Supply Chain Management PDF

Purchasing and Supply Chain Management What is a Supply Chain? Video  All stages involved, directly or indirectly...

Purchasing and Supply Chain Management What is a Supply Chain? Video  All stages involved, directly or indirectly, in fulfilling a customer request. Lecture 1  Includes manufacturers, suppliers, transporters, warehouses, Supply Chain Management and Performance retailers, and customers.  Within each company, the supply chain includes all functions involved in fulfilling a customer request. (product development, marketing, operations, distribution, finance, customer service).  All stages may not be present in all supply chains. (e.g., no retailer or distributor for Dell)  Also includes the movement of information, funds and products in both directions. Definition Supply Chain Management The Objective of a Supply Chain Maximize overall value created „The management of upstream and downstream relationships with suppliers and customers in order Supply chain value (or surplus): difference between what the to deliver superior customer value at less cost to the final product is worth to the customer and the effort the supply chain as a whole.“ M. Christopher, Logistics & Supply chain management , 2010 supply chain expends in filling the customer’s request. Supply chain profitability: difference between revenue generated from the customer and the overall cost across the supply chain. Supply chain success should be measured by total supply chain profitability, not profits at an individual stage.  Supply Chain Profitability Decision Phases of a Supply Chain  Sources of supply chain revenue: 1) Supply chain strategy or design  the customer  How to structure the supply chain over the next several years  Sources of supply chain cost: 2) Supply chain planning  flows of information, products, or funds between  Decisions over the next quarter or year stages of the supply chain 3) Supply chain operation  Supply chain management is the management of flows between and among supply chain stages to maximize total  Daily or weekly operational decisions supply chain profitability. (1) Supply Chain Strategy and Design (2) Supply Chain Planning  Decisions about the structure of the supply chain and what  Definition of a set of policies that govern short-term operations. processes each stage will perform.  Planning decisions:  Strategic supply chain decisions:  Which markets will be supplied from which locations – Locations and capacities of facilities  Planned buildup of inventories – Products to be made or stored at various locations  Subcontracting, backup locations – Modes of transportation  Inventory policies – Information systems  Timing and size of market promotions  Supply chain design decisions are long-term and expensive  Must consider demand uncertainty, exchange rates, to reverse. competition over the time horizon.  Starts with a forecast of demand in the coming year.  (3) Supply Chain Operation Supply Chain Macro Processes  Time horizon is weekly or daily (less uncertainty).  Supply chain processes can be classified into :  Goal is to handle incoming customer orders as effectively as possible. – Customer Relationship Management (CRM)  Decisions are taken regarding individual customer orders: – Internal Supply Chain Management (ISCM) - allocate orders to inventory or production, – Supplier Relationship Management (SRM) - set order due dates, - generate pick lists at a warehouse, - allocate an order to a particular shipment, - set delivery schedules,  Integration among the above three macro processes is critical - place replenishment orders. for effective and successful supply chain management. Supply Chain Process Activities Process View of a Supply Chain  Cycle view: processes in a supply chain are divided into a series of cycles, each performed at the interfaces between two successive supply chain stages.  Push/pull view: processes in a supply chain are divided into two categories depending on whether they are executed in response to a customer order (pull) or in anticipation of a customer order (push).  Step 1: Understanding the Customer Step 2: Understanding the Supply Chain and Supply Chain Uncertainty  Identify the needs of the customer segment being served  How does the firm best meet demand ?  Quantity of product needed in each lot  Dimension describing the supply chain is supply chain responsiveness  Response time customers will tolerate „Supply chain responsiveness“ is the ability to  Variety of products needed respond to wide ranges of quantities demanded  Service level required meet short lead times  Price of the product handle a large variety of products build highly innovative products  Desired rate of innovation in the product meet a very high service level  Demand uncertainty: uncertainty of customer demand for a product  Supply chain efficiency: cost of making and delivering the product  Implied demand uncertainty: resulting uncertainty for the supply to the customer. chain given the portion of the demand the supply chain must handle and attributes the customer desires  Increasing responsiveness results in higher costs that lower efficiency. Comparison of Issues Affecting Supply Chain Strategy Efficient and Responsive Supply Chains Efficient Responsive  Multiple products and customer segments Primary goal Lowest cost Quick response – selling different products to different customer segments Product design strategy Minimum production cost Modularity, postponement (with different implied demand uncertainty) Lower margins (price is the Higher margins (price is not a Pricing strategy prime driver) prime driver)  Product life cycle Manufacturing strategy High utilization Capacity flexibility – As the product goes through the life cycle, the supply chain Buffer inventory to deal with changes from one emphasizing responsiveness to one Inventory strategy Minimize inventory demand/supply uncertainty emphasizing efficiency. Reduce, but not at expense Aggressively reduce, even if Lead time strategy of greater cost costs are significant  Competitive changes over time Supplier selection strategy Cost and lower quality Speed, flexibility, quality – More competitors may result in an increased emphasis on Transportation strategy Low cost modes Responsive (fast) modes variety at a reasonable price. Supply chains with different end objectives need to be managed in different ways. The changing competitive environment Drivers of Supply Chain Performance  Facilities  The customer is more demanding. – places where inventory is stored, assembled, or fabricated – production sites and storage sites  Product life-cycles shorten.  Inventory – raw materials, WIP, finished goods, inventory policies  Downward pressure on price (low-cost...).  Transportation  In today's marketplace the order-winning-criteria are more – moving inventory from point to point in a supply chain – combinations of transportation modes and routes likely to be service-based than product-based.  Information  No longer just company, but „supply chain competition“ – data and analysis regarding inventory, transportation, facilities... – potentially the biggest driver of supply chain performance !  Sourcing – functions a firm performs and functions that are outsourced  Pricing – Price associated with goods and services provided Barriers to Supply Chain Management  Regulatory and political considerations  Lack of top management commitment  Reluctance to share, or use, relevant data  Incompatible information systems  Incompatible corporate cultures  Globalization (Source: After Brewer and Speh, 2000) Logistics ?