Chapter 01 NMIT

MRI 2305INTRODUCTION TO SUPPLY CHAIN MANAGEMENTPrinciples of Supply Chain Management: A Balanced Approach

fb : Elly Ilyani Lecturer

CHAPTER OUTLINEIntroductionWhat is Supply Chain management?Why is Supply Chain Management important?The origins of Supply Chain ManagementImportant Elements of Supply Chain Management:PurchasingOperationsDistributionIntegrationFuture Trends in Supply Chain ManagementExpanding the Supply ChainIncreasing Supply Chain responsivenessThe Greening of Supply ChainsReducing Supply Chain costs*fb : Elly Ilyani Lecturer


WHAT IS A SUPPLY CHAIN?A supply chain consists of the flow of products and services from:Raw materials manufacturersIntermediate products manufacturersEnd product manufacturersWholesalers and distributors andRetailers

Connected by transportation and storage activities, and

Integrated through information, planning, and integration activities*fb : Elly Ilyani Lecturer


WHAT IS A SUPPLY CHAIN?fb : Elly Ilyani Lecturer*SCM is all about managing flows of resources but it differs from logistics management.


SUPPLY CHAIN FOR DENIM JEANS

Copyright 2006 John Wiley & Sons, Inc.10-*SUPPLY CHAIN FOR SERVICE PROVIDERSMore difficult than manufacturingDoes not focus on the flow of physical goodsFocuses on human resources and support servicesMore compact and less extended


Copyright 2006 John Wiley & Sons, Inc.10-*VALUE VS. SUPPLY CHAINValue chainevery step from raw materials to the eventual end userultimate goal is delivery of maximum value to the end userSupply chainactivities that get raw materials and subassemblies into manufacturing operationTerms are used interchangeably


Copyright 2006 John Wiley & Sons, Inc.10-*SUPPLY CHAIN MANAGEMENT (SCM)Managing flow of information through supply chain in order to attain the level of synchronization that will make it more responsive to customer needs while lowering costsKeys to effective SCMinformationcommunicationcooperationtrust


WHAT IS SUPPLY CHAIN MANAGEMENT?Here are two definitions:The design and management of seamless, value-added process across organizational boundaries to meet the real needs of the end customerInstitute for Supply Management

Managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customerThe Supply Chain Councilfb : Elly Ilyani Lecturer*


WHAT IS SUPPLY CHAIN MANAGEMENT?Old paradigm- Firm gained synergy as a vertically integrated firm encompassing the ownership and coordination of several supply chain activities.

New paradigm- Firm in a supply chain focuses activities in its area of specialization and enters into voluntary and trust-based relationships with supplier and customer firms. fb : Elly Ilyani Lecturer*


Copyright 2006 John Wiley & Sons, Inc.10-*SUPPLY CHAIN UNCERTAINTYOne goal in SCM:respond to uncertainty in customer demand without creating costly excess inventoryNegative effects of uncertaintylatenessincomplete ordersInventoryinsurance against supply chain uncertaintyFactors that contribute to uncertaintyinaccurate demand forecastinglong variable lead timeslate deliveriesincomplete shipmentsproduct changes batch ordering price fluctuations and discountsinflated orders


Firms have discovered value-enhancing and long term benefits

Who benefits most? ~ Firms with: Large inventoriesLarge number of suppliersComplex productsCustomers with large purchasing budgets

fb : Elly Ilyani Lecturer*IMPORTANCE OF SUPPLY CHAIN MANAGEMENT


Firms with Supply Chain Management:

Start with key suppliersMove on to other suppliers, customers, and shippersIntegrate second tier suppliers and customers (second tier refers to the customers customers and the suppliers suppliers)fb : Elly Ilyani Lecturer*IMPORTANCE OF SUPPLY CHAIN MANAGEMENT


IMPORTANCE OF SUPPLY CHAIN MANAGEMENTCost savings and better coordination of resources are reasons to employ Supply Chain Management

Reduced Bullwhip Effect- the magnified reduction of safety stock costs based on coordinated planning and sharing of information

Process Integration- Interdependent activities can lead to improved quality, reduced cycle time, better production methods, etc.

fb : Elly Ilyani Lecturer*


ORIGINS OF SUPPLY CHAIN MANAGEMENT1950s & 1960sU.S. manufacturers focused on cost reduction and productivity improvement strategies

1960s-1970sIntroduction of new computer technology lead to development of Materials Requirements Planning (MRP) to coordinate inventory managementfb : Elly Ilyani Lecturer*


1980s & 1990sIntense global competition led U.S. manufacturers to adopt Supply Chain Management along with Just-In-Time (JIT), Total Quality Management (TQM), and Business Process Reengineering (BPR) practicesfb : Elly Ilyani Lecturer*ORIGINS OF SUPPLY CHAIN MANAGEMENT


ORIGINS OF SUPPLY CHAIN MANAGEMENT2000s and Beyond

Industrial buyers will rely more on third-party service providers to improve purchasing and supply management

Wholesalers/retailers will focus on transportation and logistics more & refer to these as quick response, service response logistics, and integrated logisticsfb : Elly Ilyani Lecturer*


ORIGINS OF SUPPLY CHAIN MANAGEMENTfb : Elly Ilyani Lecturer*


IMPORTANT ELEMENTS OF SUPPLY CHAIN MANAGEMENTPurchasing- Supplier alliances, supplier management, strategic sourcingOperations- Demand management, MRP, ERP, JIT, TQMDistribution- Transportation management, customer relationship management, network design, service response logisticsIntegration- Coordination/Integration activities, global integration problems, performance measurement

fb : Elly Ilyani Lecturer*


Purchasing- Trends:Long term relationshipsSupplier management- improve performance through-Supplier evaluation (determining supplier capabilities)Supplier certification (third party or internal certification to assure product quality and service requirements)Strategic partnerships- successful and trusting relationships with top-performing suppliersfb : Elly Ilyani Lecturer*IMPORTANT ELEMENTS OF SUPPLY CHAIN MANAGEMENT


Operations- Trends:Demand management- match demand to available capacityLinking buyers & suppliers via MRP and ERP systemsUse JIT to improve the pull of materials to reduce inventory levelsEmploy TQM to improve quality compliance among suppliers

fb : Elly Ilyani Lecturer*IMPORTANT ELEMENTS OF SUPPLY CHAIN MANAGEMENT


Distribution- Trends:Transportation management- tradeoff decisions between cost & timing of delivery/customer service via trucks, rail, water & airCustomer relationship management- strategies to ensure deliveries, resolve complaints, improve communications, & determine service requirementsNetwork design- creating distribution networks based on tradeoff decisions between cost & sophistication of distribution system

fb : Elly Ilyani Lecturer*IMPORTANT ELEMENTS OF SUPPLY CHAIN MANAGEMENT


IMPORTANT ELEMENTS OF SUPPLY CHAIN MANAGEMENTIntegration Trends:Supply Chain Integration- when supply chain participants work for common goals. Requires intra-firm functional integration. Based on efforts to change attitudes & adversarial relationshipsGlobal Supply Chains- advantages that accrue from sourcing from larger global market e.g., lower cost & higher quality suppliers. May involve operating exposure, which is risk found in foreign settingsSupply Chain Performance Measurement- Crucial for firms to know if procedures are workingfb : Elly Ilyani Lecturer*


FUTURE TRENDS IN SUPPLY CHAIN MANAGEMENTExpanding the Supply Chain

U.S. firms are expanding partnerships and building facilities in foreign markets

The expansion involves: breadth- foreign manufacturing, office & retail sites, foreign suppliers & customersdepth- second and third tier suppliers & customersfb : Elly Ilyani Lecturer*


FUTURE TRENDS IN SUPPLY CHAIN MANAGEMENTIncreasing Supply Chain Responsiveness

Firms will increasingly need to be more flexible and responsive to customer needs Supply chains will need to benchmark industry performance and meet and improve on a continuous basisResponsiveness improvement will come from more effective and faster product & service delivery systemsfb : Elly Ilyani Lecturer*


The Greening of Supply Chains

Supply chains will work harder to reduce environmental degradationLarge majority (75%) of U.S. consumers influenced by a firms environmental friendliness reputationRecycling and conservation are a growing alternative in response to high cost of natural resourcesfb : Elly Ilyani Lecturer*FUTURE TRENDS IN SUPPLY CHAIN MANAGEMENT


FUTURE TRENDS IN SUPPLY CHAIN MANAGEMENTReducing Supply Chain Costs

Cost reduction achieved through:Reduced purchasing costsReducing wasteReducing excess inventoryAnd reducing non-value added activitiesContinuous Improvement throughBenchmarking- improve over competitors performanceTrial & errorIncreased knowledge of supply chain processes fb : Elly Ilyani Lecturer*


Copyright 2006 John Wiley & Sons, Inc.10-*INFORMATION TECHNOLOGY: A SUPPLY CHAIN ENABLERInformation links all aspects of supply chainE-businessreplacement of physical business processes with electronic onesElectronic data interchange (EDI)a computer-to-computer exchange of business documentsBar code and point-of-saledata creates an instantaneous computer record of a saleRadio frequency identification (RFID)technology can send product data from an item to a reader via radio wavesInternetallows companies to communicate with suppliers, customers, shippers and other businesses around the world, instantaneously


Copyright 2006 John Wiley & Sons, Inc.10-*E-BUSINESS AND SUPPLY CHAINCost savings and price reductionsReduction or elimination of the role of intermediariesShortening supply chain response and transaction timesGaining a wider presence and increased visibility for companiesGreater choices and more information for customers


Copyright 2006 John Wiley & Sons, Inc.10-*E-BUSINESS AND SUPPLY CHAIN (CONT.)Improved service as a result of instant accessibility to servicesCollection and analysis of voluminous amounts of customer data and preferencesCreation of virtual companiesLeveling playing field for small companiesGaining global access to markets, suppliers, and distribution channels


Copyright 2006 John Wiley & Sons, Inc.10-*SUPPLY CHAIN INTEGRATIONInformation sharing among supply chain membersReduced bullwhip effectEarly problem detectionFaster responseBuilds trust and confidenceCollaborative planning, forecasting, replenishment, and designReduced bullwhip effectLower Costs (material, logistics, operating, etc.)Higher capacity utilizationImproved customer service levels


Copyright 2006 John Wiley & Sons, Inc.10-*Coordinated workflow, production and operations, procurementProduction efficienciesFast responseImproved serviceQuicker to marketAdopt new business models and technologiesPenetration of new marketsCreation of new productsImproved efficiencyMass customizationSUPPLY CHAIN INTEGRATION (CONT.)


Copyright 2006 John Wiley & Sons, Inc.10-*COLLABORATIVE PLANNING, FORECASTING, AND REPLENISHMENTProcess for two or more companies in a supply chain to synchronize their demand forecasts into a single plan to meet customer demandParties electronically exchangepast sales trendspoint-of-sale dataon-hand inventoryscheduled promotionsforecasts


SUPPLIERSProcurementpurchase of goods and services from suppliersOn-demand (direct response) deliveryrequires supplier to deliver goods when demanded by customerContinuous replenishmentsupplying orders in a short period of time according to a predetermined scheduleCross-enterprise teams coordinate processes between company and supplier

Copyright 2006 John Wiley & Sons, Inc.10-*


SUMMARYfb : Elly Ilyani Lecturer*


ACTIVITIESCreate a wonder product:Bring sample of the productExplain the use/functions of the productAdvertise your product

Questions to answerAre you influencing your business strategy?Is your supply chain really connected?fb : Elly Ilyani Lecturer*


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Chapter 01 NMIT

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