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SCMSupply Chain Management

Week Four-Five

F Casafranca 2013

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2

Whats New

Engineer by account demand visibility asclose to source of demand as possible

Allow SCM to manage (and intervene) in

inventory flows the cant see and dont own

Develop collaborative vision, metric, &

processes with key accounts

Develop costing systems that reflect

horizontal S.C. processes

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3

Whats New

(continued)

Think horizontally rather thanvertically.

Reduce transaction cost by trading

information technology for transactionprocessing

Align the firms internal & externalbusiness processes to focus on

customer value delivery

Utilize information technology as alearning/ teaching medium for all supply

chain partners- B. J. La Londe, The Ohio State University

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4

A SHIFT IN CUSTOMER (BUYER) DEMAND

TOWARD INTEGRATION AND CUSTOMIZATION

Highly CustomisedSolutions

Highly Integrated

Solutions

Stand Alone

Services Level of Integration

Basic Services

LevelofCustomisation

Customers

Customer Demand

CustomerDemand

Source: Roger MacFarlane, CEO

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5

SUPPLY CHAIN VALUE CREATION INVOLVES

THREE PRODUCT/SERVICE FORMS

Value-Added Product/Service Form Visibility

Information Technology

Order Fulfillment

Network Solutions

etc.

Tangible Product/Service Form

Transportation

Warehousing

Cross-Docking

Freight Forwarding

etc.

Core Product/Service Form

Efficiency

Effectiveness

Differentiation

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6

SUPPLY-DEMAND MISALIGNMENT:

THE NEED FOR DEMAND MANAGEMENT

Channel Orders

True End Customer

Demand

Production

Channel Fill and

Phantom Demand

Real

Shortage

Returns/

Cancellations

Over-Supply

Launch Date End of

Life

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WHAT IS PROCESS MANAGEMENT?

Definition:

Managing the use of anorganizations

resources to produce

something of value.

http://images.google.com/imgres?imgurl=tech-link.tt.pitt.edu/images/invention%2520disclosure%2520process.jpg&imgrefurl=http://tech-link.tt.pitt.edu/inventors_process.html&h=325&w=405&prev=/images%3Fq%3Dprocess%26svnum%3D10%26hl%3Den%26lr%3D%26ie%3DUTF-8%26oe%3DUTF-8http://images.google.com/imgres?imgurl=www.fpml.org/images/what-is-fpml/fpml-manual-process.gif&imgrefurl=http://www.fpml.org/what-is-fpml/background/index.asp&h=648&w=490&prev=/images%3Fq%3Dprocess%26svnum%3D10%26hl%3Den%26lr%3D%26ie%3DUTF-8%26oe%3DUTF-8

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PROCESS DESIGN

1. Project Process

2. Job Process

Batch Process

4. Line Process

5. Continuous Process

Low

High

Volume of

Output

Capital

Intensity

High

Low

Degree of

Specialization

customer involvement

Types

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PROCESS ALTERNATIVES

Outsourcing

Vertical Integration

Forward Vertical Integration

Backward Vertical

Integration

Resource Flexibility

Capital Intensity

Customer Involvement

http://images.google.com/imgres?imgurl=www.southwire.com/specialty/images/vertical_integration.jpg&imgrefurl=http://www.southwire.com/specialty/mag_quality.htm&h=499&w=385&prev=/images%3Fq%3Dvertical%2Bintegration%26svnum%3D10%26hl%3Den%26lr%3D%26ie%3DUTF-8%26oe%3DUTF-8%26sa%3DGhttp://images.google.com/imgres?imgurl=www.southwire.com/specialty/images/vertical_integration.jpg&imgrefurl=http://www.southwire.com/specialty/mag_quality.htm&h=499&w=385&prev=/images%3Fq%3Dvertical%2Bintegration%26svnum%3D10%26hl%3Den%26lr%3D%26ie%3DUTF-8%26oe%3DUTF-8%26sa%3DGhttp://images.google.com/imgres?imgurl=www.scaluminum.com/images/Product_Cover_final_flat.jpg&imgrefurl=http://www.scaluminum.com/&h=413&w=300&prev=/images%3Fq%3Dvertical%2Bintegration%26svnum%3D10%26hl%3Den%26lr%3D%26ie%3DUTF-8%26oe%3DUTF-8%26sa%3DG

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MANAGEMENT WORK STANDARDS

Establish standard costs and prices

Motivate workers

Comparing process designs

Scheduling

Inventory Management

Capacity planning

Timely performance appraisals

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PROCESS DEVELOPMENT

TOOLS & TECHNIQUES

Process Maps

Mind Mapping

Productivity Yield Analysis

Cycle Times

Brainstorming

Activity Based

Management (ABM)

http://www.accel-team.com/images/job_analysis.jpg

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INVENTORY MANAGEMENT Managers job to balance conflicting costs and

pressures between low and high inventories Inventory holding cost/carrying costs

Variable

Interest

Storage

Handling

Taxes

Insurance Shrinkage

Pressure for High Inventory includes Customer Service

Ordering Cost

Setup Cost

Utilization (labor & equipment)

Transportation

Supplier related expenses

http://images.google.com/imgres?imgurl=www.yccnet.com/images/customer-service.jpg&imgrefurl=http://www.yccnet.com/service.htm&h=188&w=200&prev=/images%3Fq%3Dcustomer%2Bservice%26start%3D20%26svnum%3D10%26hl%3Den%26lr%3D%26ie%3DUTF-8%26oe%3DUTF-8%26sa%3DNhttp://images.google.com/imgres?imgurl=www.usmbuildings.com/Customer%2520Service%2520Big.jpg&imgrefurl=http://www.usmbuildings.com/Customer%2520Service.html&h=327&w=400&prev=/images%3Fq%3Dcustomer%2Bservice%26start%3D20%26svnum%3D10%26hl%3Den%26lr%3D%26ie%3DUTF-8%26oe%3DUTF-8%26sa%3DN

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INVENTORY SYSTEM

DEFINED

Inventory is the stock of any item or resource used in anorganization and can include: raw materials, finished

products, component parts, supplies, and work-in-

process

An inventory system is the set of policies and controls

that monitor levels of inventory and determines what

levels should be maintained, when stock should be

replenished, and how large orders should be

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PURPOSES OF INVENTORY

To maintain independence of operations

To meet variation in product demand

To allow flexibility in production scheduling To provide a safeguard for variation in raw material

delivery time

To take advantage of economic purchase-order size

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INVENTORY COSTS

Holding (or carrying) costs

Costs for storage, handling, insurance, etc

Setup (or production change) costs Costs for arranging specific equipment setups, etc

Ordering costs

Costs of someone placing an order, etc

Shortage costs

Costs of canceling an order, etc

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INVENTORY SYSTEMS Single-Period Inventory Model

One time purchasing decision (Example: vendor selling t-shirts at a football game) Seeks to balance the costs of inventory overstock and under stock

Multi-Period Inventory Models Fixed-Order Quantity Models

Event triggered (Example: running out of stock) Fixed-Time Period Models

Time triggered (Example: Monthly sales call bysales representative)

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TYPES OF INVENTORY Cycle

Demand is regular and consistent Uses Lot Sizing (Q)

Avg Cycle Inventory = Q/2

Safety Stock

Protects against uncertainties in demand

Firm places an order earlier than when needed

Anticipation

Stockpile during low demand periods for high demand

Pipeline

Orders placed, but not received yet

Measured as avg demand during lead time

Pipeline = Average Demand/Lead Time

http://images.google.com/imgres?imgurl=www.kokatat.com/images/inventory.jpg&imgrefurl=http://www.kokatat.com/factory.htm&h=156&w=208&prev=/images%3Fq%3Dinventory%26svnum%3D10%26hl%3Den%26lr%3D%26ie%3DUTF-8%26oe%3DUTF-8

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LEVERS FOR REDUCING INVENTORY

Cycle Streamline Order and Setup processes

Increase work repeatability

Safety Stock Improve demand forecasts

Reduce lead times

Reduce supply uncertainties

Rely more on equipment and labor buffers (cross-train)

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ECONOMIC ORDER QUANTITY (EOQ)

Assumes that: Product demand is constant

No lot size constraints

Only costs are holding and setup/ordering Decisions are independent (cannot combine supplier

orders)

No uncertainty in lead times Lowest point on the Total Cost Curve

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JUST-IN-TIME SYSTEMS

Definition: to eliminate

waste by cutting

unnecessary

inventory andremoving delays in

operations.

http://images.google.com/imgres?imgurl=www.fi.edu/time/Journey/JustInTime/game.gif&imgrefurl=http://www.fi.edu/time/Journey/JustInTime/game.html&h=720&w=549&prev=/images%3Fq%3Djust%2Bin%2Btime%26svnum%3D10%26hl%3Den%26lr%3D%26ie%3DUTF-8%26oe%3DUTF-8

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CHARACTERISTICS OF JIT SYSTEMS Employee involvement

Inventory reduction

Also known as:

Zero inventory

Stockless production

Lean production

Synchronous manufacturing Material as needed

Continuous flow manufacturing

http://images.google.com/imgres?imgurl=www.damacmusic.com/acatalog/whispers-just-gets-better-with-time.jpg&imgrefurl=http://www.damacmusic.com/acatalog/Online_Catalogue_W_314.html&h=150&w=150&prev=/images%3Fq%3Djust%2Bin%2Btime%26start%3D80%26svnum%3D10%26hl%3Den%26lr%3D%26ie%3DUTF-8%26oe%3DUTF-8%26sa%3DN

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JIT MATERIAL FLOW METHODS

Pull Method customer

demand will activate

production of the item(s).

Push Method

production of the item

begins in advance ofcustomer needs.

http://images.google.com/imgres?imgurl=www.canalplace.org/html/canalfest/Train-Pull.JPG&imgrefurl=http://www.canalplace.org/html/canalfest/&h=364&w=558&prev=/images%3Fq%3Dpull%26svnum%3D10%26hl%3Den%26lr%3D%26ie%3DUTF-8%26oe%3DUTF-8%26sa%3DGhttp://images.google.com/imgres?imgurl=www.rchs.com/smplpix/push.JPG&imgrefurl=http://www.rchs.com/redbarn.htm&h=237&w=196&prev=/images%3Fq%3Dpush%26svnum%3D10%26hl%3Den%26lr%3D%26ie%3DUTF-8%26oe%3DUTF-8%26sa%3DG

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KANBAN CARD SYSTEM

Storage AreaFabrication Areas

Production Lines

Shows the flow of a Kanban card and storage box.

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LINE FLOW STRATEGY

OWMM one worker, multiple

machines - used for low volume of

certain product

Continuous Flow assembly line

processing

http://images.google.com/imgres?imgurl=www.cripo.com.ua/stati/img-st/mcdonalds-church.jpg&imgrefurl=http://www.cripo.com.ua/zaglavn.htm&h=338&w=250&prev=/images%3Fq%3Dmcdonalds%26start%3D140%26svnum%3D10%26hl%3Den%26lr%3D%26ie%3DUTF-8%26oe%3DUTF-8%26sa%3DN

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25

"Profit is the payment

you get when you take

advantage of change"

- Joseph A. Schumpeter

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THE BALANCED SUPPLY CHAIN

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27

COMPARISON OF HONDA AND CHRYSLER

Honda

Manages more suppliers in second- and third-tiers Supply network more complex

Expends more corporate resources

Takes less risk in supply chain stability

Chrysler

Manages less suppliers in tertiary level

Supply network less complex

Spends less corporate resources on supplier management

Takes more risk in supply chain stability

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28

SUPPLY BASE

A group of suppliers within the reach of the visible hand of

the focal company

The portion of the supply network within the purview of the

focal company

Suppliers actively managed by the focal company

Not all suppliers in the supply base are top-tier suppliers.

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29

FOCAL COMPANY AND ITS SUPPLY BASE

The Focal Company

Supply Base

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30

SUPPLY BASE MANAGEMENT

Number of Suppliers

Number of current suppliers with enduring business relations

Differentiation of Suppliers

Degree of different characteristics among suppliers (e.g., culture,

operating practices, etc.)

Links among Suppliers

Supplier-supplier relationships

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SUPPLY BASE MANAGEMENT AND

PERFORMANCE IMPLICATIONS

+

Transaction

cost

Supply

risk

Supplier

responsiveness

-

Supplier

innovation

Supply base management

Number of Suppliers

Differentiations

Inter-Relationships

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BALANCED SUPPLY TOOLS.

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33

BASIC BUILDING BLOCKS

Buyer-Supplier Dyads Supplier-Supplier Dyads

Buyer-Supplier-Supplier Triads

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34

BUYER-SUPPLIER DYADS

Competitive

Adversarial

New Adversarial

Cooperative

Information and resource sharing

Common goals

Deep

Understanding

Tough love

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35

SUPPLIER-SUPPLIER DYADS

Competitive

Cooperative

Co-Opetitive (cooperative competition)

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36

COMPETITIVE SUPPLIER-SUPPLIER DYADS:

FROM THE BUYERS PERSPECTIVE

Pros

Maintaining leverage power

Control of information exchange between suppliers

Cons

Lack of supplier synergy

High administrative and transaction cost

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COOPERATIVE SUPPLIER-SUPPLIER DYADS:

FROM THE BUYERS PERSPECTIVE

Pros

Information and knowledge sharing

Capacity flexibility

Cons

Potential for supplier collusion

Forward integration by suppliers

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CO-OPETITIVE SUPPLIER-SUPPLIER DYADS:

FROM THE BUYERS PERSPECTIVE

Pros

Opportunity to gain advantage of both competitive and

cooperative relationships

Low supplier switching cost

Cons

Relationship uncertainty

Risk of suppliers opportunistic behaviors

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39

TRIADS

The Real Fundamental Building Block

Three States of Buyer-Supplier-Supplier Triads

Balanced States Unbalanced States

Structural Hole States

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40

BALANCED STATES AND UNBALANCED STATES

Buyer

++

+

S2S1

Balanced State 1

S1 S2

- -

+

Buyer

Balanced State 2

S2S1

+ -

-

Buyer

Balanced State 3

++

-

S2S1

Buyer

Unbalanced State 1

S2S1

+

+ -

Buyer

Unbalanced State 2

S2S1

-

- -

Buyer

Unbalanced State 3

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CLASS EXERCISE

Form into Three teams and discuss:

-Team A: The concept of Focal Base and Supply Base Management

-Team B: The concept of DIADS and their type of relationships

-Team C: The concept of TRIADS and their type of relationships

-Team D: The six Balanced and Unbalanced states for TRIADS

Please provide an example using a Family or friendship relationships

Be ready to present in 10 minutes.

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QUESTIONS??