1 Production Operations Management Supply Chain Management U. Akinc Supply Chain Management U. Akinc

2 Supply Chains l A supply chain encompasses all the facilities, activities and functions in the delivery of products to customers from the raw material to the finished product stages. l Modern supply chain management is to manage the facilities, activities and functions in an integrated and coordinated way so as to maximize customer satisfaction. l A supply chain encompasses all the facilities, activities and functions in the delivery of products to customers from the raw material to the finished product stages. l Modern supply chain management is to manage the facilities, activities and functions in an integrated and coordinated way so as to maximize customer satisfaction.

3 Supply chain management: l is a strategic area of management l involves strategic investments in facilities, technologies and relationships l significantly impacts the way the company competes l Efficiency (cost) l Delivery speed and reliability l Quality l Customization/flexibility l is a strategic area of management l involves strategic investments in facilities, technologies and relationships l significantly impacts the way the company competes l Efficiency (cost) l Delivery speed and reliability l Quality l Customization/flexibility

4 Structure of Supply Chain

5 I. Facilities l Involve plants, warehouses, distribution centers, transportation infrastructure and communication links. Challenge: How should these be aligned and realigned across the members of the SC to maximize efficiency, speed and responsiveness for the whole chain. l Involve plants, warehouses, distribution centers, transportation infrastructure and communication links. Challenge: How should these be aligned and realigned across the members of the SC to maximize efficiency, speed and responsiveness for the whole chain.

6 II. Functions l Traditional functional organization around marketing, manufacturing, finance etc. does not foster an integrated approach to the challenges of the Modern Supply Chain Management l A more of an inter-functional, team approach to management is needed. l Traditional functional organization around marketing, manufacturing, finance etc. does not foster an integrated approach to the challenges of the Modern Supply Chain Management l A more of an inter-functional, team approach to management is needed.

7 III. Activities: l Traditional Materials management involve: l purchasing l shipping/receiving l inventory management l production scheduling l transportation/distribution l customer service l Traditional Materials management involve: l purchasing l shipping/receiving l inventory management l production scheduling l transportation/distribution l customer service

8 Supply-Chain Decisions l Sourcing: –Quality of materials/parts –Supplier selection –Location of suppliers –Ordering practices –In-bound transportation channels l Production –Plant Location –Make versus Buy –Capacity of Plants –Product Quality l Sourcing: –Quality of materials/parts –Supplier selection –Location of suppliers –Ordering practices –In-bound transportation channels l Production –Plant Location –Make versus Buy –Capacity of Plants –Product Quality

9 SC Decisions (cont.) l Inventory –How much safety stock? –JIT practices –Replenishment policies l Distribution –Channels of distribution –Transportation modes –In-house vs. out-sourced –DC locations –Recycling/recovery practices l Inventory –How much safety stock? –JIT practices –Replenishment policies l Distribution –Channels of distribution –Transportation modes –In-house vs. out-sourced –DC locations –Recycling/recovery practices

10 State of Integration l Stage I: l Stage I: traditional managemet where all facilities, functions and activities are managed independently (prior to 1960’s) l Stage II: A company integrates its material management activities and functions within its own 4 walls (1960’s) l Stage III: Enterprise Extension-- couple, coordinate and integrate all facilities, functions and activities for the entire supply chain (1990’s and beyond) l Stage I: l Stage I: traditional managemet where all facilities, functions and activities are managed independently (prior to 1960’s) l Stage II: A company integrates its material management activities and functions within its own 4 walls (1960’s) l Stage III: Enterprise Extension-- couple, coordinate and integrate all facilities, functions and activities for the entire supply chain (1990’s and beyond)

11 Three Flows l Physical goods, components, materials, re- cycling and recovery l Information -- both upstream and downstream.. Main means of integration l Financial l Physical goods, components, materials, re- cycling and recovery l Information -- both upstream and downstream.. Main means of integration l Financial

12 Bull Whip Effect l Demand uncertainty is the main cause of inefficiencies on the supply chain l Small variations in demand at the customer end often produce dramatic and violent fluctuations in orders down stream (bullwhip) l Integrating the supply chain tries to dampen these fluctuations-- often by sharing information l Demand uncertainty is the main cause of inefficiencies on the supply chain l Small variations in demand at the customer end often produce dramatic and violent fluctuations in orders down stream (bullwhip) l Integrating the supply chain tries to dampen these fluctuations-- often by sharing information

13 Supply Chain Strategies l Responsive supply chains: l Great variety of short life cycle, customized products --Innovative Products l Efficient supply chains: l Highly stable and predictable demand --Functional products l A trade-off to be resolved l Responsive supply chains: l Great variety of short life cycle, customized products --Innovative Products l Efficient supply chains: l Highly stable and predictable demand --Functional products l A trade-off to be resolved

14 Relationships l Creating a trusting, mutually beneficial relationships among the members of the supply chain is essential l Contrary to the traditional approach, in modern SCM, the suppliers are not considered as adversaries but as trusted partners l Creating a trusting, mutually beneficial relationships among the members of the supply chain is essential l Contrary to the traditional approach, in modern SCM, the suppliers are not considered as adversaries but as trusted partners

15 SC Challenges l Involves a number of different companies with diverse objectives, philosophies and management styles l Information systems used by different members may not be compatible for seamless information sharing l Sharing the benefits and risks is not always easy l Lack of universally accepted performance measures l Involves a number of different companies with diverse objectives, philosophies and management styles l Information systems used by different members may not be compatible for seamless information sharing l Sharing the benefits and risks is not always easy l Lack of universally accepted performance measures