Supply Chain Management 11e Chapter 1: Supply Chain Overview PDF

Supply Chain Management, 11e Chapter 1: Supply Chain Ma...

Supply Chain Management, 11e Chapter 1: Supply Chain Management: An Overview ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1  Discussion Outline Five major change drivers Development of supply chain management concept Integrated supply chain characteristics Supply chain flows Major supply chain issues ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2  Leading Retailers (Sales/Year) 2000 2010 2015 2019 1. Wal-Mart 1. Wal-Mart 1. Wal-Mart 1. Wal-Mart Source Table 1.1: National Retail Federation (NRF) https://nrf.com/resources/annual-retailer- 2. Kroger 2. Kroger 2. Costco 2. Amazon 3. The Home 3. Target 3. Kroger 3. Kroger Depot 4. Sears, Roebuck 4. Walgreen 4. The Home Depot 4. Costco & Company 5. Kmart 5. Home Depot 5. Target 5. Walgreens Boots Alliance 6. Albertson’s 6. Costco 6. Walgreen’s 6. The Home Depot 7. Target 7. CVS Caremark 7. CVS Caremark 7. CVS Health Corporation 8. JC Penney 8. Lowe’s 8. Amazon.com 8. Target lists/top-100-retailers 9. Costco 9. Best Buy 9. Lowe’s 9. Lowe’s Companies 10. Safeway 10. Sears Holdings 10. Best Buy 10. Albertsons Companies ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3  Six Major Change Drivers Source Figure 1.1: Center for Supply Chain Research, Penn State University. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4  Six Major Change Drivers—Globalization Globalization creates more economic and political risk, shorter product life cycle, and the blurring of traditional organizational boundaries. Inventory management challenges Faster duplicability of products & services Faster reduction in demand Requirement of new pricing policies Higher risk of obsolescence Longer and more complex supply chain challenges Growth and increased scope of outsourcing ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5  Six Major Change Drivers—Technology Technology is a facilitator of internal process and supply chain transformation. It is also a major force in changing the dynamics of the marketplace. The Internet. “Connected” 24/7 Social networks. Impact on customer demand and the speed of information transfers The world’s “knowledge pool” connection. Opportunities for collaboration in supply chains. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6  Six Major Change Drivers—Organization Consolidation and Power Shifts During the 1980s and especially the 1990s, economic power and the driving force in supply chains shift from product manufacturers to the retail end of the supply chain. More collaboration among organizations in supply chains Win-win, improved services such as: − Scheduled deliveries − “Rainbow” pallets − Advance shipments notices (ASNs) shrink-wrapped pallets Sharing of point-of-sale data to mitigate “bullwhip effect” ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7  Six Major Change Drivers—Empowered Consumers Consumers are empowered by exponentially expanded access to product sources and related information and increased buying power due to high income levels. Increased pressures on supply chain due to increased demands at the retail level in terms of: Competitive prices High quality in products and services Tailored or customized products Convenience and responsiveness – 24/7 availability with a minimum of wait time Flexibility – Omnichannel distribution strategies ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8  Six Major Change Drivers—Government Policy and Regulation More competitive environment is a result of the deregulation of several important sectors in the United States occurred in the 1980s and 1990s. The transportation industry. Expanded services beyond transportation, with service providers’ role evolving to outsourcing partners The financial sector. More flexible and responsive to customer needs, making businesses more cognizant of supply chain management impact on efficiency and cash flow The communications industry. A component of the information revolution, leading to dramatic improvements and opportunities in logistics and supply chains ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9  Six Major Change Drivers—Sustainability The pursuit of sustainability is widely recognized as a key element of successful supply chain management. This is critical to effective risk management and achieving competitive advantage. Society. Focus on people is a significant concern in the area of sustainability. Environment. The objective of being “green” is a key element of making positive contributions to improving our environment. There are many ways in which supply chains may help to achieve desired outcomes. Economy. Continued economic and financial sustainability is essential to making future positive impacts on society and the environment. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10 Evolution of Supply Chain Management Concept Source Figure 1.2: Center for Supply Chain Research, Penn State University. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11  Integrated Supply Chain—Basics SCM is the art and science of integrating the flows of products, information and financials through the entire supply pipeline from the supplier’s supplier to the customer’s customer. Source Figure 1.4: Center for Supply Chain Research, Penn State University. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12 Integrated Supply Chain—Network Source Figure 1.5 : Center for Supply Chain Research, Penn State University. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13  Supply Chain Flows Center for Supply Chain Research, Penn State University. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14  Major Supply Chain Issues (1 of 5) 1. Supply chain networks 7. Performance measurement 2. Complexity 8. Technology 3. Inventory deployment 9. Transportation management 4. Information 10. Supply chain security 5. Cost and value 11. Talent management 6. Organizational relationships ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15  Major Supply Chain Issues (2 of 5) Supply Chain Network Complexity Inventory Deployment The challenges The challenges The challenges Network system (facilities Increased requirements in Increased requirements for and supporting simplifying and continually coordination or integration transportation services) evaluating areas of to reduce inventory levels must be capable and complexity in the various on horizontal (single-firm) flexible to respond and aspects of supply chains and vertical (multiple-firms) change with market levels in the supply chain dynamics ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16  Major Supply Chain Issues (3 of 5) Organizational Information Cost and Value Relationships The challenges The challenges The challenges The sharing of information The prevention of sub- Internal collaboration along the supply chain optimization (marketing, sales, operations, finance, etc.) The discipline to ensure the integrity of the vast amount External collaboration of data collected and stored (vendors, customers, transportation companies, 3PLs) ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17  Major Supply Chain Issues (4 of 5) Performance Transportation Technology Measurement Management The challenges The challenges The challenges Connecting lower-level Evaluate, strategically plan, Transport “perfect metrics in an organization and successfully implement storm.” Transport market directly to the high-level the technology to make the changes; driver shortages; performance measures of improvements desired fuel costs; infrastructure the organization and the constraints; and regulatory supply chain changes ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18  Major Supply Chain Issues (5 of 5) Supply Chain Security Talent management The challenges The challenges Risk of disruptions, Attract, develop, and vulnerability, and exposure maintain the appropriate to terroristic threats pool of talent from entry exacerbated by distance level to executive level and complexity in global supply chain ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19  Summary The rate of change has been driven by a set of external forces including globalization, technology, organizational consolidation and shifts in power in supply chains, empowered consumers, and government policy and regulations. Supply chains are extended enterprises which require managing four flows— products, information, financials (cash), and demand on a collaborative basis. The global supply chains of the best companies must be adaptive, resilient, and responsive to meet the challenges of the global economy and develop mitigating strategies for disruptive forces. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20  Supply Chain Management, 11e Chapter 2: Global Dimensions of Supply Chains ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1  Discussion Outline Rationale for global trade and commerce Contributing factors for global commerce and supply chain flows Supply chains in global economy Global markets and strategy Supply chain security and role of ports Free trade agreements ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2  Rationale for Global Trade and Commerce Absolute advantage − Lower cost and/or access to items not available locally Comparative advantage − Differences in the cost of producing products in different countries ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3 Contributing Factors for Global Flows and Supply Chain Flows ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4  Contributing Factors for Global Flows and Trade 1. Population size and distribution 2. Urbanization 3. Land and resources 4. Technology and information 5. Globalized economy ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5  Population = Labor (1 of 3) Bureau (https://www.census.gov/popclock/), and U.S. Census Bureau (https://www.census.gov/data- Source Table 2.1: U.S. and World Population Clock and International Data Base (IDB), U.S. Census 2050 Expected 2000 Population 2010 Population 2019 Population Rank Country Population (in (in thousands) (in thousands) (in thousands) thousands) 1 China 1,268,302 1,336,681 1,389,619 1,301,627 2 India 1,006,300 1,173,108 1,311,559 1,656,554 3 United States 282,162 309,338 331,884 398,328 4 Indonesia 214,091 243,423 264,936 300,183 5 Pakistan 152,429 195,834 210,798 290,848 tools/demo/idb/informationGateway.php). 6 Brazil 174,315 184,405 210,302 232,304 7 Nigeria 125,581 165,905 208,679 416,996 8 Bangladesh 128,735 146,616 161,063 193,093 9 Russia 147,054 142,527 141,945 129,908 10 Mexico 99,775 114,061 127,318 150,568 ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6  Population = Labor (2 of 3) Bureau (https://www.census.gov/popclock/), and U.S. Census Bureau (https://www.census.gov/data- Source Table 2.1: U.S. and World Population Clock and International Data Base (IDB), U.S. Census 2050 Expected 2000 Population (in 2010 Population 2019 Population Totals Population thousands) (in thousands) (in thousands) (in thousands) TOP TEN 3,598,744 4,011,898 4,358,102 5,070,409 Countries Top Ten Percentage 59% 58% 58% 53% of World Population tools/demo/idb/informationGateway.php). TOTAL World 6,086,149 6,872,671 7,560,290 9,488,153 Population ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7  Population = Labor (3 of 3) Source: United Nations, Department of Economic and Social Affairs, Population ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Division (2017). World Population Prospects: The 2017 Revision, custom data acquired via website. (https://population.un.org/wpp/Publications/). 8  Urbanization The rise of “megacities” Urban sustainability challenges − By 2030, 60% of the world’s Waste and pollution population will live in urban areas (vs. 47% in 2000) Water and energy Change most profound in less Traffic congestions and least developed countries of Health problems the world − Urban sustainability challenges Green spaces Poverty Social security ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9  Land and Resources Crop & forest Water Food Energy Land Critical role of technology in mitigating resource scarcity ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10  Technology and Information Technology has two important dimensions. Technology as an “internal” change agent − Enhanced efficiency, effectiveness, and ability of an organization to compete in the global marketplace Technology as an “external” change agent − New forms of competition or new business models (e.g. omnichannel distribution, global outsourcing) ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11  Globalized Economy Export-Trade Flows of Merchandise (2018) Source Figure 2.2: © World Trade Organization 2019 “International Trade and Market Access Data” ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12  Globalized Economy Import-Trade Flows of Merchandise (2018) Source Figure 2.3: © World Trade Organization 2019 “International Trade and Market Access Data” ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13  Top U.S. Trading Partners (US$ Billions) 2010 2014 2018 (https://www.census.gov/foreign-trade/statistics/highlights/top/index.html); and U.S. Census China $ 456.80 $ 590.70 $ 659.80 Canada $ 525.30 $ 658.10 $ 617.20 Mexico $ 393.00 $ 534.50 $ 611.50 Source Table 2.5: Source: U.S. Census Bureau (Top Trading Partners Bureau (https://www.census.gov/foreign-trade/balance/index.html). Japan $ 180.90 $ 200.90 $ 217.60 Germany $ 130.90 $ 172.60 $ 183.60 South Korea $ 87.70 $ 114.10 $ 130.60 United Kingdom $ 98.30 $ 107.90 $ 127.00 France $ 65.60 $ 78.20 $ 88.80 India $ 48.80 $ 66.90 $ 87.50 Italy $ 42.73 $ 59.10 $ 77.90 Total Top Ten $ 2,030.03 $ 2,583.00 $ 2,801.50 Top Ten Percentage of Total, All Countries 63.63% 65.08% 66.59% TOTAL All Countries $ 3,190.20 $ 3,969.10 $ 4,206.90 ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14 Supply Chains in Global Economy ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15  Supply Chain in Global Economy Global trade growth has been fueled by free trade agreements (FTAs) that lift most tariff, quota, and fee/tax limitations on trade. The best supply chains compete successfully on a national, regional, and global basis. Bilateral  FTAs  Regional Bi-lateral Regional trade agreements involve 3 or more nations agreements are between two US currently involved in: nations − Free Trade Area of Americas − Middle East Free Trade Initiatives US currently in 20 − Enterprise for ASEAN Initiatives bi-lateral FTAs − North American Free Trade Agreement (NAFTA) − USMCA (US-Mexico-Canada) Agreement (proposed) ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16 Micro Perspective of Global Supply Chains Global Markets and Strategy ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17  Global Markets and Strategy Success in the global market-place requires development of a cohesive set of strategies including product development, technology, marketing, manufacturing, and supply chains. Supply chain perspective Customer service perspective ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18  Global Markets and Strategy Supply Chain Perspective 1. Strategically sourcing materials and components worldwide 2. Selecting global locations for key supply depots and DCs 3. Evaluating transportation alternatives and channel intermediaries 4. Understanding governmental influences on global SC flows 5. Examining opportunities for collaboration with 3PLs or 4PLs ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19  Global Markets and Strategy Customer Service Perspective 1. Standardization to reduce complexity must maintain some customization. 2. Global competition often reduces the product life cycle. 3. Organizational structures and business models change with more outsourcing. 4. Globalization introduces more volatility and complexity. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20 Supply Chain Security and Role of Ports ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21  Supply Chain Security A Balancing Act Security Measures Global Trade Flows The Trade Act of 2002 Electronic filing of cargo information The U.S. Maritime Transportation Standards for container seals and Security Act of 2002 locks, cargo tracking, identification, and screening systems for ocean The Customs Trade Partnership containers Against Terrorism (C-TPAT) A “green lane” ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 22  Role of Ports Global Supply Chain and Security Ports are a critical part of global supply chains and a major focus for global security. Over 90 percent of U.S. international trade passes through ports. Ports are bases of operation to deploy troops and equipment. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 23 Free Trade Agreements ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 24  Supply Chain in Global Economy NAFTA → USMCA Agreement NAFTA − Established free trade among Canada, the U.S., and Mexico. − Goals involved making structural changes to operate a borderless logistics network in North America. USMCA (2020) − Proposed multi-lateral trade agreement with U.S., Mexico, and Canada ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 25  Summary Trade flows between the United States and other countries have grown considerably, resulting in global supply chains becoming increasingly important. The increased complexity and competitiveness of a global economy have resulted in shorter product life cycles, new forms of competition, and new business models. Success in the global marketplace requires ongoing development of a cohesive set of strategies that has implications to both supply chains and customer services. Companies individually, jointly, and in cooperation with the government are actively involved in supply chain security. With increasing regional economic integration, NAFTA has helped to foster trade in North America. Proposed USMCA Agreement should exceed benefits of NAFTA ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 26  Supply Chain Management, 11e Chapter 3: Role of Logistics in Supply Chains ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1  Discussion Outline Value-added roles of logistics Key logistics activities Macro perspective on logistics Micro dimension of logistics Logistics and systems analysis ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2  What Is Logistics? Logistics can be viewed as part of organizational management with four major subdivisions. 1. Business Logistics. Part of supply chain that plans, implements, and controls the flow and storage of goods, services, and related information. 2. Military Logistics. Design and integration of all aspects of support for the operational capability of the military forces and their equipment. 3. Event Logistics. Network of activities, facilities & personnel required to organize, schedule & deploy the resources for an event to take place and withdraw after the event. 4. Service Logistics. Acquisition, scheduling & management of facilities, assets, personnel & materials to support a service operation & business. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3  Value-added Roles of Logistics Five Principal Types of Economic Utility Economic Utility ▪ Time ▪ Form ▪ Possession ▪ Quantity ▪ Place ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4  Value-added Roles of Logistics Generally, production/manufacturing activities are credited with providing form utility; logistics activities with time, place, and quantity utilities; and marketing activities with possession utility. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5  Key Logistics Activities 1. Transportation 8. Production planning & scheduling 2. Storage 9. Procurement 3. Industrial packaging 10. Customer service 4. Materials handling 11. Plant & warehouse site location 5. Inventory control 12. Others* 6. Order fulfillment * Others include parts and service support, return goods handling, and 7. Demand forecasting salvage and scrap disposal. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 Macro Perspective on Logistics ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7 Macro Perspective on Logistics U.S. Business Logistics Costs Source Figure 3.2: Reproduced with permission from Council of Supply Chain Management Professionals. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8  Macro Perspective on Logistics U.S. Logistics Costs as Percent of GDP ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9  Macro Perspective of Logistics U.S. Business Logistics Costs – 2018 (1 of 2) US business logistics costs ($ billion) 2018 YoY 18/17 5-yr. CAGR Transportation costs Full truckload 296.1 7.6% 3.6% Less-than-truckload 71.8 8.3% 3.5% Private or dedicated 300.9 13.1% 7.1% Source: CSCMP’s 30th Annual State of Logistics Report, 2019 Motor carriers 668.8 10.1% 5.1% Parcel 104.9 8.7% 8.0% Carload 61.4 7.2% −0.6% Intermodal 27.0 28.7% 8.1% Rail 88.4 12.9% 1.6% Air freight (includes domestic, import, export, cargo, and express) 76.5 9.2% 3.8% Water and ports (includes domestic, import, and export) 45.7 12.8% 1.5% Pipeline 53.0 12.7% 12.7% Subtotal 1,037.4 10.4% 5.1% ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10  Macro Perspective of Logistics U.S. Business Logistics Costs – 2018 (2 of 2) US business logistics costs ($ billion) 2018 YoY 18/17 5-yr. CAGR Inventory carrying costs Storage 153.1 3.2% 3.0% Source: CSCMP’s 30th Annual State of Logistics Report, 2019 Financial cost (WACC × total business inventory) 192.5 26.0% 3.0% Other (obsolescence, shrinkage, insurance, handling, others) 148.1 14.8% 3.0% Subtotal 493.7 14.8% 3.0% Other costs Carriers’ support activities 52.3 10.3% 4.5% Shippers’ administrative costs 52.1 2.8% 5.3% Subtotal 104.4 6.4% 4.9% Total US business logistics costs 1,635.46 11.4% 4.4% ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11  Micro Dimensions of Logistics Logistics Interface with other functional areas Factors affecting cost & importance of logistics ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12  Micro Dimensions of Logistics Logistics Interfaces with Other Functional Areas Manufacturing Marketing (4 Ps – Marketing Mix) Length of the production run Price (e.g. purchase quantity Available quantity of raw material and discounts) component Product (e.g. size, shape, weight, Industrial packaging packaging) Promotion Place (distribution channel selection) Logistics Finance Accounting Inventory Cost information for analysis of Warehouses & transportation fleet alternative logistics options owned and/or outsourced Supply chain tradeoffs and Customer service performance measurement ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13  Micro Dimensions of Logistics (1 of 5) Factors Affecting Cost & Importance of Logistics 1. Competitive relationships 2. Order cycle length 3. Substitutability 4. Inventory effect 5. Transportation effect 6. Product-related factors 7. Spatial relationships ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14  Micro Dimensions of Logistics (2 of 5) Factors Affecting Cost & Importance of Logistics Competitive Order Cycle Length Substitutability Relationships Customer service can Shorter order cycles Customer service is be a very important reduce the inventory important for highly form of competition. required by the substitutable products customer. to reduce lost sales cost. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15  Micro Dimensions of Logistics (3 of 5) Factors Affecting Cost & Importance of Logistics Inventory Effect Transportation Effect Spatial Relationships Increasing inventory Cost of lost sales can The location of fixed costs can reduce the be reduced by points in the logistics cost of lost sales. spending more on system with respect to transportation service demand and supply to improve customer points are very service. important to transportation costs. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16  Micro Dimensions of Logistics (4 of 5) Factors Affecting Cost & Importance of Logistics Product-related Factors Dollar value. The product’s dollar value typically affects warehousing costs, inventory costs, transportation costs, packaging costs, and even materials-handling costs. Density. Weight/space ratio affects transportation and warehousing costs. As density increases for a product, its transportation and warehousing costs tend to decrease. Susceptibility to damage. The greater the risk of damage to a product, the higher the transportation and warehousing cost. Special handling requirements. Need for special handling (e.g. refrigeration, heating, or strapping) will usually increase warehousing, transportation, and packaging costs. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17  Micro Dimensions of Logistics (5 of 5) Factors Affecting Cost & Importance of Logistics Spatial Relationship Example Source Figure 3.11: Center for Supply Chain Research, Penn State University. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18 Logistics and Systems Analysis ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19  Logistics and Systems Analysis Short-run and Long-run Analysis Short-run or Static Analysis Concentrates on a specific point in time or level of production output. Long-run or Dynamic Analysis Examines a logistics system over a long time period or range of output. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20  Logistics and Systems Analysis Approaches to Analyzing Logistics Systems The analysis of logistics systems may require different views or perspectives of logistics activities. Materials management vs. physical distribution − Examine logistics as inbound vs. outbound logistics. Cost centers − Examine logistics activities as cost centers, allowing tradeoffs between them to be analyzed. Nodes vs. links − Examine nodes (fixed spatial points where goods stop for storage or processing) vs. links (transportation network that connect the nodes in the logistics system). Logistics channels − Examine supply chain of network organizations engaged in transfer, storage, handling, communication, and other functions that contribute to product flow. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21  Summary Logistics adds place, time, and quantity utilities to products and enhances the form and possession utilities added by manufacturing and marketing. Key logistics activities are transportation, inventory, warehousing, materials handling, industrial packaging, customer service, and forecasting. On a macro basis, logistics-related costs have helped the U.S. economy maintain its competitive position on a global basis. On a micro basis, logistics interface with other functional areas which aids in making organizations more efficient and effective. The cost of logistics systems can be affected by market competition, spatial relationship of nodes, and product characteristics. Four approaches to analyzing logistics systems are: materials management vs. physical distribution, cost centers, nodes vs. links, and distribution channels. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 22  Supply Chain Management, 11e Chapter 5: Sourcing Materials and Services ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1  Discussion Outline Strategic evolution of sourcing process (purchasing, procurement, and strategic sourcing) Types of purchasing activity and quadrant technique Strategic sourcing process Total landed cost concept E-sourcing, e-procurement, and e-commerce ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2  Strategic Evolution of Sourcing Process (Purchasing, Procurement, and Strategic Sourcing) ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3  Purchasing vs. Procurement vs. Strategic Sourcing Purchasing is an activity that follows conduct of a formal sourcing process, while procurement and strategic sourcing are best described as processes. Strategic Sourcing Managing procurement priorities such that they are well-aligned with goals and objectives of the supply chain and of the overall organization. Procurement Managing a broad range of activities within the procurement process (e.g. supplier selection, price negotiation, contract management, supplier performance management). Purchasing Managing a firm’s acquisition procedures and standards, involving largely transactional activity of the buying of products & services. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4  Unique Aspects of Strategic Sourcing 1. Consolidation/leveraging of purchasing power 2. Emphasis on value 3. More meaningful supplier relationships 4. Attention directed to process improvement 5. Enhanced teamwork and professionalism 6. Enhanced teamwork and professionalism Source Figure 5.1: C. John Langley Jr., Ph.D., Penn State University, Used with permission. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5 Strategic Evolution of Sourcing Process Source Figure 5.2: C. John Langley Jr., Ph.D., Penn State University, Used with permission. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 Types of Purchasing Activity and Quadrant Technique ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7  Types and Importance of Purchases – The Quadrant Technique Not all items /services purchased are of equal importance, requiring varying procurement strategies based on their value and risk. Source Figure 5.3: C. John Langley Jr., Ph.D., Penn State University, Used with permission. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8 Three Types of Purchasing Activity Source Figure 5.4: C. John Langley Jr., Ph.D., Penn State University, Used with permission. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9  Strategic Sourcing ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10  Strategic Sourcing Five Core Principles 1. Assess total value. Emphasis beyond acquisition cost, evaluating total cost of ownership and the value of the supplier relationship. 2. Develop individual sourcing strategies. Individual spend categories need customized sourcing strategies. 3. Evaluate internal requirements. Requirements and specifications thoroughly assessed and rationalized as part of the sourcing process. 4. Focus on supplier economics. Suppliers’ economics understood before identifying buying tactics (e.g. volume leveraging, price unbundling, price adjustment mechanisms). 5. Drive continuous improvement. Strategic sourcing initiatives as subset of continuous improvement process for procurement and sourcing organizations. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11  Strategic Sourcing Process Source Figure 5.5: C. John Langley Jr., Ph.D., Penn State University, Used with permission. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12  Strategic Sourcing Process Step 1: Develop Strategic Plan Create cross-functional planning committee Identify key members of sourcing team Agree on scope of sourcing processes ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13  Strategic Sourcing Process Step 2: Understand Spend Refine understanding of sourcing needs of process-owners, with the nature of the requirement being represented by some type of measurable criteria Perform spend analysis to: − Understand spend by supplier, category, and internal user − Profile current sourcing approaches and areas for improvement Address issues of make vs. buy ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14  Strategic Sourcing (1 of 2) Steps 3–5: Supplier Portfolio Screening Source Figure 5.6: C. John Langley Jr., Ph.D., Penn State University, Used with permission. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15  Strategic Sourcing (2 of 2) Steps 3–5: Supplier Portfolio Screening Source Figure 5.7: C. John Langley Jr., Ph.D., Penn State University, Used with permission. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16  Strategic Sourcing Process Step 6: Onboarding and Transitioning Finalize understandings and agreements with suppliers Create management processes for new suppliers Conduct transition and onboarding processes ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17  Strategic Sourcing Process Step 7: Collaborative Process Improvement Regular feedback and communications Analyze net savings and compare with goals and objectives Process improvement for both suppliers and customers ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18  Total Landed Cost ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19  Total Landed Cost (TLC) Source Figure 5.8: C. John Langley Jr., Ph.D., Penn State University, Used with permission. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20 TLC Example: Cost Comparisons of Alternative Sourcing Options Country Destination Country – Switzerland Source Figure 5.9: Source: C. John Langley Jr., Ph.D., Penn State University, of Origin Price Components – all prices in Euros China Vietnam EU Net purchasing price for a specific volume of the product from 10,000 8,000 12,000 3 different suppliers Total transportation cost to Switzerland (Ocean freight from 4,000 6,000 1,200 China/Vietnam – Road freight within Europe) Customs according trade agreement 1,000 1,500 n.a. Used with permission. VAT (Switzerland 7.6%) based on value of goods 1,140 1,178 1,003 Total Landed Cost 16,140 16,678 14,203 ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21  E-sourcing, E-procurement, and E- commerce ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 22  E-sourcing and E-procurement Functionality 1. Industry analysis and supplier 7. Logistics procurement identification 8. Project management 2. Analytical tools 9. Knowledge management 3. Management of RFI/RFP processes 10. Contract management 4. Process automation 5. Online negotiations 6. Collaboration tools Source Figure 5.10: Source: C. John Langley Jr., Ph.D., Penn State University, Used with permission. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 23  Advantages and Concerns of Electronic Procurement Concerns Cyber-security Lack of face-to-face contact between the buyer and seller Technology-related concerns (lack of standard protocols, system reliability, time & money investment) Advantages Lower operating costs (reduce paperwork & sourcing time, improve control over inventory & spending) Improve procurement and sourcing efficiency (find new supply sources, improve communications, improve personnel use, lower cycle times) Reduce procurement prices Improve communications Easier access to more suppliers Source Figure 5.11: Source: C. John Langley Jr., Ph.D., Penn State University, Used with permission. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 24  Four Basic Types of E-commerce Business Models “Sell-side” vs. “buy-side” system: Whether e-Commerce capabilities are seller-centric or buyer-centric. B2B and B2C: Online businesses selling to businesses or consumers, respectively. These are both “sell- side.” Examples include Delta Air Lines (www.delta.com), Barnes & Noble (www.barnesandnoble.com), Amazon (www.amazon.com), and Office Depot (officedepot.com). Online marketplace: e-Commerce site where product or service information is provided by multiple third parties, whereas transactions are processed by the marketplace operator. Examples include Amazon (www.amazon.com), Expedia (www.expedia.com), and Uber (www.uber.com). Online trading community: A system maintained by a 3rd party technology supplier that provides buyers and sellers with a structured method for trading, bartering, or selling goods and services. Examples include eBay (www.ebay.com), Craigslist (www.craigslist.org), and NTE (www.nteinc.com). ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 25  Summary Different procurement and sourcing strategies devised based on the risk and value or profit potential from needed products/services that can be classified into: generics, commodities, distinctives, and criticals. Strategic sourcing process includes: develop strategic plan, understand spend, evaluate supply sources, finalize sourcing strategy, implement sourcing strategy, transition and onboarding, and collaborative process improvement. The concept of total landed cost is a highly-valuable element of the overall procurement process. Advantages of e-sourcing and e-procurement include lower operating costs, improved efficiency, and reduced prices. Four popular e-commerce model types are: “sell-side” vs. “buy-side;” B2B and B2C; online marketplace; and online trading community. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 26  Supply Chain Management, 11e Chapter 7: Demand Management ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1  Discussion Outline Essence and importance of demand management Balancing supply and demand Demand forecasting Sales and Operations Planning (S&OP) Collaborative Planning, Forecasting, and Replenishment (CPFR) ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2  Demand Management The Essence of Demand Management To estimate and manage customer demand and use this information to make operating decisions. To further ability of firms throughout the supply chain to collaborate on activities related to the flow of products, services, information, and capital. Desired end result: Greater value for the end user or consumer ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3  Demand Management (1 of 4) Importance of Demand Management Common Problems in Demand Management Lack of coordination between departments Too much emphasis placed on forecasts of demand, with less attention on the collaborative efforts and plans needed to be developed from the forecasts Non-strategic uses of demand information ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4  Demand Management (2 of 4) Importance of Demand Management Effective demand management unifies channel members with the common goals of satisfying customers and solving customer problems. 1. Gather & analyze knowledge about consumers, their problems, and their unmet needs. 2. Identify partners to perform functions needed in demand chain. 3. Move functions to the channel member that can perform them most effectively and efficiently. 4. Share with other supply chain members knowledge about customers, technology, and logistics challenges and opportunities. 5. Developing products and services that solve customers’ problems. 6. Develop & execute best methods to deliver products & services to consumers in the desired format. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5  Demand Management (3 of 4) Importance of Demand Management Effective demand management supports business strategy. Strategy,” Supply Chain Management Review (May/June 2000): 58. Copyright © 2000 Reed Business Information, a division of Reed Elsevier. Reproduced by permission. Source Table 7.1: Jim R. Langabeer II, “Aligning Demand Management with Human STRATEGY EXAMPLES OF HOW TO USE DEMAND MANAGEMENT Growth strategy Perform “what if” analyses on total industry volume to gauge how specific mergers and acquisitions might leverage market share. Analyze industry supply/demand to predict changes in product pricing structure and market economics based on mergers and acquisitions. Build staffing models for merged company using demand data. Portfolio strategy Manage maturity of products in current portfolio to optimally time overlapping life cycles. Create new product development/introduction plans based on life cycle. Balance combination of demand and risk for consistent “cash cows” with demand for new products. Ensure diversification of product portfolio through demand forecasts. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6  Demand Management (4 of 4) Importance of Demand Management Effective demand management supports business strategy. Strategy,” Supply Chain Management Review (May/June 2000): 58. Copyright © 2000 Reed Business Information, a division of Reed Elsevier. Reproduced by permission. Source Table 7.1: Jim R. Langabeer II, “Aligning Demand Management with Human STRATEGY EXAMPLES OF HOW TO USE DEMAND MANAGEMENT Positioning Manage product sales through each channel based on demand and product strategy economics. Manage positioning of finished goods at appropriate distribution centers, to reduce working capital, based on demand. Define capability to supply for each channel. Investment Manage capital investments, marketing expenditures, and research and strategy development budgets based on demand forecasts of potential products and maturity of current products. Determine whether to add manufacturing capacity. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7 Balancing Supply and Demand ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8  Balancing Supply and Demand Problem of Supply-Demand Misalignment University, Customer-Driven Demand Networks: Unlocking Hidden Value Source Figure 7.1: Accenture, Stanford University, and Northwestern in the Personal Computer Supply Chain (Accenture, 1997): 15. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9  Balancing Supply and Demand Supply-Demand Balancing Methods Some combinations of supply-demand balancing methods are used, depending on the nature of the product, the cost of stocking out, and the organization’s ability to properly forecast customer demand. External Balancing Methods Internal Balancing Methods Change the manner in which Manage gap using internal the customer orders: processes: Price Inventory Lead time Production flexibility ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10 Demand Forecasting Types of Forecast Error Measures Common Forecasting Techniques ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11  Demand Forecasting Demand forecasting is a major component of demand management. Forecasts serve as a plan for both marketing and operations to set goals and develop execution strategies. Two Types of Demand: Most forecasting techniques focus on independent demand. 1. Independent Demand − The demand for the primary item, known as base demand 2. Dependent Demand − The demand directly influenced by demand for independent item ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12  Demand Forecasting Factors Affecting Demand All demand is subject to certain fluctuations. Random fluctuation A development that cannot be anticipated and is usually the cause to hold safety stocks to avoid stockouts. Trend fluctuation Gradual increase or decrease in demand over time for an organization. Seasonal fluctuation Seasonal patterns that will normally repeat themselves during a year for most organizations. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13  Demand Forecasting (1 of 2) Types of Forecast Error Measures CFE Cumulative sum of forecast errors (CFE) calculates the total forecast error for a set of data, taking into consideration both negative and positive errors. 𝑡−1 CFE = ෍ 𝑒𝑡 𝑛 MSE Mean squared error (MSE) squares each period error so the negative and positive errors do not cancel each other out. ෌ 𝐸𝑡2 MSE = 𝑛 ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14  Demand Forecasting (2 of 2) Types of Forecast Error Measures MAD Mean absolute deviation (MAD) takes absolute value of each error, so the negative and positive signs are removed. σ | 𝐸𝑡 | MAD = 𝑛 MAPE ෌( |𝐸𝑡 |Τ𝐷𝑡 )100 MAPE = 𝑛 TRACK Signal Tracking signal can be used to measure forecast error, especially good at identifying if a “bias” exists in the forecast errors. CFE/MAD ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15  Demand Forecasting (1 of 2) Common Forecasting Techniques All statistical techniques used to generate forecasts require accurate data and rely on the assumption that the future will repeat the past. The key to good forecasting is to minimize forecast error by utilizing a forecasting technique that best fits the nature of the data. Three common forecasting techniques are: Simple moving average Weighted moving average Exponential smoothing Makes forecasts based on Assigns a weight to each Pros: simplicity and limited recent demand history and previous period with higher requirements for data, allows for the removal of weights usually given to good for relatively constant random effects. more recent demand. demand Pros: quick and easy to Pros: allows emphasis on Cons: forecasts will lag use more recent demand as a actual demand; Not Cons: old demand predictor of future demand. appropriate for highly dropped quickly; not Cons: not easily seasonal demand patterns accommodate seasonal, accommodate seasonal or patterns with trends trend, or business cycle demand patterns influences ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16  Demand Forecasting (2 of 2) Common Forecasting Techniques Forecast Accuracy Summary (5) (1) (2) (3) (4) TRACKING BIAS (CFE) MAD MSE MAPE SIGNAL Simple moving average + 3,087 731.08 862,696.75 7.43 4.2 Weighted moving average + 1,274 886.2 1,169,415.5 9.03 1.44 Experimental Smoothing - 5,554 520.67 403,033.5 5.52 - 10.67 Source Table 7.6: Robert A. Novack, Ph.D. Used with permission. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17 Sales and Operations Planning (S&OP) ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18  Sales and Operations Planning (S&OP) Arriving at Internal Consensus Forecast It is necessary for an organization to arrive at a forecast internally that all functional areas agree upon and can execute. A process that can be used to arrive at this consensus forecast is called sales and operations planning (S&OP). Preliminary demand forecast Marketing forecast Internal Financial forecast S&OP Consensus Forecast Distribution forecast Manufacturing forecast ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19 Sales and Operations Planning (S&OP) A Five-Step Process The How-To Book, (Cincinnati, OH: T. F. Wallace and Company, 2000): 43. Source Figure 7.2: Thomas F. Wallace, Sales and Operations Planning: Copyright © 2000 by Thomas F. Wallace. Reproduced by permission. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20 Collaborative Planning, Forecasting, and Replenishment (CPFR) ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21  Collaborative Planning, Forecasting, and Replenishment (CPFR) Arriving at Inter-Organizational Consensus Forecast Trading partners (retailers, distributors, and manufacturers) use available Internet-based technologies to collaborate on operational planning, allowing them to agree to a single forecast for an item where each partner translates this forecast into a single execution plan. Source Figure 7.3: Larry Smith, “West Marine: A CPFR Success Story,” Supply Chain Management Review (March 2006): 31. Copyright © 2006 Reed Business Information, a division of Reed Elsevier. Reproduced by permission. ©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a p