Chapter 10 Supply Chain Management Operations Management —

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Chapter 10 Supply Chain Management Operations Management - 5 th Edition Roberta Russell & Chapter 10 Supply Chain Management Operations Management - 5 th Edition Roberta Russell & Bernard W. Taylor, III Copyright 2006 John Wiley & Sons, Inc. Beni Asllani University of Tennessee at Chattanooga

Lecture Outline w w w w Supply Chain Management Information Technology: A Supply Chain Lecture Outline w w w w Supply Chain Management Information Technology: A Supply Chain Enabler Suppliers E-Procurement (overview) Distribution (overview) Supply Chain Management Software Measuring Supply Chain Performance Global Supply Chain (overview) Copyright 2006 John Wiley & Sons, Inc. 2

Supply Chain § All facilities, functions, activities, associated with flow and transformation of goods Supply Chain § All facilities, functions, activities, associated with flow and transformation of goods and services from raw materials to customer, as well as the associated information flows § An integrated group of processes to “source, ” “make, ” and “deliver” products Copyright 2006 John Wiley & Sons, Inc. 3

Supply Chain Illustration Copyright 2006 John Wiley & Sons, Inc. 4 Supply Chain Illustration Copyright 2006 John Wiley & Sons, Inc. 4

Supply Chain Management (SCM) w Managing flow of information through supply chain in order Supply Chain Management (SCM) w Managing flow of information through supply chain in order to attain the level of synchronization that will make it more responsive to customer needs while lowering costs w Keys to effective SCM n n information communication cooperation trust Copyright 2006 John Wiley & Sons, Inc. 5

Supply Chain Uncertainty w One goal in SCM: n respond to uncertainty in customer Supply Chain Uncertainty w One goal in SCM: n respond to uncertainty in customer demand without creating costly excess inventory w Negative effects of uncertainty n n lateness incomplete orders w Inventory n insurance against supply chain uncertainty Copyright 2006 John Wiley & Sons, Inc. w Factors that contribute to uncertainty n n n n inaccurate demand forecasting long variable lead times late deliveries incomplete shipments product changes batch ordering price fluctuations and discounts inflated orders 6

Bullwhip Effect Occurs when slight demand variability is magnified as information moves back upstream Bullwhip Effect Occurs when slight demand variability is magnified as information moves back upstream Copyright 2006 John Wiley & Sons, Inc. 7

Information Technology: A Supply Chain Enabler w Information links all aspects of supply chain Information Technology: A Supply Chain Enabler w Information links all aspects of supply chain w E-business n replacement of physical business processes with electronic ones w Electronic data interchange (EDI) n a computer-to-computer exchange of business documents Copyright 2006 John Wiley & Sons, Inc. w Bar code and point-of-sale n data creates an instantaneous computer record of a sale w Radio frequency identification (RFID) n technology can send product data from an item to a reader via radio waves w Internet n allows companies to communicate with suppliers, customers, shippers and other businesses around the world, instantaneously 8

RFID Capabilities Copyright 2006 John Wiley & Sons, Inc. 9 RFID Capabilities Copyright 2006 John Wiley & Sons, Inc. 9

RFID Capabilities (cont. ) Copyright 2006 John Wiley & Sons, Inc. 10 RFID Capabilities (cont. ) Copyright 2006 John Wiley & Sons, Inc. 10

Build-to-order cars over the Internet Copyright 2006 John Wiley & Sons, Inc. 11 Build-to-order cars over the Internet Copyright 2006 John Wiley & Sons, Inc. 11

E-automotive Supply Chain Processes Automotive Past w Customer sales w Push—sell from inventory stock E-automotive Supply Chain Processes Automotive Past w Customer sales w Push—sell from inventory stock w Production w Goal of even and stable production w Distribution w Mass approach w Customer relationship w Dealer-owned Copyright 2006 John Wiley & Sons, Inc. E-Automotive w Pull—build-to-order w Focus on customer demand, respond with supply chain flexibility w Fast, reliable, and customized to get cars to specific customer location w Shared by dealers and manufacturers 12

E-automotive Supply Chain (cont. ) Supply Chain Processes Automotive Past w Managing uncertainty w E-automotive Supply Chain (cont. ) Supply Chain Processes Automotive Past w Managing uncertainty w Large car inventory at dealers w Procurement w Batch-oriented; dealers order based on allocations w Complex w Product products don’t design match customer needs Copyright 2006 John Wiley & Sons, Inc. E-Automotive w Small inventories with shared information and strategically placed parts inventories w Orders made in real time based on available-topromise information w Simplified products based on better information about what customers want 13

Suppliers w Procurement n purchase of goods and services from suppliers w On-demand (direct Suppliers w Procurement n purchase of goods and services from suppliers w On-demand (direct response) delivery n requires supplier to deliver goods when demanded by customer w Continuous replenishment n supplying orders in a short period of time according to a predetermined schedule w Cross-enterprise teams coordinate processes between company and supplier Copyright 2006 John Wiley & Sons, Inc. 14

Outsourcing w Sourcing n selection of suppliers w Outsourcing n purchase of goods and Outsourcing w Sourcing n selection of suppliers w Outsourcing n purchase of goods and services from an outside supplier w Core competencies n what a company does best w Single sourcing n a company purchases goods and services from only a few (or one) suppliers Copyright 2006 John Wiley & Sons, Inc. 15

E-Procurement w Direct purchase from suppliers over the Internet w Direct products go directly E-Procurement w Direct purchase from suppliers over the Internet w Direct products go directly into production process a product, indirect products not w E-marketplaces n web sites where companies and suppliers conduct business-to-business activities w Reverse auction n a company posts orders on the Internet for suppliers to bid on Copyright 2006 John Wiley & Sons, Inc. 16

Relationship between Facilities and Functions along the Wal-Mart Supply Chain Source: Adapted from Garrison Relationship between Facilities and Functions along the Wal-Mart Supply Chain Source: Adapted from Garrison Wieland for “Wal-Mart’s Supply Chain, ” Harvard Business Review 70(2; March–April 1992), pp. 60– 71. Copyright 2006 John Wiley & Sons, Inc. 17

Distribution § Encompasses all channels, processes, and functions, including warehousing and transportation, that a Distribution § Encompasses all channels, processes, and functions, including warehousing and transportation, that a product passes on its way to final customer § Often called logistics § Logistics § transportation and distribution of goods and services § Driving force today is speed § Particularly important for Internet dot-coms Copyright 2006 John Wiley & Sons, Inc. 18

Warehouse Management Systems § Highly automated system that runs day-to-day operations of a DC Warehouse Management Systems § Highly automated system that runs day-to-day operations of a DC § Controls item putaway, picking, packing, and shipping § Features § transportation management § order management § yard management § labor management § warehouse optimization Copyright 2006 John Wiley & Sons, Inc. 19

SCM Software w Enterprise Resource Planning (ERP) n n n software that integrates components SCM Software w Enterprise Resource Planning (ERP) n n n software that integrates components of a company by sharing and organizing information and data SAP was first ERP software my. SAP. com l web enabled modules that allow collaboration between companies along the supply chain Copyright 2006 John Wiley & Sons, Inc. 20

Measuring Supply Chain Performance w Key performance indicators n inventory turnover l n inventory Measuring Supply Chain Performance w Key performance indicators n inventory turnover l n inventory days of supply l n cost of annual sales per inventory unit total value of all items being held in inventory fill rate l fraction of orders filled by a distribution center within a specific time period Copyright 2006 John Wiley & Sons, Inc. 21

Key Performance Indicators Cost of goods sold Inventory turns = Average aggregate value of Key Performance Indicators Cost of goods sold Inventory turns = Average aggregate value of inventory = = (average inventory for item i) X (unit value item i) Average aggregate value of inventory Days of supply = (Costs of goods sold)/(365 days) Copyright 2006 John Wiley & Sons, Inc. 22

Global Supply Chain § To compete globally requires an effective supply chain § Information Global Supply Chain § To compete globally requires an effective supply chain § Information technology is an “enabler” of global trade § Nations form trading groups § No tariffs or duties Copyright 2006 John Wiley & Sons, Inc. 23

Effects of 9/11 on Global Chains w Increase security measures n n added time Effects of 9/11 on Global Chains w Increase security measures n n added time to supply chain schedules Increased supply chain costs w 24 hours rules for “risk screening” n n w w extended documentation extend time by 3 -4 days Inventory levels have increased 5% Other costs include: n new people, technologies, equipment, surveillance, communication, and security systems, and training necessary for screening at airports and seaports around the world Copyright 2006 John Wiley & Sons, Inc. 24




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