© 2006 Prentice Hall, Inc.11 – 1 Supply-Chain Management.

© 2006 Prentice Hall, Inc. 11 – 1

Supply-Chain Management

Supply-Chain Management


Firestone Tire CompanyFirestone Tire Company

OEM & DistributionOEM & Distribution

Warehousing & Warehousing & TransportationTransportation

Tire & Inner TubeTire & Inner TubeManufacturingManufacturing

Synthetic Rubber Synthetic Rubber Processing and cord Mfg. Processing and cord Mfg.

Chemical Processing Chemical Processing OperationsOperations

Raw Material miningRaw Material mining

Natural RubberNatural Rubber

Rubber RefineryRubber Refinery

Rubber PlantationRubber Plantation

ShipmentShipment


OEMOEM

Chemicals Chemicals Including Including

Synthetic RubberSynthetic RubberSupplier Supplier

DistributorsDistributors

Natural RubberNatural RubberCord and SteelCord and Steel

suppliersupplierFirestone Tire Firestone Tire

CompanyCompany


OutlineOutline

Global Company Profile: Global Company Profile: VolkswagenVolkswagen

The Strategic Importance Of The The Strategic Importance Of The Supply ChainSupply Chain Global Supply-Chain IssuesGlobal Supply-Chain Issues

Supply-Chain EconomicsSupply-Chain Economics Make-or-Buy DecisionsMake-or-Buy Decisions

OutsourcingOutsourcing


Outline – ContinuedOutline – Continued

Ethics in the Supply ChainEthics in the Supply Chain

Supply-Chain StrategiesSupply-Chain Strategies Many SuppliersMany Suppliers

Few SuppliersFew Suppliers

Vertical IntegrationVertical Integration

Keiretsu NetworksKeiretsu Networks

Virtual CompaniesVirtual Companies


Outline – ContinuedOutline – Continued Managing the Supply ChainManaging the Supply Chain

Issues In an Integrated Supply ChainIssues In an Integrated Supply Chain

Opportunities in an Integrated Opportunities in an Integrated Supply ChainSupply Chain

Internet PurchasingInternet Purchasing

Vendor SelectionVendor Selection Vendor EvaluationVendor Evaluation

Vendor DevelopmentVendor Development

NegotiationsNegotiations


Outline – ContinuedOutline – Continued

Logistics ManagementLogistics Management Distribution SystemsDistribution Systems

Cost of Shipping AlternativesCost of Shipping Alternatives

Logistics, Security, and JITLogistics, Security, and JIT

Benchmarking Supply-Chain Benchmarking Supply-Chain ManagementManagement


Learning ObjectivesLearning Objectives

When you complete this chapter, you When you complete this chapter, you should be able to:should be able to:

Identify or Define:Identify or Define: Supply-chain managementSupply-chain management PurchasingPurchasing OutsourcingOutsourcing E-procurementE-procurement Materials managementMaterials management Keiretsu (a loose coalition of Keiretsu (a loose coalition of

businesses businesses Virtual companiesVirtual companies


Learning ObjectivesLearning Objectives

When you complete this chapter, you When you complete this chapter, you should be able to:should be able to:

Describe or Explain:Describe or Explain:

Supply-chain strategiesSupply-chain strategies

Approaches to negotiationsApproaches to negotiations


VolkswagenVolkswagen

Brazilian plant employs 1000 Brazilian plant employs 1000 workersworkers** 200 work for VW and are responsible 200 work for VW and are responsible

for overall quality, marketing, for overall quality, marketing, research, and designresearch, and design

800 work for other contractors and do 800 work for other contractors and do the assembly workthe assembly work

VW looks to innovative supply chain VW looks to innovative supply chain to improve quality and drive down to improve quality and drive down costscosts

* Company is now closed down* Company is now closed down



Important elements of this conceptImportant elements of this concept VW is buying not only materials, but VW is buying not only materials, but

also the also the laborlabor and related servicesand related services

Suppliers are integrated tightly into Suppliers are integrated tightly into VW’s own network, right down to VW’s own network, right down to assembly work in the plantassembly work in the plant

Purchase costs in the auto industry Purchase costs in the auto industry exceed 60% of the sales dollar, so any exceed 60% of the sales dollar, so any savings are significantsavings are significant


The Strategic Importance The Strategic Importance of the Supply Chainof the Supply Chain

Supply-chain management is the Supply-chain management is the integration of the activities that integration of the activities that procure materials and services, procure materials and services,

transform them into intermediate transform them into intermediate goods and the final product, and goods and the final product, and

deliver them to customersdeliver them to customers

Competition is no longer between Competition is no longer between companies; it is between supply chainscompanies; it is between supply chains


Supply-Chain ManagementSupply-Chain Management

1.1. Transportation vendorsTransportation vendors

2.2. Credit and cash transfersCredit and cash transfers

3.3. SuppliersSuppliers

4.4. Distributors and banksDistributors and banks

5.5. Accounts payable and receivableAccounts payable and receivable

6.6. Warehousing and inventoryWarehousing and inventory

7.7. Order fulfillmentOrder fulfillment

8.8. Sharing customer, forecasting, and Sharing customer, forecasting, and production informationproduction information

Important activities include determiningImportant activities include determining


A Supply Chain A Supply Chain

Figure 11.1Figure 11.1


Global Supply-Chain IssuesGlobal Supply-Chain Issues

React to sudden changes in parts React to sudden changes in parts availability, distribution, or shipping availability, distribution, or shipping channels, import duties, and channels, import duties, and currency ratescurrency rates

Use the latest computer and transmission Use the latest computer and transmission technologies to schedule and manage the technologies to schedule and manage the shipment of parts in and finished products shipment of parts in and finished products outout

Staff with local specialists who handle Staff with local specialists who handle duties, freight, customs and political issuesduties, freight, customs and political issues

Supply chains in a global environment Supply chains in a global environment must be able tomust be able to


How Supply-Chain How Supply-Chain Decisions Impact StrategyDecisions Impact Strategy

Low-Cost Low-Cost StrategyStrategy

Response Response StrategyStrategy

Differentiation Differentiation StrategyStrategy

Supplier’s Supplier’s GoalGoal

Supply demand Supply demand at lowest at lowest possible cost possible cost (e.g., Emerson (e.g., Emerson Electric, Taco Electric, Taco Bell)Bell)

Respond quickly Respond quickly to changing to changing requirements requirements and demand to and demand to minimize minimize stockouts (e.g., stockouts (e.g., Dell Computers)Dell Computers)

Share market Share market research; research; jointly develop jointly develop products and products and options (e.g., options (e.g., Benetton)Benetton)

Primary Primary Selection Selection CriteriaCriteria

Select primarily Select primarily for costfor cost

Select primarily Select primarily for capacity, for capacity, speed, and speed, and flexibilityflexibility

Select primarily Select primarily for product for product development development skillsskills

Table 11.1Table 11.1






Process Process Charact-Charact-eristicseristics

Maintain high Maintain high average average utilizationutilization

Invest in excess Invest in excess capacity and capacity and flexible flexible processesprocesses

Modular Modular processes that processes that lend lend themselves to themselves to mass mass customizationcustomization

Inventory Inventory Charact-Charact-eristicseristics

Minimize Minimize inventory inventory throughout the throughout the chain to hold chain to hold down costdown cost

Develop Develop responsive responsive system with system with buffer stocks buffer stocks positioned to positioned to ensure supplyensure supply

Minimize Minimize inventory in the inventory in the chain to avoid chain to avoid obsolescenceobsolescence







Lead-Time Lead-Time Charact-Charact-eristicseristics

Shorten lead Shorten lead time as long as time as long as it does not it does not increase costsincrease costs

Invest Invest aggressively to aggressively to reduce reduce production lead production lead timetime

Invest Invest aggressively to aggressively to reduce reduce development development lead timelead time

Product-Product-Design Design Charact-Charact-eristicseristics

Maximize Maximize performance performance and minimize and minimize costscosts

Use product Use product designs that designs that lead to low lead to low setup time and setup time and rapid rapid production production ramp-upramp-up

Use modular Use modular design to design to postpone postpone product product differentiation differentiation as long as as long as possiblepossible



Supply-Chain EconomicsSupply-Chain Economics

Supply Chain Costs as a Percent of SalesSupply Chain Costs as a Percent of Sales


IndustryIndustry % Purchased% Purchased

All industryAll industry 5252

AutomobileAutomobile 6767

FoodFood 6060

LumberLumber 6161

PaperPaper 5555

PetroleumPetroleum 7979

TransportationTransportation 6262


Supply-Chain EconomicsSupply-Chain Economics

Dollars of additional sales needed to equal $1 Dollars of additional sales needed to equal $1 saved through the supply chainsaved through the supply chain

Percent of Sales Spent in the Supply ChainPercent of Sales Spent in the Supply Chain

Percent Net ProfitPercent Net Profitof Firmof Firm 40%40% 50%50% 60%60% 70%70% 80%80% 90%90%

22 $3.23$3.23 $3.85$3.85 $4.76$4.76 $6.25$6.25 $9.09$9.09 $16.67$16.67

44 $3.13$3.13 $3.70$3.70 $4.55$4.55 $5.88$5.88 $8.33$8.33 $14.29$14.29

66 $3.03$3.03 $3.57$3.57 $4.35$4.35 $5.56$5.56 $7.69$7.69 $12.50$12.50

88 $2.94$2.94 $3.45$3.45 $4.17$4.17 $5.26$5.26 $7.14$7.14 $11.11$11.11

1010 $2.86$2.86 $3.33$3.33 $4.00$4.00 $5.00$5.00 $6.67$6.67 $10.00$10.00



Make-or-Buy DecisionsMake-or-Buy Decisions

1.1. Maintain core competenceMaintain core competence

2.2. Lower production costLower production cost

3.3. Unsuitable suppliersUnsuitable suppliers

4.4. Assure adequate supply (quantity or delivery)Assure adequate supply (quantity or delivery)

5.5. Utilize surplus labor or facilitiesUtilize surplus labor or facilities

6.6. Obtain desired qualityObtain desired quality

7.7. Remove supplier collusionRemove supplier collusion

8.8. Obtain unique item that would entail a prohibitive Obtain unique item that would entail a prohibitive commitment for a suppliercommitment for a supplier

9.9. Protect personnel from a layoffProtect personnel from a layoff

10.10. Protect proprietary design or qualityProtect proprietary design or quality

11.11. Increase or maintain size of companyIncrease or maintain size of company

Reasons for MakingReasons for Making



Make-or-Buy DecisionsMake-or-Buy Decisions

1.1. Frees management to deal with its primary Frees management to deal with its primary businessbusiness

2.2. Lower acquisition costLower acquisition cost

3.3. Preserve supplier commitmentPreserve supplier commitment

4.4. Obtain technical or management abilityObtain technical or management ability

5.5. Inadequate capacityInadequate capacity

6.6. Reduce inventory costsReduce inventory costs

7.7. Ensure alternative sourcesEnsure alternative sources

8.8. Inadequate managerial or technical resourcesInadequate managerial or technical resources

9.9. ReciprocityReciprocity

10.10. Item is protected by a patent or trade secretItem is protected by a patent or trade secret

Reasons for BuyingReasons for Buying



OutsourcingOutsourcing

Transfers traditional internal Transfers traditional internal activities and resources of a firm to activities and resources of a firm to outside vendorsoutside vendors

Utilizes the efficiency that comes Utilizes the efficiency that comes with specializationwith specialization

Firms outsource information Firms outsource information technology, accounting, legal, technology, accounting, legal, logistics, and productionlogistics, and production


Ethics in the Supply ChainEthics in the Supply Chain

Opportunities for unethical behavior Opportunities for unethical behavior are enormous and temptations are highare enormous and temptations are high

Many companies have strict rules and Many companies have strict rules and codes of conduct that define codes of conduct that define acceptable behavioracceptable behavior

Institute for Supply Management has Institute for Supply Management has developed a detailed set of principles developed a detailed set of principles and standards for ethical behaviorand standards for ethical behavior


Principles and Standards for Principles and Standards for Ethical Supply Management Ethical Supply Management

ConductConduct

LOYALTY TO YOUR ORGANIZATIONLOYALTY TO YOUR ORGANIZATION

JUSTICE TO THOSE WITH WHOM JUSTICE TO THOSE WITH WHOM YOU DEALYOU DEAL

FAITH IN YOUR PROFESSIONFAITH IN YOUR PROFESSION




ConductConduct

1.1. Avoid the intent and appearance of unethical or Avoid the intent and appearance of unethical or compromising practice in relationships, actions, and compromising practice in relationships, actions, and communicationscommunications

2.2. Demonstrate loyalty to the employer by diligently Demonstrate loyalty to the employer by diligently following the lawful instructions of the employer, using following the lawful instructions of the employer, using reasonable care and granted authorityreasonable care and granted authority

3.3. Avoid any personal business or professional activity that Avoid any personal business or professional activity that would create a conflict between personal interests and would create a conflict between personal interests and the interests of the employerthe interests of the employer




ConductConduct

4.4. Avoid soliciting or accepting money, loans, credits, or Avoid soliciting or accepting money, loans, credits, or preferential discounts, and the acceptance of gifts, preferential discounts, and the acceptance of gifts, entertainment, favors, or services from present or entertainment, favors, or services from present or potential suppliers that might influence, or appear to potential suppliers that might influence, or appear to influence, supply management decisionsinfluence, supply management decisions

5.5. Handle confidential or proprietary information with due Handle confidential or proprietary information with due care and proper consideration of ethical and legal care and proper consideration of ethical and legal ramifications and government regulationsramifications and government regulations

6.6. Promote positive supplier relationships through courtesy Promote positive supplier relationships through courtesy and impartialityand impartiality

7.7. Avoid improper reciprocal agreementsAvoid improper reciprocal agreementsTable 11.5Table 11.5



ConductConduct

8.8. Know and obey the letter and spirit of laws applicable to Know and obey the letter and spirit of laws applicable to supply managementsupply management

9.9. Encourage support for small, disadvantaged, and Encourage support for small, disadvantaged, and minority-owned businessesminority-owned businesses

10.10. Acquire and maintain professional competenceAcquire and maintain professional competence

11.11. Conduct supply management activities in accordance Conduct supply management activities in accordance with national and international laws, customs, and with national and international laws, customs, and practices, your organization’s policies, and these ethical practices, your organization’s policies, and these ethical principles and standards of conductprinciples and standards of conduct

12.12. Enhance the stature of the supply management Enhance the stature of the supply management professionprofession Table 11.5Table 11.5


Supply-Chain StrategiesSupply-Chain Strategies

Negotiating with many suppliersNegotiating with many suppliers

Long-term partnering with few Long-term partnering with few supplierssuppliers

Vertical integrationVertical integration

KeiretsuKeiretsu

Virtual companies that use Virtual companies that use suppliers on an as needed basissuppliers on an as needed basis


Many SuppliersMany Suppliers

Commonly used for commodity Commonly used for commodity productsproducts

Purchasing is typically based on Purchasing is typically based on priceprice

Suppliers are pitted against one Suppliers are pitted against one anotheranother

Supplier is responsible for Supplier is responsible for technology, expertise, forecasting, technology, expertise, forecasting, cost, quality, and deliverycost, quality, and delivery


Few SuppliersFew Suppliers

Buyer forms longer term Buyer forms longer term relationships with fewer suppliersrelationships with fewer suppliers

Create value through economies of Create value through economies of scale and learning curve scale and learning curve improvementsimprovements

Suppliers more willing to participate Suppliers more willing to participate in JIT programs and contribute in JIT programs and contribute design and technological expertisedesign and technological expertise

Cost of changing suppliers is hugeCost of changing suppliers is huge




Raw material Raw material (suppliers)(suppliers) Iron oreIron ore SiliconSilicon FarmingFarming

Backward integration SteelSteel

Current transformation Automobiles Integrated

circuits Flour milling

Forward integration Distribution Distribution systemssystems Circuit boardsCircuit boards

Finished goods Finished goods (customers)(customers) DealersDealers

Computers Computers Watches Watches

CalculatorsCalculatorsBaked goodsBaked goods

Vertical IntegrationVertical Integration Examples of Vertical IntegrationExamples of Vertical Integration



Developing the ability to produce goods or Developing the ability to produce goods or service previously purchasedservice previously purchased

Integration may be forward, towards the Integration may be forward, towards the customer, or backward, towards supplierscustomer, or backward, towards suppliers

Can improve cost, quality, and inventory Can improve cost, quality, and inventory but requires capital, managerial skills, and but requires capital, managerial skills, and demanddemand

Risky in industries with rapid technological Risky in industries with rapid technological changechange


Keiretsu NetworksKeiretsu Networks A middle ground between few suppliers A middle ground between few suppliers

and vertical integrationand vertical integration

Supplier becomes part of the company Supplier becomes part of the company coalitioncoalition

Often provide financial support for Often provide financial support for suppliers through ownership or loanssuppliers through ownership or loans

Members expect long-term relationships Members expect long-term relationships and provide technical expertise and stable and provide technical expertise and stable deliveriesdeliveries

May extend through several levels of the May extend through several levels of the supply chainsupply chain


Virtual CompaniesVirtual Companies

Rely on a variety of supplier Rely on a variety of supplier relationships to provide services on relationships to provide services on demanddemand

Fluid organizational boundaries that Fluid organizational boundaries that allow the creation of unique enterprises allow the creation of unique enterprises to meet changing market demandsto meet changing market demands

Exceptionally lean performance, low Exceptionally lean performance, low capital investment, flexibility, and speedcapital investment, flexibility, and speed


Managing the Supply ChainManaging the Supply Chain

Mutual agreement on goalsMutual agreement on goals

TrustTrust

Compatible organizational culturesCompatible organizational cultures

There are significant management issues in There are significant management issues in controlling a supply chain involving many controlling a supply chain involving many independent organizationsindependent organizations


Issues in an Integrated Issues in an Integrated Supply ChainSupply Chain

Local optimization - focusing on local Local optimization - focusing on local profit or cost minimization based on profit or cost minimization based on limited knowledgelimited knowledge

Incentives (sales incentives, quantity Incentives (sales incentives, quantity discounts, quotas, and promotions) - discounts, quotas, and promotions) - push merchandise prior to salepush merchandise prior to sale

Large lots - low unit cost but do not Large lots - low unit cost but do not reflect salesreflect sales

Bullwhip effect - stable demand becomes Bullwhip effect - stable demand becomes lumpy orders through the supply chainlumpy orders through the supply chain


Opportunities in an Opportunities in an Integrated Supply ChainIntegrated Supply Chain

Accurate “pull” dataAccurate “pull” data

Lot size reductionLot size reduction

Single stage control of Single stage control of replenishmentreplenishment

Vendor managed inventoryVendor managed inventory

PostponementPostponement


Opportunities in an Opportunities in an Integrated Supply ChainIntegrated Supply Chain

Channel assemblyChannel assembly

Drop shipping and special Drop shipping and special packagingpackaging

Blanket ordersBlanket orders

StandardizationStandardization

Electronic ordering and Electronic ordering and funds transferfunds transfer


Radio Frequency TagsRadio Frequency Tags



Internet used to communicate Internet used to communicate order releases against blanket order releases against blanket purchase orderspurchase orders Internet replaces other forms of Internet replaces other forms of

electronic order releaseselectronic order releases

Four Common VariationsFour Common Variations



Internet used to buy non-Internet used to buy non-standard items from catalogsstandard items from catalogs Long-term master agreements in Long-term master agreements in

placeplace

Reduces order lead-time and Reduces order lead-time and purchasing costspurchasing costs




Traditional purchasing system, Traditional purchasing system, but Internet-basedbut Internet-based Significantly speeds up Significantly speeds up

requisitioning, bidding, supplier requisitioning, bidding, supplier selection, and order placementselection, and order placement




Internet auctionsInternet auctions May be used for commodity May be used for commodity

items for which long-term items for which long-term contracts do not existcontracts do not exist



Ships good;receives

electronicpayment

Receiveselectronic

purchase order

Selects a supplierbased on quality,

cost, deliveryperformance;

issues purchaseorder

Collects/reviewsbids submittedelectronically

Assigns suppliersto bid; givesclosing dates

and conditions

Enters data intoInternet system

Buyer reviewsrequisition

Inputs request intocomputer systemand transmits to

purchasingdepartment



Individual initiatesIndividual initiatesrequisitionrequisition

PurchasingPurchasingdepartment/buyerdepartment/buyer SupplierSupplier

Prepares requisition



Suppliers get closer to their customers Shorter cycle times may improve cash

flow Capital investment is low Buyers enjoy comparison shopping,

rapid ordering, reduced transaction costs, and lower inventory

May be part of an integrated Enterprise Resource Planning (ERP) system


Vendor SelectionVendor Selection

Vendor evaluationVendor evaluation Critical decisionCritical decision

Find potential vendorsFind potential vendors

Determine the likelihood of them Determine the likelihood of them becoming good suppliersbecoming good suppliers

Vendor DevelopmentVendor Development

TrainingTraining

Engineering and production helpEngineering and production help

Establish policies and proceduresEstablish policies and procedures


Vendor SelectionVendor Selection

NegotiationsNegotiations Cost-Based Price Model - supplier Cost-Based Price Model - supplier

opens books to purchaseropens books to purchaser

Market-Based Price Model - price Market-Based Price Model - price based on published, auction, or based on published, auction, or indexed priceindexed price

Competitive Bidding - used for Competitive Bidding - used for infrequent purchases but may make infrequent purchases but may make establishing long-term relationships establishing long-term relationships difficultdifficult


Vendor EvaluationVendor Evaluation

CriteriaCriteria WeightsWeightsScores Scores

(1-5)(1-5)Weight Weight x Scorex Score

Engineering/research/innovation skillsEngineering/research/innovation skills .20.20 55 1.01.0

Production process capability Production process capability (flexibility/technical assistance)(flexibility/technical assistance)

.15.15 44 .6.6

Distribution/delivery capabilityDistribution/delivery capability .05.05 44 .2.2

Quality systems and performanceQuality systems and performance .10.10 22 .2.2

Facilities/locationFacilities/location .05.05 22 .1.1

Financial and managerial strength Financial and managerial strength (stability and cost structure)(stability and cost structure)

.15.15 44 .6.6

Information systems capability (e-Information systems capability (e-commerce, Internet)commerce, Internet)

.10.10 22 .2.2

Integrity (environmental compliance/ Integrity (environmental compliance/ ethics)ethics)

.20.20 55 1.01.0

TotalTotal 1.001.00 3.93.9


Logistics ManagementLogistics Management

Objective is to obtain efficient Objective is to obtain efficient operations through the integration operations through the integration of all material acquisition, of all material acquisition, movement, and storage activitiesmovement, and storage activities

A frequent candidate for A frequent candidate for outsourcingoutsourcing

Gain competitive advantage Gain competitive advantage through reduced costs and through reduced costs and improved customer serviceimproved customer service


Distribution SystemsDistribution Systems

TruckingTrucking Moves the vast majority of Moves the vast majority of

manufactured goodsmanufactured goods

Chief advantage is flexibilityChief advantage is flexibility

RailroadsRailroads Capable of carrying large loadsCapable of carrying large loads

Little flexibility though Little flexibility though containers and piggybacking containers and piggybacking have helped with thishave helped with this



AirfreightAirfreight Fast and flexible for light loadsFast and flexible for light loads

May be expensiveMay be expensive

WaterwaysWaterways Typically used for bulky, low-Typically used for bulky, low-

value cargovalue cargo

Used when shipping cost is Used when shipping cost is more important than speedmore important than speed



PipelinesPipelines Used for transporting oil, gas, Used for transporting oil, gas,

and other chemical productsand other chemical products


Cost of Shipping Cost of Shipping AlternativesAlternatives

Product in transit is a form of Product in transit is a form of inventory and has a carrying costinventory and has a carrying cost

Faster shipping is generally more Faster shipping is generally more expensive than slower shippingexpensive than slower shipping

We can evaluate the two costs to We can evaluate the two costs to better understand the trade-offbetter understand the trade-off


Cost of Shipping Cost of Shipping AlternativesAlternatives

Value of connectors = Value of connectors = $1,750.00$1,750.00Holding cost Holding cost = 40%= 40% per year per yearSecond carrier is Second carrier is 11 day faster and day faster and $20$20 more more expensiveexpensive

Daily cost of Daily cost of holding productholding product == xx /365/365

annual annual holding holding

costcost

product product valuevalue

= (.40 x $1,750)/ 365 = $1.92= (.40 x $1,750)/ 365 = $1.92

Since it costs less to hold the product one day longer than it does for the faster shipping ($1.92 < $20), we should use the cheaper, slower shipper


Logistics, Security, and JITLogistics, Security, and JIT

Borders are becoming more open in Borders are becoming more open in the U.S. and around the worldthe U.S. and around the world

Monitoring and controlling stock Monitoring and controlling stock moving through supply chains is moving through supply chains is more important than evermore important than ever

New technologies are being New technologies are being developed to allow close monitoring developed to allow close monitoring of location, storage conditions, and of location, storage conditions, and movementmovement


Benchmarking Supply-Benchmarking Supply-Chain ManagementChain Management


Typical FirmsTypical FirmsBenchmark Benchmark

FirmsFirms

Administrative costs as a percent of Administrative costs as a percent of purchasespurchases 3.3%3.3% .8%.8%

Lead time (weeks)Lead time (weeks) 1515 88

Time spent placing an orderTime spent placing an order 42 minutes42 minutes 15 minutes15 minutes

Percentage of late deliveriesPercentage of late deliveries 33%33% 2%2%

Percentage of rejected materialPercentage of rejected material 1.5%1.5% .0001%.0001%

Number of shortages per yearNumber of shortages per year 400400 44

© 2006 Prentice Hall, Inc.11 – 1 Supply-Chain Management.

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Transcript of © 2006 Prentice Hall, Inc.11 – 1 Supply-Chain Management.