supply chain and e-commerce

8/20/2019 Supply Chain and E-commerce

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Supply Chain Management

Introduction


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Outline

What is supply chain management?

A supply chain strategy framework

Components of a SCM

Major obstacles and common problems

Seen !leen "apan


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#raditional $iew% Supply Chains in

the !conomy &'(()* '((+,

-reight #ransportation ./01* .200 3

– #ransportation manager in charge

– #ransportation software

Inentory !4pense .11'* ./'' 3 – Inentory manager in charge

– Inentory software

Administratie !4pense .15* ./' 3

6ogistics related actiity ''7* ')807 of 9:;

.


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#raditional $iew% Cost breakdown of a

manufactured good

Profit ')7

Supply Chain Cost 1)7

Marketing Cost 107

Manufacturing Cost 207

;rofit

Supply Chain

Cost

Marketing

Cost

Manufacturing

Cost

Effort spent for supply chain activities are invisible to the customers


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What can Supply Chain Management do?

Estimated that the grocery industry could save "3# billion $1#% of operatingcost& by using effective logistics and supply chain strategies – ' typical bo( of cereal spends 1#4 days from factory to sale

– ' typical car spends 1! days from factory to dealership

– )aster turnaround of the goods is better*

+aura 'shley $retailer of ,omen and children clothes& turns its inventory 1#times a year five times faster than 3 years ago – inventory is emptied 1# times a year- or an item spends about 12.1# months in the

inventory

– /o be responsive- it relocated its main ,arehouse ne(t to )edE( hub in Memphis- /E

0ational emiconductor used air transportation and closed ,arehouses- 34%increase in sales and 4% decrease in delivery lead time


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Magnitude of upply Chain Management

Compa estimates it lost "#! 5 to "1 5 in sales in 166! because laptops ,ere not available ,hen and ,hereneeded

P78 $Proctor78amble& estimates it saved retailcustomers "! M $in 19 months& by collaborationresulting in a better match of supply and demand

:hen the 1 gig processor ,as introduced by 'M;$'dvanced Micro ;evices&- the price of the 9## meg

processor dropped by 3#%


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/op 2!

upply Chains

'M= research http>..,,,amrresearchcom publishes reports on supply chainsand other issues

/he /op 2! supply chains report comesout in 0ovembers

/he table on the right@hand side is fromThe Second Annual Supply Chain

Top 25 prepared by evin =iley and=eleased in 0ovember 2##!

http://www.amrresearch.com/http://www.amrresearch.com/


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CM 8enerated Falue

MinimiGing supply chain costs

,hile keeping a reasonable service level

customer satisfaction.uality.on time delivery- etc

/his is ho, CM contributes to the bottom line

CM is not strictly a cost reduction paradigmH


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' picture is better than 1### ,ordsH

Io, many ,ords ,ould be better than 3 pictures*

> A supply chain consists of

> aims to Match Supply and emand*

profitably for products and serices

SUPPLY SIDE DEMAND SIDE

The right

Product

Higher

ProfitsThe right

TimeThe right

Customer The right

QuantitThe right

StoreThe right

Price=++ ++ +

> achiees

Supplier Supplier Manufacturer Manufacturer Distributor Distributor Retailer Retailer Customer Customer

Upstream Downstream


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etergent supply chain%

Customer wants

detergent

Customer wants

detergent

Albertson@s

Supermarket

Albertson@s

Supermarket

#hird

party C

#hird

party C

;9 or other

manufacturer

;9 or other

manufacturer

;lastic cup

;roducer

;lastic cup

;roducer

Chemical

manufacturer

&e8g8 Oil Company,

Chemical

manufacturer

&e8g8 Oil Company,

#enneco

;ackaging

#enneco

;ackaging

;aper

Manufacturer

;aper

Manufacturer

#imber

Industry

#imber

Industry

Chemical

manufacturer

&e8g8 Oil Company,

Chemical

manufacturer

&e8g8 Oil Company,


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)lo,s in a upply Chain

Customer

Material

Information

Funds

/he flo,s resemble a chain reaction

Supplier


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CM in a Supply :etwork

Supply Chain Management &SCM, is concerned with the management and control ofthe flows of material* information* and finances in supply chains8

Su!!"

Demand

Products and Ser#ices

Cash

Supply Side OEM Demand Side

THAIA!D I!DIA ME"ICO TE"AS #S

!$Tier Suppliers Suppliers o%istics Distributors Retailers

Information

#he task of SCM is to design* plan* and e4ecute the actiities at the different stagesso as to proide the desired leels of serice to supply chain customers profitably


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related

actiities &moement* storage* and control of products across supply chains,8ource> tate of +ogistics =eport

!liminating inefficiencies in supply chains can sae millions of

.8

Tier &Tier &

Supplier Supplier Manufacturer Manufacturer Distributor Distributor Retailer Retailer Customer Customer

Inefficient

"ogistics

High

stoc$outs

Ineffecti#e

!romotions

%re&uent Su!!"

shortages

High "anded costs

to the she"f

High in#entories

through the chain

Lo' order fi""

rates

("itch)*rong Materia"+

Machine is Do'n ,effect sno'-a""s


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Supply

Sources:plants vendorsports

RegionalWarehouses:stockingpoints

FieldWarehouses:stockingpoints

Customers,demandcenterssinks

Purchase

Inventory

TransportationInventory

' 8eneric upply Chain


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Cycle $iew of Supply Chains

Customer Order

Cycle

Beplenishment Cycle

Manufacturing Cycle

;rocurement Cycle

Customer

Retailer

Distributor

Manufacturer

Supplier

'ny cycle# Customer arrival

1 Customer triggers an order

2 upplier fulfils the order

3 Customer receives the order


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Push vs Pull ystem

:hat instigates the movement of the ,ork in the system*


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;ush;ull $iew of Supply Chains

Procurement-Manufacturing and=eplenishment cycles

Customer Drder

Cycle

Customer

Drder 'rrives

Push@Pull boundary

PUSH PROCESSES PULL PROCESSES


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E(amples of upply Chains

;ell . Compa

– ;ell buys some components for a product from its suppliers

after that product is purchased by a customer E(treme case of a

pull process Kara- painLs ans,er to


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SCM Strategy


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Mission@trategy@/actics@;ecisions

Mission- Mission statement – /he reason for e(istence of an organiGation

trategy – ' plan for achieving organiGational goals

/actics – /he actions taken to accomplish strategies

Dperational decisions – ;ay to day decisions to support tactics


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+ife trategy for /ed

Ted is an undergrad. He would like to have a career in usiness! have

a good "o! and earn enough income to live com#ortaly

Mission> +ive a good life 8oal> uccessful career- good income

trategy> Dbtain a masterLs degree

/actics> elect a college and a concentration

Dperations> =egister- buy books- takecourses- study- graduate- get a Job


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+inking C and 5usiness trategy

Ne Product

De!elopment

Mar"etin# and

Sales

Operations Distributi on Ser!ice

Finance$ %ccountin#$ Information &ec'nolo#($ Human Resources

Competiti!e )*usiness+ Strate#(

Product De!elopment Strate#(

@ Portfolio of products@&imin# of product introductions

Mar"etin# Strate#(

,Fre-uent discounts,Coupons

Suppl( C'ain Strate#(


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trategies>

Product ;evelopment


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trategies

Marketing and sales strategy relates to positioning- pricing and

promotion of products.services

– eg 0ever offer more than 4#% discount

– eg E;+P every day lo, price

't :al@Mart

– eg ;emand smoothing via coupons

5est5uy

Supply chain management strategy relates to procurement-transportation- storage and delivery

– eg 0ever use more than 1 supplier for every input

– eg 0ever e(pedite orders Just because they are late

– eg 'l,ays use domestic suppliers ,ithin the sales season not in advance


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)itting the C to the customer or vice versa*

Onderstand the customer Wishes

Onderstand the Capabilities of your C

Match the Wishes ,ith the Capabilities

Challenge> Io, to meet e(tensive Wishes

,ith limited Capabilities*


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'chieving trategic )it> Consistent CM

and Competitive strategies

)it C to the customer

Onderstanding the Customer

– =ange of demand- piGGa hut stable

– Production lot siGe- seasonal products

– =esponse time- organ transplantation

– ervice level- product availability

– Product variety

–


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Contributors to


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Onderstanding the upply Chain>

Cost@=esponsiveness /radeoff

Hi#' Lo

Lo

Hi#'

=esponsiveness $in time- high service level and product variety&

Cost in "

Efficiency frontier


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'chieving trategic )it> Wishes s8 Capabilities

Implied

uncertaintyspectrum

Besponsie

&high cost,

supply chain

!fficient

&low cost,

supply chainCertain

demand

=ncertain

demand

Besponsienes

spectrum E o n

e o f

S t r a

t e g i c

- i t

$unch u##et

%$ow margin&

'ourmet dinner

%High margin&


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+oosing the strategic fit> :ebvan

:ebvan started a merger ,ith Iome8rocer in ept 2### and

completed in May 2##1

;eclared bankruptcy in uly 2##1 :hy*

– B:ebvan ,as so behemoth that could deliver anything to anyone any,here

that it lost sight of a more mundane task> pleasing grocery customers day

after dayA

– hort to midterm cash mismanagement Fenture capital of "12 5 run out

– Merger costs> duplicated ,ork force- integration of technology- realignment

of facilities

Peapod has the same business model but more focused in terms of

service and locations


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/op 1# =etailers =eported in 2##9 – )irst 4

ource ,,,deloittecom.dtt.cda.doc.content.dttQ2##9globalpo,ersofretailingpdf

http://www.deloitte.com/dtt/cda/doc/content/dtt_2008globalpowersofretailing.pdfhttp://www.deloitte.com/dtt/cda/doc/content/dtt_2008globalpowersofretailing.pdf


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/op 1# =etailers =eported in 2##9 – )irst !@1#


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5ig retailersL trategy

:al@Mart> Efficiency

/arget> More uality and service

Carrefour> Confused – ueeGed bet,een /arget and :al@Mart

– =eliance on coupon sales

– ;o coupons stabiliGe or destabiliGe a upply chain*

@Mart and ears merged in 0ovember 2##4 0o, called ears Ioldings

@Mart gets cash

ears gets presence outside malls


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Dther )actors

Multiple products in a C Multiple customers for a given product – eparate supply chains or /ailored supply chains

eg 5arnes and 0oble> =etailing and.or e@tailing

– Product and.or customer classes eg O/; library loans books for months $2 ,eeks& to faculty $students& Customer segmentation by pricing

Competitors% more- faster and global O/; online programs compete globally

Product life cycle $shortening& – CM strategy moves to,ard efficiency and lo, implied uncertainty as products age

eg 'ir travel is becoming more efficient eg outh,est airlines lead the drive for efficiency eg 'irbus announced '39# accommodating !!!@9## people on an 1- 2##!

eg )lat screen /F producer of 'O Dptronics of /ai,an ,as looking for ,ays to make its Cmore efficient in une 2##4

– =eplacement sales elling to replace broken units

eg 'C replacement is about !#% of the market

– Macroeconomic factors for visibility

)orecasting Iome ;epot sales from 7P !## price inde( Positive correlation is detected


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'chieving trategic )it over a +ifecycle

Besponsie

&high cost,

supply chain

!fficient

&low cost,

supply chainCertain

demand

=ncertain

demand

E o n e

o f

S t r a

t e g i c

- i t


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trategic cope

Suppliers Manufacturer istributor Betailer Customer

Competitie

Strategy

;roduct e8

Strategy

Supply Chain

Strategy

Marketing

Strategy


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upply Chain ;rivers and Dbstacles


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;rivers of upply Chain Performance

Efficienc( Responsi!eness

In!entor( &ransportation Facilities

Information

Suppl( c'ain structure

6ogistical

riers

Ho to ac'ie!e

Sourcin# Pricin# Cross>

-unctional

riers


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1 Cycle inventory

– 0o customer buys eggs one by one

Onstable demand> easonal inventory

– 5athing suits – Rmas toys and computer sales

=andomness> afety inventory

– 2#% more syllabi than the class siGe ,ere available in the

first class

– CompaLs loss in 6!

Pipeline inventory

– :ork in process or transit


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+ittleLs la,

+ong run averages E(pected values

< = /


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2 /ransportation

'ir

/ruck

=ail

hip

Pipeline

Electronic


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3 )acilities

Production

– )le(ible vs ;edicated

– )le(ibility costs

Production> =emember 5M:> Ba sports car disguised as a sedanA ervice> Can your instructor teach music as ,ell as CM*

ports> ' playmaker ,ho shoots ,ell is rare

=eceiving- Prepackaging-toring- Picking- Packaging- orting- 'ccumulating-

hipping – ob +ot torage> 0eed more space =eticle storage in fabs

– Crossdocking> :al@Mart


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4


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Characteristics of the 8ood


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Suality of


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E=P ystems

Supplier Customer Retailer Distributor Manufacturer

Strate#ic

Plannin#

Operational ERP (otential

)*(

(otential )*(


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'nalytical 'pplications

Supplier Customer Retailer Distributor Manufacturer

Strate#ic

Plannin#

Operational

upplier

'pps

CM

ME

;em Plan

/ransport e(ecution 7

:M

'P /ransport 7


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E=P ystems

:ider focus

Push $M=P& versus Pull $demand information transmitted

uickly throughout the supply chain&

=eal@time information Coordination and


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upply Chain oft,are Push

ee /op 1## under .articleshtml

ource anakamedala-

=amsdell- rivatsan $2##3&

Mcinsey Suarterly- 0o 1


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! ourcing

=ole in the supply chain

– et of processes reuired to purchase goods and services in a supply chain

– upplier selection- single vs multiple suppliers- contract negotiation

=ole in the competitive strategy

– ourcing is crucial


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Pricing

=ole in the supply chain

– Pricing determines the amount to charge customers in a supply chain

– Pricing strategies can be used to match demand and supply

Price elasticity> ;o you kno, yours*

=ole in the competitive strategy – Ose pricing strategies to improve efficiency and responsiveness

– +o, price and lo, product availabilityN vary prices by response times

'maGon> )aster delivery is more e(pensive

Components of pricing decisions – Pricing and economies of scale

– Everyday lo, pricing versus high@lo, pricing

– )i(ed price versus menu pricing- depending on the product and services

Packaging- delivery location- time- customer pick up

5undling productsN products and services


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Considerations for upply Chain ;rivers


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MaJor Dbstacles to 'chieving )it

SC is big>

– Fariety of products.services

– poiled customer

– Multiple o,ners $Procurement- Production-


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ealing with Multiple Owners 6ocal OptimiDation

–


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MaJor obstacles to achieving fit

Instability and Bandomness>

– Push for customiGation- segmentation – )ragmentation of upply Chain o,nership> 8lobaliGation

Increasin# implied

uncertaint(


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Common problems

+ack of relevant CM metrics> Io, to measureresponsiveness*

Io, to measure efficiency- costs- ,orker performance- etc*

Poor inventory status information /heft> MaJor problem for furniture retailers /ransaction errors> =etailers ,ith inaccurate inventory records

for !% of Os

1% of items cannot be found at a maJor retailer

poilage> active ingredients in the products are losing their properties

Product uality and yield

+ack of visibility in Cs ;o you kno, the inventory your distribution centers hold* ;o you kno, the inventory your fello, retailer holds*


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Common problems

Poor delivery status information 0ot kno,ing the order status

Poor too much or too little


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ummary

upply Chain


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even Eleven apan $E&

' Case tudy


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)actual


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More on E

More factual info> 'verage sales about t,ice of an average O store

OLs offered in store> Dver 3-### $change by time of day- day of ,eek- season&

Firtually no storage space

0o food cooking at the stores

apanese Convenient

Cheerful and lively stores

Many ready made dinner items < buy

)amous for its great bo(ed lunch and dinner

@ Dn ,eekends- ,hen < ,as single- < ,ent to buy lunch and dinner

C strategy>

Micro matching of supply and demand $by location- time of day- day of ,eek- season&


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even Eleven @ 0umber of tores

)

')))

1)))

/)))

2)))

0)))

+)))


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even Eleven @ 0et ales $5 Ten&

ales 1-63 5 Ten in 2###

)

1))

2))

+))


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even Eleven @ Pre ta( Profit $5 Ten&

)

')

1)

/)

2)

0)

+)5)


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even Eleven @


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)acilities trategy

+imited storage space at stores ,hich have only 12!@1!# m2 space – )reuent and small deliveries to stores

;eliveries arrive from over 2## plants

Products are grouped by the cooling needs – Combined delivery system> froGen foods- chilled foods- room temperature and hot foods

– uch product groups are cross@docked at distribution centers $;C& )ood ;Cs store noinventory – ' single truck brings a group of products and visits several stores ,ithin a geographical region

– 'ggregation> 0o supplier $not even cokeH& delivers direct

/he number of truck deliveries per day is reduced by a factor of from 164 to 2###till- at least 3 fresh food deliveries per day 8oods are received faster ,ith the use of

scanners Iave many outlets- at convenient locations- close to ,here customers can ,alk

)ocus on some territories- not all> :hen they locate in a place they blanket $akaclustering& the area ,ith storesN stores open in clusters ,ith corresponding ;CLs – 944 stores in the /okyo regionN even Eleven had stores in 32 out of 4 prefectures in 2##4 0o

stores in obe

– uccess rate of franchise application U 1.1##


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/he Present and the )uture


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;eloitte 2##9 8lobal =etailers urvey

E(cerpts from ,,,deloittecom.dtt.cda.doc.content.dttQ2##9globalpo,ersofretailingpdf

;o,nloaded on an 3#- 2##9
http://www.deloitte.com/dtt/cda/doc/content/dtt_2008globalpowersofretailing.pdfhttp://www.deloitte.com/dtt/cda/doc/content/dtt_2008globalpowersofretailing.pdf

supply chain and e-commerce

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