1. Supply Chain 1

2. 2 Creation and delivery of Products and Services Operations is about the creation of a product or service which adds value to the consumer. (Chapter 1) Creation of value extends beyond our facility to include suppliers and distributors. Supply Chain is the set of entities and relationship that cumulatively define material and information flows both up stream (towards suppliers) and downstream (towards customer). InputsProduct/Srvc Suppliers Distribution Returns, Recycles, demand

3. Supply Chain 3 Customer’s Customer Suppliers’ Supplier SCOR is structured around five distinct management processes Plan SupplierCustomer Make DeliverSourceMake DeliverMakeSource Deliver Source Deliver Internal or External Your Company Source SCOR Model Return Supply Transformation Distribution

4. Supply Chain 4 Def: The design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer. * Objectives: Supply chain integration seeks optimization within the supply chain by minimizing the total cost at all levels. Production quantities, product availability, service levels, lead times, production quantities, and technical and product support. Multiple companies to function efficiently as a single company with full information visibility and accountability. Focus: Reduce uncertainty across the entire supply chain Supply Chain Management Who does supply chain management??

5. Supply Chain 5 Supply Chain Functions Supply chain transforms a group of ad hoc and often fragmented processes into a cohesive system capable of delivering value to the customer. Functions include: Forecasting Purchasing Inventory management Information management Quality assurance Scheduling Production Distribution Delivery Customer Service * ISM

6. Supply Chain 6 Vision of the Virtual Corporation Supplier Distribution Logistics Production Supplier Wholesaler Relationships to business partners based on independence Close cooperation with partners in critical functions (e.g. sub-systems) Retaining core competences in- house, outsourcing other functions Vertically Integrated Corporation Supply Chain IntegratorBusiness Community Integration/ Virtual Corporation Distribution Marketing Logistics Production Engineering MIS/ Finance Marketing Engineering MIS/Finance Customer Source: Gartner Group 02/1998 Distribution Marketing Logistics Production Engineering MIS/ Finance Processes crossing boundaries between legal entities (not equal virtual enterprise) to be integrated by e-enablers implies a switch from vertical integration to increased partnerships in purchasing/production/trading communities... (Plan, Source, Make, Deliver,Return)

7. Supply Chain 7 Supply Chain Decisions The development of a successful supply chain integrates and balances Purchasing, Operations, Logistics SCM Example

8. Supply Chain 8 Purchasing Elements Traditional buyer relationship vs Supply Chain Management relationship Supplier Management Supplier evaluation Initial v Ongoing Supplier certification Strategic Partnerships Supplier involvement Make or Buy Outsourcing Build in-house Sourcing strategy Global Local

9. Supply Chain 9 Operations Elements Demand management matching demand to available capacity what products/features distribution promotion Inventory Control - placement & amount depends on product JIT/Lean Mfg - focus on cost and flexibility Total Quality Management - focus on quality Focus is on Operations throughout supply chain

10. Supply Chain 10 Logistics Elements Transportation Management Modes of transportation is a trade off between cost and delivery timing Logistics (LTL, Overnight, 2 –day) Successful service delivery depends on service location, service capacity and service capability. Third Party Logistics (3PL) warehousing shipping Location & Storage Direct/distributor inventory Bull Whip Effect Warehouse location Packaging & Material Handling Packaging to prevent damage, plus marketing Handling for shelf life and minimize damage

11. Supply Chain 11 Mapping Material Flow Latin American Suppliers (D1) Warehouse Other Suppliers (D1) Manufacturing European Supplier (S1) (SR1,SR3) (S1, D1) (SR1,DR1,DR3) (S1, S2, M1, D1) (SR1,SR3,DR3) (D2) (DR1) Warehouse Warehouse Warehouse (S1, D1) (SR1,DR1,DR3) (S1) (SR1,SR3)

12. Supply Chain 12 Measuring Supply Chain Performance Delivery: On time; Fill rate; Lead Time Quality: Performance; Conformance; Satisfaction Flexibility: Volume; Mix Time: Throughput; Cash-to-Cash cycle time Cost: Unit Cost; Distribution; Carrying Cost; Accounts Receivable.

13. Supply Chain 13 Improving Supply Chains Structural Improvement Engaging in forward and backward integration Pursuing major process simplification Changing configuration of factories, warehouses or retail locations. Pursue major product redesign Working with third party logistics Infrastructure Improvement Cross-functional teams Partnerships Setup time reduction Information systems Cross-docking

14. Supply Chain 14 Coordination of material, information and financial flows between and among all the participating enterprises in a business transaction. E- Procurement Order Placement (B2B, B2C) Order Fulfillment Payment methods Reverse Auctions Demand Management Access to supplier production schedules for anticipated delivery dates Access to retailer’s inventory to determine quantity and time needs Technology and Supply Chain

15. Supply Chain 15 Need For Supply Chain 1.Improve Operations 2.Increasing Levels of Outsourcing 3.Increasing Transportation Costs 4.Competitive Pressures 5.Increasing Globalization 6.Increasing Importance of e-commerce 7.Complexity of supply chains (Virtual Corporation) 8.Need to manage Inventories

16. Supply Chain 16

17. Supply Chain 17 Dealing with Trade-Offs in Creating Supply Chains 1.Lot Size to Inventory Bullwhip effect: progressively larger inventories as you move back through the supply chain 2.Inventory to Transportation Cost Cross docking 3.Lead Time to Transportation Cost 4.Product Variety to Inventory Delayed differentiation (Postponement) 5.Cost to Customer Service Disintermediation: reducing one or more steps out of the supply chain. 6.Certainty to Uncertainty of data in decision making 7.Control to Potential lower unit cost

18. Supply Chain 18 End customer Raw materials Source: SC Faculty Michigan State University Relationship management Materials/service, cash, information and knowledge flows Core competences, skills, capacities Working capital and human resources Supplier network Distribution network Sourc- ing Supply/ logistics Production/ operation Own Integrated corporation Planning Information Flow

19. Supply Chain 19 Competitive Advantage & Supply Chain Strategy The Supply Chain Strategy should support the competitive advantage of the product or service. Types of products: Imitators & Innovators Strategy ImitatorsInnovators ObjectiveLow costQuick response to demand ManufacturingHi volumeInventory & quick throughput InventoryLow, hi turnoverInventory throughout SuppliersCost & qualitySpeed, flex, quality