1. Adeyl Khan, Faculty, BBA, NSU

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. 11-2 Sometimes referred to as value chains Purchasing ReceivingStorageOperationsStorage ProductionDistribution Typical Supply Chains

3. Adeyl Khan, Faculty, BBA, NSU Warehouses Factories Processing centers Distribution centers Retail outlets Offices Facilities 11-3 Forecasting Purchasing Inventory management Information management Quality assurance Scheduling Production and delivery Customer service Functions and Activities

4. Adeyl Khan, Faculty, BBA, NSU  Typical Supply Chain for a Manufacturer  Typical Supply Chain for a Service 11-4 Supplier Storage } Mfg.StorageDist.RetailerCustomer Supplier } StorageService Customer

5. Adeyl Khan, Faculty, BBA, NSU Need for Supply Chain Management  Improve operations  Increasing levels of outsourcing  Increasing transportation costs  Competitive pressures  Increasing globalization  Increasing importance of e-commerce  Complexity of supply chains  Manage inventories 11-5

6. Adeyl Khan, Faculty, BBA, NSU Bullwhip Effect 11-6 Final Customer Initial Supplier Demand Inventory oscillations become progressively larger looking backward through the supply chain

7. Adeyl Khan, Faculty, BBA, NSU 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 11-7

8. Adeyl Khan, Faculty, BBA, NSU Benefits from SCM 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 11-8

9. Adeyl Khan, Faculty, BBA, NSU Global Supply Chains  Increasing more complex  Language  Culture  Currency fluctuations  Political  Transportation costs  Local capabilities  Finance and economics  Environmental 11-9

10. Adeyl Khan, Faculty, BBA, NSU Elements of Supply Chain Management 11-10 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

11. Adeyl Khan, Faculty, BBA, NSU 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 11-11

12. Adeyl Khan, Faculty, BBA, NSU 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 11-12 Movement within the facilityIncoming and outgoing shipmentsBar codingEDIDistributionJIT Deliveries 0 214800 232087768

13. Adeyl Khan, Faculty, BBA, NSU Materials Movement 11-13 RECEIVING Storage Work center Work center Storage Work center Storage Shipping

14. Adeyl Khan, Faculty, BBA, NSU Distribution Requirements Planning  Distribution requirements planning (DRP) is a system for inventory management and distribution planning  Extends the concepts of MRPII  Used to plan and coordinate various operations 11-14 Transportation Warehousing Workers Equipment Financial flows Uses of DRP

15. Adeyl Khan, Faculty, BBA, NSU E-Business  E-Business: the use of electronic technology to facilitate business transactions  Applications include  Internet buying and selling  E-mail  Order and shipment tracking  Electronic data interchange 11-15

16. Adeyl Khan, Faculty, BBA, NSU Advantages E-Business Have a global presence Improve competitiveness and quality Analyze customer interests Collect detailed information Shorten supply chain response times Realize substantial cost savings Create virtual companies Level the playing field for small companies Advantages 11-16 Customer expectations Order quickly -> fast delivery Order fulfillment Order rate often exceeds ability to fulfill it Inventory holding Outsourcing loss of control Internal holding costs Disadvantages

17. Adeyl Khan, Faculty, BBA, NSU Reverse Logistics  Reverse logistics – the backward flow of goods returned to the supply chain  Processing returned goods  Sorting, examining/testing, restocking, repairing  Reconditioning, recycling, disposing  Gatekeeping – screening goods to prevent incorrect acceptance of goods  Avoidance – finding ways to minimize the number of items that are returned 11-17

18. Adeyl Khan, Faculty, BBA, NSU  Effective Supply Chain Requires linking the market, distribution channels processes, and suppliers  Supply chain should enable members to:  Share forecasts  Determine the status of orders in real time  Access inventory data of partners 11-18 Trust among trading partners Effective communications Supply chain visibility Event-management capability The ability to detect and respond to unplanned events Performance metrics Successful Supply Chain

19. Adeyl Khan, Faculty, BBA, NSU SCOR Metrics PerspectiveMetrics ReliabilityOn-time delivery Order fulfillment lead time Fill rate (fraction of demand met from stock) Perfect order fulfillment FlexibilitySupply chain response time Upside production flexibility ExpensesSupply chain management costs Warranty cost as a percent of revenue Value added per employee Assets/utilizationTotal inventory days of supply Cash-to-cash cycle time Net asset turns 11-19

20. Adeyl Khan, Faculty, BBA, NSU 11-20 AttributePerformance Attribute DefinitionLevel 1 Metric Supply Chain Reliability The performance of the supply chain in delivering: the correct product, to the correct place and customer, at the correct time, in the correct condition and packaging, and with the correct quantity and documentation Delivery Performance Fill Rates Perfect Order Fulfillment Supply Chain Responsiveness The velocity at which a supply chain provides products to the customer. Order Fulfillment Lead Times Supply Chain Flexibility The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage. Supply Chain Response Time Production Flexibility Supply Chain Costs The costs associated with operating the supply chain. Cost of Goods Sold Total Supply Chain Management Costs Value-Added Productivity Warranty / Returns Processing Costs Supply Chain Asset Management Efficiency The effectiveness of an organization in managing assets to support demand satisfaction. This includes the management of all assets: fixed and working capital. Cash-to-Cash Cycle Time Inventory Days of Supply Asset Turn

21. Adeyl Khan, Faculty, BBA, NSU RFID Technology  Used to track goods in supply chain  RFID tag attached to object  Similar to bar codes but uses radio frequency to transmit product information to receiver  RFID eliminates need for manual counting and bar code scanning 11-21

22. Adeyl Khan, Faculty, BBA, NSU CPFR- Collaborative Planning, Forecasting, and Replenishment  Focuses on information sharing among trading partners  Forecasts can be frozen and then converted into a shipping plan  Eliminates typical order processing 11-22 1. Develop Front End Agreement 2. Create the Joint Business Plan 3. Create the Sales Forecast 4. Identify Exceptions for Sales Forecast 5. Resolve/Collaborate on Exception Items 6. Create Order Forecast 7. Identify Exceptions for Order Forecast 8. Resolve/Collaborate on Exception Items 9. Order Generation CPFR Process

23. Adeyl Khan, Faculty, BBA, NSU CPFR Results  Nabisco and Wegmans  50% increase in category sales  Wal-mart and Sara Lee  14% reduction in store-level inventory  32% increase in sales  Kimberly-Clark and Kmart  Increased category sales that exceeded market growth 11-23

24. Adeyl Khan, Faculty, BBA, NSU Creating an Effective Supply Chain  Develop strategic objectives and tactics  Integrate and coordinate activities in the internal supply chain  Coordinate activities with suppliers with customers  Coordinate planning and execution across the supply chain  Form strategic partnerships 11-24 Quality Cost Flexibility Velocity Customer service SC Performance Drivers Inventory velocity The rate at which inventory(material) goes through the supply chain Information velocity The rate at which information is communicated in a supply chain

25. Adeyl Khan, Faculty, BBA, NSU Supply chain optimization Barriers to integration of organizations Getting top management on board Dealing with trade-offs Small businesses Variability and uncertainty Long lead times Challenges 11-25 Lot-size-inventory Bullwhip effect Inventory-transportation costs Cross-docking Lead time-transportation costs Product variety-inventory Delayed differentiation Cost-customer service Disintermediation Trade-offs

26. Adeyl Khan, Faculty, BBA, NSU Trade-offs  Bullwhip effect  Inventories are progressively larger moving backward through the supply chain  Cross-docking  Goods arriving at a warehouse from a supplier are unloaded from the supplier’s truck and loaded onto outbound trucks  Avoids warehouse storage 11-26  Delayed differentiation  Production of standard components and subassemblies, which are held until late in the process to add differentiating features  Disintermediation  Reducing one or more steps in a supply chain by cutting out one or more intermediaries

27. Adeyl Khan, Faculty, BBA, NSU Supply Chain Issues 11-27 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

28. Adeyl Khan, Faculty, BBA, NSU Supply Chain Situational Comparison ProblemPotential Improvement BenefitsPossible Drawbacks Large inventories Smaller, more frequent deliveries Reduced holding costs Traffic congestion Increased costs Long lead times Delayed differentiation Disintermediation Quick responseMay not be feasible May need absorb functions Large number of parts ModularFewer parts Simpler ordering Less variety Cost Quality OutsourcingReduced cost, higher quality Loss of control VariabilityShorter lead times, better forecasts Able to match supply and demand Less variety 11-28

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30. Adeyl Khan, Faculty, BBA, NSU Purchasing  Purchasing is responsible for obtaining the materials, parts, and supplies and services needed to produce a product or provide a service.  Purchasing cycle: Series of steps that begin with a request for purchase and end with notification of shipment received in satisfactory condition. 11-30 Develop and implement purchasing plans for products and services that support operations strategies Goal of Purchasing Identifying sources of supply Negotiating contracts Maintaining a database of suppliers Obtaining goods and services Managing supplies Duties of Purchasing

31. Adeyl Khan, Faculty, BBA, NSU Purchasing Interfaces 11-31 Purchasing Legal Accounting Operations Data processing Design Receiving Suppliers

32. Adeyl Khan, Faculty, BBA, NSU 11-32 Requisition received Supplier selected Order is placed Monitor orders Receive orders Purchasing Cycle Purchasing Legal Accounting Operations Dataprocess-ing Design Receiving Suppliers

33. Adeyl Khan, Faculty, BBA, NSU  Centralized purchasing  Purchasing is handled by one special department  Decentralized purchasing  Individual departments or separate locations handle their own purchasing requirements  Value analysis  Examination of the function of purchased parts and materials in an effort to reduce cost and/or improve performance 11-33

34. Adeyl Khan, Faculty, BBA, NSU Supplier selection  Choosing suppliers  Evaluating sources of supply  Supplier audits  Supplier certification  Supplier relationships  Supplier partnerships 11-34 Quality and quality assurance Flexibility Location Price Product or service changes Reputation and financial stability Lead times and on-time delivery Other accounts Factors in Choosing a Supplier Vendor analysis: Evaluating the sources of supply in terms of Price Quality Services Location Inventory policy Flexibility Evaluating Sources of Supply

35. Adeyl Khan, Faculty, BBA, NSU Supplier as a Partner AspectAdversaryPartner Number of suppliersManyOne or a few Length of relationship May be briefLong-term Low priceMajor considerationModerately important ReliabilityMay not be highHigh OpennessLowHigh QualityMay be unreliable; buyer inspects At the source; vendor certified Volume of businessMay be lowHigh FlexibilityRelatively lowRelatively high LocationWidely dispersedNearness is important 11-35

36. Adeyl Khan, Faculty, BBA, NSU Supplier Partnerships- Ideas could improve competitiveness  Reduce cost of making the purchase  Reduce transportation costs  Reduce production costs  Improve product quality  Improve product design  Reduce time to market  Improve customer satisfaction  Reduce inventory costs  Introduce new products or services 11-36

37. Adeyl Khan, Faculty, BBA, NSU Critical Issues Cost Quality Agility Customer service Competitive advantage Strategic importance Benefits Risks Technology management 11-37 Increased outsourcing Increased conversion to lean production Just-in-time deliveries Globalization Purchasing function

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39. Adeyl Khan, Faculty, BBA, NSU Learning Objectives  Explain what a supply chain is.  Explain the need to manage a supply chain and the potential benefits of doing so.  Explain the increasing importance of outsourcing.  State the objective of supply chain management.  List the elements of supply chain management.  Identify the strategic, tactical, and operations issues in supply chain management.  Describe the bullwhip effect and the reasons why it occurs. 11-39

40. Adeyl Khan, Faculty, BBA, NSU Learning Objectives  Explain the value of strategic partnering.  Discuss the critical importance of information exchange across a supply chain.  Outline the key steps, and potential challenges, in creating an effective supply chain.  Explain the importance of the purchasing function in business organizations.  Describe the responsibilities of purchasing.  Explain the term value analysis.  Identify several guidelines for ethical behavior in purchasing. 11-40

41. Adeyl Khan, Faculty, BBA, NSU  Video: Tech Logistics  Video: Tracking, GPS  Video: Intermodel Transp. 11-41