Supply Chain Management

Team 223 EMBA 2002

Introduction

• Supply chains exist in both service and manufacturing organizations

• May be simple or complex

• Made up of various organizations

– inherent conflicts may exist between them

– Ideally a well-balanced, well-practiced relay team, positioned for “hand-offs”

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Supply Chain Management

Cover Graphic From Internet, ORACLE Website, Oracle Supply Chain applications

A Brief History*

• Multicommodity Logistics Network Model

• “PLANETS”

• Stochastic Sub-Models

• Normative Model

• Comprehensive Deterministic Model

• “OPTIMIZER” Model

* Ganeshan, Ram and Harrison, Terry P. An Introduction to Supply Chain Management. Internet, Penn State University website

Supply Chain Management

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Supply Chain Management

A Brief History (continued)

• Current Research– Shows promise in reducing inventories, increasing customer service

– Several limitations:

• Focus is on the inventory system only; largely ignores the

production side of the supply chain

• Assumes re-supply from only one site

• Restricted to well-known forms of demand and lead-time

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Supply Chain Decisions*

• Two broad categories: – Strategic

• longer horizon

• linked with corporate strategy

• guide supply chain policies from a design perspective

– Operational

• shorter term

• focus of effort is on effective, efficient management of product flow

• Four major decision areas: Location, Production, Inventory and Transportation. Each has strategic and operational elements.

*Ganeshan, Ram and Harrison, Terry P. An Introduction to Supply Chain Management. Internet, Penn State University website

Supply Chain Management

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Supply Chain ManagementSupply Chain Decisions

• Location: largely strategic– Involves commitment to a long term plan

– Decisions regarding size, number, location represent the basic strategy for accessing customer markets

– Considerable impact on revenue, cost and levels of service

• Production– Strategic:

• Product Path(s): these decisions determine the exact path(s) the product will take to and from a facility

• Facility capacity: this decision will depend primarily upon the degree of vertical integration within the firm

– Operational:

• The focus is on detailed production schedulingTeam 223 EMBA 2002 6

Supply Chain Decisions

• Inventory– Strategic: top management goals

– Operational: the primary approach to inventory management

• Push vs. Pull

• Optimal order quantities and reorder points

• safety stock levels

• Transportation – Primarily strategic

– Closely linked with inventory decisions

– Customer service levels & geographic location play key role

• Shipment size

• Routing

• Scheduling

Supply Chain Management

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Supply Chain Management Tools

• Strategy Tools for SCM– Broad decision scope

– Requires lots of data

– Provide approximate solutions

– Focus is on design

• Operational Tools for SCM– Address day-to-day SCM operation

– Models have a narrower scope, consider detail and provide optimal solutions

– Focus is on inventory control policies (usually multi-level)

Supply Chain Management

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Supply Chain Management

Supply Chain Flow - Manufacturing

• Advance Planning, Scheduling and Logistics Techniques

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Graphic from: Internet, ORACLE Website, Oracle Supply Chain applications

Supply Chain Management

Supply Chain Flow - Manufacturing

• Procurement - Vendor/Supplier Management

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Graphic from: Internet, ORACLE Website, Oracle Supply Chain applications

Supply Chain Flow - Manufacturing*

• Manufacturing– Workflow technologies enable trading partners to:

• Collaborate on new product development

• Shorten time-to-market

– Detailed product information can be collected and distributed to various partners to expedite collaboration

– New product design timelines and objectives can be synchronized to achieve shared goals

• Distribution– Impacts inventory level, cost and customer service level

– Push vs. Pull Inventory

– The Role of Warehouse and Distribution Managers

*Internet, ORACLE Website, Oracle Supply Chain applications

Supply Chain Management

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Supply Chain Management

Supply Chain Flow - Manufacturing

• Customers– Customization becoming standard to order fulfillment

– Synchronized operations, global visibility and large-scale reductions in inventory across the extended supply chain grant trading partners the agility and flexibility necessary for participation in a mass customization model

Supply Chain Management

Supply Chain Flow - A Service Industry ExampleAirborne Logistics Services

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From: Airborne Express: WebMethods at Work with Airborne Logistics Services

Supply Chain Management

Driving Forces

• With the Internet Age:– Traditional barriers to market entry have disappeared

– Global markets can be reached overnight

– Customers are more informed, demanding

• Forrester Research forecasts that inter-company trade over the Internet will double every year over the next 5 years - from $43B last year to $1.3T by 2003*

• The Bottom Line: ROI. A recent Benchmarking Partners, Inc. study revealed that 90% of surveyed companies benefited from integration through electronic commerce.

*Internet, WebMethods website, Whitepapers, B2B Integration: The Drive to Gain and Maintain Competitive Advantage

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Supply Chain Management

Supply Chain Synchronization: B2B & SCM*

• B2B: the automated exchange of information between different organizations– Crosses corporate boundaries (firewalls)

– Accomplished over the Internet or VAN’s (Value-Added Networks)

– Increasingly uses open standards such as XML and HTTP

– Has spawned dedicated organizations to develop the software solutions

*Internet, WebMethods website, Whitepapers, B2B Integration: The Drive to Gain and Maintain Competitive Advantage

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Supply Chain Management

Considerations for SCM Development & Deployment

• Learning Costs of new tools and data

• Supplier information needs

• Optimize the entire system

• Implement in stages

• System flexibility and capability for customization*

• Impact on employees (jobs, assignments, responsibilities, compensation structure)

*Managing and Using Information Systems, Keri E. Pearlson, John Wiley & Sons, 2001, pg 100

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Supply Chain Management

Examples: Success Stories

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Supply Chain Management

Examples: Success Stories

• IBM– Supplier relationships moved to web beginning in 1998

– Links 20,000 IBM suppliers

– 94% of invoices handled electronically

– 400,000 e-invoices/month via IBM’s private exchange

– Estimated savings: $400M/year

• Kimberly Clark– Implemented an Automated Replenishment Program with

44 retailers

– Estimated savings: $200M/2 years

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