Supply Chain Value Chain Business System © K.E.Homa.

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Slide 1 Slide 2 Supply Chain Value Chain Business System K.E.Homa Slide 3 Supply Chain For product-based companies, it all comes together in the supply chain a.k.a. value chain, business system the underlying infrastructure for procuring, transforming, delivering, and servicing. Slide 4 Order Entry DEMAND Dely & Service SUPPLY Operations LINKING PROCESSES Customers View Slide 5 Order Entry DEMAND Dely & Service SUPPLY Operations LINKING PROCESSES C C ost Q Q uality S S ervice F F lexibility Customers View Slide 6 Matl Labor $$$ INPUTS Goods & Svcs OUTPUTS Operations TRANSFORMING PROCESSES E E fficiency P P roductivity A A dvantage Producers View Slide 7 SUPPLY CHAIN Value Chain Business System DesignPurch.Mfg.Distrib.Service Complementary / synergistic combinations Slide 8 SuppliersCustomers LogisticsPurch.Mfg.Distrib.Service TRADITIONAL SITUATION Operations focused Sequential processes Sub-optimization PROGRESSIVE ACTIONS More integration Concurrent processing Better information flow Supply Chain Prototypical View Slide 9 From a strategic / tactical perspective Ownership is usually a legal detail and financial impracticality, not necessarily a strategic imperative. Allied networks (formal & virtual) of best providers are increasingly prevalent. Supply Chain Slide 10 Caveat Virtual There is nothing virtual about merely shifting investment and costs from one supply chain partner to another. If someone is left holding the investment or cost, its real not virtual! Supply Chain Slide 11 Strategic advantage usually requires a creative (unique and synergistic) combination of options across supply chain activities. Supply Chain Slide 12 Technology Product Design Manufacturing MarketingDistributionService Idea source State of art Prod./process integration Patents Function Physical characteristics Aesthetics Quality Integration Technology Raw materials Capacity Location Procurement Prices Advertising/ promotion Sales force Package Brand Channels Integration Inventory Warehousing Transport Warranty Speed Captive/ independent Prices Complementary / synergistic combinations Supply Chain Leverage Points Slide 13 Global Optimization Objective is too deliver appropriate service level at lowest cost across the system. Locally optimizing processes in one silo sometimes increases total system costs. Supply Chain Slide 14 Value Added add value CQFS*financial returns Each stage of the supply chain must add value consistent with globally optimizing CQFS* and provide adequate financial returns to the provider Supply Chain * Cost Quality Flexibility Service Slide 15 Supply Chain : Value Added Value Added Value Added Value Added Profit Parts & Matl SUPPLIER MANUFACTURER DISTRIBUTOR RETAILER PRICEPRICE PROFIT R.O.S. R.O.I Slide 16 Order Entry Dely & Service Matl Labor $$$ Goods & Svcs Operations Demand Supply InputsOutput 2-Dimensional Integrated View Slide 17 Order Entry Dely & Service Matl Labor $$$ Goods & Svcs Operations PRODUCTIVITYPRODUCTIVITY SERVICE LEVEL Fill rate On-time Cost R.O.I. Performance Metrics Slide 18 Better service Lower costs Less investment Supply Chain Management Mega-Objectives Slide 19 Appropriate Q, F, S Lowest Cost Lowest Investment) Supply Chain Performance Requirements: CQFS* * Cost Quality Flexibility Service Slide 20 Hassle-free order entry High fill rates Consistent cycle times Dependable deliveries Timely order tracking Accurate invoicing Customers requirements escalating... Customer Service Minimum Requirements Slide 21 Full Availability (100%) Near-immediate delivery Scheduled Deliveries Perfect Orders, Shipments, Bills Zero tolerance ! Customer Service Emerging Requirements Slide 22 Ship complete or cancel Near-immediate deliveries Electronic shipping notices Continuous replenishment (Vendor managed inventory) Customer Service Escalatinging Requirements Slide 23 Investment J. I. T. / Quick Response Long Payment Terms Consignment / Buy-Backs Vendor Managed Inventory Costs Slotting Fees Pre-Tagging Precisely Built Loads In-Store Service New Games Shifting investment, costs and risk back to suppliers Slide 24 Caveat Virtual There is nothing virtual about merely shifting investment and costs from one supply chain partner to another. If someone is left holding the investment or cost, its real not virtual! Supply Chain Slide 25 Product design and operations process efficiency are inextricably linked. Operations efficiency is ultimately limited by product design for manufacturing. Supply Chain Slide 26 Information (logical assets) moves faster and is usually cheaper (after infrastructure is in place) than physical assets (people, plants, trucks, inventory, etc.). Best operators support physical assets with logical assets and substitute logical for physical whenever possible. Supply Chain Slide 27 SuppliersCustomers LogisticsPurch.Mfg.Distrib.Service Product Design Establishes the upper bound on supply chain efficiency Information Technology Enables and institutionalizes supply chain processes Complementary / synergistic combinations Supply Chain Prototypical View Slide 28 Supply Chain Value Chain Business System K.E.Homa

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