Reid & Sanders, Operations Management © Wiley 2002 Supply Chain Management 4 C H A P T E R.
-
Upload
moris-cobb -
Category
Documents
-
view
233 -
download
3
Transcript of Reid & Sanders, Operations Management © Wiley 2002 Supply Chain Management 4 C H A P T E R.
Page 2Reid & Sanders, Operations Management© Wiley 2002
Learning Objectives
• Describe supply chains and SCM• Describe the bullwhip effect• Describe SCM factors• Describe the role of vertical integration• Solve insourcing or outsourcing problems• Describe the role of purchasing in SCM• Describe the role of information sharing in SCM• Describe the technologies used in information sharing• Describe how to implement SCM• Describe the role of warehouses in supply chains• Describe trends in SCM
Page 3Reid & Sanders, Operations Management© Wiley 2002
What is a Supply Chain?
• A network of activities that deliver a finished product or service to the customer.– The connected links of external suppliers,
internal processes, and external distributors.
Page 4Reid & Sanders, Operations Management© Wiley 2002
Components of a Typical Supply Chain
ExternalSuppliers
InternalFunctions
ExternalDistributors
INFORMATION
Page 6Reid & Sanders, Operations Management© Wiley 2002
Supply Chain Management
• Supply Chain Management entails:– Coordinating the movement of goods and
delivery of services. – Sharing information between members of
the supply chain. • For example: sales, forecasts, promotional
campaigns, and inventory levels.
Page 8Reid & Sanders, Operations Management© Wiley 2002
External Suppliers
• External suppliers provide the necessary raw materials, services, and component parts.
• Purchased materials & services frequently represent 50% (or more) of the costs of goods sold.
• Suppliers are frequently members of several supply chains – often in different roles.
Page 9Reid & Sanders, Operations Management© Wiley 2002
External Suppliers
• Tier one suppliers:– Directly supplies materials or services to the firm that
does business with the final customer
• Tier two suppliers:– Provides materials or services to tier one suppliers
• Tier three suppliers:– Providers materials or services to tier two suppliers
Page 10Reid & Sanders, Operations Management© Wiley 2002
Internal Functions
• Vary by industry & firm, but might include:– Processing– Purchasing– Production Planning & Control– Quality Assurance– Shipping
Page 11Reid & Sanders, Operations Management© Wiley 2002
Logistics & Distribution
• Logistics: getting the right material to the right place at the right time in the right quantity:– Traffic Management:
• The selection, scheduling & control of carriers (e.g.: trucks & rail) for both incoming & outgoing materials & products
– Distribution Management: • The packaging, storing & handling of products in transit
to the end-user.
Page 12Reid & Sanders, Operations Management© Wiley 2002
Information Sharing
• Supply chain partners can benefit by sharing information on sales, demand forecasts, inventory levels & marketing campaigns
• Inaccurate or distorted information leads to the Bullwhip Effect
Page 14Reid & Sanders, Operations Management© Wiley 2002
The Bullwhip Effect
• If information isn’t shared, everyone has to guess what is going on downstream.
• Guessing wrong leads to too much or too little inventory:– If too much, firms hold off buying more until
inventories fall (leading suppliers to think demand has fallen).
– If too little, firms demand a rush order & order more than usual to avoid being caught short in the future (leading suppliers to think demand has risen).
Page 15Reid & Sanders, Operations Management© Wiley 2002
The Bullwhip Effect
• Farther away from the customer, the quality of information gets worse & worse as supply chain members base their guesses on the bad guesses of their partners.
• The result is increasingly inefficient inventory management, manufacturing, & logistics
Page 16Reid & Sanders, Operations Management© Wiley 2002
Short-Circuit the Bullwhip
• Make information transparent:– Use Electronic Data Interchange (EDI) to support
Just-In-Time supplier replenishment– Use bar codes & electronic scanning to capture &
share point-of-sale data
• Eliminate wholesale price promotions & quantity discounts
• Allocate scarce items in proportion to past sales to avoid attempts to ‘game’ the system
Page 17Reid & Sanders, Operations Management© Wiley 2002
Electronic Data Interchange
• The most common method of using computer-to-computer links to exchange data between supply chain partners in a standardized format.
• Benefits include:– Quick transfer of information– Reduced paperwork & administration– Improved data accuracy & tracking capability
Page 18Reid & Sanders, Operations Management© Wiley 2002
Vertical Integration
• A measure of how much of the supply chain is controlled by the manufacturer.– Backward integration:
• Acquiring control of raw material suppliers.
– Forward integration: • Acquiring control of distribution channels.
Page 19Reid & Sanders, Operations Management© Wiley 2002
Outsourcing
• Entails paying third-party suppliers to provide raw materials and services, rather than making them in-house.
• Outsourcing is increasing as many firms try to focus their internal operations on what they do best.
Page 20Reid & Sanders, Operations Management© Wiley 2002
Whether to Outsource?
• What volume is required?• Are items of similar quality available in the
marketplace?• Is long-term demand for the item stable?• Is the item critical to success of the firm?• Does the item represent a core competency
of the firm?
Page 21Reid & Sanders, Operations Management© Wiley 2002
Breakeven Analysis
QVCFCQVCFC
QVCFCTC
QVCFCTC
MakeMakeBuyBuy
MakeMakeMake
BuyBuyBuy
:PointceIndifferen
:InsourcingofCostTotal
:gOutsourcinofCostTotal
Page 22Reid & Sanders, Operations Management© Wiley 2002
Example: The Bagel Shop
• Bill & Nancy plan to open a small bagel shop.– The local baker has offered to sell them bagels at
40 cents each. However, they will need to invest $1,000 in bread racks to transport the bagels back & forth from the bakery to their store.
– Alternatively, they can bake the bagels at their store for 15 cents each if they invest $15,00 in kitchen equipment.
– They expect to sell 60,000 bagels each year.
• What should they do?
Page 23Reid & Sanders, Operations Management© Wiley 2002
Example Solved
Interpretation: – They anticipate selling 60,000 bagels (greater
than the indifference point of 56,000).– Therefore, make the bagels in-house.
000,56:
15.0$000,15$40.0$000,1$
QVCFCQVCFC MakeMakeBuyBuy
forSolve
:nCalculatio PointceIndifferen
Page 24Reid & Sanders, Operations Management© Wiley 2002
Developing a Supply Base
• How to chose between suppliers?
• One supplier or many per item?
• Whether to partner with suppliers?
Page 25Reid & Sanders, Operations Management© Wiley 2002
Criteria for Choosing Suppliers
• Cost:– Cost per unit & transaction costs
• Quality:– Conformance to specifications
• On-time delivery:– Speed & predictability
Page 26Reid & Sanders, Operations Management© Wiley 2002
Arguments for One Supplier per Item
• May only be one practical source for the item – Patent issues, geography, or quality considerations)
• The supply chain is integrated to support JIT or EDI– Making multiple suppliers impractical
• Availability of quantity discounts• Supplier may be more responsive if it’s guaranteed all
your business for the item• Contract might bind you to using only one supplier• Deliveries may be scheduled more easily
Page 27Reid & Sanders, Operations Management© Wiley 2002
Arguments for Multiple Suppliers per Item
• No single supplier may have sufficient capacity• Competition may result in better pricing or service• Multiple suppliers spreads the risk of supply chain
interruption• Eliminates purchaser’s dependence on a single
source of supply• Provides greater volume flexibility• Government regulation may require multiple suppliers
– Antitrust issues
• Allows testing new suppliers without risking a complete disruption of material flow
Page 28Reid & Sanders, Operations Management© Wiley 2002
Partnering with Suppliers
• Involves developing a long-term, mutually-beneficial relationship:– Requires trust to share information, risk,
opportunities, & investing in compatible technology
– Work together to reduce waste and inefficiency & develop new products
– Agree to share the gains
Page 29Reid & Sanders, Operations Management© Wiley 2002
The Role of Warehouses
• General Warehouses: – Used for long-term storage of goods
• Distribution Warehouses:– Transportation consolidation:
• Consolidate LTL into TL deliveries
– Product mixing & blending:• Group multiple items from various suppliers
– Improve service:• Reduced response time• Allow for last-minute customization
Page 30Reid & Sanders, Operations Management© Wiley 2002
Future Challenges
• Household Replenishment:– Fulfilling consumer demand at the point of
use (the home).– Often called ‘the last mile’ problem.
• Freeze Point Delay (Postponement):– Last minute customization to provide
exactly what the consumer wants while maintaining very small inventories
Page 31Reid & Sanders, Operations Management© Wiley 2002
The End
Copyright © 2002 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United State Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.