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Supply Chain Design Lecture 1 Concepts of Supply Chain.pptx

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Supply Chain Design Lecture 1 Concepts of Supply Chain.pptx

  1. 1. Business Logistics/Supply Chain—A Vital Subject The supply chain is simply another way of saying “the whole process of business.”
  2. 2. Supply Chain Management Defined by Stock & Boyer in 2009 The management of a network of relationships within a firm and between interdependent organizations and business units consisting of material suppliers, purchasing, production facilities, logistics, marketing, and related systems that facilitate the forward and reverse flow of materials, services, finances and information from the original producer to final customer with the benefits of adding value, maximizing profitability through efficiencies, and achieving customer satisfaction.
  3. 3. Warehousing Warehousing Transportation Transportation Vendors/plants/ports Transportation Factory Transportation Customers Information flows The Immediate Supply Chain for an Individual Firm
  4. 4. Supply Chain: Manufacturing Example
  5. 5. Supply Chain: Service Example
  6. 6. Supply Chain management • Cross function approach • Integrated approach • Overall objective is more important • Conflict resolution • Planning uncertainty i.e. contingency plans • Decision making at corporate level • Eliminate redundant activities • Ultimate objective is customer astonishment
  7. 7. Creating Value • Companies seek to develop a distinctive advantage and differentiate themselves in the mind of consumer. • Customers seek value in terms of: – Quality – Cost – Flexibility – Delivery – Innovation
  8. 8. The Value Chain of typical manufacturing firm INDIRECTLY create the value as perceived by the customer DIRECTLY create the value as perceived by the customer
  9. 9. Internal Value Chain: Local Focus R & D Operations Executive Management Logistics Marketing Human Resource Management Accounting Finance Supply Management Information Technology
  10. 10. Internal Value Chain: Company Focus R & D Operations Executive Management Logistics Marketing Human Resource Management Accounting Finance Supply Management Information Technology Upstream Suppliers Downstream Customers
  11. 11. Internal Value Chain: Company Focus R & D Operations Executive Management Logistics Marketing Human Resource Management Accounting Finance Supply Management Information Technology Upstream Suppliers Downstream Customers
  12. 12. SCM: Linked Value Chains R & D Executive Management Logistics Human Resource Management Accounting Finance Supply Management Information Technology R & D Executive Management Logistics Human Resource Management FinaMnacerketing Accounting Finance Supply Management Information Technology R & D Operations Executive Management InformationOperations Logistics Marketing Human Resource Management Accounting Finance Marketing Supply Management Technology R & D Operations Executive Management Logistics Marketing Human Resource Management Accounting Supply Management Information TechOnopleorgaytions R & D Operations Executive Management Logistics Marketing Human Resource Accounting Finance Supply Management Information Technology Focal FirmManagement Supplier Supplier’s Supplier Customer Customer’s Customer
  13. 13. Supply Chain Integration Common Theoretical Ideal
  14. 14. Focus Company Suppliers Supplier’s suppliers Customers Customers/ End users Acquire Convert Distribute The Supply Chain is Multi-Enterprise Product and information flow Scope in reality CR (2004) Prentice Hall, Inc.
  15. 15. Generalized Supply Chain Model SUPPLIER NETWORK INTEGRA TED ENTERPRISE DISTRIBUTIVE NETWORK Information, Product, Service, Financial and Knowledge Flows M A T E R I A L S Capacity, Information, Core Competencies, Capital and Human Resources Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Relationship Management Procurement Manufacturing Distribution E N D C O N S U M E R S
  16. 16. Conflicts within the supply chains  High inventories – higher customer service levels  [ but supply chains operate inefficiently]  Low inventories – Efficient supply chain operations  [ but customer service levels are at stake] Supplier objective Manufacturer objective Retailer objective Customer objective Large stable demand for less variety of materials Desire low product variety / high production volumes Reduce inventory and transportation costs Low price & high product quality and variety Flexible delivery schedules Flexible delivery schedules Rapid replenishment JIT receiving of products, short lead times Supply chain management best practices by Blenchard
  17. 17. Inventory Strategy • Forecasting Transport Strategy • Inventory decisions • Transport fundamentals • Purchasing and supply Customer • Transport decisions C O N T R O L L I N G G scheduling decisions service goals NNING NIZIN • Storage fundamentals • Storage decisions • The product • Logistics service A • Ord. proc. & info. sys. A PL ORG Location Strategy • Location decisions • The network planning process PLANNING ORGANIZING CONTROLLING Transport Strategy • Transport fundamentals • Transport decisions Customer service goals • The product • Logistics service • Ord. proc. & info. sys. Inventory Strategy • Forecasting • Inventory decisions • Purchasing and supply scheduling decisions • Storage fundamentals • Storage decisions Location Strategy • Location decisions • The network planning process Study Framework The focus is here
  18. 18. Corporate Strategy  Strategy formulation begins with defining a corporate strategy. This involves: a.Assessing needs, strengths, and weaknesses of the 4 major components: - customers - suppliers - competitors - the company itself b."Visioning" where counter -intuitive, unheard of, and unconventional strategies are considered.  Corporate strategies are converted to more specific strategies for the various functional areas of the firm such as logistics.
  19. 19. The Bullwhip Effect • Variation in demand is exaggerated as information moves upstream away from the point of use. • Variation in demand is exaggerated due to infrequent demand and/or inventory level information exchange and order batching.
  20. 20. The Dynamics of the Supply Chain Order Size Time Customer Demand Retailer Orders Distributor Orders Production Plan
  21. 21. The Dynamics of the Supply Chain Order Size Time Customer Demand Production Plan
  22. 22. Demand Collaboration • Bullwhip effect costs can be as high as 12 to 25% • Bullwhip can be effectively mitigated by: – Sharing point of sale data – Collaborative forecasting – Collaborative future product promotion planning

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