Professional Documents
Culture Documents
Introduction to
Supply Chain
Management
McGraw-Hill/Irwin
materials manufacturers
Intermediate products manufacturers
End product manufacturers
Wholesalers and distributors and
Retailers
1-5
1-6
SCM Definition
Material Flow
Supplier
Converter
Distributor
Retailer
Source
Converter
Supplier
Distributor
Consumers
End-User
Value-Added Services
Funds/Demand Flow
Information Flow
Reuse/Maintenance/After Sales Service Flow
1-7
Key Observations
Every
suppliers
Customers customers
Efficiency
Multiple
level approach
levels of activities
Strategic
Tactical Operational
1-9
1-10
design phase
associated capabilities and knowledge
sourcing decisions
production plans
1-11
over time
Matching demand-supply difficult
Different levels of inventory and backorders
Recent
Lean
production/Off-shoring/Outsourcing
1-13
1-14
1-15
Yarn
YarnSpinning
Spinning
[Korea]
[Korea]
QC
QC&
&Shipping
Shipping
[Hong
[HongKong]
Kong]
Weaving
Weaving
[Taiwan]
[Taiwan]
Stitching
Stitching
[Indonesia]
[Indonesia]
Zippers+
Zippers+
[Japan+]
[Japan+]
1-16
REASONS
EXAMPLES
Stiff competition
General slowdown in the PC
shortages
Productivity inefficiencies
market
1-18
is not a solution
Demand is not the only source of
uncertainty
Recent trends make things more uncertain
Lean
manufacturing
Outsourcing
Off-shoring
1-19
P&G
Losses
of $1B/day
Store stock-outs, factory shutdowns
1999
Taiwan earthquake
Supply
2001
Supply
1-20
1950s
1960s
1970s
1980s
1990s
2000s
Beyond
1-21
1-22
FIGURE 1-5: Total U.S. logistics costs between 1984 and 2005
1-23
U.S. companies spend more than $1 trillion in supplyrelated activities (10-15% of Gross Domestic Product)
Transportation 58%
Inventory 38%
Management 4%
1-24
1-25
Transactional Complexity
National Semiconductors:
Production:
Produces chips in six different locations: four in the US, one in
Britain and one in Israel
Chips are shipped to seven assembly locations in Southeast
Asia.
Distribution
The final product is shipped to hundreds of facilities all over the
world
20,000 different routes
12 different airlines are involved
95% of the products are delivered within 45 days
5% are delivered within 90 days.
1-26
PC Value Chain
Performance of Traditional PC Manufacturer
1-27
1-28
1-29
Percent
Shirt
Saving
Manufacturer
Distributor
Retailer
Customer
$52.72
0%
Manufacturer
Distributor
Retailer
Customer
$41.34
28%
Manufacturer
Distributor
Retailer
Customer
$20.45
62%
1-30
P&Gs estimated savings to retail customers of $65 million through logistics gains
Build-to-order strategy
Wal-Mart transformation into the worlds largest retailer by changing its logistics
system:
highest sales per square foot, inventory turnover and operating profit of any discount
retailer
1-31
Strategic Partnering
Outsourcing and Offshoring
Product Design
Information Technology
Customer Value
Smart Pricing
Supply
Supply
Supply
Both
Supply
Development
Development
Development
Supply
Both
Supply
Global Optimization
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
1-32
1-33
Software Packages
Computerized
Beer Game
Risk Pool Game
Procurement Game
1-34
1-35
Endoscopic Surgical
Instruments
Permits
1-36
Business Overview
National
1-37
Part
suppliers
Meditech
Assembly
Meditech
Warehouse
Hospitals
Intl
Meditech
Affiliates
1-38
2 - 16
weeks
Assembly
2
weeks
Bulk Inventory
Packaging &
Sterilization
FG Inventory
1
week
1-39
Production Planning
Annual
Forecast
Monthly
Revision
Transfer
Requirements
Monthly
Plan
MRP
Parts
Procurement
Plan
Weekly
Assembly
Schedule
1-40
Monthly
Plan
Production Planning
MRP
Order point;
Order quantity
Material
Plan
Parts Inventory
Assembly
Bulk Inventory
Packaging &
Sterilization
FG inventory
1-41
Whats Wrong?
Poor
1-42
is quite predictable
Usage in hospitals is quite stable
Market share moves slowly over time
With each new product, dealer must build
inventory to fill pipeline
1-43
Poor
information systems
No one looked at demand
No one had responsibility for forecast
errors
Tendency to shift the blame
Built-in delays and monthly buckets in
planning system
Amplifier in planning system
1-44
What to Do?
Recognize
predictable
Establish accountability for forecast
Eliminate planning delays and/or reduce
time bucket
Alternatively, put assembly within pull
system and eliminate bulk inventory
1-45