Operations management 12th stevenson ch15 supply chain management

Chapter 15
Supply Chain Management

McGraw-Hill/Irwin

Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.


Chapter 15: Learning Objectives

 You should be able to:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Instructor Slides

Discuss the key issues of supply chain management (SCM)
Name the recent trends in SCM
Summarize the motivations and risks of outsourcing as a strategy
State some of the complexities that are involved with global supply chains
List some of the strategic, tactical and operational responsibilities of SCM
Give examples of some advantages of e-business
Explain the importance of supplier partnerships

Discuss the issues involved in managing returns
List the requirements of an effective supply chain
Name some of the challenges in creating an effective supply chain

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Supply Chain

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

Instructor Slides

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Facilities

 The sequence of the supply chain begins with basic suppliers and extends all the
way to the final customer

 Warehouses
 Factories
 Processing centers
 Distribution centers
 Retail outlets

 Offices

Instructor Slides

15-4


Functions and Activities

 Supply chain functions and activities
 Forecasting
 Purchasing
 Inventory management
 Information management
 Quality assurance
 Scheduling
 Production and delivery
 Customer service

Instructor Slides

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Supply Chain Management

Supply Chain Management (SCM)
 The strategic coordination of business functions within a business organization
and throughout its supply chain for the purpose of integrating supply and
demand management

Instructor Slides

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SCM Managers

 SCM Managers
 People at various levels of the organization who are responsible for managing supply and
demand both within and across business organizations.

 Involved with planning and coordinating activities
 Sourcing and procurement of materials and services
 Transformation activities
 Logistics

Instructor Slides

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Key SCM Issues

 The goal of SCM is to match supply to demand as effectively and efficiently as
possible

 Key issues:
 Determining appropriate levels of outsourcing
 Managing procurement

 Managing suppliers
 Managing customer relationships
 Being able to quickly identify problems and respond to them
 Managing risk

Instructor Slides

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Trends in SCM

Trends affecting supply chain design and management:
 Measuring supply chain ROI
 “Greening” the supply chain
 Re-evaluating outsourcing
 Integrating IT
 Managing risks
 Adopting lean principles

Instructor Slides

15-9


Global Supply Chains

 Global supply chains

 Product design often uses inputs from around the world

 Some manufacturing and service activities are outsourced to countries where labor and/or


materials costs are lower
Products are sold globally

 Complexities

 Language and cultural differences
 Currency fluctuations
 Political instability
 Increasing transportation costs and lead times
 Increased need for trust amongst supply chain partners

Instructor Slides

15-10


Management Responsibilities

Aspects of management responsibility:
 Legal
Being knowledgeable about laws and regulations of the countries where supply chains
exist

Obeying laws and operating to conform to regulations

 Economic
Supplying products and services to meet demand as efficiently as possible

 Ethical
Conducing business in ways that are consistent with the moral standards of society

Instructor Slides

15-11


Management Responsibility:
Strategic

Certain strategic responsibilities have a major impact on the success of both
supply chain management and the business itself:

 Supply chain strategy alignment
 Network configuration
 Information technology
 Products and services
 Capacity planning
 Strategic partnerships
 Distribution strategy
 Uncertainty and risk reduction

Instructor Slides

15-12


Management Responsibility:

Tactical and Operational

Tactical

Operational



Scheduling



Receiving



Transforming



Forecasting



Sourcing



Operations Planning



Order fulfilling



Managing inventory



Managing inventory



Transportation planning





Shipping

Collaborating



Information sharing



Controlling

Instructor Slides

15-13


Procurement

The purchasing department is responsible for obtaining the materials, parts,
and supplies and services needed to produce a product or provide a service.

The goal of procurement
 Develop and implement purchasing plans for products and services that support
operations strategies

Instructor Slides

15-14


Duties of purchasing

Identifying sources of supply
Negotiating contracts
Maintaining a database of suppliers
Obtaining goods and services
Managing supplies

Instructor Slides

15-15


The Purchasing Cycle

The main steps:
1.

Purchasing receives the requisition

2.

Purchasing selects a supplier

3.

Purchasing places the order with a vendor

4.

Monitoring orders

5.

Receiving orders

Instructor Slides

15-16

E-Business

 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
 Product and service promotion
 Provide information about products and services

Instructor Slides

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Advantages of E-Business

 Companies can:

 Have a global presence
 Improve competitiveness and quality of service
 Analyze customer interests
 Collect detailed information about clients’ preferences

 Shorten supply chain response times
 Reduce or eliminate the role of ‘traditional’ retailers and/or intermediaries
 Realize substantial cost savings

 Also allows the:

 Creation of virtual companies
 Leveling of the playing field for small companies

Instructor Slides

15-18


E-Business Order Fulfillment Problems

 Customer expectations

 Order quickly  Quick delivery

 Demand variability creates order fulfillment problems
 Sometimes Internet demand exceeds an organization’s ability to fulfill
orders

 Inventory

 Outsourcing order fulfillment
 Loss of control
 Build large warehouses
 Internal holding costs

Instructor Slides

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Supplier Management

Choosing suppliers
Supplier audits
Supplier certification
Supplier relationship management
Supplier partnerships
 CPFR (collaborative planning, forecasting, and replenishment)
 Strategic partnering

Instructor Slides

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Vendor Analysis, Supplier Audits,
and Supplier Certification

Vendor analysis
 Evaluating the sources of supply in terms of price, quality, reputation, and service
 Supplier audit
 A means of keeping current on suppliers’ production (or service) capabilities, quality and delivery
problems and resolutions, and performance on other criteria

 Supplier certification
 Involves a detailed examination of a supplier’s policies and capabilities
 The process verifies the supplier meets or exceeds the requirements of a buyer

Instructor Slides

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Supplier Relationship Management

 Type of relationship is often governed by the duration of the trading
relationship

 Short-term
 Oftentimes involves competitive bidding
 Minimal interaction
 Medium-term
 Often involves an ongoing relationship
 Long-term
 Often involves greater cooperation that evolves into a partnership

Instructor Slides

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Strategic Partnering

Two or more business organizations that have complementary products or

services join so that each may realize a strategic benefit

 Example:
When a supplier agrees to hold inventory for a customer in return for a long-term
commitment

 The customer’s inventory holding cost is reduced and the supplier is relieved of the costs that
would be needed to continually find new customers

Instructor Slides

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Inventory Management

Inventory issues in SCM
 Inventory location
Centralized inventories
Decentralized inventories

 Inventory velocity
The speed at which goods move through a supply chain

 The bullwhip effect
Inventory oscillations that become increasingly larger looking backward through the
supply chain

Instructor Slides

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The Bullwhip Effect

 Variations in demand cause inventory fluctuations to fluctuate and get out
of control

 Inventory fluctuation can be magnified by
 Periodic ordering
 Reactions to shortages
 Forecast inaccuracies
 Order batching
 Sales incentives and promotions
 Liberal product return policies
 Results in
 Higher costs
 Lower customer satisfaction

Instructor Slides

15-25