Supply Chain Management BCOR 1010 From Boeings 787

Supply Chain Management BCOR 1010

From Boeing’s 787…

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

Supply Chain Management… �Makes � Business Work! Wal-Mart, Dell, Seven-Eleven Japan, Amazon, Toyota, IBM, Apple… �Or 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 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 Chemical Manufacturer Paper Manufacturer Tenneco Packaging P&G or Other Manufacturer Wal-Mart or Third Party DC Plastic 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 distribution centers Fabric Producer Zipper Producer Thread Producer Wal-Mart Stores Customers Request: Buying detergent, clothes, TV, …. . . Electronics Components Producer Plastic Producer

Example: HP Suppliers IC Mfg Suppliers PC Board Suppliers Subassembl y FAT USA DCs Retailer Consume r Europe DCs Retailer Consume r Asian DCs Retailer Consume r 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 Procure services and materials � Transform them into intermediate and final products � Deliver them to the customer � �Where 13 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 demand Warehouse Orders Retailer Orders Actual Consumer Demand Production Plan Time Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

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

Volumes What Management Wants… Production Plan Consumer Demand Time

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

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

Extended Scope (Remember Topper…) Source: line 56. 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 Goods 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! Execution Plannin g From Execution: • Production scheduling • Distribution scheduling and rou • Customs Brokerage From The Sunday times november 23, 2002 Strategy “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! Execution Plannin g To Planning: • Workforce & Production plannin • Inventory policies • Supply Allocation From CNNMONEY. COM February 26, 2009 Strategy “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! Execution Plannin g And Strategy: • Network design • Sell direct or through retailers? • Outsource or in-house? Consider The IMPACT: Strategy Walmart: “Every Day Low Prices” Hyundai: “ 10 -year warranty program” Costco: “ 90 -day return program