Introduction To Supply-Chain Management - 123seminarsonly
Introduction to Supply Chain Management Syed Tabish Hussain Iqra University Tel: 03212971409 E-mail: Syed tabishh@hotmail.com
Copyright 2002 D. Simchi-Levi
Introduction Materials - any commodities used directly or indirectly in producing a product or service. – Raw materials, component parts, assemblies, finished goods, and supplies Supply chain - the way materials flow through different organizations from the raw material supplier to the finished
What is a Supply Chain? All stages involved, directly or indirectly, in fulfilling a customer request Includes manufacturers, suppliers, transporters, warehouses, 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 4
What is a Supply Chain? Customer is an essential part of the supply chain Includes movement of products from suppliers to manufacturers to distributors, but also includes movement of information, funds, and products in both directions Typical supply chain stages: customers, retailers, distributors, manufacturers, suppliers All stages may not be present in all supply chains. 5
Supply Chain Management ---A River Copyright 200
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 Inventory & warehousing costs Transportation costs
SC, if not managed effectively Reduced Profitability Lower Revenue Higher Costs Poor Quality Poor Availability Poor Service High Inventory High Inventory Long Lead Times for Innovations And, many more
New-age Supply Chain Vendor Inbound Transportation Manufacturing Primary Transportation Warehousing Secondary Transportation Customer I n v e n t o r y MI n gv me nt .t o r y F l o Cw os s t I n f o r m a t i o n FR l ios wk P la n n in g R e la tio n s h P i p e l i n e I n St ee r ag ma tli eo sn s / V Li sai bn lde e d C o s St h a r e d S h a r e dS C T e a m AF po pc ru os a oc nh l a Vendor Intermediaries Customer Product Information
Receiving and Inspection Raw Materials, Parts, and In-process WareHousing Production Finished Goods Warehousing Materials Management Warehousing and Purchasin Production Inventory g Control Control Physical materials flow Information flow Inspection, Packaging, And Shipping Shipping and Traffic Customers Suppliers Supply Chain Management in a Manufacturing Plant
INTRODUCTION Supply chain management is the configuration, coordination and improvement of a sequentially related set of operations With supply chain management, the idea of satisfying an entire chain of customers becomes reality
Flows in a Supply Chain Information Product Customer Funds Supply Chain 12
Supply Chain Management Definition: Supply Chain Management is primarily 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 and at the right time, and so as to minimize total system cost subject to satisfying service requirements. Notice: – Who is involved – Cost and Service Level – It is all about integration
Supply Chain Management Refers to all the management functions related to the flow of materials from the company’s direct suppliers to its direct customers. Includes purchasing, traffic, production control, inventory control, warehousing, and shipping. Two alternative names: – Materials management – Logistics management
Cross-Functional Linkages Finance Budgeting. Analysis. Funds. Design Sustainability. Quality. Manufacturabi lity. MIS What IT solutions to make it all work together? Operations and Supply Chain Accounting Performance measurement systems. Planning and control. Human Resources Skills? Training? # of Employees? Marketing What products? What volumes? Costs? Quality? Delivery? 15
Decision Phases of a Supply Chain Supply chain strategy or design Supply chain planning Supply chain operation 16
Supply Chain Strategy or Design Decisions about the structure of the supply chain and what processes each stage will perform. Strategic supply chain decisions – Locations and capacities of facilities – What SC’s configuration will be , how resources will be allocated and what process each stage will perform – 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 uncertainties
Supply Chain Planning Definition of a set of policies that govern short-term operations Fixed by the supply configuration from previous phase Starts with a forecast of demand in the coming year 18
Supply Chain Planning Planning decisions: – Which markets will be supplied from which locations – Planned buildup of inventories – Subcontracting, backup locations – Inventory policies – Timing and size of market promotions Must consider in planning decisions demand uncertainty, exchange rates, 19
Supply Chain Operation Time horizon is weekly or daily Decisions regarding individual customer orders Supply chain configuration is fixed and operating policies are determined Goal is to implement the operating policies 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 20
Copyright 2002 D. Simchi-Levi
Sequential Optimization vs. Global Optimization Sequential Optimization Procurem ent Planning Manufact uring Planning Distributi on Planning Demand Planning Global Optimization Supply Contracts/Collaboration/Information Systems and DSS Procurem ent Planning Manufactu ring Planning Distributio n Planning Demand Planning
Global Optimization 1.Supply chain is complex network 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
Global Optimization 2. Different facilities in the supply chain frequently have different conflicting objectives 3. Dynamic system of supply chain buying power increase or decrease 4. System variation over time due to seasonal fluctuation , advertisement , promotion and change in pricing strategies of the competitor Copyright 2002 D. Simchi-Levi
SCOR is structured around five distinct management processes Plan Deliver Return Suppliers’ Supplier Source Make Return Deliver Return Make Source Deliver Return Return Your Company Supplier Internal or External Source Make Return Deliver Source Return Return Customer Internal or External SCOR Model Building Block Approach Processes Metrics Best Practice Technology Copyright 2002 D. Simchi-Levi Customer’s Customer
Supply-Chain Operations Reference-model (SCOR) 5.0 - Processes Plan P1 Plan Supply Chain Source S1 Source Stocked Products S2 Source MTO Products S3 Source ETO Products P3 Plan Make P4 Plan Deliver Make M1 Make-to-Stock M2 Make-to-Order M3 Engineer-to-Order P5 Plan Returns Deliver D1 Deliver Stocked Products D2 Deliver MTO Products D3 Deliver ETO Products Return Deliver Return Source Enable Copyright 2002 D. Simchi-Levi Customers Suppliers P2 Plan Source
Supply Chain Management Requires Many Different Functions Purchasing Logistics Engineerin Procure Distributio Operation g ment n s Transporta Information tion Marketing Systems Materials Warehousin Production g Store Copyright 2002 D. Simchi-Levi
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) 28
Cycle View of Supply Chains Customer Customer Order Cycle Retailer Replenishment Cycle Distributor Manufacturing Cycle Manufacturer Procurement Cycle Supplier 29
Cycle View of a Supply Chain Each cycle occurs at the interface between two successive stages Customer order cycle (customer-retailer) Replenishment cycle (retailer-distributor) Manufacturing cycle (distributormanufacturer) Procurement cycle (manufacturer-supplier) Cycle view clearly defines processes involved and the owners of each process. Specifies the roles and responsibilities of each member and the desired outcome of each 30 process.
Push/Pull View of Supply Chains Procurement, Manufacturing and Replenishment cycles PUSH PROCESSES Customer Order Cycle PULL PROCESSES Customer Order Arrives 31
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 32
Push/Pull View of Supply Chain Processes Useful in considering strategic decisions relating to supply chain design – more global view of how supply chain processes relate to customer orders Can combine the push/pull and cycle views – L.L. Bean – Dell The relative proportion of push and pull processes can have an impact on 33
Supply Chain Macro Processes in a Firm Supply chain processes discussed in the two views can be classified into: – Customer Relationship Management (CRM) – Internal Supply Chain Management (ISCM) – Supplier Relationship Management (SRM) Integration among the above three macro processes is critical for 34
Gateway: A Direct Sales Manufacturer Why did Gateway have multiple production facilities in the US? What advantages or disadvantages does this strategy offer relative to Dell, which has one facility? What factors did Gateway consider when deciding which plants to close? Why does Gateway not carry any finished goods inventory at its retail stores? Should a firm with an investment in retail stores carry any finished goods inventory? Is the Dell model of selling directly without any retail stores always less expensive than a supply chain with retail stores? 35
7-Eleven What factors influence decisions of opening and closing stores? Location of stores? Why has 7-Eleven chosen off-site preparation of fresh food? Why does 7-Eleven discourage direct store delivery from vendors? Where are distribution centers located and how many stores does each center serve? How are stores assigned to distribution centers? Why does 7-Eleven combine fresh food shipments by temperature? What point of sale data does 7-Eleven gather and what information is made available to store 36 managers? How should information systems be
Toyota Where should plants be located, what degree of flexibility should each have, and what capacity should each have? Should plants be able to produce for all markets? How should markets be allocated to plants? What kind of flexibility should be built into the distribution system? How should this flexible investment be valued? What actions may be taken during product design to facilitate this flexibility? 37
Conflicting Objectives in the Supply Chain 1. Purchasing Stable volume requirements Flexible delivery time Little variation in mix Large quantities 2. Manufacturing Long run production High quality High productivity Low production cost Copyright 2002 D. Simchi-Levi
Conflicting Objectives in the Supply Chain 3. Warehousing Low inventory Reduced transportation costs Quick replenishment capability 4. Customers Short order lead time High in stock Enormous variety of products Low prices Copyright 2002 D. Simchi-Levi
Order Size The Dynamics of the Supply Chain Customer Demand Distributor Distributor Orders Orders Retailer Retailer Orders Orders Production ProductionPlan Plan Time Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998 Copyright 2002 D. Simchi-Levi
Order Size The Dynamics of the Supply Chain Customer Demand Production ProductionPlan Plan Time Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998 Copyright 2002 D. Simchi-Levi
Supply Chain: The Magnitude In 1998, American companies spent 898 billion in supply-related activities (or 10.6% of Gross Domestic Product). – Transportation 58% – Inventory 38% – Management 4% Third party logistics services grew in 1998 by 15% to nearly 40 billion Copyright 2002 D. Simchi-Levi
Supply Chain: The Magnitude (continued) It is estimated that 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. – Copyright 2002 D. Simchi-Levi
Supply Chain: The Magnitude (continued) Compaq computer estimates it lost 500 million to 1 billion in sales in 1995 because its laptops and desktops were not available when and where customers were ready to buy them. Boeing Aircraft, one of America’s leading capital goods producers, was forced to announce writedowns of 2.6 billion in October 1997. The reason? “Raw material shortages, internal and supplier parts shortages ”. (Wall Street Journal, Oct. 23, 1997) Copyright 2002 D. Simchi-Levi
Supply Chain: The Potential Procter & Gamble estimates that it saved retail customers 65 million through logistics gains over the past 18 months. “According to P&G, the essence of its approach lies in manufacturers and suppliers working closely together . jointly creating business plans to eliminate the source of wasteful practices across the entire supply chain”. (Journal of Business Strategy, Oct./Nov. Copyright 2002 D. Simchi-Levi 1997)
Supply Chain: The Potential Dell Computer has outperformed the competition in terms of shareholder value growth over the eight years period, 19881996, by over 3,000% (see Anderson and Lee, 1999) using - Direct business model - Build-to-order strategy. Copyright 2002 D. Simchi-Levi
Supply Chain: The Potential In 10 years, Wal-Mart transformed itself by changing its logistics system. It has the highest sales per square foot, inventory turnover and operating profit of any discount retailer. Copyright 2002 D. Simchi-Levi
Supply Chain Challenges Achieving Global Optimization – Conflicting Objectives – Complex network of facilities – System Variations over time – Copyright 2002 D. Simchi-Levi
Supply Chain Challenges Achieving Global Optimization – Conflicting Objectives – Complex network of facilities – System Variations over time Managing Uncertainty – Matching Supply and Demand – Demand is not the only source of uncertainty – Copyright 2002 D. Simchi-Levi
Supply Management’s Impact on Net Income and the Bottom Line Increased Sales: Faster to Market Improved Quality Pricing Flexibility Innovation Lower Total Cost: 1-50 Acquisition Cost Processing Cost Quality Cost Downtime Cost Risk Cost Cycle Time Cost Conversion Cost Non-value Added Cost Supply Chain Cost Post Ownership Cost World Class Supply ManagementSM, ISBN 0-07-229070-6, Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
What’s New in Logistics? Global competition Shorter product life cycle New, low-cost distribution channels More powerful well-informed customers Internet and E-Business strategies Copyright 2002 D. Simchi-Levi
New Concepts Push-Pull strategies Direct-to-Consumer Strategic alliances Manufacturing postponement Dynamic Pricing E-Procurement Copyright 2002 D. Simchi-Levi
Operations and Supply Chain Management and You Some of the many career positions Analyst Commodity Manager Customer Service Manager International Logistics Manager Logistics Services Salesperson Production Manager Sourcing Analyst Logistics and Material Planner Systems Support Manager (MIS) Transportation Manager Process Analyst Scheduler Purchasing Agent 53
Operations and Supply Chain Activities Process selection, design, and improvement Forecasting for decision making Capacity planning for capital investment and resource levels Inventory management for amount and location Planning and control for work scheduling and meeting demand Purchasing, managing supplier 54
INTRODUCTION Supply chain management is the configuration, coordination and improvement of a sequentially related set of operations With supply chain management, the idea of satisfying an entire chain of customers becomes reality. 12 Flows in a Supply Chain Customer Information
Supply chain management 1.1.2.1. Supply chain processes: the integrated supply chain point of view To describe supply chains from a process point of view, we refer to the supply chain operations reference (SCOR) model. SCOR is a cross-industry standard for supply chain management and has been developed and endorsed by the supply-chain council .
companies. In this case, supply chain management mainly focuses on cooperation between the supply chain actors. 1.1.2. Supply chain management 1.1.2.1. Supply chain processes: the integrated supply chain point of view To describe supply chains from a process point of view, we refer to the supply chain operations reference (SCOR) model.
Accenture reports how a microchip company created a more resilient and sustainable supply chain to respond in almost real-time to disruptions. Read more. Keywords: sustainable supply chain, supply chain resilience, advanced supply chain, maturity assessment, proactive risk management, supply chain digital twin, supply chain stress test Created Date
Qlik for supply chain: forecasting and planning 6 Qlik for supply chain: sourcing and supplier performance 8 Qlik for supply chain: production insights 10 Qlik for supply chain: warehousing and distribution 12 Qlik for supply chain: transportation, storage and logistics 14 Qlik for supply chain: fleet management 16
green supply chain management. Supply Chain in the Environmental Life Cycle Raw Material Extraction Transport ManufactureTransport Retail/ Consumer Use Transport Disposal Concept Design Typical Supply Chain Scope Designing the supply chain concurrently with the product is a supply chain management best practice.
supply chain resilience. One of those strategic enablers is cyber posture. Making Cybersecurity-Supply Chain Risk Management (C-SCRM) a priority was identified as key to enhancing supply chain cyber resilience. Cybersecurity-Supply Chain Risk Management (C-SCRM) efforts manage supply chain risk by identifying susceptibilities and vulnerabilities to
Having examined 'supply chain' concept, let us now briefly examine aspects related to Supply Chain Management. Supply Chain Management (SCM) As supply chains have become more complex and crucial for businesses dependent economies, we need to clearly differentiate supply chain management from logistics management (Ballou, 2006a).
rounding supply chain vs. supply chain competition, the Integrated Supply Chain Management (ISCM) Program at the Massachusetts Institute of Technology (MIT) conducted a Delphi study with more than 30 supply chain experts from industry, academia, and consulting. The study found that the gr
