Supply Chain Management Chapter 8 What is Supply

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Supply Chain Management Chapter #8

Supply Chain Management Chapter #8

What is Supply Chain? A set of suppliers, manufacturers, service providers, distributors and retailers

What is Supply Chain? A set of suppliers, manufacturers, service providers, distributors and retailers working together to deliver goods & services to the final consumer, is called supply chain or value delivery network. › E. g. in making and marketing its i. Pod Touch products, Apple manages an entire network of suppliers on one end and retailers on the other end (known as ‘Apple Plus’) outside the company who work together to serve the final customers. Every firm or organization is a member of some supply chain.

Supply Chain Management Developing a strategy to organize and control the resources involved in

Supply Chain Management Developing a strategy to organize and control the resources involved in the flow of services and materials with in the supply chain. The goal is to reduce costs as well as to increase performance. Supply chains must be managed to coordinate the inputs with the outputs in a firm to achieve the appropriate competitive priorities of the firm’s enterprise processes.

Supply Chain Design Total costs Inefficient supply chain operations Area of improved operations Reduce

Supply Chain Design Total costs Inefficient supply chain operations Area of improved operations Reduce costs New supply chain efficiency curve with changes in design and execution Improve performance Supply chain performance 8. 1 – Supply Chain Efficiency Curve

Supply Chain Design for Services Provide support for the essential elements of various services

Supply Chain Design for Services Provide support for the essential elements of various services the firm delivers, called “Service Package”. A service Package includes: Supporting Facilities: The physical resources that must be in place before a service can be offered (Location, Decoration, Supporting equipment, facility layout etc) Facilitating Goods: The material purchased or consumed by the buyer, Soap, paper, shampoo, food, and beverages. Explicit Services: the benefits that are readily observable by the sense and that consist of essential features of the service, A comfortable bed, in a clean room Implicit Services: Psychological benefits that they customer may sense, Friendly employees, calm music.

Supply Chain Flowers: Local/International Packaging Maintenance services Fed. Ex delivery service Arrangement materials Local

Supply Chain Flowers: Local/International Packaging Maintenance services Fed. Ex delivery service Arrangement materials Local delivery service Flowers-on-Demand Florist Home customers Supply Chain for a Florist Commercial customers Internet service

Supply Chain Design for Manufacturing u Helps to Control inventory by managing the flow

Supply Chain Design for Manufacturing u Helps to Control inventory by managing the flow of materials. u Serves as a competitive weapon for cost reduction, as manufacturing firms spend 60% of their total sales on purchase of materials and services. u Suppliers can be identified by their position in supply chain – “tiers”. u Upstream u Downstream

Supply Chain for Manufacturing Upstream Downstream Tier 3 Tier 2 Tier 1 Tomato suppliers

Supply Chain for Manufacturing Upstream Downstream Tier 3 Tier 2 Tier 1 Tomato suppliers Tomato grading stations Tomato paste factories Ketchup factory Information flows Cash flows Supply Chain for a Ketchup Factory Retail sales Consumers

Supply Chain for Manufacturing Tier 3 Poland Tier 2 Germany Tier 1 USA Canada

Supply Chain for Manufacturing Tier 3 Poland Tier 2 Germany Tier 1 USA Canada Mexico Germany Australia USA Mexico Malaysia China West Coast Supply Chain for a Manufacturing Firm East Europe Components Major subassemblies USA Manufacturer Ireland East Coast Raw materials Assembly West Europe Retail

Inventory and Supply Chains Input flow of materials Inventory level Creation of Inventory Scrap

Inventory and Supply Chains Input flow of materials Inventory level Creation of Inventory Scrap flow Output flow of materials

Types of Inventory Three aggregate categories › Raw materials: The inventories needed for the

Types of Inventory Three aggregate categories › Raw materials: The inventories needed for the production of services and goods. › Work-in-process: Items such as components and assemblies, needed to produce a final product in manufacturing. › Finished goods: The items in manufacturing plants, warehouses and retail outlets that sold to the firm’s customers.

Types of Inventory at Successive Stocking Points

Types of Inventory at Successive Stocking Points

Supply Chain Dynamics › Upstream members must react to the changing demands. › Slightest

Supply Chain Dynamics › Upstream members must react to the changing demands. › Slightest change in customer demand can ripple through the entire chain. › Bullwhip effect is a phenomena in supply chains whereby ordering patterns experience increased variance as we proceed upstream in the chain.

Supply Chain Dynamics External causes of disruption: Please see page 386 (book-1)for details ›

Supply Chain Dynamics External causes of disruption: Please see page 386 (book-1)for details › Volume/Demand changes: › Service & product mix changes by customers: › Delay of Deliveries: › Under filled Shipments:

Supply Chain Dynamics Internal causes of disruption: › › › Internally generated shortages: Engineering

Supply Chain Dynamics Internal causes of disruption: › › › Internally generated shortages: Engineering changes: New product & service introduction: Sales Promotion activities: Information Errors:

Manufacturer’s weekly orders to package supplier Order quantity 9, 000 Package supplier’s weekly orders

Manufacturer’s weekly orders to package supplier Order quantity 9, 000 Package supplier’s weekly orders to cardboard supplier Retailers’ daily orders to manufacturer 7, 000 Consumers’ daily demands 5, 000 3, 000 0 Day 1 Day 30 Day 1 Month of April Supply Chain - Bullwhip effect for Facial Tissues Day 30

Supply chain Integration › High degree of functional and organizational integration minimizes disruptions and

Supply chain Integration › High degree of functional and organizational integration minimizes disruptions and delays. › Integration must include linkages between the firm, its suppliers, and its customers. › Value chains of each member must be linked externally in a manner that it operates as a single system.

Supply Chain Integration First-Tier Supplier Service/Product Provider New service/ product development process Supplier relationship

Supply Chain Integration First-Tier Supplier Service/Product Provider New service/ product development process Supplier relationship process Support Processes Business-to -business (B 2 B) customer relationship process Order fulfillment process External Value Chain Linkages New service/ product development process Supplier relationship process Business-to -business (B 2 B) customer relationship process Order fulfillment process External Consumers External Suppliers Support Processes