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Supply Chain Logistics Spring2014
Supply Chain LogisticsPlanning
The supply chain is simply another way ofsaying the whole process of business.
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Copyri ght 2013 by The McGraw-H il l Companies, In c. All ri ghts reserved.McGraw-Hill/Irwin
CHAPTER 1:21st Century Supply Chains
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The supply chain revolution
Why integration creates value
Generalized supply chain model Responsiveness
Financial sophistication
Globalization
Overview of 21st-century supply
chains
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Supply Chain Management Consists of firms collaborating to
leverage strategic positioning andto improve operating efficiency
Supply Chain Strategy Is a channel and businessorganizational arrangementbased on acknowledgedependency and collaboration
Logistics The work required to move andgeographically position inventory
The supply chain revolution has reshapedcontemporary strategic thinking
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Successful supply chain strategies
A recent Andersen Consulting study revealed six different, but equally successful,
supply chain strategies.
Market Saturation Driven: Focusing on generating high profit margins, through
strong brands and ubiquitous marketing and distribution.
Operationally Agile: Configuring assets and operations to react nimbly toemerging consumer trends along lines of product category or geographic region.
Freshness Oriented: Concentrating on earning a premium by providing the
consumer with product that is fresher than competitive offerings.
Consumer Customizer: Using mass customization to build and maintain close
relationships with end-consumers through direct sales.
Logistics Optimizer: Emphasizing a balance of supply chain efficiency and
effectiveness.
Trade Focused: Prioritizing "low price, best value" for the consumer (as with
the logistics optimizer strategy but focusing less on brand than on dedicated
service to trade customers). Source: Supply Chain Management Review, March/ April 2000, p. 29.
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The total integration of the overall business
process creates value
Table 1.1 Integrative Management Value Proposition
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The integrated value-creation process must be
managed across firms from end to end
Figure 1.1 The Integrated Supply Chain Framework s
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Logistics activities and decisions at each
level of functionality
Figure 1.2 Information Functionality
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Transaction system functionality consists of
formalized rules and procedures
Standardizedcommunications focus ontracking and regulatingday-to day logisticaltransactions
For example, Order entry
Order fulfillment Inventory adjustment
Invoicing
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Management control functionality focuses on
performance management and reporting
Provides real time feedback on
supply chain performance and
resource utilization
Common performance
dimensions include
Cost
Customer service
Productivity
Quality
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Decision analysis functionality focuses on
software tools to assist managers
Software tools help to identify,evaluate and comparealternatives to improveeffectiveness E.g., Excel solver
Types of analysis include Supply chain design
Inventory management
Resource allocation
Routing
Segmental profitability Also called decision support
software in MIS departments
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Strategic planning functionality transforms
transactional data to assist in strategy evaluation
Organizes transaction and
performance data into a
relational database to assist in
evaluating alternative business
strategies
Examples include
Strategic alliance decisions
Development of manufacturing
capabilities Customer responsiveness
opportunities
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13/381-13Figure 1.4 SCIS Usage, Decision Characteristics, and Justification
More opportunities exist for improvements at
higher levels of functionality
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Supply chain information system modules
Enterprise integration and administration
Enterprise supply chain operations
Enterprise planning and monitoring
Communication technology
Consumer connectivity
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Application oriented perspective of SCIS
modules
Figure 1.4 Application Oriented SCIS Framework
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Enterprise resource management (ERP)
The backbone of most firms logistical information systems
Maintains an integrated database of current and historical
data
Processes most (if not all) transactions across all businessfunctions
Example transactions include
Order entry and management
Inventory assignment
Shipping
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Application oriented perspective of SCIS
modules
Figure 1.4 Application Oriented SCIS Framework
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Enterprise integration and administration modules
are not specific supply chain apps
Figure 1.5 Enterprise Integration and Administration Components
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Application oriented perspective of SCIS
modules
Figure 1.4 Application Oriented SCIS Framework
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Enterprise operations modules support day-
to-day supply chain operations
Figure 1.6 Enterprise Operations Modules
Enterprise Operations
Customer
relationship
management
Logistics Manufacturing Purchasing
Donald J. Bowersox, Ph.D. 2005
Inventory
Deployment
Customer Relationship
Management
(CRM)
Forecasting
Demand Management
(DMS)
Collaborative
Planning, Forecasting
and Replenishment
(CPFR)
Order Management
(OMS)
Finished Inventory
Management
(FIM)
Order Processing
(OPS)
Warehouse
Management (WMS)
Transportation
Management (TMS)
Yard Management
(YMS)
Accounts Receivable
Interface
Manufacturing
Resource Planning
(MRP II)
Capacity Management
Planning (CMP)
Master Production
Schedule (MPS)
Production Execution
and Control (Shop
Floor)
Quality Management
(QM)
Purchase Order
Administration
(POA)
Materials Requirements
Planning (MRP)
Supplier Relationship
Management (SRM)
Accounts Payable
Interface
Integrated Inventory
Planning
Advanced Planning and
Scheduling\
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Application oriented perspective of SCIS
modules
Figure 1.4 Application Oriented SCIS Framework
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Enterprise planning and monitoring modules
facilitate exchange of planning information
Figure 1.7 Enterprise Planning and Monitoring Modules
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Integrative management requires simultaneous
achievement of 8 processes
Table 1.2 Eight Supply Chain Processes
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Concepts necessary for achieving integrated
management
Lowest total process costis the focus of integrated management Differs from lowest cost of each function in the process
Collaborationof operating information, technology and risk hasbeen encouraged by national legislation to keep US-based firms
competitive Enterprise extensionincludes expanded managerial influence and
control beyond traditional ownership boundaries of a singleenterprise
Integrated service providers (ISP)provide a range of logisticsservices to accommodate customers, ranging from order entry toproduct delivery Commonly known as third (or fourth) party service providers
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Enterprise extension
Information sharing paradigmsupply chain
participants sharing operating information can
achieve a high degree of collaboration and
enhanced strategic planning.
Process specialization paradigmthe commitment
to focus collaborative arrangements on planning
joint operations with a goal of eliminatingnonproductive or non-value adding redundancy by
firms in a supply chain.
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Integrated service providers (ISPs)
Outsourcing
Transportation modes
Public warehouses Value-added services
Third- and fourth-party service providers
Asset- or nonasset-based service providers
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Forces driving supply chain
strategies
Information technology
Integrative management
Responsiveness Financial sophistication
Globalization
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Responsiveness emerges as a competitive
advantage
Figure 1.8 Anticipatory Business Model
Figure 1.9 Responsive Business Model
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Postponement strategies keep supply
chains responsive
Types of Postponement
Manufacturing (or Form)
Geographic (or Logistics)
Combined
Manufacturing and geographic types are exact
opposites in practice but have the same goal
Meeting customer demand quickly while minimizing
inventories
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Manufacturing (or form) postponement
Manufacturing one order at a time
Base modular construction of product
No customization until the exact customer specs and
financial commitment is received
Objective is to maintain products in an uncommitted status
as long as possible
Balances economy of scale with responsiveness Can build a sufficient quantity of ready to customize basic units
Requires a lot of forethought during product design
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Example of manufacturing postponement
Keeping all the car panels a base color (white or gray) untilthe order is received, then painting to the color ordered
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Geographic (or logistics) postponement
Build or stock a full-line inventory at one or a few strategic
locations
Forward deployment of inventory is postponed until
customer orders are received Once orders received, specific item is expedited to the local
distributor
Advantages are manufacturing economies of scale alongwith responsiveness to customer
Often used for critical, high cost parts and assemblies (e.g.
engines)
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Example of geographic postponement
Keeping full inventory in a central warehouse and releasing
customer orders to local distributors or direct shipping to
customer
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Combined postponement
Keeping the basic products centralized and
performing the customization at the destination
distributor
Historical example - Autos Installing dealer options like sound systems, GPS, sun
roofs on new cars purchased
Contemporary example - Computers Dell Computers, doing final assembly or packaging
additional system options like printers, digital cameras at
a distribution center
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Barriers to implementing responsive
systems
Need for publicly held
corporations to maintain
planned quarterly profits Expectations of continued financial
results often drive promotional andpricing strategies to load the
channel with inventory
Need to establish collaborative
relationships
Most business managers do nothave training or experience in
development of collaborative
arrangements
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Financial sophistication enables measurement of
time-based supply chain
Cash-to-Cash Conversionthe time required to convertraw material or inventorypurchases into sales revenue
Dwell Time Minimizationdwell time is the ratio of timethat an assets sits idle to thetime required to satisfy itssupply chain mission
Cash Spinreducing assets inthe supply chain can spincash for reinvestment in otherprojects
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Globalization offers firms several attractive
opportunities
Demand exceeds localsupply 90% of global demand is not
fullysatisfied by local supply
Strategic sourcing Identifying and matching thesources of raw materials andcomponents to manufacturersand distributors
Offshoring Moving manufacturing and
distribution operations tocountries with favorable laborcosts and tax laws
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Significant differences for global logistics
Distanceof typical order-to-delivery operations issignificantly longer compared to domestic business
Documentationrequirements for business
transactions is significantly more complex
Operations must be deal with significant Diversity
in work practices and local operating environments
How consumers Demandproducts and servicesmust accommodate cultural variations