Supply Chains Part 1

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supply chain management

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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the supply chain network (see slide 3 for diagram)

Notes: 1.supply chains are complex!!! To get anything done requires major effort 2.coordination is key 3.information is critical,if you don’t have it you can't compete 4.Walmart is excellent at this

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Grainger Center for Supply Chain ManagementUW School of BusinessBoard Member Responses What has been the biggest change in supply chain mgmt.?

1.instant communication 2.increased collaboration 3.demand-side complexity 4.sustainability 5.Developing economies (BRICS)Brazil, Russia, India, China, South Africa

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changes in supply chain management over the last 15 years - Brian Smith, Director of Logistics and Indirect Procurement, Harley-Davidson (see slide 5)

changed From: To: chart

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supply chain management - objectives

1.increased profit 2.reduced inventory levels 3.reduced order fulfillment times 4. improved customer service – time & place utility 5.smooth, timely flow of materials 6.flexibility to allow for response to change

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supply chain management - tools/inputs

1.demand forecasts 2.supplier-customer coordination mechanisms 3.material tracking systems 4.inventory levels and locations 5.facility location choices 6.supplier selection – How many? Which ones?

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why the recent emphasis on supply chain management

1.huge opportunity for cost savings and service improvement 2.globalization 3.electronic commerce

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Case Study: Dell Computer (see slide 8) -gives graphics

1.a faster business model 2.dominant model in the PC industry 3.Dell’s direct model: eliminate 3rd-party distribution Virtual integration: blur traditional roles and boundaries

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Case Study: Dell Computer key issues in Dell’s success - Part 1

1.relationship with the customer 2.information+technology-virtual integration 3.focus on high margin activities–not vertically integrated 4. shared info with suppliers leads to quicker time to market 5.focus on inventory velocity not inventory levels

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Case Study: Dell Computer key issues in Dell’s success - Part 2

6.outsource deliveries and follow-up service use e-commerce 7.substitute information for inventory 8.increasingly segmented market– better attention and focus 9.closer to the customer-better forecasting and more value to customer

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supply chain strategy

1.not a “one-size-fits-all” solution 2. meet customer needs 3.design depends on amount of uncertainty

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Hau Lee on Supply Chain Strategy

Hau Lee’s approach to supply chain strategy is one of aligning supply chains with the uncertainties regarding demand and the supply process

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stable supply process

has mature technologies

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evolving supply process

has rapidly changing technologies

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aligning supply chain strategies with product uncertainties

based on uncertainty in supply and demand

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aligning supply chain strategies with product uncertainties like demand and supply (see slide 13) for chart

DEMAND UNCERTAINTY 1.low-functional products 2.high innovative products SUPPLY UNCERTAINTY 1.low-stable process 2.high- evolving process

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decisions on inventory levels and locations

1.How much inventory do we want? uncertainty = inventory 2.How “complete” is the inventory we hold?-postponement 3.Do we push inventory down toward the customers, or hold it back at higher levels?

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How “complete” is the inventory we hold? postponement **Notes**

Postponement – keep products in the assembly process until orders are taken. It will increase manufacturing costs. This leads to risk pooling. Square root of n helps to inventory lower also.

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Do we push inventory down toward the customers, or hold it back at higher levels?

1.consider demand rate, demand variability – “risk-pooling” – square root of n rule 2.How difficult is transshipment? 3.How important is rapid delivery?

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demand uncertainties

1.low-functional products 2.high - technological products

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supply uncertainties

1.low-stable process 2.high-evolving process

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tools for supply chain decisions: inventory positioning - buffering

1.buffer before the high value-added steps 2.buffer after variable lead times 3. buffer before significant increases in product variety

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inventory levels: cost-service trade-offs (see slide 17 for graph) **NOTES** - think more about the end points

1.local finished goods 2.local and regional finished goods 3.regional finished goods 4.local work in process 5.central finished goods 6.central work in process 7. central raw materials 8.build-to-order

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performance measurement in the supply chain #1 rule of performance measurement

"What gets measured (and rewarded) is what gets done!”

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characteristics of good measures

A good measure: 1.is quantitative 2.is easy to understand 3.encourages appropriate behavior 4.is visible 5.is defined and mutually understood 6.measures only what is important

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some typical supply chain performance measures

1.time 2.quality 3.cost

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time performance measures

1.on-time delivery 2. order time cycle 3.order cycle time variability

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quality performance measures

1.overall customer satisfactions 2. perfect order fulfillment - on-time, complete, damage-free, accurate invoice 3.forecast accuracy

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cost performance measure

1.inventory turns, weeks of supply 2.cash-to-cash cycle time 3.costs of capacity -excess or shortfall

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selecting measures for supply chain success

1.make sure measures are in sync with strategy 2.truly understand customer need dates 3.understand your cost structure-How much service and at what price? 4.use information technology for data collection and analysis 5.focus on a few key measures

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