Supply Chain Management OPIM 310-Lecture #6 Instructor: Jose Cruz

Supply Chain All activities associated with the flow and transformation of goods and services from raw materials to the end user, the customer 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 A sequence of business activities from suppliers through customers that provide the products, services, and information to achieve customer satisfaction

The Supply Chain Information Cash 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 Materials, parts, sub- assemblies, and services Figure 7.1

Supply Chain Management Synchronization of activities required to achieve maximum competitive benefits Synchronization of activities required to achieve maximum competitive benefits Coordination, cooperation, and communication Coordination, cooperation, and communication Rapid flow of information Rapid flow of information Vertical integration Vertical integration

Supply Chain Uncertainty Forecasting, lead times, batch ordering, price fluctuations, and inflated orders contribute to variability Forecasting, lead times, batch ordering, price fluctuations, and inflated orders contribute to variability Inventory is a form of insurance Inventory is a form of insurance Distorted information is one of the main causes of uncertainty Distorted information is one of the main causes of uncertainty

Information in the Supply Chain Centralized coordination of information flows Centralized coordination of information flows Integration of transportation, distribution, ordering, and production Integration of transportation, distribution, ordering, and production Direct access to domestic and global transportation and distribution channels Direct access to domestic and global transportation and distribution channels Locating and tracking the movement of every item in the supply chain Locating and tracking the movement of every item in the supply chain

Information in the Supply Chain Consolidation of purchasing from all suppliers Consolidation of purchasing from all suppliers Intercompany and intracompany information access Intercompany and intracompany information access Data interchange Data interchange Data acquisition at the point of origin and point of sale Data acquisition at the point of origin and point of sale Instantaneous updating of inventory levels Instantaneous updating of inventory levels

Electronic Business Replacement of physical processes with electronic ones Replacement of physical processes with electronic ones Cost and price reductions Cost and price reductions Reduction or elimination of intermediaries Reduction or elimination of intermediaries Shortening transaction times for ordering and delivery Shortening transaction times for ordering and delivery Wider presence and increased visibility Wider presence and increased visibility

Electronic Business Greater choices and more information for customers Greater choices and more information for customers Improved service Improved service Collection and analysis of customer data and preferences Collection and analysis of customer data and preferences Virtual companies with lower prices Virtual companies with lower prices Leveling the playing field for smaller companies Leveling the playing field for smaller companies Gain global access to markets & customers Gain global access to markets & customers

Electronic Data Interchange Computer-to-computer exchange of business documents in a standard format 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 Quick access, better customer service, less paperwork, better communication, increased productivity, improved tracing and expediting, improves billing and cost efficiency

Bar Codes Computer readable codes attached to items flowing through the supply chain 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 Generates point-of-sale data which is useful for determining sales trends, ordering, production scheduling, and deliver plans

The Internet Instant global access to organizations, individuals, and information sources Instant global access to organizations, individuals, and information sources Fundamentally changes the way organizations do business Fundamentally changes the way organizations do business Removed geographic barriers Removed geographic barriers Adds speed and accessibility to the supply chain Adds speed and accessibility to the supply chain

Figure 7.2Build-to-Order Cars over the Internet

The E-Automotive Supply Chain SUPPLY CHAIN PROCESSAUTOMOTIVE PASTE-AUTOMOTIVE Customer sales Push—sell from inventory Pull—Build-to-order Production Goal of even and stable production Focus on customer demand, respond with supply chain flexibility Distribution Mass approach Fast, reliable, and customized to get cars to specific customer location Customer relationships Dealer-owned Shared by dealers and manufacturers Managing uncertainty Large car inventory at dealers Small inventories with shared information and strategically placed parts inventories Procurement Batch-oriented; dealers order based on allocations Orders made in real time based on available-to-promise information Product design Complex products don’t match customer needs Simplified products based on better information about what customers want Table 7.2

Intranets and Extranets Intranets are internet-like networks that operate within a single organization Intranets are internet-like networks that operate within a single organization Extranets are intranets that can be connected to the global internet Extranets are intranets that can be connected to the global internet Difference is in who has access to the system Difference is in who has access to the system

IT Issues Increased benefits and sophistication come with increased costs 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 Efficient web sites do not necessarily mean the rest of the supply chain will be as efficient Security problems are very real Security problems are very real Partnership and trust are important elements that may be new to business relationships Partnership and trust are important elements that may be new to business relationships

Suppliers Purchased materials account for about half of manufacturing costs Purchased materials account for about half of manufacturing costs Materials, parts, and service must be delivered on time, of high quality, and low cost Materials, parts, and service must be delivered on time, of high quality, and low cost Suppliers should be integrated into their customers’ supply chains Suppliers should be integrated into their customers’ supply chains Partnerships should be established Partnerships should be established On-demand delivery (JIT) is a frequent requirement On-demand delivery (JIT) is a frequent requirement

Sourcing Relationship between customers and suppliers focuses on collaboration and cooperation Relationship between customers and suppliers focuses on collaboration and cooperation Outsourcing has become a long-term strategic decision Outsourcing has become a long-term strategic decision Organizations focus on core competencies Organizations focus on core competencies Single-sourcing is increasingly a part of supplier relations Single-sourcing is increasingly a part of supplier relations

E-Procurement Business-to-business commerce conducted on the Internet 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 Benefits include lower transaction costs, lower prices, reduce clerical labor costs, and faster ordering and delivery times Currently used more for indirect goods Currently used more for indirect goods E-Marketplaces service industry-specific companies and suppliers E-Marketplaces service industry-specific companies and suppliers

Figure 7.3 The Wal-Mart Supply Chain

Figure 7.4 Centralized Supply at Honda America

Distribution The actual movement of products and materials between locations The actual movement of products and materials between locations Handling of materials and products at receiving docks, storing products, packaging, and shipping Handling of materials and products at receiving docks, storing products, packaging, and shipping Often called logistics Often called logistics Driving force today is speed Driving force today is speed Particularly important for Internet dot-coms Particularly important for Internet dot-coms

Figure 7.5Order Fulfillment at Amazon.com

Distribution Centers and Warehousing DCs are some of the largest business facilities in the United States DCs are some of the largest business facilities in the United States Trend is for more frequent orders in smaller quantities Trend is for more frequent orders in smaller quantities Flow-through facilities and automated material handling Flow-through facilities and automated material handling Final assembly and product configuration may be done at the DC Final assembly and product configuration may be done at the DC

Warehouse Management Systems Highly automated systems Highly automated systems Controls item putaway, picking, packing, and shipping Controls item putaway, picking, packing, and shipping Transportation management, order management, yard management, labor management, warehouse optimization Transportation management, order management, yard management, labor management, warehouse optimization

Figure 7.6A WMS

Vendor-Managed Inventory Manufacturers generate orders, not distributors Manufacturers generate orders, not distributors Stocking information is accessed using EDI Stocking information is accessed using EDI A first step towards supply chain collaboration A first step towards supply chain collaboration Increased speed, reduced errors, and improved service Increased speed, reduced errors, and improved service

Collaborative Distribution and Outsourcing Collaborative planning, forecasting, and replenishment (CPFR) Collaborative planning, forecasting, and replenishment (CPFR) Internet-based exchange of data and information Internet-based exchange of data and information Significant decrease in inventory levels and more efficient logistics Significant decrease in inventory levels and more efficient logistics Companies focus on core competencies Companies focus on core competencies

Transportation Important element, often overlooked Important element, often overlooked Common methods are railroads, trucking, water, air, intermodal, package carriers, and pipelines Common methods are railroads, trucking, water, air, intermodal, package carriers, and pipelines

Railroads 150,000 miles in US 150,000 miles in US Low cost, high-volume Low cost, high-volume Improving flexibility Improving flexibility intermodal service intermodal service double stacking double stacking

Most used mode in US Most used mode in US Flexible, small loads Flexible, small loads Consolidation, Internet load match sites Consolidation, Internet load match sites Part of TQM supplier-customer relationship Part of TQM supplier-customer relationship Single sourcing reduces number of trucking firms serving a company Single sourcing reduces number of trucking firms serving a company Trucking

Air Rapidly growing segment of transportation industry Rapidly growing segment of transportation industry Lightweight, small items Lightweight, small items Quick, reliable, expensive Quick, reliable, expensive Major airlines and US Postal Service, UPS, FedEx, DHL Major airlines and US Postal Service, UPS, FedEx, DHL

Package Carriers FedEx, UPS, US Postal Service, DHL FedEx, UPS, US Postal Service, DHL Significant growth driven by e-businesses Significant growth driven by e-businesses Use several modes of transportation Use several modes of transportation Expensive Expensive Fast and reliable Fast and reliable Innovative use of technologies Innovative use of technologies

Intermodal Combination of several modes of transportation Combination of several modes of transportation Most common are truck/rail/truck and truck/water/rail/truck Most common are truck/rail/truck and truck/water/rail/truck Enabled by the use of containers Enabled by the use of containers

Water One of oldest means of transport One of oldest means of transport Low-cost, high-volume, slow Low-cost, high-volume, slow Bulky, heavy and/or large items Bulky, heavy and/or large items Standardized shipping containers improve service Standardized shipping containers improve service The most common form of international shipping The most common form of international shipping

Pipelines Primarily for oil & refined oil products Primarily for oil & refined oil products Slurry lines carry coal or kaolin Slurry lines carry coal or kaolin High capital investment High capital investment Low operating costs Low operating costs Can cross difficult terrain Can cross difficult terrain

Internet Transportation Exchanges Bring together shippers and carriers Bring together shippers and carriers Initial contact, negotiations, auctions Initial contact, negotiations, auctions Typically only one form of transportation, intermodal exchanges have been difficult to develop Typically only one form of transportation, intermodal exchanges have been difficult to develop