Supply Chain Management (I)

11-1

Lecture 6

Presenter:

ISMAULLAH BUTT
PhD (Candidate)
 Learning Objectives
11-2
 Explain what a supply chain is.
 Explain the need to manage a supply chain and the
potential benefits of doing so.
 Explain the increasing importance of outsourcing.
 State the objective of supply chain management.
 List the elements of supply chain management.
 Identify the strategic, tactical, and operations issues in
supply chain management.
 Describe the bullwhip effect and the reasons why it occurs.
 Explain the value of strategic partnering.
 Discuss the critical importance of information exchange
across a supply chain.
 Supply Chain Overview
SCM-3

Transportation Transportation Customers

Warehousing

Information
flows
Factory

Transportation

Vendors/plants/ports
Warehousing Transportation

CR (2004) Prentice Hall, Inc. 1-2

 Supply Chain Management
11-4

 Supply Chain: the sequence of organizations - their

facilities, functions, and activities - that are involved
in producing and delivering a product or service.

Sometimes referred to as value chains

 Facilities
11-5

 Warehouses
 Factories
 Processing centers
 Distribution centers
 Retail outlets
 Offices
 Functions and Activities
Forecasting
11-6


 Purchasing
 Inventory management
 Information management
 Quality assurance
 Scheduling
 Production and delivery
 Customer service
 Typical Supply Chains
11-7

Production Distribution
Purchasing Receiving Storage Operations Storage
 Typical Supply Chain for a Manufacturer
11-8

Supplier

Supplier

Supplier
}
Storage Mfg. Storage Dist. Retailer Customer
 Typical
Figure 11.1b
Supply Chain for a Service
11-9

Supplier

Supplier
} Storage Service Customer
 Need for Supply Chain Management
Improve operations
11-10
1.

2. Increasing levels of outsourcing

3. Increasing transportation costs
4. Competitive pressures
5. Increasing globalization
6. Increasing importance of e-commerce
7. Complexity of supply chains
8. Manage inventories
 Bullwhip
Figure 16.3
Effect
11-11

Demand

Initial
Final Customer
Supplier

Inventory oscillations become progressively

larger looking backward through the supply chain
 Benefits of Supply Chain Management
11-12

Organization Benefit

Campbell Soup Doubled inventory turnover rate

Hewlett-Packard Cut supply costs 75%

Sport Obermeyer Doubled profits and increased sales 60%

National Bicycle Increased market share from 5% to 29%

Wal-Mart Largest and most profitable retailer in the

world
 Benefits of Supply Chain Management
Lower inventories
11-13


 Higher productivity
 Greater agility
 Shorter lead times
 Higher profits
 Greater customer loyalty
 Integrates separate organizations into a cohesive
operating system
 Global Supply Chains
11-14

 Increasingly more complex because of:

 Language

 Culture

 Currency fluctuations
 Political

 Transportation costs
 Local capabilities

 Finance and economics

 Environmental
 Elements of Supply Chain Management
11-15
Element Typical Issues
Customers Determining what customers want
Forecasting Predicting quantity and timing of demand
Design Incorporating customer wants, mfg., and time
Processing Controlling quality, scheduling work
Inventory Meeting demand while managing inventory costs
Purchasing Evaluating suppliers and supporting operations
Suppliers Monitoring supplier quality, delivery, and relations

Location Determining location of facilities

Logistics Deciding how to best move and store materials
 Strategic or Operational
Two types of decisions in supply chain
11-16

management
 Strategic – design and policy
 Operational – day-to-day activities
 Major decisions areas

 Location
 Production
 Inventory
 Distribution
 Logistics
11-17

 Logistics
 Refers to the movement of materials and information
within a facility and to incoming and outgoing
shipments of goods and materials in a supply chain
 Logistics
• Movement within the facility
11-18

• Incoming and outgoing shipments

• Bar coding
• EDI
• Distribution 0

• JIT Deliveries 214800 232087768

 Materials Movement
Figure 11.4
11-19
Work center
Work center Work
center

Work Storage
center

Storage

Storage
RECEIVING

Shipping
 Distribution Requirements Planning
11-20

 Distribution requirements planning (DRP) is a

system for inventory management and
distribution planning
 Extends the concepts of MRPII
 Uses of DRP
11-21

 Management uses DRP to plan and coordinate:

 Transportation

 Warehousing

 Workers

 Equipment

 Financial flows
 E-Business
11-22
 E-Business: the use of electronic technology to
facilitate business transactions
 Applications include
 Internet buying and selling
 E-mail

 Order and shipment tracking

 Electronic data interchange (EDI)
 Reverse Logistics
11-23

 Reverse logistics – the backward flow of goods

returned to the supply chain
 Processing returned goods
 Sorting,examining/testing, restocking, repairing
 Reconditioning, recycling, disposing

 Gatekeeping – screening goods to prevent incorrect

acceptance of goods
 Avoidance – finding ways to minimize the number of
items that are returned