Supply Chain Management BCOR1010

Supply Chain Management BCOR1010

From Boeing’s 787

To Topper the Trick Terrier Plastic Eyes: (Shenzhen, China) Voice Recognition Requirements: (San Francisco) Voice Recognition Programming: (Taiwan) Plastic Body: (Malaysia) Speaker for voice: (Dongguan, China) Motors for legs: (Shaoguan, China) Plastic legs: (Taiwan) Microfiber for Coat: (Korea) Transistors: (Shenzhen, China) IC chips: (Taiwan) Wiring: (Dongguan, China) Packaging: (Hong Kong)

Supply Chain Management Makes Wal-Mart, Dell, Seven-Eleven Japan, Amazon, Toyota, IBM, Apple Or Business Work! Stumble Hershey’s Halloween Nightmare: New order management and shipping systems don’t start right, as Hershey can’t fulfill critical Halloween orders; 150 million in revenue lost as stock drops 30% Cisco’s Inventory Disaster: Lack of demand and inventory visibility as market slows leads to 2.2 billion inventory write-off and stock price cut in half Nike’s Planning System Perplexity: New planning system causes inventory and order woes, blamed for 100 revenue miss as stock loses 20%

But, What is a Supply Chain? A supply chain consists of all stages involved, directly or indirectly, in fulfilling customer requests The entire process from point of origin (raw materials) to point of consumption (final products bought by customers) A network (interdependent system) of facilities including materials supply from suppliers transformation of materials to (inventories of) semi-finished and finished products distribution of finished products to customers

Stages of a Detergent Supply Chain Timber Company Paper Tenneco Manufacturer Packaging Wal-Mart P&G or Other or Third Manufacturer Party DC Chemical Plastic Manufacturer Producer Wal-Mart Store Customer

Example: Wal-Mart Procter & Gamble Da-Fa Clothing, Inc. (China) SONY Factory (Malaysia) Plastic Producer Chemical Producer Wal-Mart or thirdparty distributio n centers Fabric Producer Zipper Producer Thread Producer Wal-Mart Stores Customers Request: Buying detergent, clothes, TV, . Electronics Components Producer Plastic Producer

Example: HP Supplier s IC Mfg Supplier s PC Board Supplier s Subassemb ly FAT USA DCs Retailer Consum er Europe DCs Retailer Consum er Asian DCs Retailer Consum er Suppliers FAT Final assembly & test IC Mfg Integrated circuit manufacturing PC Board Printed circuit board

Example: Dell Monitors by SONY (Mexico) Keyboards by Acer (Taiwan) CPU by Intel (USA) Dell Assembly Plant Customers order computers on Dell’s website Other components Dell is significantly revamping its entire supply chain strategy and, in large measure, abandoning its make-toorder model [April, 2008]

A Typical Supply Chain Information Flow Supplier Manufacturer Distributor Material/Product Flow Value-Added Services Funds Flow Retailer Customer

Now, What is a Supply Chain! Flow of products and services from Suppliers Raw materials manufacturers Intermediate products manufacturers End product manufacturers Distributors and wholesalers Retailers Customer Connected through transportation, information, and exchanges of funds Supplier Manufacturer Distributor Retailer Customer

Key Observations Every facility that impacts costs need to be considered Suppliers’ suppliers Customers’ customers Efficiency and cost-effectiveness throughout the system is required System level approach

So, What is Supply Chain Management? Supply Chain Management is the coordination and integration of the activities so as to maximize profitability across the entire chain 13 Procure services and materials Transform them into intermediate and final products Deliver them to the customer Where is a supply chain’s revenue generated? And where are costs incurred?

The Challenge Uncertainty Can cripple the supply chain Forecasting is not the Solution! Conflicting Objectives Think Global, not Local Competition is between supply chains, not single companies Evolving Nature of Business Shortening Product Lifecycles Off-shoring, Outsourcing

Uncertainty Volumes Propagates through the network and distorts deman Warehouse Warehouse Orders Orders Retailer RetailerOrders Orders Actual Actual Consumer Consumer Demand Demand Production ProductionPlan Plan Time Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

Volumes What Management Gets. Consumer Consumer Demand Demand Production ProductionPlan Plan Time

Volumes What Management Wants Production ProductionPlan Plan Consumer Consumer Demand Demand Time

What is Supply Chain Management? Supply Chain Management is Risk Management! 18 Peanut Butter Anyone?

Conflicting objectives across the supply chain Manufacturer Distributor Large production batches Low inventory Few DCs Retailer Few stores Customer Convenience Low inventory Short lead time Little variety Large variety of Close to DCs products Large shipments

Extended Scope (Remember Topper ) Source: line56.com

What is Supply Chain Management? Supply Chain Management is Process Management! 21 Cross-functional Inter-organizational

The Evolving Nature of Business Trends in U.S. Employment Proportation of total employement 90 80 70 60 Service 50 Manufacturing 40 Agriculture 30 20 Goods 10 0 Year vs.Services Tangible Intangible Uniform, efficient processes Customized, less efficient pr. Uniform output Specialized output Mnfctrd before purchase Performed after purchase Customer not involved Customer participates “Low or No-touch” “High-touch” Output can be stored Output is perishable Easier to measure Harder to measure

What is Supply Chain Management? Supply Chain Management is Service Management! Quality Management Queueing Revenue Management 23

Intermezzo Sketch That Chain! Celestial Seasonings Interceptor Netflix body armor

Then, What is Supply Chain Management! Execu tion From Execution: Production scheduling Distribution scheduling and routing Customs Brokerage Plann ing Strate gy From The Sunday times november 23, 2002 “Can suppliers bring down your firm? A thunderstorm put Ericsson out of the mobile-phone industry. Could such a disaster happen to you? ”

Then, What is Supply Chain Management! Execu tion To Planning: Workforce & Production planning Inventory policies Supply Allocation Plann ing Strate gy From CNNMONEY.COM February 26, 2009 “Macy’s reined in inventories and offered exclusive merchandise from Martha Stewart and Tommy Hilfiger in the period to keep sales from declining as much as at Kohl’s Corp. and J.C. Penney Co.”

Then, What is Supply Chain Management! Execu tion And Strategy: Network design Sell direct or through retailers? Outsource or in-house? Plann ing Consider The IMPACT: Strate gy Walmart: “Every Day Low Prices” Hyundai: “10-year warranty program” Costco: “90-day return program