Supply Chain ManagementSupply Chain Management

BUSN 653BUSN 653

Week 11Week 11

Terry TonkinTerry Tonkin

DevotionalDevotional

Craig GloverCraig Glover

Don’t let me steal your Don’t let me steal your joy!joy!

““He has shown kindness by giving He has shown kindness by giving you rain from heaven and crops in you rain from heaven and crops in their seasons; he provides you with their seasons; he provides you with plenty of food and fills your hearts plenty of food and fills your hearts with joy.”with joy.”

Acts 14:17Acts 14:17

OM NotesOM Notes

Read the discussion forumsRead the discussion forums

Learning ObjectivesLearning Objectives

Apply Scriptural wisdom to Apply Scriptural wisdom to organizational management issues.organizational management issues.

Introduce the concept of supply chain Introduce the concept of supply chain management and describe how it has management and describe how it has changed the supplier relationship.changed the supplier relationship.

Explain the requirements for the Explain the requirements for the establishment of a successful supply establishment of a successful supply chain.chain.

Supply Chain ManagementSupply Chain Management

Supply chain management has taken on increased importance in the recent years. One major reason for this growing recognition is that purchased materials and components represent an increasing percentage of the manufacturing cost of each item.

What is Supply Chain What is Supply Chain Management”?Management”?

Supply chain management is a relatively new concept in business. The supply chain can be defined as a group of firms that provide all the various processes required to make a finished product. The chain begins with raw material and ends with a finished product that is delivered to the final customer.

EEXHIBIT 11.2XHIBIT 11.2 The The Evolution of Supply Chain Evolution of Supply Chain ManagementManagement

Core

A) Isolating the Technical Core:

Raw Material

Finished Goods

Suppliers Customer

Manufacturing facility

11-5

Problems with the old Problems with the old modelmodel

Less responsive to changes in the Less responsive to changes in the market placemarket place

Large inventoriesLarge inventories Adversarial relationships with Adversarial relationships with

supplierssuppliers Multiple suppliersMultiple suppliers Low cost was the bottom lineLow cost was the bottom line

EEXHIBIT 11.2XHIBIT 11.2 The Evolution of The Evolution of Supply Chain Management Supply Chain Management continuedcontinued

Core

B) Introduction of JIT Concepts:

Suppliers (few)

Customer

Manufacturing facility

11-6

Benefits of the JIT conceptBenefits of the JIT concept

More responsive to changing More responsive to changing needs of customerneeds of customer

Reduced inventoriesReduced inventories More dependent on suppliersMore dependent on suppliers Single logistics supplierSingle logistics supplier Supplier has employees in the Supplier has employees in the

facilityfacility

EEXHIBIT 11.2XHIBIT 11.2 The Evolution of The Evolution of Supply Chain Management Supply Chain Management continuedcontinued

Core

C) The Use of a Single Logistics Partner:

Manufacturing facility

Suppliers (few)

Logistics(inbound)

Logistics(outbound)

Customer

11-7

EEXHIBIT 11.2XHIBIT 11.2 The Evolution of The Evolution of Supply Chain Management Supply Chain Management continuedcontinued

Core

D) The Use of a Single Logistics Partner:

Manufacturing facility

Suppliers (few)

Logistics(outbound)

Customer

11-8

Factors Impacting the Factors Impacting the Supply ChainSupply Chain

Reduced Number of Reduced Number of SuppliersSuppliers

Increased CompetitionIncreased Competition Shorter Product Life Shorter Product Life

CyclesCycles TechnologyTechnology Shared or Reduced RiskShared or Reduced Risk

11-9

EXHIBIT 11.3 The Trend Toward Reducing the Number of Suppliers N

umbe

r of

Sup

plie

rs

300

600

900

1,200

A B C D ECompanies

- 1996

- 1991

11-10

Requirements for a Requirements for a Successful Supply ChainSuccessful Supply Chain

TrustTrust Long-Term Long-Term

RelationshipsRelationships Information SharingInformation Sharing Individual Strengths of Individual Strengths of

OrganizationsOrganizations

11-11

EXHIBIT 11.4 The Trade-off between Transportation Costs and the Cost of Capital

Costs

Transportation time in days

Cost of Capital

Cost of Transportation

Total Costs

11-12

Total CostTotal Cost

TC = Transportation Cost + In-TC = Transportation Cost + In-transit inventory carrying cost + transit inventory carrying cost + purchase costpurchase cost

TC = DM + (X/365) DC + DCTC = DM + (X/365) DC + DC

Problem 1 -- Who wins?Problem 1 -- Who wins?

TC (OhiO)= DC = 100,000 * $40 = $4 TC (OhiO)= DC = 100,000 * $40 = $4 millionmillion

TC (Asia) = DM + (X/365)iDC + DCTC (Asia) = DM + (X/365)iDC + DC

= 100,000 * $4.50 + = 100,000 * $4.50 + (42/365)*.2*100,000*$35 +(42/365)*.2*100,000*$35 +

100,000*$35 = 100,000*$35 = 450,000+322,190+3,500,000=450,000+322,190+3,500,000=

$4.27 million$4.27 million

AssignmentAssignment

Each student should identify and describe one supply chain or inventory process utilized by your selected organization.

A summary of your findings should be posted in the appropriate discussion forum by 2359, November 26, 2000.

QuestionsQuestions

The final exam! The final exam! The final exam will be posted on November 16th. The exam is open book. However, it should be an individual effort.

The completed exam should be submitted via the digital drop box no later than 2359 on December 2, 2000.