Supply Chain Management Team 223 EMBA 2002

Introduction Supply chains exist in both service and manufacturing organizations May be simple or complex Made up of various organizations – inherent conflicts may exist between them – Ideally a well-balanced, well-practiced relay team, positioned for “hand-offs” Team 223EMBA Supply Chain Management Cover Graphic From Internet, ORACLE Website, Oracle Supply Chain applications

A Brief History* Multicommodity Logistics Network Model “PLANETS” Stochastic Sub-Models Normative Model Comprehensive Deterministic Model “OPTIMIZER” Model * Ganeshan, Ram and Harrison, Terry P. An Introduction to Supply Chain Management. Internet, Penn State University website Supply Chain Management Team 223EMBA 20023

Supply Chain Management A Brief History (continued) Current Research – Shows promise in reducing inventories, increasing customer service – Several limitations: Focus is on the inventory system only; largely ignores the production side of the supply chain Assumes re-supply from only one site Restricted to well-known forms of demand and lead-time Team 223EMBA 20024

Supply Chain Decisions * Two broad categories: – Strategic longer horizon linked with corporate strategy guide supply chain policies from a design perspective – Operational shorter term focus of effort is on effective, efficient management of product flow Four major decision areas: Location, Production, Inventory and Transportation. Each has strategic and operational elements. * Ganeshan, Ram and Harrison, Terry P. An Introduction to Supply Chain Management. Internet, Penn State University website Supply Chain Management Team 223EMBA 20025

Supply Chain Management Supply Chain Decisions Location: largely strategic – Involves commitment to a long term plan – Decisions regarding size, number, location represent the basic strategy for accessing customer markets – Considerable impact on revenue, cost and levels of service Production – Strategic: Product Path(s): these decisions determine the exact path(s) the product will take to and from a facility Facility capacity: this decision will depend primarily upon the degree of vertical integration within the firm – Operational: The focus is on detailed production scheduling Team 223EMBA 20026

Supply Chain Decisions Inventory – Strategic: top management goals – Operational: the primary approach to inventory management Push vs. Pull Optimal order quantities and reorder points safety stock levels Transportation – Primarily strategic – Closely linked with inventory decisions – Customer service levels & geographic location play key role Shipment size Routing Scheduling Supply Chain Management Team 223EMBA 20027

Supply Chain Management Tools Strategy Tools for SCM – Broad decision scope – Requires lots of data – Provide approximate solutions – Focus is on design Operational Tools for SCM – Address day-to-day SCM operation – Models have a narrower scope, consider detail and provide optimal solutions – Focus is on inventory control policies (usually multi-level) Supply Chain Management Team 223EMBA 20028

Supply Chain Management Supply Chain Flow - Manufacturing Advance Planning, Scheduling and Logistics Techniques Team 223EMBA Graphic from: Internet, ORACLE Website, Oracle Supply Chain applications

Supply Chain Management Supply Chain Flow - Manufacturing Procurement - Vendor/Supplier Management Team 223EMBA Graphic from: Internet, ORACLE Website, Oracle Supply Chain applications

Supply Chain Flow - Manufacturing * Manufacturing – Workflow technologies enable trading partners to: Collaborate on new product development Shorten time-to-market – Detailed product information can be collected and distributed to various partners to expedite collaboration – New product design timelines and objectives can be synchronized to achieve shared goals Distribution – Impacts inventory level, cost and customer service level – Push vs. Pull Inventory – The Role of Warehouse and Distribution Managers * Internet, ORACLE Website, Oracle Supply Chain applications Supply Chain Management Team 223EMBA

Team 223EMBA Supply Chain Management Supply Chain Flow - Manufacturing Customers – Customization becoming standard to order fulfillment – Synchronized operations, global visibility and large-scale reductions in inventory across the extended supply chain grant trading partners the agility and flexibility necessary for participation in a mass customization model

Supply Chain Management Supply Chain Flow - A Service Industry Example Airborne Logistics Services Team 223EMBA From: Airborne Express: WebMethods at Work with Airborne Logistics Services

Supply Chain Management Driving Forces With the Internet Age: – Traditional barriers to market entry have disappeared – Global markets can be reached overnight – Customers are more informed, demanding Forrester Research forecasts that inter-company trade over the Internet will double every year over the next 5 years - from $43B last year to $1.3T by 2003* The Bottom Line: ROI. A recent Benchmarking Partners, Inc. study revealed that 90% of surveyed companies benefited from integration through electronic commerce. *Internet, WebMethods website, Whitepapers, B2B Integration: The Drive to Gain and Maintain Competitive Advantage Team 223EMBA

Supply Chain Management Supply Chain Synchronization: B2B & SCM* B2B: the automated exchange of information between different organizations – Crosses corporate boundaries (firewalls) – Accomplished over the Internet or VAN’s (Value-Added Networks) – Increasingly uses open standards such as XML and HTTP – Has spawned dedicated organizations to develop the software solutions *Internet, WebMethods website, Whitepapers, B2B Integration: The Drive to Gain and Maintain Competitive Advantage Team 223EMBA

Supply Chain Management Considerations for SCM Development & Deployment Learning Costs of new tools and data Supplier information needs Optimize the entire system Implement in stages System flexibility and capability for customization * Impact on employees (jobs, assignments, responsibilities, compensation structure) *Managing and Using Information Systems, Keri E. Pearlson, John Wiley & Sons, 2001, pg 100 Team 223EMBA Co

Supply Chain Management Examples: Success Stories Team 223EMBA

Supply Chain Management Examples: Success Stories IBM – Supplier relationships moved to web beginning in 1998 – Links 20,000 IBM suppliers – 94% of invoices handled electronically – 400,000 e-invoices/month via IBM’s private exchange – Estimated savings: $400M/year Kimberly Clark – Implemented an Automated Replenishment Program with 44 retailers – Estimated savings: $200M/2 years Team 223EMBA