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Supply Chain Management

OPIM 5110 – Lecture # 6

Instructor: Jose Cruz

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Supply Chain All activities associated with the flow

and transformation of goods and services from raw materials to the end user, the customer

A sequence of business activities from suppliers through customers that provide the products, services, and information to achieve customer satisfaction

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The Supply ChainInformation

Cash

Products and Services

Products and Services

Products and Services

Customers

Total satisfaction with quality, price, delivery, and service

Distributors

Package and delivery

Inventory

Producers

Finished goods, end products and services

Inventory

Suppliers

Inventory

Materials, parts, sub-assemblies, and services

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Supply Chain Management

Synchronization of activities required to achieve maximum competitive benefits

Coordination, cooperation, and communication

Rapid flow of informationVertical integration

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Supply Chain Uncertainty

Forecasting, lead times, batch ordering, price fluctuations, and inflated orders contribute to variability

Inventory is a form of insuranceDistorted information is one of

the main causes of uncertainty

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Information in the Supply Chain

Centralized coordination of information flows

Integration of transportation, distribution, ordering, and production

Direct access to domestic and global transportation and distribution channels

Locating and tracking the movement of every item in the supply chain

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Information in the Supply Chain

Consolidation of purchasing from all suppliers

Intercompany and intracompany information access

Data interchange Data acquisition at the point of origin

and point of sale Instantaneous updating of inventory

levels

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Electronic Business Replacement of physical processes

with electronic ones Cost and price reductions Reduction or elimination of

intermediaries Shortening transaction times for

ordering and delivery Wider presence and increased visibility

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Electronic Business Greater choices and more information for

customers Improved service Collection and analysis of customer data

and preferences Virtual companies with lower prices Leveling the playing field for smaller

companies Gain global access to markets & customers

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Electronic Data Interchange

Computer-to-computer exchange of business documents in a standard format

Quick access, better customer service, less paperwork, better communication, increased productivity, improved tracing and expediting, improves billing and cost efficiency

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Bar Codes

Computer readable codes attached to items flowing through the supply chain

Generates point-of-sale data which is useful for determining sales trends, ordering, production scheduling, and deliver plans

1234 5678

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The Internet Instant global access to organizations,

individuals, and information sources Fundamentally changes the way

organizations do business Removed geographic

barriers Adds speed and accessibility

to the supply chain

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Intranets and Extranets

Intranets are internet-like networks that operate within a single organization

Extranets are intranets that can be connected to the global internet

Difference is in who has access to the system

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IT Issues Increased benefits and sophistication

come with increased costs Efficient web sites do not necessarily

mean the rest of the supply chain will be as efficient

Security problems are very real Partnership and trust are important

elements that may be new to business relationships

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Suppliers Purchased materials account for about

half of manufacturing costs Materials, parts, and service must be

delivered on time, of high quality, and low cost

Suppliers should be integrated into their customers’ supply chains

Partnerships should be established On-demand delivery (JIT) is a frequent

requirement

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Sourcing Relationship between customers and

suppliers focuses on collaboration and cooperation

Outsourcing has become a long-term strategic decision

Organizations focus on core competencies

Single-sourcing is increasingly a part of supplier relations

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E-Procurement Business-to-business commerce

conducted on the Internet Benefits include lower transaction costs,

lower prices, reduce clerical labor costs, and faster ordering and delivery times

Currently used more for indirect goods E-Marketplaces service industry-specific

companies and suppliers

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Figure 7.3 The Wal-Mart Supply Chain

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Distribution The actual movement of products and

materials between locations Handling of materials and products at

receiving docks, storing products, packaging, and shipping

Often called logistics Driving force today

is speed Particularly important

for Internet dot-coms

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Figure 7.5 Order Fulfillment at Amazon.com

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Distribution Centers and Warehousing

DCs are some of the largest business facilities in the United States

Trend is for more frequent orders in smaller quantities

Flow-through facilities and automated material handling

Final assembly and product configuration may be done at the DC

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Warehouse Management Systems

Highly automated systemsControls item putaway, picking,

packing, and shippingTransportation management,

order management, yard management, labor management, warehouse optimization

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Vendor-Managed Inventory

Manufacturers generate orders, not distributors

Stocking information is accessed using EDI

A first step towards supply chain collaboration

Increased speed, reduced errors, and improved service

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Collaborative Distribution and Outsourcing

Collaborative planning, forecasting, and replenishment (CPFR)

Internet-based exchange of data and information

Significant decrease in inventory levels and more efficient logistics

Companies focus on core competencies

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Transportation

Important element, often overlooked

Common methods are railroads, trucking, water, air, intermodal, package carriers, and pipelines

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Railroads

150,000 miles in USLow cost, high-volume Improving flexibility

intermodal service double stacking

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Most used mode in USFlexible, small loadsConsolidation,

Internet load match sitesPart of TQM supplier-customer

relationshipSingle sourcing reduces number of

trucking firms serving a company

Trucking

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AirRapidly growing segment of

transportation industryLightweight, small itemsQuick, reliable,

expensiveMajor airlines

and US Postal Service, UPS, FedEx, DHL

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Package CarriersFedEx, UPS, US Postal Service, DHLSignificant growth driven by

e-businessesUse several modes

of transportationExpensiveFast and reliable Innovative use of

technologies

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IntermodalCombination of several modes of

transportationMost common are truck/rail/truck

and truck/water/rail/truckEnabled by the

use of containers

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WaterOne of oldest means of transportLow-cost, high-volume, slowBulky, heavy and/or large itemsStandardized shipping containers

improve serviceThe most common

form of international shipping

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PipelinesPrimarily for oil & refined oil

productsSlurry lines carry coal or kaolinHigh capital investmentLow operating costsCan cross difficult terrain

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Internet Transportation Exchanges

Bring together shippers and carriers

Initial contact, negotiations, auctions

Typically only one form of transportation, intermodal exchanges have been difficult to develop