Lecture Introduction to operations management - Chapter 10: Supply chain management

In this chapter we will discuss: Supply chain & supply chain management, purchasing and logistics, measuring supply chain performance, supply chain dynamics—the bullwhip effect, improving supply chain performance, supply chain structural improvements, supply chain infrastructural improvements, technology and supply chain management.

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Operations Management

Contemporary Concepts and Cases

Chapter Ten Supply Chain Management

Operations Management

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Chapter Ten Outline

4S Supply Chain & Supply Chain Management

4 Purchasing and Logistics

4 Measuring Supply Chain Performance

4 Supply Chain Dynamics—the Bullwhip Effect

4 [mproving Supply Chain Performance

4 Supply Chain Structural Improvements

4 Supply Chain Infrastructural Improvements

4 Technology and Supply Chain Management

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Supply Chain

The set of entities and relationships that

cumulatively define materials and information

flows both downstream toward the customer and

upstream toward the very first supplier

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Supply Chain Management

“The design and management of seamless,

value-added processes across organizational

boundaries to meet the real needs of the end

customer ˆ

` Institute for Supply Management

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A Typical Supply Chain

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Suppliers Suppliers Factories Wareho uses Retail Customers

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SCOR Is founded on five distinct

management processes

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SCOR Model

Building Block Approach

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SCOR = Supply Chain Operations Reference-model

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Purchasing and Logistics

4 Vhe purchasing function: sources inputs into

the transformation process of the firm from

other for-profit and nonprofit organizations

— Global sourcing

3® The logistics function: typically responsible ` for the actual movement and storage of goods

across organizations in a supply chain

— Reverse logistics

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Measuring Supply Chain

Performance (1)

3 Delivery

— On time delivery of entire orders

— Fill rate

— Lead time

— Product or service performance

— Conformance to specifications

— Customer satisfaction

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Performance (2)

® Flexibility

— Time to change volume of output by a fixed amount

— Time it takes to change the mix of products or

servIces delivered

— Total throughput time

— Cash to cash cycle

4Days in inventory + days in accts receivable - days in accounts payable

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Performance (3)

4®Cost

— Materials and components

— Fabrication and assembly

— Logistics

4 WIP among supply chain members

4 Finished goods to the customer

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System Dynamics in Supply Chains

4 Supply chain is a highly interactive system

Decisions in each part of the chain affect the

other parts

3® There 1s an accelerafor (bullwhipn) ejJect

3 Even with perfect information, replenishment

3® The best way to improve a supply chain is to

reduce the total replenishment time and to feed

back actual demand information to all levels

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Improving Supply Chain

Performance

Basic Ways to Improve Supply Chain Structure:

— Change structure

4Capacity, Facilities, Process technology, Vertical integration

4 People, Information systems, Organization, Production and inventory control, Quality control systems

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Supply Chain Structural

Improvements

3 Forward and Backward Intesration

4) Major process simplification

4 Changing the configuration of factories,

warehouses, or retail locations

4 Major product redesign

4 Working with third-party logistics providers

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Supply Chain Infrastructure

Improvements

4) Cross-functional teams

4 Partnerships with suppliers and customers

4 Set-up time reduction to reduce lot sizes

4 [ntegrated information systems

4) Cross-docking—keeps goods out of

warehouses

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Technology and SCM

® Crowth of e-commerce

— B2B (business-to-business)

— B2C (business-to-consumer)

4) Fundamental processes in supply chains:

— Order placement

A Information before order is entered

4) Actual order entry

— Order fulfillment

4 Direct link to internal operations & suppliers

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Processes for e-Procurement (Figure 10.6)

REQUEST

Requirement Selection Requisition Approval

BUY Requisition Negotiate Contract

SUPPLY

Order

PAYMENT

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Types of e-procurement

4 On-line catalogs listing products, prices, etc

4 Vhird-part auctions—treverse auctions

4 Private exchanges to connect suppliers

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Problems with e-procurement

4.'T'oo much focus on technology; not enough on

systems

4 Insufficient concern about joint value

propositions so that both partners benefit

4 Fragmented efforts within and across `

companies

4 Record accuracy and data issues

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Summary