1. OUTLINE
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Chapter 2 and 3 (Chopra)

2. Performance – Strategic fit
Match the supply chain’s responsiveness to the uncertainty of supply and demand
Balance between responsiveness and effectiveness (cost) 2

3. Performance – Product Life Cycle
Demand – uncertain to relatively certain
Margins from high to low
Availability essential early to capture the market
Price – unimportant to important 3

4. Performance – Inter-company Scope
A strategic fit between companies in a supply chain is important because competition is shifting:
From company vs. company
To supply chain vs. supply chain 4

5. Definitions Facilities – places where product is Stored Assembled
Fabricated
Inventory –
Raw materials
Work in process (WIP)
Finished goods (FG)
Transportation
Spares

6. Definitions - continued
Transportation – moving inventory from point to point
Ground
Road
Rail
Pipe line
Barge
Air
Ship
Information
Data
Analysis

7. Barge transportation

8. Southeastern Arizona – Galiuro Mountains

9. Southeastern Arizona – El Paso to LA Pipeline

10. El Paso to LA Pipeline - Station

11. Framework

12. Facilities
Role in the chain – the where of the supply chain
Role in the competitive strategy – Location, location, location
Components of decisions
Location
Capacity
Operational methods
Warehousing methods
Tradeoff: Responsiveness vs. Efficiency

13. Inventory
Role in the supply chain – alleviate mismatch between supply and demand
Increase demand that can be satisfied
Exploit economies of scale
Definitions:
Material flow (Flow time) – elapsed time between material entering the supply chain and exiting
Throughput – rate at which material moves through the chain
Little’s law: Inventory = Throughput x Flow time
Flow time is also called cycle time

14. Inventory - continued
Role in competitive strategy: responsiveness
Components of inventory decisions:
Cycle inventory – satisfies demand between replenishments
Safety Stock – protects against variations in demand
Seasonal Inventory – built up to counter demand that exceeds capacity
Sources – from whom to buy (or make)

15. Transportation
Role: move material
Role in competitive strategy: match required responsiveness
Components of decisions:
Mode (rail, truck, air, ship, pipeline, electronic)
Route and network selection
Sourcing
Who provides transportation services?

16. Information
Role: connects the members of the chain and supports daily operations
Role in strategy: most important underpinning
Components of decisions:
Push/pull
What to share
Forecasting and planning
Pricing
Enabling technologies: Software (EDI, ERP, SCM)

17. Obstacles
Increasing variety
Shorter life cycles
Demanding customers
Decreasing vertical integration
Globalization

18. Benefits of collaboration
Establishing contacts
Gaining Insight
Joint projects

19. Definition
Benchmarking
Identifying, understanding and adapting outstanding practices from other organizations to improve performance

20. International Chains – what is different?

21. International Chains – what is different?
Greater geographic and time distances
Diversity of demand and supply conditions
Wage rates
Taxes
Incentives
Political climates
Exchange rates
Special laws

22. Cycle time
Definition – the total elapsed time required to complete a process (e.g. 4 years to get an engineering degree, one month to build an airplane)
Little’s Law: Cycle time = Work in process/Throughput
Causes of long cycle times:
Waiting
Old processes that don’t add value
Serial vs. parallel, external vs. internal
Repeated activities
Batching
Excessive controls

23. Measuring Performance
What should measuring performance accomplish?

24. Measuring Performance
What should measuring performance accomplish?
Basis for understanding the system
Influence behavior in the system
Provide information about results
Provide information that will initiate actions to improve the system
Create accountability in individual operations
The concept of Supply Chain Management requires that overall performance be measured, but intermediate points must also be measured to insure accountability

25. Measuring Performance (continued)
Typical internal measures
% orders on time
Inventory turns
Cycle time
Costs/Goods sold
Aging of orders

26. Measuring Performance (continued)
Typical supply chain measurements
Cycle time
% orders on time (service level) or fill rate
Order aging
Comparisons to competitors (Bench marking)
Responsiveness to changes in demand
End items sold/Total costs
Market Share

27. Chapter 4 – Designing the distribution network in a Supply Chain
Move and store product between stages
The structure of the network influences:
Response time
Variety of products
Availability of products
Customers’ experience
Visibility of orders
Returnability

28. Some basic relationships in a supply network
Lower response times require more facilities
Inventory costs increase with the number of facilities
Transportation costs decrease with the number of facilities
Total logistics costs vary parabolically with the number of facilities – there is an optimum number of facilities

29. Major types of distribution networks
Definition: Inventory Turns = Annual Sales/ average inventory
Manufacturing Storage with direct shipping (drop)
Manufacturing Storage with direct shipping and in transit merge
Distributor Storage with carrier delivery
Distributor Storage with Last Mile delivery (not carrier)
Manufacturer/Distributor Storage with customer pickup
Retail Storage with customer pickup

30. Summary
Who owns what matters!
Choice of network has long term consequences
Exclusivity
Customer preference

31. “Mr. Osborne, may I be excused? My brain is full”