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4.2 Supply Chain Management

The document defines supply chain management and discusses its importance. It can be summarized as follows: 1) A supply chain involves all parties involved in fulfilling a customer request, including suppliers, manufacturers, distributors, and retailers. Supply chain management (SCM) aims to coordinate these entities to minimize costs and ensure demands are met. 2) SCM has evolved from a focus on inventory management to integrated planning across partners. Technologies now enable real-time collaboration and decision making across extended supply networks. 3) Proper SCM is important for matching supply and demand in uncertain environments and flexible product markets. Firms can gain significant benefits from SCM including lower costs, higher productivity, and better customer fulfillment.

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Sachinkodad
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697 views

4.2 Supply Chain Management

The document defines supply chain management and discusses its importance. It can be summarized as follows: 1) A supply chain involves all parties involved in fulfilling a customer request, including suppliers, manufacturers, distributors, and retailers. Supply chain management (SCM) aims to coordinate these entities to minimize costs and ensure demands are met. 2) SCM has evolved from a focus on inventory management to integrated planning across partners. Technologies now enable real-time collaboration and decision making across extended supply networks. 3) Proper SCM is important for matching supply and demand in uncertain environments and flexible product markets. Firms can gain significant benefits from SCM including lower costs, higher productivity, and better customer fulfillment.

Uploaded by

Sachinkodad
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 10

4.

2 Supply Chain Management

1
Definitions

2
What Is the Supply Chain?

• Also referred to as the logistics network


• Suppliers, manufacturers, warehouses, distribution
centers and retail outlets – “facilities”
Suppliers Manufacturers Warehouses & Customers
Distribution Centers

and the

• Raw materials
• Work-in-process (WIP) inventory Transportation Transportation
Costs Costs

• Finished products
Material Costs Transportation
Manufacturing Costs Inventory Costs
Costs

that flow between the facilities

3
The Supply Chain
Suppliers Manufacturers Warehouses & Customers
Distribution Centers

Transportation Transportation
Costs Costs
Material Costs Transportation
Manufacturing Costs Inventory Costs Costs
4
What Is Supply Chain Management (SCM)?

Plan Source Make Deliver Buy

• A set of approaches used to efficiently integrate


– Suppliers
– Manufacturers
– Warehouses
– Distribution centers
• So that the product is produced and distributed
– In the right quantities
– To the right locations
– And at the right time
• System-wide costs are minimized and
• Service level requirements are satisfied

5
History of Supply Chain Management

• 1960’s - Inventory Management Focus, Cost Control


• 1970’s - MRP & BOM - Operations Planning
• 1980’s - MRPII, JIT - Materials Management,
Logistics
• 1990’s - SCM - ERP - “Integrated” Purchasing,
Financials, Manufacturing, Order Entry
• 2000’s - Optimized “Value Network” with Real-Time
Decision Support; Synchronized & Collaborative
Extended Network

6
The Importance of Supply Chain Management

• Dealing with uncertain environments – matching


supply and demand
– U.S Surgical Corporation announced a $22 million loss in
1993 due to “larger than anticipated inventories on the
shelves of hospitals”
– IBM sold out its supply of its new Aptiva PC in 1994
costing it millions in potential revenue
– Hewlett-Packard and Dell found it difficult to obtain
important components for its PC’s from Taiwanese
suppliers in 1999 due to a massive earthquake
• U.S. firms spent $898 billion (10% of GDP) on
supply-chain related activities in 1998

7
The Importance of Supply Chain Management

• Shorter product life cycles of high-technology products


– Less opportunity to accumulate historical data on customer
demand
– Wide choice of competing products makes it difficult to predict
demand
• The growth of technologies such as the Internet enable greater
collaboration between supply chain trading partners
– If you don’t do it, your competitor will
– Major buyers such as Wal-Mart demand a level of “supply chain
maturity” of its suppliers
• Availability of SCM technologies on the market
– Firms have access to multiple products (e.g., SAP, Baan, Oracle,
JD Edwards) with which to integrate internal processes

8
Supply Chain Management – Key Issues

ISSUE CONSIDERATIONS
Network Planning • Warehouse locations and capacities
• Plant locations and production levels
• Transportation flows between facilities to minimize cost and time

Inventory Control • How should inventory be managed?


• Why does inventory fluctuate and what strategies minimize this?

Supply Contracts • Impact of volume discount and revenue sharing


• Pricing strategies to reduce order-shipment variability

Distribution Strategies • Selection of distribution strategies (e.g., direct ship vs. cross-docking)
• How many cross-dock points are needed?
• Cost/Benefits of different strategies

Integration and Strategic • How can integration with partners be achieved?


Partnering • What level of integration is best?
• What information and processes can be shared?
• What partnerships should be implemented and in which situations?
Outsourcing & Procurement • What are our core supply chain capabilities and which are not?
Strategies • Does our product design mandate different outsourcing approaches?
• Risk management

Product Design • How are inventory holding and transportation costs affected by product
design?
• How does product design enable mass customization?

Source: Simchi-Levi 9
Supply Chain Management – Benefits

• A 1997 PRTM Integrated Supply Chain Benchmarking Survey


of 331 firms found significant benefits to integrating the supply
chain

Delivery Performance 16%-28% Improvement


Inventory Reduction 25%-60% Improvement
Fulfillment Cycle Time 30%-50% Improvement
Forecast Accuracy 25%-80% Improvement
Overall Productivity 10%-16% Improvement
Lower Supply-Chain Costs 25%-50% Improvement
Fill Rates 20%-30% Improvement
Improved Capacity Realization 10%-20% Improvement

10

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