1 Lecture 6 BSB 370 Supply Chain Management Chapter 11

2 Supply Chain Management  Supply Chain: the sequence of organizations - their facilities, functions, and activities - that are involved in producing and delivering a product or service. Sometimes referred to as value chains

3  Warehouses  Factories  Processing centers  Distribution centers  Retail outlets  Offices Facilities

4 Functions and Activities  Forecasting  Purchasing  Inventory management  Information management  Quality assurance  Scheduling  Production and delivery  Customer service

5 Typical Supply Chains Typical Supply Chains Purchasing ReceivingStorageOperationsStorage ProductionDistribution

6 Typical Supply Chain for a Manufacturer Typical Supply Chain for a Manufacturer Supplier Storage } Mfg.StorageDist.RetailerCustomer Figure 11.1a

7 Supplier } StorageService Customer Typical Supply Chain for a Service Typical Supply Chain for a Service Figure 11.1b

8 1. Improve operations 2. Increasing levels of outsourcing 3. Increasing transportation costs 4. Competitive pressures 5. Increasing globalization 6. Increasing importance of e-commerce 7. Complexity of supply chains 8. Manage inventories Need for Supply Chain Management

9 Bullwhip Effect Figure 11.3 Final Customer Initial Supplier Demand Inventory oscillations become progressively larger looking backward through the supply chain

10 Benefits of Supply Chain Management OrganizationBenefit Campbell SoupDoubled inventory turnover rate Hewlett-PackardCut supply costs 75% Sport ObermeyerDoubled profits and increased sales 60% National BicycleIncreased market share from 5% to 29% Wal-MartLargest and most profitable retailer in the world

11 Benefits of Supply Chain Management  Lower inventories  Higher productivity  Greater agility  Shorter lead times  Higher profits  Greater customer loyalty  Integrates separate organizations into a cohesive operating system

12 Global Supply Chains  Increasing more complex  Language  Culture  Currency fluctuations  Political  Transportation costs  Local capabilities  Finance and economics  Environmental

13 Elements of Supply Chain Management Deciding how to best move and store materialsLogistics Determining location of facilitiesLocation Monitoring supplier quality, delivery, and relations Suppliers Evaluating suppliers and supporting operationsPurchasing Meeting demand while managing inventory costsInventory Controlling quality, scheduling workProcessing Incorporating customer wants, mfg., and timeDesign Predicting quantity and timing of demandForecasting Determining what customers wantCustomers Typical IssuesElement Table 11.1

14 Strategic or Operational  Two types of decisions in supply chain management  Strategic – design and policy  Operational – day-today activities  Major decisions areas  Location  Production  Inventory  Distribution

15 Supply Chain Issues Quality control Production planning and control Inventory policies Purchasing policies Production policies Transportation policies Quality policies Design of the supply chain, partnering Operating IssuesTactical Issues Strategic Issues

16 Supply Chain Benefits and Drawbacks Less varietyAble to match supply and demand Shorter lead times, better forecasts Variability Loss of controlReduced cost, higher quality OutsourcingCost Quality Less varietyFewer parts Simpler ordering ModularLarge number of parts May not be feasible May need absorb functions Quick responseDelayed differentiation Disintermediation Long lead times Traffic congestion Increased costs Reduced holding costs Smaller, more frequent deliveries Large inventories Possible Drawbacks BenefitsPotential Improvement Problem Table 11.5

17  Logistics  Refers to the movement of materials and information within a facility and to incoming and outgoing shipments of goods and materials in a supply chain Logistics

18 Logistics Movement within the facility Incoming and outgoing shipments Bar coding EDI Distribution JIT Deliveries