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SEEM 4610 Supply Chain Management
Janny M.Y. Leung SEEM 4610 Supply Chain Management Janny Leung
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Supply Chain Management
What is a Supply Chain? A supply chain consists of all stages involved, directly and indirectly, in fulfilling a customer’s request. SEEM 4610 Supply Chain Management Janny Leung
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Supply Chain Management
Who is in a supply chain? Suppliers transporters manufacturers warehouses distributors retailers customers SEEM 4610 Supply Chain Management
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What happens in a supply chain?
Retailer Distributor Manufacturer Supplier Transporter SEEM 4610 Supply Chain Management
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Supply Chain Management
Flows in a supply chain Material flows Information flows Cash flows SEEM 4610 Supply Chain Management
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What happens in a supply chain?
On-line retailer Manufacturer Supplier Order assembler Bank Transporter SEEM 4610 Supply Chain Management
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Traditional view of logistics
Manufacturing cost 48% Marketing cost 27% Logistics cost 21% Profit 4 % Logistics related activity account for 11% of GNP of USA Savings in cost reduction: typical box of cereal spends 104 days from factory to sale US Grocery industry: 10% operating cost = $30 billion SEEM 4610 Supply Chain Management
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Supply Chain Management: The True Magnitude
Compaq estimates it lost US$1 billion in sales in 1995 because laptops were not available when and where needed When the new 1 gig processor was introduced by AMD, the price of 800 MB processor dropped by 30% Proctor&Gamble estimated savings of US$65 million by collaboration resulting in better matching of supply and demand SEEM 4610 Supply Chain Management
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“Staple yourself to an order”
Every time an order is handled, a customer is handled Every time an order is neglected, a customer is neglected Supply chain management: focus on the systemic view focus on the customers’ interest SEEM 4610 Supply Chain Management
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The order management cycle
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Objective of a supply chain
Maximise the overall value generated = (Worth of product to customer) – (cost/effort expended in filling request) The customer is the ONLY source of revenue! Supply chain management is the management of the flows in a supply chain to maximise total profitability SEEM 4610 Supply Chain Management
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Cycle view of a supply chain
Customer Retailer Distributor Manufacturer Supplier Customer order cycle Replenishment cycle Manufacturing cycle Procurement cycle SEEM 4610 Supply Chain Management
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Supply Chain Management
Customer Order Cycle Customer Arrival Customer order entry Customer order fulfilment Customer order receiving SEEM 4610 Supply Chain Management
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Supply Chain Management
Replenishment Cycle Retail order trigger Retail order entry Retail order fulfilment Retail order receiving SEEM 4610 Supply Chain Management
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Supply Chain Management
Manufacturing Cycle Order Arrival (from distributor, retailer or customer) Production Scheduling Manufacturing Shipping Receiving at distributor/retailer/customer SEEM 4610 Supply Chain Management
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Supply Chain Management
Procurement Cycle Order trigger Production/purchase planning Shipping Delivery/receipt of order Component orders can be much better controlled once manufacturing schedule is set! SEEM 4610 Supply Chain Management
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Push/Pull Boundary in a Supply Chain
Pull processes initiated in response to a customer order e.g. Dell Push processes initiated in anticipation of customer orders e.g. supermarket SEEM 4610 Supply Chain Management
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Drivers of Supply Chain Performance
Responsiveness Efficiency Supply chain structure inventory transportation facilities information SEEM 4610 Supply Chain Management
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Considerations for Supply chain drivers
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Decision Phases in a Supply Chain
Supply chain strategy and design configuration location/capacity transportation modes Supply chain planning distribution flow planning inventory level/location outsourcing Supply chain operation order fulfilment replenishment shipment SEEM 4610 Supply Chain Management
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Importance of Supply Chain - Dell’s Success Story
Dell since 1993, earnings growth > 65% Direct Sales customers -> manufacturers -> suppliers Customer management enormous database steers customers over phone to configurations in stock Make-to-order; low inventory matching supply to demand; reduce obsolescence risk Co-ordinates direct shipment from suppliers with service representatives sophisticated information exchange among suppliers and logistics provider Few manufacturing centers (Austin, Brazil, China, Ireland, Malaysia) Tight tracking and management of cash flow SEEM 4610 Supply Chain Management
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Dell’s Direct Model Dell.com Voice-to-voice Face-to-face
Inside Sales Reps Take order Review info Enter in system JIT Inventory Mat’l immediately ready to use Qty meeting order vol. Custom-designed Computers The Traveler specifies unique configuration The Traveler travels throughout assembly to shipping Kitting Traveler is pulled, all components required to make the system are picked into a tote Build to Order Workers use the kit to assemble and initial test the entire system test Testing and Integration Boxing & Shipping SEEM 4610 Supply Chain Management
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Supply Chain Management
Seven-Eleven Japan Phenomenal growth 1974: first store; 1999: 8097 stores In last decade: sales tripled, inventory reduced by 1/3, profits quadrupled Company image convenient, cheerful ready-made lunch and dinner SEEM 4610 Supply Chain Management
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Supply Chain Management
Seven Eleven stores Key products (over 3000 SKUs): processed foods 50 % fresh foods 30% non-food 20% Small stores, no storage space Supply chain objective: Micro-matching of supply and demand (by location, time of day, day of week, season,etc.) SEEM 4610 Supply Chain Management
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7-11 Supply Chain strategy
Facilities dominant location strategy 844 in Tokyo, 5523 in 21 prefectures Information high-speed data network linking stores, HQ, suppliers and DCs store computer linked to POS and scanner for sales and receiving sales analysis by SKU and product categories sales trend impacts store display Distribution deliveries from over 200 plants cross-docking at distribution centres (hold no food inventory) combined delivery (fresh+chilled+frozen) reduce truck visit to stores no direct delivery Approx. 60 inventory turns per year!! SEEM 4610 Supply Chain Management
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Other Supply Chain Examples
Amazon.com no retail stores purchase from book distributor instead of from publisher “assemble”-to-order books and music Li & Fung integrator role Supply Chain Management - Hong Kong Style SEEM 4610 Supply Chain Management
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Supply Chain Management
Readings “Staple yourself to an order”, B.P. Shapiro, V.K. Rangan, J.J. Sviokla, Harvard Business Review, July-August, 1992. “Fast Global and Entrepreneurial: Supply Chain Management, Hong Kong Style” Harvard Business Review, Sept-Oct 1998. SEEM 4610 Supply Chain Management
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