Description
Supply Chain Management - SCM
Supply Chain Management _ Brief Intro Supply Chain Networks and Current issues Make or Buy Strategic sourcing/Supplier Relations Drivers for Supply chain design Bull whip effect
Traditional View: Logistics in the Manufacturing Firm
Profit P fit Logistics Cost Marketing Cost Manufacturing Cost 48% 4% 21% 27%
Manufacturing Cost Profit Logistics Cost Marketing Cost
The supply chain
Operations performance should be seen as a whole supply chain issue
Benefits of looking at the whole supply chain Puts the operation into its competitive context Helps identify the key players identif ke pla ers Shifts emphasis to the long term Sensitises the operation to macro changes Changes the nature of the ‘supplier–buyer’ relationship
Supply networks are the interconnections of relationships between operations
Flow of Products/Services Flow of Information Upstream
Second-tier suppliers First-tier suppliers
Focal level
Downstream
First-tier customers Second-tier customers
Company A
Company B
Company C
x x x
Supply side of the network
x
x
Demand side of the network
Agile Networks Through agility in manufacturing facilities Through network flexibility
Agile manufacturing enablers
‘Agility’ defined as the
capability to survive and prosper in a competitive environment of continuous and unpredictable change by reacting quickly and effectively to changing markets, driven by customercustomer-designed products and services is a services, desired goal for many such firms – Gunasekaran (2001, 2007)
Supply Chain Networks Lean networks – Toyota, Honda, Hero
Agile Networks – Nokia, Cisco
Lean Network (NOKIA? India)
Design & Development R A W Promotion & Sales C U S T M A T L S Flows of material, information, money, and knowledge After?Sales Support Service Centers
Plastics India Supplier
Finished Goods Manufacturing Distribution Warehousing Retailing
O M E R S
Materials Supply
Components Supply
Material procurement process ….
Purchase Request Or Material Request
Stores Or Purchase
Enquiry Issuing
Quotation Analysis
Negotiate
Purchase Order
Strategic Sourcing
Commodity studies- select best suppliers in commodity group studiesRationalize supplier base with closer relationships with a few suppliers
STRATEGIC PROCESSES • Commodity strategy
• Professional development • Procurement Planning
PUSH SOURCING FOCUS UP
DRIVE ACTIVITY LEVELS DOWN
• Fewer
TACTICAL PROCESSES • Supplier selection/management
• Contracting and leverage • Materials management • Market/supplier analysis
• Establish procurement planning process • Redesign strategic sourcing process • Create crossdivisional, crossgeography organization
spot buys • Fewer invoices • Fewer suppliers • Less manual work • Fewer stocked items
TRANSACTIONAL PROCESSES • Order Management
• Accounts payable • Inventory control/warehousing
Paradigm Shift
Make – Buy and types of supply relationship
Close – few suppliers Long-term virtual operation
Type of inter-firm contact
‘Partnership’ supply relationships
Vertical integration
Transact tional – many su uppliers
Virtual spot p trading
Traditional market supply
Resource scope The character of internal operations activity Do nothing Do everything
Make or Buy Decisions
Vertically Integrated Products make or buy –the value chain design
“Modular products” an example
integral
modular
Make-or-Buy framework
Make or Buy
Make or Buy
Make or Buy
The classic case _ The IBM PC
The classic case _ The IBM PC
The IBM PC value chain
Examples of Outsourcing Problems IBM
PC market entry in 1981 Outsourced many components to get to market quickly 40% market share by 1985 beating Apple as the top PC manufacturer Other competitors like Compaq used the same suppliers IBM tried to regain market by introducing the PS/2 line with the OS/2 system
Suppliers and competitors did not follow IBM market share shrunk to 8% in 1995
Behind Compaq’s 10% leading share Led to eventual sale of PC business to Lenovo
Make or Buy
When is the use of pure market mechanisms appropriate in buyer–supplier relationships?
Many Market mechanisms appropriate
Number of supply alternatives s
Leverage market uncertainty
Leverage needs uncertainty
Market mechanisms inappropriate
Few
Resource dimension Low Cost of changing suppliers High
Supplier segmentation: identifying strategic suppliers
Elements of process partnership relationships
Attitudes Trust Long-term p expectations Joint learning Closeness of relationship Joint coordination of activities Joint problem solving Few relationships Sharing success Multiple points of contact
Information transparency Dedicated assets Actions
Supply networks agility through change in supplier groups
Flow of Products/Services Flow of Information Upstream
Second-tier suppliers First-tier suppliers
Focal level
Downstream
First-tier customers Second-tier customers
SBU A
SBU B
Plant C
x x x
Supply side of the network
x
x
Demand side of the network
Various other supply chain flexibilities such postponement, modularization of products, and more customized products
Supply Chain – Drivers which affect the structure and characteristics
Supply chain structure Design for Efficiency D i f Effi i Design for Responsiveness
Drivers Facilities
Plants Ware houses Distribution centers
Transportation
Inventory
At W/H At D.C At Plant
Information
Degree of support- I.T. can replace inventory, facilities
Air Land Sea
Supply chain planning : The complexity of the problem
Considerations for Supply Chain Drivers
Driver Inventory Transportation Facilities Information Efficiency Cost of holding Consolidation Responsiveness Availability Speed
Consolidation / Proximity / Dedicated Flexibility What information is best suited for each objective
Supply Chain Decisions: Structuring Drivers
Strategy (Design) Planning Operation
Network Design Decisions
Facility role Facility location Capacity allocation Market and supply allocation
-Some Trade Offs
5-33
The Cost-Response Time Frontier CostHi
Local FG Mix Regional FG
Cost
Local WIP Central FG Central WIP Central Raw Material and Custom production Custom production with raw material at suppliers
Low Low Response Time Hi
Service and Number of Facilities
Response Time
Number of Facilities
Where inventory needs to be for a one week order response time - typical results --> 1 DC -->
Customer DC
Costs and Number of Facilities
Inventory y Costs Facility costs
Transportation
Number of facilities
Cost Buildup as a Function of Facilities
Total Costs
C Cost of Operations s
Percent Service Level Within Promised Time
Facilities Inventory Transportation Labor
Number of Facilities
The Wal-Mart Supply Chain
The Supply Chain
Study ERP_IT in SCM in yr 2000 Supplier Factory
20 + 50
Depot
50
RS
6000
HPC Business More than 400 SKUs Over 1.3 Mn tons of Soaps & Dets. 50,000 tons of Pers. Products
Retailer
600,000
Consumer
The IT Strategy
MFG-PRO Financial
HO Branch
INFORMATION
GOODS
RDC
Supplier
Factory
Depot
RS
Retailer
Consumer
MFG-PRO
Manufacturing
MFG-PRO
Distribution
RS Computerization, Customer Service Monitoring
Now changed from MFG PRO to SAP the market leader
Integrated Supply Chain
Supplier share
HO
Centralized Planning g
Source Networks Marketing Plans Seasonal build up
RDC
Indents VMI Low vol. packs
Decentralized Operations
QR System
Orders PDP
Supplier
Factory
High vol. packs
JIT Depot
RS
Enabling Integration
Internet
3P Units
128 Kbps 512 Kbps
128 Kbps
Depots
LAN
L A N
Branches/Offices Research Centers
Factories
SHARED HUB HUGHES/DELHI
HLL HO
Response Time
14 Days
2 Days
Packed Stock Level
Tons
95000 85000 75000 65000 55000 45000 35000 25000 Avg '97 Avg '97 Exit '97 Avg '98 Avg '99
Increasing Variability of Orders Up the Supply Chain
Lee, H, P. Padmanabhan and S. Wang (1997), Sloan Management Review
We Conclude ….
Order Variability is amplified up the supply chain; upstream echelons face higher variability. What you see is not what they face. face
O r d e r V a r i a b i l i ty i n th e
80
S u p p ly C h a in
70
60
50
Order
40
30
20
10 F a c to r y 0 D is t r ib u t o r W h o le s a le r R e t a ile r C u s to m e r
11
13
15
17
19
W e e k
21
1
3
5
7
9
The Bullwhip Effect
No POS Data Little Information Sharing Poor Forecasting Min /Max Production Schedules Not Shared for Distribution Planning g Little Information Sharing g for Manufacturing Planning
Manufacturing
Distributor
End User
The longer the supply chain, the harder the whip cracks!
Major factors contributing to Bullwhip effect
Demand forecasting Lead time Batch Ordering Price fluctuations Rationing and shortage gaming
Summary
Issues in Supply Chain Make vs Buy Supplier relationships Drivers for SC design and inter-relationships interBull whip effect
doc_694996238.pdf
Supply Chain Management - SCM
Supply Chain Management _ Brief Intro Supply Chain Networks and Current issues Make or Buy Strategic sourcing/Supplier Relations Drivers for Supply chain design Bull whip effect
Traditional View: Logistics in the Manufacturing Firm
Profit P fit Logistics Cost Marketing Cost Manufacturing Cost 48% 4% 21% 27%
Manufacturing Cost Profit Logistics Cost Marketing Cost
The supply chain
Operations performance should be seen as a whole supply chain issue
Benefits of looking at the whole supply chain Puts the operation into its competitive context Helps identify the key players identif ke pla ers Shifts emphasis to the long term Sensitises the operation to macro changes Changes the nature of the ‘supplier–buyer’ relationship
Supply networks are the interconnections of relationships between operations
Flow of Products/Services Flow of Information Upstream
Second-tier suppliers First-tier suppliers
Focal level
Downstream
First-tier customers Second-tier customers
Company A
Company B
Company C
x x x
Supply side of the network
x
x
Demand side of the network
Agile Networks Through agility in manufacturing facilities Through network flexibility
Agile manufacturing enablers
‘Agility’ defined as the
capability to survive and prosper in a competitive environment of continuous and unpredictable change by reacting quickly and effectively to changing markets, driven by customercustomer-designed products and services is a services, desired goal for many such firms – Gunasekaran (2001, 2007)
Supply Chain Networks Lean networks – Toyota, Honda, Hero
Agile Networks – Nokia, Cisco
Lean Network (NOKIA? India)
Design & Development R A W Promotion & Sales C U S T M A T L S Flows of material, information, money, and knowledge After?Sales Support Service Centers
Plastics India Supplier
Finished Goods Manufacturing Distribution Warehousing Retailing
O M E R S
Materials Supply
Components Supply
Material procurement process ….
Purchase Request Or Material Request
Stores Or Purchase
Enquiry Issuing
Quotation Analysis
Negotiate
Purchase Order
Strategic Sourcing
Commodity studies- select best suppliers in commodity group studiesRationalize supplier base with closer relationships with a few suppliers
STRATEGIC PROCESSES • Commodity strategy
• Professional development • Procurement Planning
PUSH SOURCING FOCUS UP
DRIVE ACTIVITY LEVELS DOWN
• Fewer
TACTICAL PROCESSES • Supplier selection/management
• Contracting and leverage • Materials management • Market/supplier analysis
• Establish procurement planning process • Redesign strategic sourcing process • Create crossdivisional, crossgeography organization
spot buys • Fewer invoices • Fewer suppliers • Less manual work • Fewer stocked items
TRANSACTIONAL PROCESSES • Order Management
• Accounts payable • Inventory control/warehousing
Paradigm Shift
Make – Buy and types of supply relationship
Close – few suppliers Long-term virtual operation
Type of inter-firm contact
‘Partnership’ supply relationships
Vertical integration
Transact tional – many su uppliers
Virtual spot p trading
Traditional market supply
Resource scope The character of internal operations activity Do nothing Do everything
Make or Buy Decisions
Vertically Integrated Products make or buy –the value chain design
“Modular products” an example
integral
modular
Make-or-Buy framework
Make or Buy
Make or Buy
Make or Buy
The classic case _ The IBM PC
The classic case _ The IBM PC
The IBM PC value chain
Examples of Outsourcing Problems IBM
PC market entry in 1981 Outsourced many components to get to market quickly 40% market share by 1985 beating Apple as the top PC manufacturer Other competitors like Compaq used the same suppliers IBM tried to regain market by introducing the PS/2 line with the OS/2 system
Suppliers and competitors did not follow IBM market share shrunk to 8% in 1995
Behind Compaq’s 10% leading share Led to eventual sale of PC business to Lenovo
Make or Buy
When is the use of pure market mechanisms appropriate in buyer–supplier relationships?
Many Market mechanisms appropriate
Number of supply alternatives s
Leverage market uncertainty
Leverage needs uncertainty
Market mechanisms inappropriate
Few
Resource dimension Low Cost of changing suppliers High
Supplier segmentation: identifying strategic suppliers
Elements of process partnership relationships
Attitudes Trust Long-term p expectations Joint learning Closeness of relationship Joint coordination of activities Joint problem solving Few relationships Sharing success Multiple points of contact
Information transparency Dedicated assets Actions
Supply networks agility through change in supplier groups
Flow of Products/Services Flow of Information Upstream
Second-tier suppliers First-tier suppliers
Focal level
Downstream
First-tier customers Second-tier customers
SBU A
SBU B
Plant C
x x x
Supply side of the network
x
x
Demand side of the network
Various other supply chain flexibilities such postponement, modularization of products, and more customized products
Supply Chain – Drivers which affect the structure and characteristics
Supply chain structure Design for Efficiency D i f Effi i Design for Responsiveness
Drivers Facilities
Plants Ware houses Distribution centers
Transportation
Inventory
At W/H At D.C At Plant
Information
Degree of support- I.T. can replace inventory, facilities
Air Land Sea
Supply chain planning : The complexity of the problem
Considerations for Supply Chain Drivers
Driver Inventory Transportation Facilities Information Efficiency Cost of holding Consolidation Responsiveness Availability Speed
Consolidation / Proximity / Dedicated Flexibility What information is best suited for each objective
Supply Chain Decisions: Structuring Drivers
Strategy (Design) Planning Operation
Network Design Decisions
Facility role Facility location Capacity allocation Market and supply allocation
-Some Trade Offs
5-33
The Cost-Response Time Frontier CostHi
Local FG Mix Regional FG
Cost
Local WIP Central FG Central WIP Central Raw Material and Custom production Custom production with raw material at suppliers
Low Low Response Time Hi
Service and Number of Facilities
Response Time
Number of Facilities
Where inventory needs to be for a one week order response time - typical results --> 1 DC -->
Customer DC
Costs and Number of Facilities
Inventory y Costs Facility costs
Transportation
Number of facilities
Cost Buildup as a Function of Facilities
Total Costs
C Cost of Operations s
Percent Service Level Within Promised Time
Facilities Inventory Transportation Labor
Number of Facilities
The Wal-Mart Supply Chain
The Supply Chain
Study ERP_IT in SCM in yr 2000 Supplier Factory
20 + 50
Depot
50
RS
6000
HPC Business More than 400 SKUs Over 1.3 Mn tons of Soaps & Dets. 50,000 tons of Pers. Products
Retailer
600,000
Consumer
The IT Strategy
MFG-PRO Financial
HO Branch
INFORMATION
GOODS
RDC
Supplier
Factory
Depot
RS
Retailer
Consumer
MFG-PRO
Manufacturing
MFG-PRO
Distribution
RS Computerization, Customer Service Monitoring
Now changed from MFG PRO to SAP the market leader
Integrated Supply Chain
Supplier share
HO
Centralized Planning g
Source Networks Marketing Plans Seasonal build up
RDC
Indents VMI Low vol. packs
Decentralized Operations
QR System
Orders PDP
Supplier
Factory
High vol. packs
JIT Depot
RS
Enabling Integration
Internet
3P Units
128 Kbps 512 Kbps
128 Kbps
Depots
LAN
L A N
Branches/Offices Research Centers
Factories
SHARED HUB HUGHES/DELHI
HLL HO
Response Time
14 Days
2 Days
Packed Stock Level
Tons
95000 85000 75000 65000 55000 45000 35000 25000 Avg '97 Avg '97 Exit '97 Avg '98 Avg '99
Increasing Variability of Orders Up the Supply Chain
Lee, H, P. Padmanabhan and S. Wang (1997), Sloan Management Review
We Conclude ….
Order Variability is amplified up the supply chain; upstream echelons face higher variability. What you see is not what they face. face
O r d e r V a r i a b i l i ty i n th e
80
S u p p ly C h a in
70
60
50
Order
40
30
20
10 F a c to r y 0 D is t r ib u t o r W h o le s a le r R e t a ile r C u s to m e r
11
13
15
17
19
W e e k
21
1
3
5
7
9
The Bullwhip Effect
No POS Data Little Information Sharing Poor Forecasting Min /Max Production Schedules Not Shared for Distribution Planning g Little Information Sharing g for Manufacturing Planning
Manufacturing
Distributor
End User
The longer the supply chain, the harder the whip cracks!
Major factors contributing to Bullwhip effect
Demand forecasting Lead time Batch Ordering Price fluctuations Rationing and shortage gaming
Summary
Issues in Supply Chain Make vs Buy Supplier relationships Drivers for SC design and inter-relationships interBull whip effect
doc_694996238.pdf