CHAPTER 1:

21st-Century Supply Chains

McGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
 The supply chain (r)evolution has reshaped
contemporary strategic thinking
Supply Chain Management
Begin to End activities from RM to Fin
Goods Shipment to Customers
Supply Chain Strategy
Info (Systs) replace Inv & Lowers
Costs; Reduce Complexity; Elim Non
Value Activities
Logistics (root word IGTM)
Using Integrated Systems to manage
and move inventory while
balancing Cost Vs Service

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 Corp Structures
SC Org vs Log Org
CEOs Org = Mrktg-Sales-R&D-Law-HR-Fin-SC

SC Org = ProcureMfgrEngineeringLog

Log Org = Demand PlngSupply PlngCust

Svc/Order Processing---Transp MgtWhse Mgt
Customer Logistics (Log Collaboration eg VMI)

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 Balance Cost vs Service
Cost = Lowest Landed Cost (more on this later)

Service = Customers want OTIF:

Deliver On Time
In Full
Soooo, would you ship a Customer Order In Full from
a more distant/higher cost location vs shipping 98% of
cases from the LLC Location? NoteCustr has
automated systems to reorder the 2% if cut from order.
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The Spaghetti Chart or Integrated Systems Overview
from Beginning to End

Figure 1.1 The Integrated Supply Chain Framework s 1-5

 Integration Lowers Costs
Data flows throughout the SC from begin to end

No need to re-enter data via Manual Labore

Time is the Critical Elementmissing prior to 96

Now have visibility to Future Planned Inventory

Information replaces Safety inventory 1-6

 Inventory Data of OldNot Integrated
Back in the daysystems not linked, not integrated

Did not have visibility to Puts and Takes of Inventory

Did not see future production nor intransit arrival

dates for PLANNED increases to Inventory

Did not know customer orders by Ship Date for

PLANNED decreases from Inventory
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 Time Based Inventory
Integrate the Puts and Takes of Inventory ie

Actual Customer Orders w/Future Shipmts by Day

Future Production and Intransit Arrivals by Day

All allow for ATP = Available to Promise = to

Stretch inventory
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 ATP
Use future inventory (production or intransit arrival)

If Inventory planned to arrive before Order Pick Date =

apply ATP

Whats the downside of ATP = New Newseach one

of you post your bullet points in the eCollege
discussion thread by Sunday night Sep 6 (or earlier
since it is Labor Day weekend)
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Systems that support Log Mgt Functions
PlanExecute--Control

Figure 1.2 Information Functionality

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 PLAN
Log Planning Systems
Demand Planning +

Production Planning
(APO in SAP) =

PSI (Prod, Sales, Inv) =

MRP (Mtls Reqts Plan)

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 EXECUTE
Daily Transaction Systems

Tracking and regulating Daily

Log transactions (not Islands
but linked together)

Integrated Custr Order Flow:

Order Processing (OPS)
LLC DC Sourcing
Inventory avail (PSI)
Carrier Selection (TMS)
Sched Carrier P/up (TMS)
Pick Order & Load (WMS)
Ship & Deliver (TMS) 1-12
 CONTROL
Part A via Cost and Service Reporting = Our Focus

Provides timely feedback on supply

chain performance to fix issues
quickly & ID opps
Reporting is P v A Plan vs Actual
Cost ($/Cwt)monthly reports
&
Service (Fill Rate & OTIF) = Daily, Wkly

Use Pareto 80:20 Rule of

Significant Few vs Trivial many
Top 10 Lanes or Top 10 Custrs Rpts

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 CONTROL Or PLAN?
Part B via Analysis = Not our Focus!
Data Warehouse from which to
download data to evaluate
alternative business strategies
& IMPROVE curr processes

Examples include
Custr Profitability
Flexible Manufacturing
Customer Initiatives (VMI)
Network Analysis

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 Evolution from Islands to Spaghetti
Many systems (modules) in the Pyramid have
existed forever as stand alone systems or islands
So, how did the we evolve from Islands to
Integrated Systems
Hint # 1-a certain software Co figured out how to
do the linkage & that was..
Hint # 2there are course(s) in RBS (undergrad) to
teach/expose students to their software

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 SC Evolution from Islands to Spaghetti
SAPs ERP Solution in Mid 90s
Enterprise Resource Planning (begin to end)
SC Module ApproachOrder Processing, Demand
Planning, Production Planning,TMS, WMS, YMS all
linked using the same Calendar
Can select SAP module or Best in Breed (but spend
more $ to connect SAP to the B in B)
Best in Breed SC Systs inclu Manu/JDA, Red Prairie
IQDo you use SAP? For what? Like it??
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Logistics Information Systems Architecture

Load
Optimization SAP VMI

Dynamic Demand
Sourcing Planning
Logic Planning/
Fulfillment

Plant Level
TMS Production Planning/ WMS
MRP

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 ERP modules support Supply Chain
Management (Begin to End)
Enterprise Operations

Customer
Inventory
relationship Logistics Manufacturing Purchasing
Deployment
management

Customer Relationship Purchase Order Integrated Inventory

Finished Inventory
Management Manufacturing Administration Planning
Management
(CRM) Resource Planning (POA)
(FIM) Advanced Planning and
(MRP II)
Scheduling\
Forecasting
Materials Requirements
Order Processing
Demand Management Capacity Management Planning (MRP)
(OPS)
(DMS) Planning (CMP)
Supplier Relationship
Warehouse
Collaborative Master Production Management (SRM)
Management (WMS)
Planning, Forecasting Schedule (MPS)
and Replenishment Accounts Payable
Transportation
(CPFR)
Production Execution Interface
Management (TMS)
and Control (Shop
Floor)
Order Management Yard Management
(OMS) (YMS)
Quality Management Donald J. Bowersox, Ph.D. 2005
(QM)
Accounts Receivable
Interface Figure 1.6 Enterprise Operations Modules 1-18
 Pull System (via Flex Mfgr System)
Push (80%) transition to Pull (20%) at C&D
Figure 1.8 Push System

Figure 1.9 Pull System

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 Push vs Pull
Push = MTF = Make to Forecast also
Push = MTI = Make to Inventory also
Push = MTS = Make to a Schedule (Were making
SKU A on Monday and SKU B on Tuesday)

Pull = MTO = Make to Order (in reality, we adjust

Prodn based on Customer Orders) example:
Hmmmwere getting heavy orders for SKU B, thus
Produce that on Mon and make A on Tues
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 Common Approach in Pull Systems =
Postponement
Postponement often used for Autos, Electronics

Keeping all the car panels a base color (white or gray) until
the order is received, then painting to the color ordered

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 Postponement in CPG
Church & Dwights LLD plants add Scent at Filler

Able to make vanilla batches at 10,000 gallons/batch

Change scents by small tank above filler

Thus able to REACT & produce many skus per shift

Prodn Flexibility key to Pull System Manufacturing 1-22

 Financial measurements of time-based supply
chains (I care about Inv Turns only)
Cash-to-Cash Conversion
the time required to convert
raw material or inventory
purchases into sales revenue =
Inventory Turnover
Dwell Time Minimization
dwell time is the ratio of time
that assets sit idle to the time
required to satisfy its supply
chain mission = Capacity Util
Cash Spinreducing assets in
the supply chain can spin
cash for reinvestment in other
projects = Cash is King
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 Globalization offers firms several attractive
opportunities
Demand exceeds local supply
90% of global demand is not fully
satisfied by local supply

Strategic sourcing
Willing to look beyond US

Offshoring/Importing
Moving manufacturing and
distribution operations to countries
with favorable labor costs and tax
laws = CHEAP LABOR vs higher
Transportation Costs, Higher
Inventory and Longer Response
Time = Can we do Pull Systems
if overseas sourcing?
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