Download Supply-chain management

Chapter 10
Supply-Chain Strategy
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Supply-Chain Management Defined?
Measuring Supply-Chain Performance
Bullwhip Effect
Outsourcing Defined
Value Density Defined
Mass Customization Defined
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1
What is Supply-Chain Management?
Defined
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Supply-chain:
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Supply-chain management is a total
system approach to managing the entire flow
of information, materials, and services from
raw-material suppliers through factories and
warehouses to the end customer.
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2
Supply Chain
®
VISA
VISA
®
Mat'l Flow
Supplier
Credit Flow
Mfg.
Supplier
Retailer
Consumer
Wholesaler
Retailer
Schedules Order
Flow
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Cash
Flow
3
Supply Chain Model
Suppliers
Plants
Plant DC
Retail DC
Store
Wholesaler
September 22, 1999
Racine
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4
Quaker and HyVee
Push vs. Pull
Push
Pull
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5
Quaker and HyVee
Push vs. Pull
Tighter linkage between Quaker and HyVee
means:
HyVee:
•
•
•
Quaker:
•
•

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6
Align Supply Chain Capability With
Business Strategy
Business
Strategy:
–
–
Supply
Chain Role:
–
–
Supply
Chain Measure:
–
–
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7
Balancing Supply Chain Capability with
Customer Demands
Increased Demand:
Marketing programs
Promotions
Customer
Requirements
Supply Chain
Capability
Customer
Requirements
Supply Chain
Capability
Suppliers,
Manufacturers,
Distributors,
Carriers
Market
Demand,New
Products,
Promotions
Increased
Costs
Overtime
Expediting
Increased
Inventory
Information
Information
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8
Formulas for Measuring Internal
Supply-Chain Performance
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Inventory Turnover =
Weeks of Supply 
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9
Example of Measuring Internal
Supply-Chain Performance
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Suppose a company’s new annual report
claims their costs of goods sold for the
year is $160 million and their total average
inventory (production materials + work-inprocess) is worth $35 million. This
company is used to having any inventory
turn ratio of 10.
What is this year’s Inventory Turnover
ratio? What does it mean?
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1
Example of Measuring Supply-Chain
Performance (Continued)
Inventory Turnover
=
=
=
Without knowing the industry average of turns for this
company it is not possible to comment on how they are
competitively doing in the industry.
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1
Supply Chain Measures
Common practice is to measure within a function:
Supplier
Plant
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Distribution Customer
Center
1
Measure Across Supply Chain Nodes
The correct method is to measure across a node:
Supplier
Plant
Distribution
Center
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Customer
1
Total Supply Chain Inventory
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Sum of inventory on hand at each node of the
supply chain
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Supplier, Manufacturer, Distributor, Retailer
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Measurement Timing: Weekly data collection
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1
Bullwhip Effect
The magnification of variability in orders in the supply-chain.
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What is the Bullwhip Effect?
Variance in each customer’s orders * lots of customers =
total variance for retailer
Variance in each retailer’s orders * multiple retailers =
total variance for wholesaler
Variance in each wholesaler’s orders * multiple wholesalers =
total variance for manufacturer
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1
The Bullwhip Effect – Cont’d
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Causes of the Bullwhip Effect
– Price fluctuations
– Periodic order policies
– Rational/shortage gaming
– Production schedules
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1
What is Outsourcing?
Defined
Outsourcing:
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Reasons to Outsource
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Organizationally-driven -
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Improvement-driven -
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Financially-driven -
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Revenue-driven -
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Cost-driven -
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Employee-driven -
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When outsourcing (or whenever working
with suppliers)
Confrontation
Low-Bid
Traditional
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Partnership
2
Outsourcing
Under what conditions would you not want to outsource?
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2
Logistics
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The process of planning, implementing, and
controlling the efficient, effective flow and
storage of goods, services, and related
information from the point of origin to the
point of consumption for the purpose of
conforming to customer requirement.
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Logistics
Consumer Supply Chain
Reverse
Logistics
Supplier
Manufacturer
Supplier’s
Supplier
Wholesaler/
Distributor
Consumer
Retailer
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Value Density
Defined
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Value density: the value of an item per
pound of weight.
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It is used as an important measure when
deciding where items should be stocked
geographically and how they should be
shipped.
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Mass Customization
Defined
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Mass customization is a term used to
describe the ability of a company to deliver
highly customized products and services to
different customers.
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2