1. Slides used in class may be different from slides in student pack 1 Supply Chain Definition Benefits and Need for Supply Chain Management Outsourcing Bullwhip Effect Measuring Performance Purchasing, Logistics, and EDI Creating an Effective Supply Chain Chapter 10 Supply Chain Strategy & Management

2. Slides used in class may be different from slides in student pack 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. Supply-chain management is a total systems approach to managing the entire flow of information, materials, and services from raw- material suppliers through factories and warehouses to the end customer

3. Slides used in class may be different from slides in student pack 3 Warehouses, Factories, Processing centers, Distribution centers, Retail outlets, Offices Material and credit flow Information flow Money flow Facilities and Flows

4. Slides used in class may be different from slides in student pack 4 Supply Chain Cash Consumer Retailer Mfg. Mat'l Flow VISA ® ® Credit Flow Supplier Wholesaler Retailer Flow Order Flow Schedules

5. Slides used in class may be different from slides in student pack 5 Typical Supply Chains Purchasing Receiving Storage Operations Storage ProductionDistribution

6. Slides used in class may be different from slides in student pack 6 Supplier Storage } Service Customer Typical Supply Chain for a Service

7. Slides used in class may be different from slides in student pack 7 Supply Chain Model Wholesaler SuppliersPlantsRetail DCStorePlant DC Organizations are both suppliers and customers

8. Slides used in class may be different from slides in student pack 8 Benefits of Supply Chain Management 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

9. Slides used in class may be different from slides in student pack 9 Improve operations - Increasing levels of outsourcing - Increasing transportation costs - Competitive pressures - Need for Supply Chain Management

10. Slides used in class may be different from slides in student pack 10 Need for Supply Chain Management Increasing globalization - Increasing importance of e-commerce - Complexity of supply chains - Manage inventories -

11. Slides used in class may be different from slides in student pack 11 What is Outsourcing? Outsourcing: moving a firm’s internal activities and decision responsibility to outside providers.

12. Slides used in class may be different from slides in student pack 12 Reasons to Outsource Organizationally-driven - Improvement-driven - Financially-driven - Revenue-driven - Cost-driven - Employee-driven -

13. Slides used in class may be different from slides in student pack 13 Bullwhip Effect The magnification of variability in orders in the supply-chain.

14. Slides used in class may be different from slides in student pack 14 The Bullwhip Effect – Cont’d

15. Slides used in class may be different from slides in student pack 15 Causes of the Bullwhip Effect –Price fluctuations –Periodic order policies at the wholesaler and manufacturer levels –Rational/shortage gaming.... trade deals offered by manufacturers to wholesalers –Production schedules based on forecasts of wholesaler demand versus consumer demand

16. Slides used in class may be different from slides in student pack Inventory Formulas for Measuring Supply-Chain Performance

17. Slides used in class may be different from slides in student pack 17 Inventory Measurement Example Suppose a company’s new annual report claims their costs of goods sold for the year is $160 million and their total average inventory (production materials + work-in- process) is worth $35 million. This company is used to having any inventory turn ratio of 10. What is this year’s Inventory Turnover ratio? What does it mean? How many weeks of supply does the company have?

18. Slides used in class may be different from slides in student pack 18 Inventory Measurement Example (Cont’d) Inventory Turnover = = = Weeks of Supply =

19. Slides used in class may be different from slides in student pack 19 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 From the Supply Chain Council’s Supply Chain Operations Reference Model

20. Slides used in class may be different from slides in student pack 20 Purchasing is the link between an organization and its suppliers Material costs are greater than labor costs Companies implementing JIT require small lot deliveries just as they need them Products are purchased in the global market Purchasing in Supply Chain Management

21. Slides used in class may be different from slides in student pack 21 The movement of materials and information within a facility and to the incoming and out going shipments of goods and materials Logistics

22. Slides used in class may be different from slides in student pack 22 Materials Movement RECEIVING Storage Work center Work center Storage Work center Storage Shipping

23. Slides used in class may be different from slides in student pack 23 Value Density Value density It is used as an important measure when deciding where items should be stocked geographically and how they should be shipped

24. Slides used in class may be different from slides in student pack 24 Information Flow Electronic Data interchange (EDI) - computer to computer transmission of transactions between companies –

25. Slides used in class may be different from slides in student pack 25 Increased productivity Reduction of paperwork Lead time and inventory reduction Facilitation of just-in-time systems Electronic transfer of funds Improved control of operations Reduction in clerical labor Increased accuracy Benefits of Electronic Data Interchange

26. Slides used in class may be different from slides in student pack 26 Develop strategic objectives and tactics Integrate and coordinate activities in the internal supply chain Coordinate suppliers with customers Coordinate planning and execution Form strategic partnerships Issues in Effective Supply Chain Design

27. Slides used in class may be different from slides in student pack 27 Hau Lee’s Concepts of Supply Chain Design/Management Hau Lee’s approach to supply chain (SC) is one of aligning SC’s with the uncertainties revolving around the supply process side of the SC A stable supply process has mature technologies and an evolving supply process has rapidly changing technologies Types of SC’s – – – –

28. Slides used in class may be different from slides in student pack 28 Hau Lee’s SC Uncertainty Framework Demand Uncertainty Low (Functional products) High (Innovative products) Efficient SC Ex.: Responsive SC Ex.: Risk-Hedging SC Ex.: Agile SC Ex.: Low (Stable Process) High (Evolving Process) Supply Uncertainty

29. Slides used in class may be different from slides in student pack 29 Balancing Supply Chain Capability with Customer Demands Information Supply Chain Capability Customer Requirements Increased Costs Overtime Expediting Increased Inventory Increased Demand: Marketing programs Promotions Supply Chain Capability Customer Requirements Information Market Demand,New Products, Promotions Suppliers, Manufacturers, Distributors, Carriers

30. Slides used in class may be different from slides in student pack 30 Other Challenges

31. Slides used in class may be different from slides in student pack 31 Mass Customization Mass customization is a term used to describe the ability of a company to deliver highly customized products and services to different customers The key to mass customization is

32. Slides used in class may be different from slides in student pack 32 Supply Chain Problems, Potential Improvements, Benefits, and Drawbacks ProblemPotential Improvement BenefitsPossible Drawbacks Large inventories Smaller, more frequent deliveries Reduced holding costs Traffic congestion Increased costs Long lead timesDelayed differentiation Disintermediation Quick responseMay not be feasible May need to absorb functions performed by intermediary 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