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Inventory Management & Supply Chain

Supply Chain
Management

Chapter 11
9
th
Edition

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Inventory Management & Supply Chain
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
Sometimes referred to as value chains
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Inventory Management & Supply Chain
Warehouses
Factories
Processing centers
Distribution centers
Retail outlets
Offices

Facilities
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Inventory Management & Supply Chain
Functions and Activities
Forecasting
Purchasing
Inventory management
Information management
Quality assurance
Scheduling
Production and delivery
Customer service

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Inventory Management & Supply Chain
Typical Supply Chain

MANUFACTURING
Supplier
Supplier
Supplier
Storage
}
Mfg. Storage Dist. Retailer Customer
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Inventory Management & Supply Chain
Supplier
Supplier
}
Storage Service
Customer
Typical Supply Chain
Service
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Inventory Management & 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
8. Manage inventories
Need for Supply Chain Management
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Inventory Management & Supply Chain
Bullwhip Effect
Final Customer
Initial
Supplier
Demand
Inventory oscillations become progressively
larger looking backward through the supply chain
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Inventory Management & Supply Chain
Benefits of Supply Chain Management
Organization Benefit
Campbell Soup Doubled inventory turnover rate
Hewlett-Packard Cut supply costs 75%
Sport Obermeyer Doubled profits and increased sales 60%
National Bicycle Increased market share from 5% to 29%
Wal-Mart Largest and most profitable retailer in the
world
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Inventory Management & Supply Chain
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
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Inventory Management & Supply Chain
Global Supply Chains
Increasing more complex
Language
Culture
Currency fluctuations
Political
Transportation costs
Local capabilities
Finance and economics
Environmental
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Inventory Management & Supply Chain
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
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Inventory Management & Supply Chain
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
Logistics
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Inventory Management & Supply Chain
Materials Movement
Figure 11.4
R
E
C
E
I
V
I
N
G

Storage
Work
center
Work center
Work center
Storage
Work
center
Storage
Shipping
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Inventory Management & Supply Chain
Management uses DRP (Distribution
requirements planning) to plan and
coordinate:
Transportation
Warehousing
Workers
Equipment
Financial flows

Uses of DRP
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Inventory Management & Supply Chain
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
E-Business
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Inventory Management & Supply Chain
Companies can:
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 E-Business
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Inventory Management & Supply Chain
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
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Inventory Management & Supply Chain
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
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Inventory Management & Supply Chain
Successful Supply Chain
Trust among trading partners
Effective communications
Supply chain visibility
Event-management capability
The ability to detect and respond to
unplanned events
Performance metrics

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Inventory Management & Supply Chain
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

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Inventory Management & Supply Chain
1. Develop strategic objectives and
tactics
2. Integrate and coordinate activities in
the internal supply chain
3. Coordinate activities with suppliers
with customers
4. Coordinate planning and execution
across the supply chain
5. Form strategic partnerships
Creating an Effective Supply Chain
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Inventory Management & Supply Chain
Supply Chain Performance Drivers
1. Quality
2. Cost
3. Flexibility
4. Velocity
5. Customer service
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Inventory Management & Supply Chain
Velocity
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
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Inventory Management & Supply Chain
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.
Purchasing
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Inventory Management & Supply Chain
Identifying sources of supply
Negotiating contracts
Maintaining a database of suppliers
Obtaining goods and services
Managing supplies
Duties of Purchasing
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Inventory Management & Supply Chain
Purchasing Cycle
1. Requisition received
2. Supplier selected
3. Order is placed
4. Monitor orders
5. Receive orders
Purchasing
Legal
Accounting
Operations
Data
process-
ing
Design
Receiving
Suppliers
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Inventory Management & Supply Chain
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