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SUPPLY CHAIN MANAGEMENT SUPPLY CHAIN MANAGEMENT – AN OVERVIEW– AN OVERVIEW

Chwen SheuChwen SheuPaul Edgerly Chair ProfessorPaul Edgerly Chair Professor

Kansas State UniversityKansas State University(CSCMP Kansas City Roundtable(CSCMP Kansas City Roundtable))

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PRESENTATION OUTLINEPRESENTATION OUTLINE

I.I. SUPPLY CHAIN SUPPLY CHAIN MANAGEMENT (SCM): MANAGEMENT (SCM): INTRODUCTIONINTRODUCTION

II.II. WHY IS SCM IMPORTANT?WHY IS SCM IMPORTANT?

III.III. GREEN SUPPLY CHAIN GREEN SUPPLY CHAIN MANAGEMENTMANAGEMENT

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1. SUPPLY CHAIN 1. SUPPLY CHAIN MANAGEMENT (SCM)MANAGEMENT (SCM)

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SEARCHING … …SEARCHING … …““SUPPLY CHAIN MANAGEMENT”SUPPLY CHAIN MANAGEMENT”

Yahoo?

Google

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WHAT IS SCM?WHAT IS SCM?

Supply ChainSupply Chain A network of of suppliers, manufacturers, A network of of suppliers, manufacturers,

warehouses, 3PL, retail outlets, warehouses, 3PL, retail outlets, customers.customers.

Supply chain management (SCM)Supply chain management (SCM) The management of flows between and The management of flows between and

among supply chain stages to maximize among supply chain stages to maximize total supply chain profitabilitytotal supply chain profitability

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Traditional Supply Chain SystemsTraditional Supply Chain SystemsSupplier Manufacturer Manufacture Wholesale Retail Customer (1st,2nd,…) Plant Distribution Distribution

Center Center

Material FlowInformation Flow

3rd Party Logistics Providers (3PL)

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BEEF SUPPLY CHAINBEEF SUPPLY CHAIN

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IC SUPPLY CHAIN

矽晶圓

化學品

氣 體

IC 製造業 IC 封裝測試業

封裝材料業

光罩業

OEM

IBM

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SCM Survey:

2004 IT Industry

(236 firms)

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How IMPORTANT is the SC function to your organization's business strategy ?

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Who is directly RESPONSIBLE for determining your SC operations?

Up from 14.2% in 2003

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Compared to 2003, how is your SPENDING on SC likely to change in 2004?

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II. SCM: WHY IS IT IMPORTANT?

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SCM: IT’S A NEW BALL GAMESCM: IT’S A NEW BALL GAME

Improves CompetitivenessImproves Competitiveness EfficiencyEfficiency

Cost: “Lean manufacturing” Cost: “Lean manufacturing” “ “Lean Lean supply chainsupply chain” (e.g., Boeing)” (e.g., Boeing)

ResponsivenessResponsiveness

Customization (e.g., Dell)Customization (e.g., Dell)

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Efficiency: Boeing Example

TotalTotalDollars Spent in 2002Dollars Spent in 2002

$ 22.6$ 22.6BB6,1936,193

TotalTotalSupplier BaseSupplier Base

~70%~70% of Product Costof Product Cost

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Responsiveness: DellResponsiveness: Dell

Why SCM?Why SCM?

A win-win partnershipA win-win partnership

Value-addedValue-added

““We focus on how we can We focus on how we can coordinate our coordinate our activities to create the most activities to create the most value for customers.”value for customers.”

- M. Dell- M. Dell

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(3PL)SupplierAssembly Plants

Retailer

Supplier Assembly Plants(3PL)

重新洗牌 Responsive

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CREATING VALUESCREATING VALUES

Producers

Shipping

EastmanWarehou

se

EastmanIT Dept

Wait …

Open the boxes &

Load

EastmanEmployee

s

Tradition: Time Consuming & Costly

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Implementing SCM requires a fundamental change in the way firms operate

““Gee, we've never Gee, we've never done that before, done that before, but why not? Let's but why not? Let's give it a trygive it a try.”.”

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PARTNERSHIP & PARTNERSHIP & Bullwhip EffectBullwhip Effect

P&G found that

• Demand variability (Pampers) increases for SC members located farther upstream (1:10)

Retailer Wholesaler P&G 3M

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Lee, H, P. Padmanabhan and S. Wang (1997), Sloan Management Review

What You See Is Not What They FaceWhat You See Is Not What They Face

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III. GREEN SUPPLY III. GREEN SUPPLY CHAIN MANAGEMENT CHAIN MANAGEMENT

(GSCM) (GSCM)

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GSCM = SCM + EMGSCM = SCM + EM

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“I think God's going to come down and pull civilization over for speeding.”

— Steven Wright

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ENVIRONMENTAL ENVIRONMENTAL MANAGEMENT? WHY?MANAGEMENT? WHY?

12 12 tonstons of CO of CO22 per capita are per capita are produced per year. Only produced per year. Only 8%8% of this of this emission is managed by nature. emission is managed by nature.

The average temp of the Earth could The average temp of the Earth could raise up to raise up to 5ºC5ºC by the end of 21 by the end of 21 century century Sea level could rise up to Sea level could rise up to 100 meters100 meters. .

A visit to Amsterdam could be soon a A visit to Amsterdam could be soon a submarine visitsubmarine visit..

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EM? WHY?EM? WHY?

60 % 60 % of managers considered environmental of managers considered environmental issues to be highly important, 82 % expected issues to be highly important, 82 % expected the importance would further increase in the the importance would further increase in the years to come (2002).years to come (2002).

“… “… a new industrial revolution. It is the most a new industrial revolution. It is the most forceful trend in my lifetime ... it will redefine forceful trend in my lifetime ... it will redefine the rules of the gamethe rules of the game.” (CEO, Sony).” (CEO, Sony)

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Waste Electrical and Electronic Waste Electrical and Electronic Equipment (WEEE)Equipment (WEEE)

Restriction of Hazardous Restriction of Hazardous Substances (RoHS)Substances (RoHS)

Energy-using Products (EuP) Energy-using Products (EuP)

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EM – DEVELOPMENTEM – DEVELOPMENT USAUSAa.a. Total cost of compliance over the past 25 years have Total cost of compliance over the past 25 years have

exceeded $1 trillion (~$120 billion annually).exceeded $1 trillion (~$120 billion annually).

b.b. 1970s1970s: 2000 federal, state, and local e-regulations; : 2000 federal, state, and local e-regulations; TodayToday: 100,000. Business in LA must answer up to : 100,000. Business in LA must answer up to 72 separate authorities. 72 separate authorities.

c.c. Computer Takeback: Among 28 global computer Computer Takeback: Among 28 global computer firms, U.S. computer firms rank 9firms, U.S. computer firms rank 9thth (Apple), 11 (Apple), 11thth (HP). (HP).

d.d. 80% of consumer are willing to pay more for 80% of consumer are willing to pay more for greengreen..

e.e. Dow Jones Sustainability IndexDow Jones Sustainability Index

f.f. ““It's a difficulty for European firms, and it's a huge It's a difficulty for European firms, and it's a huge difficulty for American firmsdifficulty for American firms.”.”

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EM – DEVELOPMENTEM – DEVELOPMENT

JapanJapan 63% of Japanese consumers are willing to pay 63% of Japanese consumers are willing to pay

5% more, 27% pay 15% more for green 5% more, 27% pay 15% more for green products. products.

Green Products Green Products • Toyota Hybrid Prius Toyota Hybrid Prius uses half the petrol & uses half the petrol &

emits only half the carbon dioxide.emits only half the carbon dioxide. Sony Green PartnerSony Green Partner

EuropeEurope No kidding!!!No kidding!!!

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TOYOTA Eco-Friendly Prius ~$20,000

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EM & TQMEM & TQM

Total Quality Environmental Total Quality Environmental Management (TQEM) Management (TQEM)

Prevention is better than compliancePrevention is better than compliance

Continuous improvement & innovation: Continuous improvement & innovation: technology, process, design, materialtechnology, process, design, material

Must involve suppliersMust involve suppliers

Benefit outweighs cost Benefit outweighs cost EM Is FreeEM Is Free

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EM – BUSINESS IMPACTSEM – BUSINESS IMPACTS

• Pepsi: Saved $44 million by switching from corrugated to reusable plastic shipping containers for one liter & 20 oz bottles, conserving 196 million lb of corrugated material.

• Texas Instruments: Saved $8 million each year by reducing its transit packaging budget for its semi-conductor business thru source reduction, recycling & use of reusable packaging.

• Commonwealth Edison: Produced $50 million in financial benefits from the implementation of Life-Cycle Analysis approach.

• Dow Corning: Saved $2.3 million by using reconditioned steel drum in 1995. It also conserved 7.8 million lb of steel.

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GSCM – LIFE CYCLE GSCM – LIFE CYCLE ANALYSIS/ASSESSMENTANALYSIS/ASSESSMENT

Design Raw Mat. Logistics ManufactureRetailer/Customer

RecycleReuse

Disposal

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CRISIS? OPPORTUNITY?CRISIS? OPPORTUNITY?

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“… We are convinced that being good to the environment is also good for business – and have every intention of keeping it that way.”

- 1997 Xerox EHS Progress Report