Examples of Supply Chains
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Transcript of Examples of Supply Chains
What Is All The Fuss About Supply Chain
Management?
• Introduction• We have come a long way!• The supply chain response• Retail supply chain• Auto supply chain• Aerospace supply chain• PC supply chain• McDonald’s Supply chain• More supply chains
We Have Come A Long Way
Clerical
Order Placers
Limited educationalresources
MaterialsManagement
Supply ChainManagement
The Supply Chain Response
As the economy changes, as competition becomes more global, it’s no longer company vs. company but supply chain vs. supply chain.Harold Sirkin, Boston Consulting Group
As the economy changes, as competition becomes more global, it’s no longer company vs. company but supply chain vs. supply chain.Harold Sirkin, Boston Consulting Group
Today’s Business Today’s Business World is a Jungle!!!World is a Jungle!!!Today’s Business Today’s Business
World is a Jungle!!!World is a Jungle!!!
When you find yourself When you find yourself
in in
the jungle, remember, the jungle, remember,
ONLY THE FIT ONLY THE FIT
SURVIVESURVIVE!!!!!!
When you find yourself When you find yourself
in in
the jungle, remember, the jungle, remember,
ONLY THE FIT ONLY THE FIT
SURVIVESURVIVE!!!!!!
What is a Supply Chain?
Customer wantsdetergent and goes
to Supermarket
Customer wantsdetergent and goes
to SupermarketSupermarketSupermarket
Supermarket or 3rd
party DC
Supermarket or 3rd
party DC
P&G or othermanufacturerP&G or othermanufacturer
PlasticproducerPlastic
producer
Chemicalmanufacturer
(e.g. Oil Company)
Chemicalmanufacturer
(e.g. Oil Company)
TennecopackagingTenneco
packaging
Paper manufacturer
Paper manufacturer
TimberindustryTimber
industry
Chemicalmanufacturer
(e.g. Oil Company)
Chemicalmanufacturer
(e.g. Oil Company)
Source: Chopra & Meindl 2001
Supply Chain: Wal-Mart
Customer wants detergent from Wal-Mart
Tenneco Packaging
Wal-Mart or Third-Party Distribution Center
P&G or other Manufacturer
Plastic Producer
The Wal-Mart Store
Chemical Manufacturer
Chemical Manufacturer Paper Manufacturer
Timber Industry
SupplySupply
Sources:plantsvendorsports
Manufacturers,Regionalwarehouses:stocking points
Field warehouses:stockingpoints
Customers,demandcenters
MaterialProduction/purchase costs
Manufacturing/Inventory &warehousing costsTransportation costs Inventory &
warehousing costs
Transportation costs
Source: Simchi-Levi & al, 2000
A Typical Manufacturer’s Supply Chain
The Extended Enterprise Supply Chain
Raw Material Supplier
SubassemblySupplier
Assembly Plant
ComponentSupplier Dealer
DelightedCustomer
Maximized value at minimized cost
Drivers of Supply Chain Performance
• Inventory
• Transportation
• Facilities
• InformationSource: Chopra & Meindl 2001
Competitive Strategy
Supply Chain Strategy
Drivers of Supply Chain Performance
Drivers
Inventory
Transportation
Facilities Information
Source: Chopra & Meindl 2001
Supply Chain Structure
Efficiency Responsiveness
Considerations for Supply Chain Drivers
Driver Efficiency Responsiveness
Inventory Cost of holding Availability
Transportation Consolidation Speed
Facilities Consolidation / Dedicated
Proximity / Flexibility
Information What information is best suited for each objective
Source: Chopra & Meindl 2001
Drivers of Supply Chain Performance
Inventory:• Role of inventory in the Supply Chain:
– Anticipation of future demand– Production and distribution costs reduction
• economies of scale
Source: Chopra & Meindl 2001
Drivers of Supply Chain Performance
Transportation:• Role of transportation in the Supply Chain:
– Transportation moves the product between different stages in a Supply Chain
• Transportation choices impact the responsiveness and the efficiency of the Supply Chain
Source: Chopra & Meindl 2001
Drivers of Supply Chain Performance
Facilities: • Role of facilities in the Supply Chain:
– Where inventory is transformed into another state - manufacturing facility
– Where inventory is stored before being shipped - warehousing facility
• Choices such as number of facilities or capacity impact the Supply Chain
Source: Chopra & Meindl 2001
Drivers of Supply Chain Performance
Information:• Role of Information in the Supply Chain:
– Serves as the connection between the Supply Chain’s various stages (allows coordination of actions)
– Allows daily operations of each stage of the Supply Chain (ex. : a production scheduling system needs information)
Source: Chopra & Meindl 2001
SC Nokia
• Nokia’s frequent & rapid product introduction, major contributors to fast revenue & profit growth are:– supported by a very flexible & efficient SC
• Nokia has put in place:– rapid response manufacturing,– quick-ship logistics,– global SC web that links Nokia’s suppliers & plants,
supports Vendor Managed Inventories and collaborative planning
Source: Accenture, 2003
SC Zara (1)
• Global clothing manufacturer/retailer – 44 countries
• Focused on time to market, costs, order fulfillment & customer satisfaction
• Zara owns 630 retail stores worldwide• Store managers send customer feedback directly to
Zara’s in-house designers via handheld devices– designers are kept abreast of fast-changing trends &
demands– gives Zara vital information on sale of less-desirable
merchandise– better managed inventories
Source: Accenture, 2003
SC Zara (2)
• Zara acquires fabrics in only 4 colors & postpones dyeing & printing until close to manufacturing reducing waste and minimizing need to clear unsold inventories
• Zara can deliver new styles in 3 to 6 weeks, compared with up to 5 months for competitors
Source: Accenture, 2003
SC Henkel
• Multinational manufacturer of consumer & industrial products
• Put in place collaborative planning, forecasting & replenishment (CPFR) with Condis, a Spanish supermarket & several packaging suppliers for laundry & home care products
• Involves daily interchange for key items, coordinates business planning (combined promotions & collaborative forecasts) & jointly defined & measured key performance indicators.
Source: Accenture, 2003
Cost in the Average New Vehicle?
30%Chrysler
70%Supply Chain
A Typical Seating Supply Chain
Johnson Controls
Chrysler FordGeneralMotors
Canadian Fab
Douglas &Lomason
Technotrim
Milliken &Company
Lear Favesa
Collins & Aikman
Textileather
Soft Trim Suppliers
Dudek &Bock Spring
Rockford SpringR. R. Spring
Specialty Screw
Excel/Atwood
Hardware Suppliers
SUPPLIERS
TVS-M
KANBAN/
REUSABLE CONTAINERS
TRANSPORTATIONVANNED STOREWISE
MATERIAL FLOW
INFORMATION FLOW
IMAGE-SOUTH ZONE(WITH MILKRUN)
LOGISTICS SERVICE PROVIDER
LOGISTICS SERVICE PROVIDER
BAR CODED INVOICES
JIT CALLS TROUGH INTERNET
EMPTYCONTAINERS
2BIN
SUPPLIERS
TVS-M
SCHEDULES
DISPOSABLE CONTAINERS
TRANSPORTATIONVANNED LOCATIONWISE
AT 3PL START HUB
MATERIAL FLOW
INFORMATION FLOW
IMAGE-NORTH/WEST ZONE(WITH MILKRUN)
LOGISTICS SERVICE PROVIDER
LOGISTICS SERVICE PROVIDER
UNPACKING AT RECEIPT
ASN
SUPPLIERS
TVS-M
SCHEDULES
DISPOSABLE CONTAINERS
DOOR DELIVERY BY SUPPLIER
MATERIAL FLOW
INFORMATION FLOW
IMAGE-REMOTE SUPPLIERS
UNPACKING AT INWARDING
ASN
Best practice suppliers,who are leading the
Supply-Chain EDI Initiative Supply Chain Example
Working together towards process improvement
Chrysler
(Tier 1)Dana Corp.
(Tier 2)Impact Forge
(Tier 3)Mac SteelNorthstar
Steel
Axles
Forgings
Communication Flow
(Supply Chain EDI)
Material Flow
(On-Time Delivery)
Great Cars & Trucks
Steel
DealershipsExtended Enterprise In Action:
Modularity is a key design advantage in the manufacture of modern aircraft
A clear move towards
Modularity
Expanding the Operations Frontier -Dell’s “revolution” in the PC market
• Dell’s competitive advantage: Provide customized PC configurations, with short delivery times and affordable prices.
• Dell’s success in PC market:
Vir
tual
Inte
gra
tio
n
Customer
Dell
Suppliers
Dell Supply Chain
PUSH
PULL
PC SUPPLY CHAINS
Typical PC Supply Chain(Compaq, HP, IBM, etc.)
Customer
DistributionChannels
Manufacturer
Suppliers
PUSH
PULL
The Critical Success Factors underlying Dell’s competitive advantage
• Very high product (configurable) variety – mass customization!
• Direct fulfillment - no intermediaries• No production launch until customer order booked
(pure pull!)• Very low finished goods inventory (costs) – high
inventory turns (raw material inventory influenced by “recommended configurations”)
• High velocity material flows & fulfillment
Supporting Dell’s competitive advantage through a new operational model
•Focused on strategic partnerships: suppliers down from 200 to 47•Suppliers maintain nearby ship points; delivery time 15 minutes to 1 hour•Suppliers own inventory until used in production•Demand pull throughout value chain – “information for inventory” substitution
• Demand forecasting is critical – changes are shared immediately within Dell and with supply base
• Customers frequently steered to “recommended configurations” with high availability to balance supply and demand
• External logistics supplier used to manage inbound supply chain
Emerging factors and trends enabling Dell’s strategy
• The commoditization of the PC industry– Standardized and interchangeable components– Emergence of reliable manufacturing service
providers• Recent advances in Supply Chain Management
– Information Technology (IT) platforms that allow the effective and efficient information exchange and coordination across the entire supply chain
– 3rd party logistics service providers– Emerging emphasis on virtual rather than vertical
company integration
Suppliers(International)
1.2 Million PC/Yr.Glasgow U.K.
Warehouse
PortPC Assembly
Plant
13 TransshipmentPoints (TPs) in Europe
Country-wide Distribution
Centers (DCs)
Retailers
Example of a Typical Supply Chain: IBM Europe PC Supply Chain
McDonald’s Supply Chain
• Purchasing– “The 3 legged stool”: Corporation – Franchisees –
Suppliers– Exclusive, certified facilities– Handshake agreements, Trust– Long term win-win partnership, risk sharing– Rigorous product and service specifications– Strong focus on quality, product specification and
environmental audits– Decentralized supplier structure, zone
consolidation for multinational suppliers– Distributor is wholesaler for Restaurants
The McDonald’s Supply Chain
• Logistics– ~100 sales items in the restaurant– ~400 SKUs in the warehouse (Hubs: up to 1,500)– ~200 restaurants per DC (~180 DCs globally)– Delivery frequency: ~3/wk, higher in urban areas– 2-3 stops per route– Exclusive distributors (3PL)– Freight consolidation (via freight forwarders)– Long term partnerships with service providers,
risk sharing– Strong quality focus (Cold Chain, HACCP, QIP)
The McDonald’s Supply Chain
• McDonald’s Supply Chain Challenges– Even stronger focus on freshness and quality– On-going product innovations– Strong customer demand fluctuations
based on promotions– Order- and inventory management
restaurant – DC – supplier -raw material supplier
– Bull Whip effect – Cannibalization– Change Management in a de-
centralized structure (NT + OO = EOO)
The McDonald’s Supply Chain
New Product Introductions
Big Mac Brand Advertising
Monopoly
Big Mac / Sony Connect
Big Macs discounted in selected markets
Core Product Promotions
Promotional Impact
Vision of Supply Chain Integration
(Quality,service,cleanliness and value)
Two future orientated strategies
McD DC :
integrated
… but they need not care where the goods come from!”
“As demand arises on customers’ side ...
... supply turns on and off automatically, ...
The McDonald’s Supply Chain “One Stop Shopping” processes and an automated water supply have a lot in common:
One Stop Shopping
Delivering a wide range of benefits to our restaurants
• Common business models and tools
• Borderless knowledge transfer
• Optimization of services
• Economies of scale
• Centralized competence
• Financial strength
• Easy customer communications
DC Sofia, Bulgaria
McDonald’s Logistics Network
• DQMP (Distributor Quality Management Process)
• Operations and Customer Relations (Operations Manual)
• Quality Control (HACCP / QIP) (Hazard analysis critical
control point Quality inspection program)
• Cold Chain standards
• Hygiene regulations
• Product handling standards
• Emergency and contingency plans
• Risk & Crisis management
• Continuous unannounced internal and 3rd party audits for
DCs result in superior quality scores regularly.
McDonald’s Logistics Standards
“One-Stop-Shopping“Lean Logistics Solution
Supply Chain Services for McDonald‘s restaurants
Results
SUPPLY CHAINS OF
COSTUME JEWELLERY
FOOTWEAR
PROCESSED MANGO
LEATHER GOODS
HOLIDAY DÉCOR
FURNITURE
HOUSEWARE
Example of an Extended Supply Chain Structure (Hugos, 2003)
Raw Material Producer
Manufacturer Distributor Retailer Retail Customer
Product Designers
Market Research
Logistics Provider
Finance Provider
Business Customer
Supply Chain of the Costume Jewelry Sector (Beng Hui, 2005)
Collectors of Raw Materials Middle Men/Resellers
ExportersSubcontractorsForeign Buyers/Retailers
Final Customer
Manufacturers of Foreign Made components
Supply Chain of the Fine Jewelry Sector (Beng Hui, 2005)
Local Miners
Middlemen/CB
Jewelry Manufacturer
Foreign/Buyers Retailers
Local Retailers
Foreign customers
Local customersSupplier of
Imported Jewels
Supply Chain of the Processed Mango Sector (Beng Hui, 2005)
Independent Farmers
Middlemen
Company Owned Farms
Mango Processor
Fresh Mango Exporter
Foreign Buyers/ Retailers
Foreign Customer
Local Retailers
Local Customers
Supply Chain of the Leathergoods Sector (Manalang, 2005)
Foreign Makers of Components
Local Middlemen
Local Tannery
Local Fiber Processors
Foreign Tannery
Foreign Merchandisers
Leather goods Manufacturer
Local Wholesalers/ Direct Selling
Local Retailers
Foreign Wholesalers
Foreign Retailers
Local Customers
Foreign CustomersSubcontractors
of non-leather components
Supply Chain of the Footwear Sector (Manalang, 2005)
Foreign Makers of Components
Local Middlemen
Local Tannery
Subcontracting for some large companies
Footwear Manufacturer
Local Wholesaler/ Direct Selling
Local Retailers
Local Customers
Supply Chain of the Holiday Decors Sector (Mutuc, 2005)
Local Supplier of Imported Materials
Processors/Collectors of Local RM
Local Middlemen
Subcontracting
Holiday Décor Manufacturer
Foreign Buyers/Retailers
Foreign Customers
Local Retailers
Local Customers
Supply Chain of the Furniture Sector (Mutuc, 2005)
Local Supplier of Imported Materials
Processors/Collectors of Local RM
Local Middlemen
Subcontracting for special designs (i.e. weaving)
Furniture Manufacturer
Foreign Buyers/Retailers
Foreign Customers
Local Retailers
Local Customers
Supply Chain of the Houseware Sector (Mutuc, 2005)
Local Supplier of Imported Materials
Processors/Collectors of Local RM
Local Middlemen
Subcontracting
Manufacturing
Foreign Buyers/Retailers
Foreign Customers
Local Retailers
Local Customers