Supply Chain Management: Strategy, Planning, and Operation PDF

Supply Chain Management: Strategy, Planning, and Operation Seventh Edition, Global Edition Chapter 1 Understanding the Supply Chain Copyright © 20...

Supply Chain Management: Strategy, Planning, and Operation Seventh Edition, Global Edition Chapter 1 Understanding the Supply Chain Copyright © 2019 Pearson Education, Ltd. Learning Objectives 1.1 Discuss the goal of a supply chain and explain the impact of supply chain decisions on the success of a firm. 1.2 Define the three key supply chain decision phases and explain the significance of each one. 1.3 Describe the cycle and push/pull views along with the macro processes of a supply chain. 1.4 Identify important issues and decisions to be addressed in a supply chain. 1.5 Develop skill that employers have identified as critical to success in the workplace. Copyright © 2019 Pearson Education, Ltd. What Is a Supply Chain? (1 of 3) All parties involved, directly or indirectly, in fulfilling a customer request Includes manufacturers, suppliers, transporters, warehouses, retailers, and customers Within each organization, the supply chain includes all functions involved in receiving and fulfilling a customer request (new product development, marketing, operations, distribution, finance, customer service) Copyright © 2019 Pearson Education, Ltd. What Is a Supply Chain? (2 of 3) Customer is an integral part of the supply chain Includes movement of products from suppliers to manufacturers to distributors and information, funds, and products in both directions May be more accurate to use the term “supply network” or “supply web” Typical supply chain stages: customers, retailers, wholesalers, distributors, manufacturers, suppliers Copyright © 2019 Pearson Education, Ltd. What Is a Supply Chain? (3 of 3) Figure 1-1 Stages of an Automotive Supply Chain Copyright © 2019 Pearson Education, Ltd. Flows in a Supply Chain Figure 1-2 The Three Flows in a Supply Chain Copyright © 2019 Pearson Education, Ltd. The Objective of a Supply Chain (1 of 3) Maximize net value generated Supply Chain Surplus = Customer Value − Supply Chain Cost Copyright © 2019 Pearson Education, Ltd. The Objective of a Supply Chain (2 of 3) Example: a customer purchases a wireless router from Best Buy for $60 (revenue) Supply chain incurs costs (convey information, produce components, storage, transportation, transfer funds, etc.) Difference between $60 and the sum of all of these costs is the supply chain profitability Supply chain profitability is total profit to be shared across all stages of the supply chain Success should be measured by total supply chain surplus, not profits at an individual stage Copyright © 2019 Pearson Education, Ltd. The Objective of a Supply Chain (3 of 3) Customer the only source of revenue Sources of cost include flows of information, products, or funds between stages of the supply chain Effective supply chain management involves the management of supply chain assets and product, information, and fund flows to grow the total supply chain surplus Copyright © 2019 Pearson Education, Ltd. Importance of Supply Chain Decisions Wal-Mart, $1 billion sales in 1980 to $482 billion in 2016 Seven-Eleven Japan, ¥1 billion sales in 1974 to ¥2.7 trillion in 2016 Webvan folded in two years Borders, $4 billion in 2004, declared bankruptcy in 2010 Dell, $56 billion in 2006, adopted new supply chain strategies Copyright © 2019 Pearson Education, Ltd. Summary of Learning Objective 1 The goal of a supply chain should be to grow overall supply chain surplus. Supply chain surplus is the difference between the value generated for the customer and the total cost incurred across all stages of the supply chain. A focus on the supply chain surplus increases the size of the overall pie for all members of the supply chain. Supply chain decisions have a large impact on the success or failure of each firm because they significantly influence both the revenue generated and the cost incurred. Successful supply chains manage flows of product, information, and funds to provide a high level of product availability to the customer while keeping costs low. Copyright © 2019 Pearson Education, Ltd. Decision Phases in a Supply Chain 1. Supply chain strategy or design – How to structure the supply chain over the next several years 2. Supply chain planning – Decisions over the next quarter or year 3. Supply chain operation – Daily or weekly operational decisions Copyright © 2019 Pearson Education, Ltd. Supply Chain Strategy or Design Decisions about the configuration of the supply chain, allocation of resources, and what processes each stage will perform Strategic supply chain decisions – Outsource supply chain functions – Locations and capacities of facilities – Products to be made or stored at various locations – Modes of transportation – Information systems Supply chain design must support strategic objectives Supply chain design decisions are long-term and expensive to reverse – must take into account market uncertainty Copyright © 2019 Pearson Education, Ltd. Supply Chain Planning (1 of 2) Definition of a set of policies that govern short- term operations Fixed by the supply configuration from strategic phase Goal is to maximize supply chain surplus given established constraints Starts with a forecast of demand in the coming year Copyright © 2019 Pearson Education, Ltd. Supply Chain Planning (2 of 2) Planning decisions: – Which markets will be supplied from which locations – Planned buildup of inventories – Subcontracting – Inventory policies – Timing and size of market promotions Must consider demand uncertainty, exchange rates, competition over the time horizon in planning decisions Copyright © 2019 Pearson Education, Ltd. Supply Chain Operation Time horizon is weekly or daily Decisions regarding individual customer orders Supply chain configuration is fixed and planning policies are defined Goal is to handle incoming customer orders as effectively as possible Allocate orders to inventory or production, set order due dates, generate pick lists at a warehouse, allocate an order to a particular shipment, set delivery schedules, place replenishment orders Much less uncertainty (short time horizon) Copyright © 2019 Pearson Education, Ltd. Summary of Learning Objective 2 Supply chain decisions may be characterized as strategic (design), planning, or operational, depending on the time horizon over which they apply. Strategic decisions relate to supply chain configuration. These decisions have a long-term impact that lasts for several years. Strategic decisions define the constraints for planning decisions, and planning decisions define the constraints for operational decisions. Planning decisions cover a period of a few months to a year and include decisions regarding production plans, subcontracting, and promotions over that period. Operational decisions span from minutes to days and include sequencing production and filling Copyright © 2019 Pearson Education, Ltd. Process Views of a Supply Chain 1. Cycle View: The processes in a supply chain are divided into a series of cycles, each performed at the interface between two successive stages of the supply chain. 2. Push/Pull View: The processes in a supply chain are divided into two categories, depending on whether they are executed in response to a customer order or in anticipation of customer orders. Pull processes are initiated by a customer order, whereas push processes are initiated and performed in anticipation of customer orders. Copyright © 2019 Pearson Education, Ltd. Cycle View of Supply Chain Processes (1 of 2) Figure 1-3 Supply Chain Process Cycles Copyright © 2019 Pearson Education, Ltd. Cycle View of Supply Chain Processes (2 of 2) Figure 1-4 Subprocesses in Each Supply Chain Process Cycle Copyright © 2019 Pearson Education, Ltd. Push/Pull View of Supply Chain Processes Supply chain processes fall into one of two categories depending on the timing of their execution relative to customer demand Pull: execution is initiated in response to a customer order (reactive) Push: execution is initiated in anticipation of customer orders (speculative) Push/pull boundary separates push processes from pull processes Copyright © 2019 Pearson Education, Ltd. Figure 1-5 Push/Pull View of Supply Chains Copyright © 2019 Pearson Education, Ltd. Push/Pull View – L.L. Bean Figure 1-6 Push/Pull Processes for the L.L. Bean Supply Chain Copyright © 2019 Pearson Education, Ltd. Push/Pull View – Ethan Allen Figure 1-7 Push/Pull Processes for Ethan Allen Supply Chain for Customized Furniture Copyright © 2019 Pearson Education, Ltd. Supply Chain Macro Processes Supply chain processes discussed in the two views can be classified into 1. Customer Relationship Management (CRM): – all processes at the interface between the firm and its customers 2. Internal Supply Chain Management (ISCM): – all processes that are internal to the firm 3. Supplier Relationship Management (SRM): – all processes at the interface between the firm and its suppliers Copyright © 2019 Pearson Education, Ltd. Figure 1-8 Supply Chain Macro Processes Copyright © 2019 Pearson Education, Ltd. Summary of Learning Objective 3 (1 of 2) The cycle view divides processes into cycles, each performed at the interface between two successive stages of a supply chain. Each cycle starts with an order placed by one stage of the supply chain and ends when the order is received from the supplier stage. A push/pull view of a supply chain characterizes processes based on their timing relative to that of a customer order. Pull processes are performed in response to a customer order, whereas push processes are performed in anticipation of customer orders. Copyright © 2019 Pearson Education, Ltd. Summary of Learning Objective 3 (2 of 2) All supply chain processes within a firm can be classified into three macro processes: CRM, ISCM, and SRM. The C RM macro process consists of all processes at the interface between the firm and the customer that work to generate, receive, and track customer orders. The I SC M macro process consists of all supply chain processes that are internal to the firm and work to plan for and fulfill customer orders. The SRM macro process consists of all supply chain processes at the inter- face between the firm and its suppliers that work to evaluate and select suppliers and then source goods and services from them. Integration among the three macro processes is crucial for successful supply chain management. Copyright © 2019 Pearson Education, Ltd. Examples of Supply Chains Gateway and Apple Zara W.W. Grainger and McMaster-Carr Toyota Amazon Macy's Copyright © 2019 Pearson Education, Ltd. Gateway and Apple 1. Why did Gateway choose not to carry any finished-product inventory at its retail stores? Why did Apple choose to carry inventory at its stores? 2. What are the characteristics of products that are most suitable to be carried in finished-goods inventory in a retail store? What characterizes products that are best manufactured to order? 3. How does product variety affect the level of inventory a retail store must carry? 4. Is a direct selling supply chain without retail stores always less expensive than a supply chain with retail stores? 5. What factors explain the success of Apple retail and the failure of Gateway Country stores? Copyright © 2019 Pearson Education, Ltd. Zara 1. What advantage does Zara gain against the competition by having a very responsive supply chain? 2. Why has Inditex chosen to have both in-house manufacturing and outsourced manufacturing? Why has Inditex maintained manufacturing capacity in Europe even though manufacturing in Asia is much cheaper? 3. Why does Zara source products with uncertain demand from local manufacturers and products with predictable demand from Asian manufacturers? 4. What advantage does Zara gain from replenishing its stores multiple times a week compared to a less frequent schedule? 5. Do you think Zara’s responsive replenishment infrastructure is better suited for online sales or retail sales? Copyright © 2019 Pearson Education, Ltd. W.W. Grainger and McMaster-Carr 1. How many DCs should be built and where should they be located? 2. How should product stocking be managed at the D Cs? Should all DCs carry all products? 3. What products should be carried in inventory and what products should be left with the supplier to be shipped directly in response to a customer order? 4. What products should W.W. Grainger carry at a store? 5. How should markets be allocated to D Cs in terms of order fulfillment? What should be done if an order cannot be completely filled from a D C? Should there be specified backup locations? How should they be selected? Copyright © 2019 Pearson Education, Ltd. Toyota 1. Where should the plants be located, and what degree of flexibility should be built into each? What capacity should each plant have? 2. Should plants be able to produce for all markets or only for specific contingency markets? 3. How should markets be allocated to plants and how frequently should this allocation be revised? 4. How should the investment in flexibility be valued? Copyright © 2019 Pearson Education, Ltd. Amazon 1. Why is Amazon building more warehouses as it grows? How many warehouses should it have, and where should they be located? 2. Should Amazon stock every product it sells? 3. What advantage can online players derive from setting up a brick-and-mortar location? How should they use the two channels to gain maximum advantage? 4. What advantages and disadvantages does the online channel enjoy in the sale of shoes and diapers relative to a retail store? 5. For what products does the online channel offer the greater advantage relative to retail stores? What characterizes these products? Copyright © 2019 Pearson Education, Ltd. Macy’s and W.W. Grainger 1. Should online orders be filled from stores or fulfillment centers? What role(s) should each facility play? 2. How should store inventories be managed in an omni- channel setting? 3. Should returns be kept at a store or sent to a fulfillment center? Copyright © 2019 Pearson Education, Ltd. Summary of Learning Objective 4 (1 of 2) At a strategic level, a supply chain designer must decide whether to build a responsive supply chain like Zara or focus on lower costs. A decision must be made on the location and capacity of each facility and whether it will be dedicated or flexible in terms of the products it produces and markets it serves. The designer must decide whether products will be sold directly to customers, through distributors like Grainger, or through brick-and- mortar retailers like Macy’s. If opting for omni- channel retail, the designer must decide which facilities will fulfill different customer orders. Copyright © 2019 Pearson Education, Ltd. Summary of Learning Objective 4 (2 of 2) The planner must then decide on the production levels at each production site and inventory levels at each DC and retail store. As customer orders arrive, the operations manager must decide how each order will be fulfilled given the available inventory and production schedule. The goal when making all these decisions is to maximize the supply chain surplus. Copyright © 2019 Pearson Education, Ltd. Developing Skills for Your Career Lessons learned in this book will help develop career skills no matter what path you take Employers have identified communication, critical thinking, collaboration, knowledge application and analysis, business ethics and social responsibility, data literacy, and information technology application and computing skills as critical Link between strategic decision making and analytics Copyright © 2019 Pearson Education, Ltd. Summary of Learning Objective 5 Skills learned in this book will be of great use no matter what path students choose to follow. The book is developed with the premise that good strategic decisions cannot be made without access to relevant analytics, and all analytics should be designed to support decision making. As a result, students will develop critical thinking, the ability to formulate and analyze problems, and support their recommendations with analytics that uses data literacy and computing skills. Copyright © 2019 Pearson Education, Ltd.