chapter 10 supply chain strategy. supply-chain management measuring supply-chain performance supply...

Download Chapter 10 Supply Chain Strategy. Supply-Chain Management Measuring Supply-Chain Performance Supply Chain Decisions Cycle and Push-Pull View of Supply

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  • Slide 1
  • Chapter 10 Supply Chain Strategy
  • Slide 2
  • Supply-Chain Management Measuring Supply-Chain Performance Supply Chain Decisions Cycle and Push-Pull View of Supply Chains Bullwhip Effect Outsourcing Value Density Mass Customization OBJECTIVES 10-2
  • Slide 3
  • Supply-chain is a term that describes how organizations (suppliers, manufacturers, distributors, and customers) are linked together What is a Supply Chain? 10-3
  • Slide 4
  • What is Supply Chain Management? Supply-chain management is a total system approach to managing the entire flow of information, materials, and services from raw-material suppliers through factories and warehouses to the end customer 10-4
  • Slide 5
  • What is a Supply Chain? Customer wants detergent and goes to Jewel Jewel Supermarket Jewel or third party DC P&G or other manufacturer
  • Slide 6
  • What is a Supply Chain? Customer wants detergent and goes to Jewel Jewel Supermarket Jewel or third party DC P&G or other manufacturer Plastic Producer Tenneco Packaging Chemical manufacturer (e.g. Oil Company)
  • Slide 7
  • What is a Supply Chain? Customer wants detergent and goes to Jewel Jewel Supermarket Jewel or third party DC P&G or other manufacturer Plastic Producer Chemical manufacturer (e.g. Oil Company) Tenneco Packaging Paper Manufacturer Timber Industry Chemical manufacturer (e.g. Oil Company)
  • Slide 8
  • Formulas for Measuring Supply-Chain Performance One of the most commonly used measures in all of operations management is Inventory Turnover In situations where distribution inventory is dominant, Weeks of Supply is preferred and measures how many weeks worth of inventory is in the system at a particular time 10-8
  • Slide 9
  • Example of Measuring Supply-Chain Performance Suppose a companys new annual report claims their costs of goods sold for the year is $160 million and their total average inventory (production materials + work-in- process) is worth $35 million. This company normally has an inventory turn ratio of 10. What is this years Inventory Turnover ratio? What does it mean? 10-9
  • Slide 10
  • Example of Measuring Supply-Chain Performance (Continued) = $160/$35 = 4.57 Since the companys normal inventory turnover ration is 10, a drop to 4.57 means that the inventory is not turning over as quickly as it had in the past. Without knowing the industry average of turns for this company it is not possible to comment on how they are competitively doing in the industry, but they now have more inventory relative to their cost of goods sold than before. = $160/$35 = 4.57 Since the companys normal inventory turnover ration is 10, a drop to 4.57 means that the inventory is not turning over as quickly as it had in the past. Without knowing the industry average of turns for this company it is not possible to comment on how they are competitively doing in the industry, but they now have more inventory relative to their cost of goods sold than before. 10-10
  • Slide 11
  • Decision Phases of a Supply Chain Supply chain strategy or design Supply chain planning Supply chain operation
  • Slide 12
  • Supply Chain Strategy or Design Decisions about the structure of the supply chain and what processes each stage will perform What are some strategic supply chain decisions? Locations and capacities of facilities Products to be made or stored at various locations Modes of transportation Information systems Chain design must support strategic objectives Design decisions are long-term and expensive to reverse must address market uncertainty
  • Slide 13
  • Supply Chain Planning Definition of a set of policies that govern short-term operations Fixed by the supply configuration from previous phase Starts with a forecast of demand in the coming year
  • Slide 14
  • Supply Chain Planning What are some planning decisions? Which markets will be supplied from which locations Planned buildup of inventories Subcontracting, backup locations Inventory policies Timing and size of market promotions Must consider in planning decisions demand uncertainty, exchange rates, competition over the time horizon
  • Slide 15
  • Supply Chain Operation Time horizon is weekly or daily Decisions regarding individual customer orders Supply chain configuration is fixed and operating policies are determined Goal is to implement the operating policies as effectively as possible some examples? Allocate orders to inventory or production, set order due dates, generate pick lists at a warehouse, allocate an order to a particular shipment, set delivery schedules, place replenishment orders Much less uncertainty (short time horizon)
  • Slide 16
  • Process View of a Supply Chain Cycle view: processes in a supply chain are divided into a series of cycles, each performed at the interfaces between two successive supply chain stages Push/pull view: processes in a supply chain are divided into two categories: Executed in response to a customer order (pull) Executed in anticipation of a customer order (push)
  • Slide 17
  • Cycle View of Supply Chains Customer Order Cycle Replenishment Cycle Manufacturing Cycle Procurement Cycle Customer Retailer Distributor Manufacturer Supplier
  • Slide 18
  • Cycle View of a Supply Chain Each cycle occurs at the interface between two successive stages Customer order cycle (customer-retailer) Replenishment cycle (retailer-distributor) Manufacturing cycle (distributor- manufacturer) Procurement cycle (manufacturer- supplier) Cycle view clearly defines processes involved and the owners of each process. Specifies the roles and responsibilities of each member and the desired outcome of each process.
  • Slide 19
  • Customer Order Cycle Involves all processes directly involved in receiving and filling the customers order Customer arrival Customer order entry Customer order fulfillment Customer order receiving
  • Slide 20
  • Replenishment Cycle All processes involved in replenishing retailer inventories (retailer is now the customer) Retail order trigger Retail order entry Retail order fulfillment Retail order receiving
  • Slide 21
  • Manufacturing Cycle All processes involved in replenishing distributor (or retailer) inventory Order arrival from the distributor, retailer, or customer Production scheduling Manufacturing and shipping Receiving at the distributor, retailer, or customer
  • Slide 22
  • Procurement Cycle All processes necessary to ensure that materials are available for manufacturing to occur according to schedule Manufacturer orders components from suppliers to replenish component inventories However, component orders can be determined precisely from production schedules (different from retailer/distributor orders that are based on uncertain customer demand) Important that suppliers be linked to the manufacturers production schedule
  • Slide 23
  • Push/Pull View of Supply Chains Procurement, Manufacturing and Replenishment cycles Customer Order Cycle Customer Order Arrives PUSH PROCESSESPULL PROCESSES
  • Slide 24
  • Push/Pull View of Supply Chain Processes Supply chain processes fall into one of two categories depending on the timing of their execution relative to customer demand Pull: execution is initiated in response to a customer order (reactive) Push: execution is initiated in anticipation of customer orders (speculative) Push/pull boundary separates push processes from pull processes Strategic supply chain decisions may lead to changing the push/pull boundaryStrategic supply chain decisions may lead to changing the push/pull boundary
  • Slide 25
  • Example: L.L. Bean Where is the push/pull boundary for L.L. Bean? Customer order cycle is pull, remaining processes are push What are the implications of moving the boundary to the replenishment cycle?
  • Slide 26
  • Example: Dell Where is the push/pull boundary for Dell? Customer and manufacturing is a pull cycle Procurement is a push cycle What are the implications of moving the boundary to the customer cycle?
  • Slide 27
  • L.L. Bean vs. Dell Computer How would you compare the two cycles? Dell has fewer stages (customer, manufacturer, supplier) and more pull processes than L.L. Bean Can these differences affect supply chain performance? For Dell, no FG inventory, very low component inventory, supplier integration (demand info, part quality), faster new product introduction, outsources service/support (better coord.), close tracking of cash flows
  • Slide 28
  • Example: Snapple Acquisition Quaker owns Gatorade and acquired Snapple in 1994 and tried to synergize the two distribution systems Snapple produced under contract, sold through restaurants, strong in northeast and west coast Gatorade manufactured by Quakers plants, sold in supermarkets and grocery stores, strong in south and southwest Efforts to merge supply chains failed, and in 28 months Quaker sold Snapple for 20% less than purchase price
  • Slide 29
  • The Importance of Supply Chain Flows Close connection between design and management of supply chain flows (product, information, and cash) and supply chain success Dell: success Quaker Oats (Snapple): failure Supply chain decisions can play a significant role in the success or failure o

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