Post on 05-Dec-2014
description
Dr. RAVI SHANKARProfessor
Department of Management StudiesIndian Institute of Technology DelhiHauz Khas, New Delhi 110 016, India
Phone: +91-11-26596421 (O); 2659-1991(H); (0)-+91-9811033937 (m)Fax: (+91)-(11) 26862620
Email: r.s.research@gmail.comhttp://web.iitd.ac.in/~ravi1
SESSION#1: Basics & Beyond (CFVG: 2012)
OPERATIONS MANAGEMENT: A
Supply Chain Management
Perspective
2
The Objectives of this Session is to:
�Understand the course objective
�Understand the basic concepts of Supply Chain Management (SCM) & Operations Management (OM)
�Relate SCM with practical business world
�Assess organizational needs towards SCM
�Take decision related to operations of SCM
�Understand the Recent Trends in SCM
3
Few Information
� Text Book� Simchi-Levi et al.: Designing
and Managing the Supply Chain: 3rd edition, McGraw Hill, NY (2008): Available in Your Library
� Reference Books� Sunil Chopra & Peter Menidel,
Supply Chain Management: 3rd edition, Pearson Education (2007).
� Wisner, Leong and Tan, Principles of Supply Chain Management, Thomson South-Western, 2005 (Complete List Available on course outline)
4
Another Reference Book
5
In case you are interested in further study
in SCM
� Journal(s):
� Supply Chain Management: An International Journal (Available on www.emaraldinsight.com)
� Supply Chain Management Review
� Purchasing World
� International Journal of Purchasing and Materials Management
� International Journal of Physical Distribution & Logistics Management
6
Course Objectives
� To understand the basics of SCM
� To understand the current practices in SCM
� To develop decision making capabilities in SCM
� To understand and develop different strategies of SCM
7
Purchasing
Manufacturing
Distribution
SUPPLIERS
Sales
The Functional Approach
� Traditional Approach: Functional, silo based !
� No attempt to look holistically!
CU
S
TO
ME
RS
8
Purchasing
Manufacturing
Distribution
SUPPLIERS
Sales
Integrated Supply Chain Approach
� Looks at the entire chain
� Global rather than local focus
� Integrated rather than fragmented approach
CUSTOMERS
9
Supply Chain StagesSupply Chain (SC) encompasses all activities associated with the flow
and transformation of materials from the raw material stage through to the end user.
Supply Chain Management (SCM) involves management of FOUR flows in a Supply Chain: (i) Material, (ii) Information , (iii) Money &
(iv) Ownership
Supplier Manufacturer Distributor Retailer Customer
The Linear Supply Chain
� Limited visibility & velocity
� Inventory build-up
10
11
What are the Goals of Supply Chain
Management?
� Supply chain management is concerned with the efficient integration of suppliers, factories, warehouses and stores so that merchandise is produced and distributed:
� In the right quantities
� To the right locations
� At the right time
� In order to
� Minimize total system cost
� Satisfy customer service requirements
12
Evolution of Supply Chain Management
1950s 1960s 1970s 1980s 1990s 2000s Beyond
Traditional Mass Manufacturing
Inventory Management/Cost Optimization
JIT, TQM, BPR, Alliances
SCM Formation/Extensions
Further Refinement of
SCM Capabilities
13
Evolution of Logistical Integration, 1960-2012
Demand Forecasting
Purchasing
Requirements Planning
Production Planning
Manufacturing Inventory
Operations Scheduling
Materials Handling
Packaging
Inventory
Facility Planning
Order Processing
Transportation
Quality &Customer Service Strategic Planning
Materials
Management
Physical
Distribution
LogisticsSupply Chain
Management
Information Technology
Marketing
1980s
1990s
2000s
TYPICAL OM DOMAINS
14
Supply Chain Decisions: Structuring
Drivers
Strategy
(Design)
Planning
Operation
15
Supply Produce Distribute Sell
Plan/Design
Source
•Product Architecture
•Make/Buy
•Early Supplier Involvement
•Strategic Partnerships
•Suppliers Selection
•Supply Contracts
Fulfillment Supply Chain
Develo
pm
en
t Su
pp
ly C
hain
The Enterprise Fulfillment and Development Supply Chains
16
Decision <> time horizon
Strategic Planning
Detail
Hour Week Quartile YearTime
Supply Chain Structure Design
Supply Chain Network Design
Demand Planning
Sales & Operations Planning
Supply Chain Planning
Inventory Planning
Distribution Planning
Manufacturing Planning
Transportation Planning
Operations Scheduling
Delivery Scheduling
Execution Systems
Source: AMR Research
Execution
Tactical
Strategical
17
Let us start the course with a Quiz
A box of cereal spends ? days in the supply chain
Poor coordination in the food industry supply chain wasted ? dollars.
A typical new car spends ? days traveling from the factory to the dealership.
U.S. companies spend ? % of Gross Domestic Product on Supply Chain & Logistics
Total inventory in the pharmaceutical supply chain exceeds ? days.
18
Complexity: The Magnitude
� A typical box of cereal spends 104 days getting from factory to supermarket.
� The grocery industry could save $30 billion (10% of operating cost) by using effective logistics strategies
� A typical new car spends 15 days traveling from the factory to the dealership.
� U.S. companies spend more than $1 trillion in supply-related activities (10-15% of Gross Domestic Product)
� Transportation 58%
� Inventory 38%
� Management 4%
19
Consider the following
� Wal-Mart and K-Mart were founded in the same year. While K-Mart declared Bankruptcy in 2001 while Wal-Mart became the largest retailer in USA and perhaps in the world.
� Dell has been able to generate profits even when its competitors lost money on their PC operations.
� Honda has established itself as a dominant brand in automobiles.
What have these firms done? What is the secret of their success?
20
Logistics: Past
The study of logistics has its roots in the military…The traditional view emphasized local optimization within
functional silos and within individual corporations
But functional optimization leads to conflicts ...
21
What is Supply Chain Management?
� SCM is the collaborative design and
management of seamless, value-added
processes to meet the real needs of the
end customer.
22
Supply
Sources:plantsvendorsports
RegionalWarehouses:stocking points
Field Warehouses:stockingpoints
Customers,demandcenterssinks
Production/purchase costs
Inventory &warehousing costs
Transportation costs
Inventory &warehousing costs
Transportation costs
23
Transactional Complexity
National Semiconductors:• Production:
– Produces chips in six different locations: four in the US, one
in Britain and one in Israel
– Chips are shipped to seven assembly locations in
Southeast Asia.
• Distribution
– The final product is shipped to hundreds of facilities all over
the world
– 20,000 different routes
– 12 different airlines are involved
– 95% of the products are delivered within 45 days
– 5% are delivered within 90 days.
24
upstream
downstream
Example: Typical supply chain
25
Example: Toshiba PC supply chain
upstream
downstream
Intel,
AMDSeagate,
IBM
Microsoft,
Red Hat
Toshiba America
Irvine, California
Europe DC
Toshiba Turkey
North America DC
26
Example: Dell Computers Supply Chain
Website
or Phone
Dell Assembly
PlantCustomer wants
To buy computer
Master Board
Hard disk
SRAM
Direct Shipment
Customer’s Order
Concept of Disintermediation in Dell Direct Supply Chain
What are its benefits for Dell?
Any other example of similar type in Vietnam?
27
Magnitude of Supply Chain CostsExample: The Apparel Industry
Manufacturer Distributor Retailer Customer
Cost per Percent
Shirt Saving
$52.72 0%
$41.34 28%
$20.45 62%
Manufacturer Distributor Retailer Customer
Manufacturer Distributor Retailer Customer
28
29
QC & Shipping
[Hong Kong]
QC & Shipping
[Hong Kong]Product Design
[Hong Kong]
Product Design
[Hong Kong]
Zippers+…
[Japan+…]
Zippers+…
[Japan+…]
Stitching
[Indonesia]
Stitching
[Indonesia]Weaving
[Taiwan]
Weaving
[Taiwan]Yarn Spinning
[Korea]
Yarn Spinning
[Korea]
An Illustration: How Li & Fung Limited Might
Make a Dress
Globally Dispersed Manufacturing
30
Discussion Questions for you
� Are all supply chains same/similar?
� How about cold chains?
� Where does the retail fit in supply chain?
� Where does OM fit in supply chain?
� What are inbound/outbound activities in supply chain?
� What about information and inventory? Are they related in some way in supply chain?
31
Complexity in Logistics
� Multi-location
� Multi-product
� Added Cost at various stages and locations
� Multi-modal transportation
� Different perspectives held by various stakeholders in the logistics !
32
Magnitude of Supply Chain CostsCost Elements of a Typical Trade Book
33
Conflicting Objectives
in the Supply Chain
1. Purchasing
• Stable volume requirements
• Flexible delivery time
• Little variation in mix
• Large quantities
2. Manufacturing
• Long run production
• High quality
• High productivity
• Low production cost
34
Conflicting Objectives
in the Supply Chain
3. Warehousing
• Low inventory
• Reduced transportation costs
• Quick replenishment capability
4. Customers
• Short order lead time
• High in stock
• Enormous variety of products
• Low prices
35
Managing a Supply Chain is not EasyManaging a Supply Chain is not Easy
1. Uncertain ___________________
2. Conflicting ___________________ across the supply chain
Manufacturers Distributors Retailers Consumers
Convenience
Short lead time
Large variety of
products
Few stores
Low inventory
Little variety
Close to DCs
Low inventory
Few DCs
Large shipments
Large production batches
36
Uncertainty and Risk FactorsFluctuations of Inventory and Backorders throughout the Supply Chain
Order variations in the supply chain
37
� Forecasting is not a final solution
� Demand is not the only source of uncertainty
� Recent trends make things more uncertain
� Lean manufacturing
� Outsourcing
� Off-shoring
Uncertainty and Risk Factors
38
� August 2005 – Hurricane Katrina� P&G coffee supplies from sites around New Orleans
� Six month impact
� 2002 West Coast port strike � Losses of $1B/day
� Store stock-outs, factory shutdowns
� 1999 Taiwan earthquake
� Supply interruptions of HP, Dell
� 2001 India (Gujarat state) earthquake� Supply interruptions for apparel manufacturers
Uncertainty and Risk Factors
39
�Compaq estimates it lost $0.5 billion to $1 billion in sales in
1995 because laptops were not available when and where
needed
�P&G estimates it saved retail customers $65 million by
collaboration resulting in a better match of supply and demand
�In 1997, American companies spent $862 billion, or about
10% of GNP on supply chain related activities which include the cost of movement, storage and control of products across
the supply chain.Most of these costs include unnecessary cost
components due to redundant stock, inefficient transportation strategies, and other wasteful strategies in the supply chain
Similar SCM Experiences
40
Other Issues in Management of Supply Chain
� Lead time
� Total cost
� Management of Inventory
� Material Handling
� Performance Monitoring & Control
� Sensitization about the Logistics cost to all the stakeholders !
� Information Sharing…………..
41
Supply Chain Responsiveness
� Respond to wide ranges of quantities demanded
� Meet short lead times
� Handle a large variety of products
� Build highly innovative products
� Meet a very high service level
42
EExamples of logistics strategy decisionsxamples of logistics strategy decisions
� Middle-men / direct deliveries
� Structure of logistics network
� Control principles of a logistics network
� Integrating production and logistics
� Effect of reducing the number of suppliers
� Location issues
� Selecting the most appropriate price/quality combination of logistics services
� Frequencies and cycle times in production and distribution
� Inventory level policy
� Sensitivity analyses with varying scenarios (volumes, costs...)
43
InitiativesTechnologyIntegration
Cost Management
Cycle Time Alliances
EnvironmentalPressures
Inbound, Operations
& Outbound
The Core Issuesin Supply Chain Management
634
44
�Let us list few, which are relevant for Vietnam..
� Lead Time??
� Integration??
� Coordination??
� Environmental Issues??
� …
Effective Supply Chain-Challenges
Case Study: CJ GLS (VN) Freight Co. Ltd
• Founded in 1998
• Revenue (FY 2007): US$900 mil
• More than 2,000 employees worldwide
• CJ GLS Inc. – HQ in South Korea
• CJ GLS Asia – RHQ in Singapore
• 17 owned entities in 11 countries
across the Asia-Pacific region and Europe
• More than 100 strategic partners
and agents around the world
CJ GLS Inc.
AlabamaAlabama
QingdaoQingdao
ShanghaiShanghai
Los AngelesLos Angeles
CJ GLS Inc.
CJ Global Logistics Service, Inc. (CJ GLS) is a logistics and supply chain management solutions provider with three key business areas.
Express
3rd PartyLogistics
InternationalForwarding
� Inventory Management, Put-away, and Pick and Pack
� Transportation, Cross-Docking, and Home Delivery
� Reverse Logistics and Disposal
� Proprietary IT System for Interface and Data Analysis, and Supply Network Analysis and Re-design
� Inventory Financing, Tariff and Taxes Management� Container Maximization and Routing Optimisation
� Order Processing Management
� Global Control Centre
� CSI Survey and Feedback
� Ocean Transportation
� Air Transportation
� Customs Clearance and Bonded Transportation
� Global Freight Tender and Negotiation
� Single Freight Payment
� Global Tracking and Tracing
� Customer Support
* Global Freight Management
* Customer Order Management
* Supply Network Solutions
* Supply Chain Functions
* Total Door-to-Door Service
� Home Shopping Delivery
� Last Mile Delivery and Return
� Web Solution such as Order Management
� Payment Solution such as Escrow Service
� Call Centre Management
Milestones
Following its acquisition of HTH and Accord in 2006, CJ GLS is now on of the top 3PL in Asia with a total revenue of US$ 900 million.
Year Key Milestones of CJ GLS
1998
1999
• Established
• Launch of International Forwarding and
Express Business
2001
2002
• ISO 9001 Certification
• Awarded the Order of Industrial Merit for Logistics
(Top Prize of Korean Logistics Association)
• 2nd Prize – Enterprise 50 Awards (Singapore)
2003
2004
• Start of Integrated Logistics Business
• Fastest Growing 50 Award (Singapore)
2005
2006
2008
• CJ Logistics Institute set up
• Acquired HTH and Accord
• Grand Prize – 1st Korea RFID-Industrialization
Contest (Ministry of Commerce, Korea)
Aquited EC Logistics Malaysia
Global 3PL and Forwarding (US$320 mil)
Express(US$310 mil)
3PL (Korea)(US$270 mil)
1998 2000 2002 2004 2006
US$90M
US$135M
US$175M
US$390M
US$800M
US$900M
2007
(M&A)
• One of the world’s 25 largest logistics and supply chain management companies
Global logistics and supply chain management company with an extensive international network, including
own physical network.
▪ Manage 17 subsidiaries in 11 countries
▪ Also work closely with about 100 strategic partners and agents throughout the world
Global Network
− Korea (Seoul, Incheon, Suwon, Pusan, Daegu,
Kwangju and Daejeon)
− Singapore (Toh Guan, Jurong, Changi and Keppel)
− China (Shanghai, Shenzhen, Tianjin, Fuzhou,
Suzhou and Qingdao)
− Hong Kong
− Indonesia (Jakarta, Denpasar, Semarang, Medan
and Surabaya)
− Malaysia (Klang, Kuala Lumpur, Penang and Johor
Bahru)
− Netherlands (Amsterdam)
− Philippines (Manila)
− Thailand (Bangkok and Laem Chabang)
− USA (Alabama and Los Angeles)
− Vietnam (Ho Chi Minh City, Hanoi and Danang)
AlabamaAlabama
QingdaoQingdao
ShanghaiShanghai
Los AngelesLos Angeles
CJ GLS (VN) Freight Co., Ltd’s Facts & Figures
� Founded in VietNam 2002
� BinhDuong Warehouse : 10,000 sqm
� Hanoi Warehouse : 7,500 sqm
� Danang Warehouse : 2,300 sqm
� Distribution : 30,000 cbm/month
� Employees : 150
� Revenue 2007 : USD 8.5 million
CJ GLS (VN) Freight Offices
� Corporate Office in HoChiMinh :
� Room 304, 3rd Floor , Waseco Plaza
� 10 Pho Quang St., Ward 2, TanBinh Dist.,
� HCMC, VietNam
� Tel: +(84) 8 9976134-8
� Fax:+(84) 8 9976130-2
� Branch Office in Hanoi :
� Room 401,4th Floor, Thanh Dong Building
� 132-138 Kim Ma St., Ba Dinh Dist.,
� Hanoi, VietNam
� Tel: +(84) 4 5122560
� Fax:+(84) 4 5122561
CJ GLS (VN): Products & Services
� Integrated Logistics Operations
� Air Freight Forwarding
� Sea Freight Forwarding
� Consolidation Services
� Land Transport
� Customs Brokerage
� Door-To-Door Delivery
� Warehousing & Distribution Center
� Project Cargo Handling
CJ GLS (VN): Song Than Logistics Center
� Operated June 2007
� Normal Warehouse Facility
� Located in Song Than Industrial Park 2
20 minutes from HoChiMinh City.
� Rack storage
� Full warehouse management system
� Dedicated machinery and staff
� Pick/Pack operations
� Bar coding potential
� Customs facilities
� QA/QC services
� Export/import documentation facility
CJ GLS (VN): New Organization
BDRichard Dien
FinanceSon Dien
HR and AminThao Vien
ForwardingTBA
LogisticsTBA
Samsung Account
Lee Seung Hoon
Managing DirectorNae Seok Jeong
Ho Chi MinhBranch managerKim Goo Yeon
Effective from 1 Jan, 2009
CJ GLS (VN): New Organization
OperationTBA
FinanceThanh Ha
HRQuoc An
LogisticShin Sung Moo
Managing DirectorNae Seok Jeong
Hanoi Branch manager
Terry Kim
Effective from 1 Jan, 2009
Customer Industry Coverage Area Business ScopeLogistics Function
Electronics •Factory in Yen Phong IP , Nortern of VietNam
• Manufacturting cellphones to export Asia, Europe & Middle East in Mar2009
Airfreight services
Warehouse & Distribution
Electronics HoChiMinh,Hanoi,
Danang
• Distributors of Sanyo,Panasonic,
• Philips, Toshiba,Mitshubitshi,
• Pionner
WH, trucking, distribution,customs brokers
F&B Nhatrang,HoChiMinh . Manufacture of F&B products Trucking & customs clearances
Constructions tiles, marbles,…
HoChiMinh • Manufacturing construction products
International freight import handling
Electronics Factory in Bien Hoa, VietNam • Lighting products, local sales WH, customs broker, distribution
CJ GLS (VN): Major Projects
CJ GLS VietNam & Samsung Mobile Division MOU in Hanoi Oct 2008
CJ GLS (VN): Major Customers
Cosmetics and ApparelFootwear Others
ElectronicsConsumer Goods