Agenda

What is Supply Chain and Supply Chain Management Why is SCM SCM Evolution

Supply Chain Flows Supply Chain Decision Process View of a Supply Chain Emerging Trends in Semiconductor & SCM help

A supply chain is a network of facilities that procure raw materials, transform them into intermediate goods and then final products, and deliver the products to customers through a distribution system (Lee and Billington )
A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. (Ganeshan and Harrison 19)

Supply chain management deals with the management of materials, information and financial flows in a network consisting of suppliers, manufacturers, distributors, and customers (Stanford Supply Chain Forum, 1999)
The definition -American professional association (APICS) Supply Chain Management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers

upstream

downstream

Design Source Negotiate Buy Make Move Store Service Fulfill Sell Market

Agenda
What is Supply Chain and Supply Chain Management Why is SCM SCM Evolution

Supply Chain Flows Supply Chain Decision Process View of a Supply Chain Emerging Trends in Semiconductor & SCM help

Excess Inventory costs Excess freight charges Lost sales / Stock outages Wasted time and energy Extra staff Customer dissatisfaction Capital costs Real Estate Costs Manufacturing Costs Globalization

Core Organizational Priorities

Cost reduction Organizational growth and survival Creation of new markets Improved customer service Reduced cycle time Increased inventory turnover

Key problems with current SCs

Un-integrated operations inside own organizations Weak IT infrastructure outside own organizations Differing operating practices between own organization and vendors/ customers Impact of global players on the industry

Lack of Supply Chain integration

Generally very few firms have either tightly coupled or completely loosely defined supply chain relationships. Push Pull strategy is therefore common. Greater degree of coupling with suppliers compared with retailers and distributors.

Lack of penetration of IT Systems in SC operations

CBS are mostly used for financial and accounting purposes. Purchasing and sales functions come next. The use is rather low for logistics and warehousing functions. Use of e- mail is very common to communicate with other organizations. Use of EDI is rather low.

Agenda
What is Supply Chain and Supply Chain Management Why is SCM SCM Evolution

Supply Chain Flows Supply Chain Decision Process View of a Supply Chain Emerging Trends in Semiconductor & SCM help

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Complex In-House Manageable 1993 Actual SCM 2000 Advance Planning, Web enabled Globalization

Simple 1970 Material requirement Planning

1980 JIT

1950 Inbound/ outbound Inventory flow

Outsource

SaaS
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The NET:
Predetermined pricing is replaced by auction based price bidding. Sourcing is becoming global as suppliers all over the world sell on the NET. Long term partnerships with vendors are replaced by deal based relationships. Buyers compete with one another to secure the best and cheapest suppliers.

The STRATEGY :
Increasing customization requires versatile suppliers. Competitive strategy requires the supply chain has to be fast and flexible. Firms in mature markets build long supply chains and brand the product. Companies that compete on cost, pick suppliers on the basis of price.

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E-ENVIRONMENT Functions

Supply Chain

Logistics Sourcing Procurement

Supply Network

JIT Movement Tracking Capability Shipping Accuracy

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The 4 Rs of SCM
Right products Right quantities Right place Right moment at minimal cost.

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Agenda
What is Supply Chain and Supply Chain Management Why is SCM SCM Evolution

Supply Chain Flows Supply Chain Decision Process View of a Supply Chain Emerging Trends in Semiconductor & SCM help

15

Information Product

Customer
Funds

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Supply side second-tier suppliers first-tier suppliers

Demand side first-tier customers second-tier customers

Company B

Company C

X X

X X X
For Company A Internal supply network Immediate supply network Total supply network
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Down stream

Up stream

` ` `

Raw materials enter into a manufacturing organization via a supply system and are transformed into finished goods. Finished goods are then supplied to the consumers through a distribution system. Several companies linked together in the process, each adding value to the product as it moves through the supply chain.

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Information Flow
Products or services usually flow from supplier to customer. Design and demand information usually flow from customer to supplier.

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Agenda
What is Supply Chain and Supply Chain Management Why is SCM SCM Evolution

Supply Chain Flows Supply Chain Decision Process View of a Supply Chain Emerging Trends in Semiconductor & SCM help

20

Where to produce & assemble goods? How much to produce? When to produce?

Where to store finished goods? Where to store spare parts? How much to store? How to retrieve from storage? Customer

Manufacture

Warehouse
Customer What markets to serve? What level of service? What level of service cost? Customer

Supplier

Where to acquire materials components?

Manufacture

Warehouse
Customer How much to ship? When to ship? What modes of transportation?
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What fleet size? What vehicle routes? What shipment size?

Strategize

location

Produc tMix

Months / Years

Plan

Production

Supply Demand Match

..

Days/ Weeks

Execute

Pick Pack Ship Deliver

Replenishments

..

Hours/ Minutes

Collaborate Monitor Control

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Decisions about the structure of the SC and what processes each stage will perform Strategic SC decisions Facilities - Locations and capacities Inventory made or stored at various locations Transportation Modes Information systems SC design must support strategic objectives SC design decisions are long-term and expensive to reverse must take into account market uncertainty

` `

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How do we achieve Corporate Strategic Goals Start with a forecast of demand in the coming year Planning/Policy decisions: Which markets will be supplied from which locations? Planned buildup of inventories Subcontracting, backup locations Inventory policies Timing and size of market promotions Must consider in demand uncertainty, exchange rates, competition over the time horizon

` ` `

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Time horizon is weekly or daily Decisions regarding individual customer orders SC structure and operating policies are determined Goal is to implement the operating policies as effectively as possible Allocate orders to inventory or production, set order due dates, generate pick lists at a warehouse, allocate an order to a particular shipment, set delivery schedules, place replenishment orders Much less uncertainty (short time horizon)

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Agenda
What is Supply Chain and Supply Chain Management Why is SCM SCM Evolution

Supply Chain Flows Supply Chain Decision Process View of a Supply Chain Emerging Trends in Semiconductor & SCM help

26

Cycle view: processes in a supply chain are divided into a series of cycles, each performed at the interfaces between two successive supply chain stages Push/pull view: processes in a supply chain are divided into two categories depending on whether they are executed in response to a customer order (pull) or in anticipation of a customer order (push)

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Customer

Customer Order Cycle

Retailer

Replenishment Cycle
Distributor

Manufacturing Cycle
Manufacturer

Procurement Cycle
Supplier
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Each cycle occurs at the interface between two stages Customer order cycle (customer-retailer) Replenishment cycle (retailer-distributor) Manufacturing cycle (distributor-manufacturer) Procurement cycle (manufacturer-supplier) Cycle view defines processes involved, the owners of each process. Specifies the roles and responsibilities of each member and the desired outcome of each process.

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Involves all processes directly involved in receiving and filling the customers order Customer arrival Customer order entry Customer order fulfillment Customer order receiving

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Customer Arrival

Customer Order Receiving

Customer Order Entry

Customer Order Fulfillment

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All processes involved in replenishing retailer inventories (retailer is now the customer) Retail order trigger Retail order entry Retail order fulfillment Retail order receiving

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Retail Order Trigger

Retail Order Receiving

Retail Order Entry

Retail Order Fulfillment

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All processes involved in replenishing distributor (or retailer) inventory Order arrival from the distributor, retailer, or customer Production scheduling Manufacturing and shipping Receiving at the distributor, retailer, or customer

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Order Arrival

Receiving

Production Scheduling

Manufacturing and Shipping

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All processes necessary to ensure that materials are available according to schedule Manufacturer orders components from suppliers to replenish component inventories However, component orders can be determined precisely from production schedules (different from retailer/distributor orders that are based on uncertain customer demand) Important that suppliers be linked to the manufacturers production schedule

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Procurement, Manufacturing and Replenishment cycles

Customer Order Cycle

PUSH PROCESSES

PULL PROCESSES

Customer Order Arrives

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A push / pull view of the Supply Chain categorizes processes based on whether they are initiated in response to a customer order ( pull ) or in anticipation of a customer order ( push ). This view is very useful when considering strategic decisions relating to supply chain design. Pull Process
Customer order arrives

Customer order cycle

Customer

Replenishment, Manufacturing Procurement cycles

Push Process

Manufacturer

Supplier
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Pull Process Customer order& manufacturing cycle Customer

Customer order arrives

Manufacturer ( Dell )

Procurement cycle Push Process

Supplier

Dell Company Supply Chain

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Supply chain processes fall into push or pull depending on times of execution and customer demand Pull: execution is initiated in response to a customer order (reactive) Made or Assembled to Order Push: execution is initiated in anticipation of customer orders (speculative) Made or Assemble to Stock Push/pull boundary separates push processes from pull processes

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P/P are strategic decisions of SC design a global view of how SC processes relate to customer orders Can combine the push/pull and cycle views The relative proportion of push and pull processes often impact supply chain performance

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Production decisions based on long-term forecasts Ordering decisions based on inventory & forecasts What are the problems with push strategies?
Inability to meet changing demand patterns Obsolescence The bullwhip effect:
x Excessive inventory x Excessive production variability x Poor service levels

Hard to predict production capacity or transportation capacity

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Production is demand driven

Production and distribution coordinated with true customer demand Firms respond to specific orders

Pull Strategies result in:

Reduced lead times (better anticipation) Decreased inventory levels at retailers and manufacturers Decreased system variability Better response to changing markets

But:
Harder to leverage economies of scale Doesn t work in all cases

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PushPull Boundary

Push Strategy Raw Materials

Pull Strategy End Customer

Supply chain time line

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A shift from a Push System...

Production decisions are based on forecast

to a Push-Pull System
Initial portion of the supply chain is replenished based on long-term forecasts
x For example, parts inventory may be replenished based on forecasts

Final supply chain stages based on actual customer demand.

x For example, assembly may based on actual orders.

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Build to Stock Forecast demand Buys components Assembles computers Observes demand and meets demand if possible. A traditional push system

Build to order Forecast demand Buys components Observes demand Assembles computers Meets demand A push-pull system

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Demand uncertainty

Pull

I Computers

II Furniture

Push
L L

IV Books & CDs

III Grocery
H

Delivery cost Unit price Economies of Scale

Pull

Push

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Higher demand uncertainty suggests pull Higher importance of economies of scale suggests push High uncertainty/ EOS not important such as the computer industry implies pull Low uncertainty/ EOS important such as groceries implies push Demand is stable Transportation cost reduction is critical Pull would not be appropriate here.

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Low uncertainty but low value of economies of scale (high volume books and CDs) Either push strategies or push/pull strategies might be most appropriate High uncertainty and high value of economies of scale For example, the furniture industry How can production be pull but delivery push? Is this a pull-push system?

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Push Objective Complexity Focus Lead time Processes Minimize cost High Resource allocation Long Supply chain planning

Pull Maximize service level Low Responsiveness Short Order fulfillment

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The push section: Uncertainty is relatively low Economies of scale important Long lead times Complex supply chain structures: Thus Management based on forecasts is appropriate Focus is on cost minimization Achieved by effective resource utilization supply chain optimization

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The pull section: High uncertainty Simple supply chain structure Short lead times Thus Reacting to realized demand is important Focus on service level Flexible and responsive approaches

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The push section requires: Supply chain planning Long term strategies The pull section requires: Order fulfillment processes Customer relationship management Buffer inventory at the boundaries: The output of the tactical planning process The input to the order fulfillment process.

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Agenda
What is Supply Chain and Supply Chain Management Why is SCM SCM Evolution

Supply Chain Flows Supply Chain Decision Process View of a Supply Chain Emerging Trends i & SCM help

55

 Increased levels of outsourcing Multiple levels of outsourcing Increased focus on customer intimacy Proliferation of VMI/SMI/CMI programs Increased focus on Tactical and Business planning Higher value add planning processes Increased focus on the complete value chain More collaboration between strategic customers and suppliers Demand shaping based on business strategy, manufacturing constraints, and inventory Demand creation based on intelligent pricing tied to availability Increased focus on CRD performance improvement To maintain/increase market share Tighter coupling between planning and execution Exception based intervention in execution of plans
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Issue
Extensive Capital Investment

Industry Response
Maximize capacity/equipment utilization across business divisions. Optimize profits based on product mix. Increased outsourcing. Instant response to requests. Perfect delivery.

SCM systems can do

Strategic Corporate Planning. Good procurement system Profit Optimization.

Increasing customer demands

Integrated Planning & Fulfillment. Interactive delivery quoting.

Shrinking product life cycles

Shorter lead times and faster time to market. Reduce excess/obsolete Inventory.

Inventory planning.

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Issue
Demand variability

Industry Response
Increased forecast accuracy Carefully managed response buffers Global penetration Cost effective operations Customer satisfaction

SCM Systems Can Do

Integrated Value Chain Planning.

Intense competition

Integrated Value Chain Planning. Customer Program Management. Inventory planning.

Long manufacturing cycle times

Strategic positioning of inventory along the supply chain

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 Design and validate your supply chain strategy before you deploy define scope and scale Collaborate on demand and gain consensus for the most accurate forecast execution Collaborate, optimize, monitor and control, production, inventory, distribution and transportation simultaneously across multiple enterprises global optimization Execute, monitor, and review your SCM performance carefully with predefined KPI and objectives operations evaluation

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