services from: • Raw materials manufacturers • Intermediate products manufacturers • End product manufacturers • Wholesalers and distributors and • Retailers • Connected by transportation and storage activities • Integrated through information, planning, and integration activities • Cost and service levels GV: NGUYEN Thi Duc Nguyen 2 What Is Supply Chain Management? • Supply chain management is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize system wide costs while satisfying service level requirements. What Is Supply Chain Management? • A typical supply chain is a chain operation such as: raw materials are procured, products are produced, shipped to warehouses, and then shipped to retailers or customers (David Simchi-Levi et al., 2000) 6 GV: NGUYEN Thi Duc Nguyen 3 What Is Supply Chain Management? • Felix et al. (2003) SC system integrates all operations and departments through suppliers, inbound logistics, core manufacturer, outbound logistics, marketing and sales, and end customers •  “SCM” ＞“Logistic”! 7 What Is Supply Chain Management? • Stadtler (2002; 2005) built the house of SCM and mentioned to the SC planning matrix (Meyr et al., 2002) which procurement, related production, business functions: transportation and distribution, and sales 8 GV: NGUYEN Thi Duc Nguyen 4 What Is Supply Chain Management? Competitiveness Customer service Integration: Coordination: Choice of partners Use of information and communication technology Network organization and inter-organizational collaboration Leadership Process orientation Advanced planning Foundation: Logistics, marketing, operations research, organizational theory, purchasing and supply… Fig. House of SCM (Stadtler, 2002; 2005) 9 What Is Supply Chain Management? • “Fierce competition in today’s global market, the introduction of products with short life cycles, and the heightened expectations of customers have forced business enterprises to invest in, and focus attention on, their supply chains” (David Simchi-Levi et al., 2000). Therefore, supply chain management (SCM), now, is very important role in business activities! • Emphasize on the role of SCM. 10 GV: NGUYEN Thi Duc Nguyen 5 SUPPLY CHAIN Purchasing Suppliers Manufacturing Raw materials Factories Distributing Warehouse/ storage Retailers/ customers Fig. Typical Supply Chain 11 SUPPLY CHAIN procurement long-term production distribution sales Strategic Network planning mid-term Master Planning short-term Purchasing & Material Requirements Planning Production Planning Distribution Planning Scheduling Transport Planning Demand Planning Demand fulfillment Fig. Software modules covering the Supply Chain planning matrix (Meyr et al., 2002) 12 GV: NGUYEN Thi Duc Nguyen 6 SUPPLY CHAIN MANAGEMENT Supply chain management is concerned with the efficient integration of suppliers, factories, warehouses and stores so that merchandise is produced and distributed: •In the right quantities •To the right locations •At the right time 13 WHAT IS SUPPLY CHAIN MANAGEMENT? • Supply chain management is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize system wide costs while satisfying service level requirements. GV: NGUYEN Thi Duc Nguyen 7 TWO OTHER FORMAL DEFINITIONS The design and management of seamless, valueadded process across organizational boundaries to meet the real needs of the end customer Institute for Supply Management Managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer The Supply Chain Council THE GOAL OF SUPPLY CHAIN MANAGEMENT =>What Is the Goal of Supply Chain Management? In order to •Minimize total system cost •Satisfy customer service requirements 16 GV: NGUYEN Thi Duc Nguyen 8 Khách hàng: nhu cầu THE SCM NETWORK Nhà máy Tổng kho Đại lý Cung ứng Chi phí bảo quản Chi phí sản xuất / mua Chi phí vận chuyển Chi phí bảo quản Chi phí vận chuyển Fig. The logistics network 17 D. Simchi-Levi, P. Kaminshy & E. Simchi-Levi, 1999 Key Observations • Every facility that impacts costs need to be considered • Suppliers’ suppliers • Customers’ customers • Efficiency and cost-effectiveness throughout the system is required • System level approach • Multiple levels of activities • Strategic – Tactical – Operational GV: NGUYEN Thi Duc Nguyen 9 Other Related Observations • Supply chain strategy linked to the Development Chain • Challenging to minimize system costs and maximize system service levels • Inherent presence of uncertainty and risk THE DYNAMICS OF THE SUPPLY CHAIN Production Plan Distributor Orders Order Size Retailer Orders Customer demand Fig. The Dynamics of the Supply Chain Time 20 Tom McGuffry, Electronic Commerce and Value Chain Management, 1998 GV: NGUYEN Thi Duc Nguyen 10 THE DYNAMICS OF THE SUPPLY CHAIN Practical information for managers Order Size Production Plan Customer demand Time Fig. The Dynamics of the Supply Chain 21 Tom McGuffry, Electronic Commerce and Value Chain Management, 1998 THE DYNAMICS OF THE SUPPLY CHAIN Order Size What Management Wants… The plan needs to be achieved by managers Customer demand Production Plan Tom McGuffry, Electronic Commerce and Value Chain Management, 1998 Time 22 GV: NGUYEN Thi Duc Nguyen 11 2 &3. SUPPLY CHAIN STRUCTURE AND ITS OPERATION 23 STRUCTURE & COMPONENTS Sources: plants vendors ports Regional Warehouses: stocking points Field Warehouses: stocking points Customers, demand centers sinks Supply Inventory & warehousing costs Production/ purchase costs Transportation costs D. Simchi-Levi, P. Kaminshy & E. Simchi-Levi, 1999 GV: NGUYEN Thi Duc Nguyen Inventory & warehousing costs Transportation costs 24 12 The SCM Network FIGURE 1.1: The logistics network STRUCTURE & COMPONENTS 1. (Suppliers): Suppliers Suppliers Manufacturing Plants Suppliers Khách hàng 26 GV: NGUYEN Thi Duc Nguyen 13 STRUCTURE & COMPONENTS 2. (Manufacturers): 27 STRUCTURE & COMPONENTS 3. (Distributors): 28 GV: NGUYEN Thi Duc Nguyen 14 STRUCTURE & COMPONENTS 4. (Retailers): 29 STRUCTURE & COMPONENTS 5. (Customers/end-users): 30 GV: NGUYEN Thi Duc Nguyen 15 THE DEVELOPMENT CHAIN - Product architechture Plan/Design - Make/buy - Early supplier involvement - Strategic partnerships Source - Supplier (vendor) selection - Supply contracts Supply Produce Distribute Sell D. Simchi-Levi, P. Kaminshy & E. Simchi-Levi, 2008 31 The Development Chain • Set of activities and processes associated with new product introduction. Includes: • product design phase • associated capabilities and knowledge • sourcing decisions • production plans GV: NGUYEN Thi Duc Nguyen 16 The Development Chain Fig. The enterprise development and supply chain • Set of activities and processes associated with new product introduction. Includes: • product design phase • associated capabilities and knowledge • sourcing decisions • production plans 4. The COMPLEXITY in SUPPLY CHAIN 34 GV: NGUYEN Thi Duc Nguyen 17 Complexity: The Magnitude • U.S. companies spend more than $1 trillion in supply-related activities (10-15% of Gross Domestic Product) • Transportation 58% • Inventory 38% • Management 4% • The grocery industry could save $30 billion (10% of operating cost) by using effective logistics strategies • A typical box of cereal spends 104 days getting from factory to supermarket. • A typical new car spends 15 days traveling from the factory to the dealership. Complexity: The Magnitude • Compaq computer’s loss of $500 million to $1 billion in sales in one year • Laptops and desktops were not available when and where customers were ready to buy them • Boeing’s forced announcement of write-downs of $2.6b • Raw material shortages, internal and supplier parts shortages…. • Cisco’s multi-billion ($2.2b) dollar write-off of inventories in 2001-2002 • Customers balked on orders due to market meltdown GV: NGUYEN Thi Duc Nguyen 18 Transactional Complexity National Semiconductors: • Production: – Produces chips in six different locations: four in the US, one in Britain and one in Israel – Chips are shipped to seven assembly locations in Southeast Asia. • Distribution – The final product is shipped to hundreds of facilities all over the world – 20,000 different routes – 12 different airlines are involved – 95% of the products are delivered within 45 days – 5% are delivered within 90 days. Supply Chain: The Potential • P&G’s estimated savings to retail customers of $65 million through logistics gains • Dell Computer’s outperforming of the competition in terms of shareholder value growth over more than two decades by over 3,000% using: • Direct business model • Build-to-order strategy • Wal-Mart transformation into the world’s largest retailer by changing its logistics system: • highest sales per square foot, inventory turnover and operating profit of any discount retailer GV: NGUYEN Thi Duc Nguyen 19 5. KEY ISSUES IN SC MANAGEMENT 43 Uncertainty and Risk Factors • Forecasting is not a solution • Demand is not the only source of uncertainty • Recent trends make things more uncertain • Lean manufacturing • Outsourcing • Off-shoring GV: NGUYEN Thi Duc Nguyen 20 RULES FOR logistic MANAGERs 6 RULES FOR logistic MANAGERs of the right product in the right quantity the right condition at the right price the right customer at the right cost 51 Key Issues in Supply Chain Management Chain Distribution Network Configuration Supply Inventory Control Supply Production Sourcing Supply Supply Contracts Both Distribution Strategies Supply Development Strategic Partnering Outsourcing and Offshoring Development Product Design Development Information Technology Supply Customer Value Both Smart Pricing Supply Global Optimization Managing Risk and Uncertainty Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y TABLE 1-1: Key supply chain management issues GV: NGUYEN Thi Duc Nguyen 21 KEY STRATEGIES FOR SC SUCCESS Shorter, more predictable supply chains Key strategies for supply chain success Add final value to product closer to customer Move inventory upstream and out of supply chain Greater collaboration among supply chain firms Move to strategic sourcing and supply management Increased outsourcing of logistics services Leveraging information technology 53 Questions? 54 GV: NGUYEN Thi Duc Nguyen 22