McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved Business Plug-in B8 SUPPLY CHAIN MANAGEMENT

8-2 BASICS OF SUPPLY CHAIN The supply chain has three main links: 1.Materials flow from suppliers and their “upstream” suppliers at all levels 2.______________ of materials into semifinished and finished products through the organization’s own production process 3.Distribution of products to customers and their “downstream” customers at all levels

8-3 BASICS OF SUPPLY CHAIN Organizations must embrace technologies that can effectively manage supply chains

8-4 USING IT TO DRIVE THE SUPPLY CHAIN The four primary drivers of supply chain management 1.Facilities 2.Inventory 3.Transportation 4.____________ Organizations use these four drivers to support either a supply chain strategy focusing on efficiency or a supply chain strategy focusing on ______________.

8-5 USING IT TO DRIVE THE SUPPLY CHAIN

8-6 FACILITIES DRIVER Facility – processes or transforms inventory into another product, or stores the inventory before shipping to the next facility Three primary facilities components 1._________ 2.Capacity 3.Operational design

8-7 FACILITIES 1: Location Location efficiency – centralize the location to gain economies of scale, which increases efficiency Location effectiveness – ____________ the locations to be closer to the customers or suppliers, which increases effectiveness

8-8 FACILITIES 2: Capacity Capacity efficiency – minimal excess capacity with the ability to produce only what is required Capacity effectiveness – large amounts of excess capacity which can handle wide swings in __________

8-9 FACILITIES 3: Operational Design Operational design efficiency – product focus design allows the facility to become highly efficient at producing one single product, increasing efficiency Operational design effectiveness – ___________ focus design allows the facility to perform a specific function on many different types of products, increasing effectiveness

8-10 FACILITIES DRIVER

8-11 INVENTORY DRIVER Inventory – offsets uncertainty in _________ and/or demand Inventory management and control software – provides control and _________ to the status of individual items maintained in inventory Two primary inventory components 1.Cycle inventory 2.Safety inventory

8-12 INVENTORY 1: Cycle Inventory Cycle inventory – the ________ amount of inventory held to satisfy customer demands between inventory deliveries –Efficiency – holding _______ amounts of inventory and processing orders weekly or even daily –Effectiveness – holding large amounts of inventory and processing deliveries only once a month

8-13 INVENTORY 2: Safety Inventory Safety inventory – extra inventory held due to uncertainty in supply and/or demand –Safety inventory efficiency – holding small amounts of safety inventory (____ uncertainty in supply/demand) –Safety inventory effectiveness – holding large amounts of safety inventory (high uncertainty in supply/demand)

8-14 INVENTORY DRIVER

8-15 TRANSPORTATION DRIVER Transportation – moves inventories between the different stages in the supply chain Two primary inventory components 1.Method of transportation 2.Transportation _________

8-16 TRANSPORTATION 1: Method of Transportation Global inventory management system – provides the ability to locate, track, and ________ the movement of components or material anywhere upstream or downstream in the supply chain –Method of transportation efficiency –Method of transportation effectiveness

8-17 TRANSPORTATION 2: Transportation Route Transportation planning software – tracks and ________ the movement of materials to ensure the delivery of materials and finished goods at the right time, the right place, and the lowest cost Distribution management software – coordinates the transportation of materials from a manufacturer to distribution centers to the final customer –Transportation route efficiency –Transportation route effectiveness

8-18 TRANSPORTATION DRIVER

8-19 INFORMATION DRIVER Information – an organization must decide what information it wants to share, and how it will share, with its supply chain partners Two primary information components 1.Information sharing 2.Push versus ______ strategy

8-20 INFORMATION 1: Information Sharing Information sharing efficiency – freely share large quantities of information to increase the speed and decrease the costs of supply chain processing Information sharing effectiveness – share only selected information with certain entities, which will _________ the speed and increase the costs of supply chain processing

8-21 INFORMATION 2: Push vs. Pull Information Strategy Pull information strategy (efficiency) –Supply chain partners are responsible for pulling all relevant information –Pull technology – pulls information Push information strategy (effectiveness) –Organization takes the responsibility to push information out to its supply chain partners –Push technology – sends information

8-22 INFORMATION DRIVER

8-23 APPLYING A SUPPLY CHAIN DESIGN

8-24 FUTURE SUPPLY CHAIN TRENDS Fastest growing SCM components –Supply chain _______ management (SCEM) Real-time issues resolution –Selling chain management In the selling phase –Collaborative engineering In the design phase –Collaborative demand planning