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CHAPTER 8

CHAPTER 8. SUPPLY CHAIN MANAGEMENT. Chapter Eight Overview. SECTION 8.1 – SUPPLY CHAIN FUNDAMENTALS Basics of Supply Chain Information Technology’s Role in the Supply Chain Supply Chain Management Success Factors SCM Success Stories SECTION 8.2 – APPLYING A SUPPLY CHAIN DESIGN

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CHAPTER 8

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  1. CHAPTER 8 SUPPLY CHAIN MANAGEMENT

  2. Chapter Eight Overview • SECTION 8.1 – SUPPLY CHAIN FUNDAMENTALS • Basics of Supply Chain • Information Technology’s Role in the Supply Chain • Supply Chain Management Success Factors • SCM Success Stories • SECTION 8.2 – APPLYING A SUPPLY CHAIN DESIGN • Using Information Technology to Drive the Supply Chain • Facilities Driver • Inventory Driver • Transportation Driver • Information Driver • Applying a Supply Chain Design • Future Supply Chain Trends

  3. SECTION 8.1 SUPPLY CHAIN FUNDAMENTALS

  4. BASICS OF SUPPLY CHAIN • Organizations must embrace technologies that can effectively manage supply chains

  5. BASICS OF SUPPLY CHAIN

  6. INFORMATION TECHNOLOGY’S ROLE IN THE SUPPLY CHAIN • IT’s primary role is to create integrations or tight process and information linkages between functions within a firm

  7. INFORMATION TECHNOLOGY’S ROLE IN THE SUPPLY CHAIN Factors Driving SCM

  8. Visibility • Supply chain visibility – the ability to view all areas up and down the supply chain • Bullwhip effect – occurs when distorted product demand information passes from one entity to the next throughout the supply chain

  9. Consumer Behavior • Companies can respond faster and more effectively to consumer demands through supply chain enhances • Demand planning software – generates demand forecasts using statistical tools and forecasting techniques

  10. Competition • Supply chain planning (SCP)software– uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain • Supply chain execution (SCE) software – automates the different steps and stages of the supply chain

  11. Competition • SCP and SCE in the supply chain

  12. Speed

  13. SUPPLY CHAIN MANAGEMENT SUCCESS FACTORS

  14. SUPPLY CHAIN MANAGEMENT SUCCESS FACTORS • SCM industry best practices include: • Make the sale to suppliers • Wean employees off traditional business practices • Ensure the SCM system supports the organizational goals • Deploy in incremental phases and measure and communicate success • Be future oriented

  15. SCM SUCCESS STORIES • Top reasons why more and more executives are turning to SCM to manage their extended enterprises

  16. SCM SUCCESS STORIES

  17. USING IT TO DRIVE THE SUPPLY CHAIN • The four primary drivers of supply chain management • Facilities • Inventory • Transportation • Information • Organizations use these four drivers to support either a supply chain strategy focusing on efficiency or a supply chain strategy focusing on effectiveness

  18. USING IT TO DRIVE THE SUPPLY CHAIN

  19. FACILITIES DRIVER • Facility – processes or transforms inventory into another product, or it stores the inventory before shipping it to the next facility • Three primary facilities components • Location • Capacity • Operational design

  20. FACILITIES 1: Location • Location efficiency – centralize the location to gain economies of scale, which increases efficiency • Location effectiveness – decentralize the locations to be closer to the customers, which increases effectiveness

  21. FACILITIES 2: Capacity • Capacity efficiency – minimal excess capacity with the ability to produce only what is required • Capacity effectiveness – large amounts of excess capacity which can handle wide swings in demand

  22. FACILITIES 3: Operational Design • Operational design efficiency – product focus design allows the facility to become highly efficient at producing one single product, increasing efficiency • Operational design effectiveness – functional focus design allows the facility to perform a specific function on many different types of products, increasing effectiveness

  23. FACILITIES DRIVER

  24. INVENTORY DRIVER • Inventory – offsets discrepancies between supply and demand • Inventory management and control software – provides control and visibility to the status of individual items maintained in inventory • Two primary inventory components • Cycle inventory • Safety inventory

  25. INVENTORY 1: Cycle Inventory • Cycle inventory – the average amount of inventory held to satisfy customer demands between inventory deliveries • Cycle inventory efficiency – holding small amounts of inventory and receiving orders weekly or even daily • Cycle inventory effectiveness – holding large amounts of inventory and receiving inventory deliveries only once a month

  26. INVENTORY 2: Safety Inventory • Safety inventory – extra inventory held in the event demand exceeds supply • Safety inventory efficiency – holding small amounts of safety inventory • Safety inventory effectiveness – holding large amounts of safety inventory

  27. INVENTORY DRIVER

  28. TRANSPORTATION DRIVER • Transportation – moves inventories between the different stages in the supply chain • Two primary inventory components • Method of transportation • Transportation route

  29. TRANSPORTATION 1: Method of Transportation • Global inventory management system – provides the ability to locate, track, and predict the movement of every component or material anywhere upstream or downstream in the supply chain • Method of transportation efficiency • Method of transportation effectiveness

  30. TRANSPORTATION 2: Transportation Route • Transportation planning software– tracks and analyzes the movement of materials and products to ensure the delivery of materials and finished goods at the right time, the right place, and the lowest cost • Distribution management software – coordinates the process of transporting materials from a manufacturer to distribution centers to the final customer • Transportation route efficiency • Transportation route effectiveness

  31. TRANSPORTATION DRIVER

  32. INFORMATION DRIVER • Information – an organization must decide how and what information it wants to share with its supply chain partners • Two primary information components • Information sharing • Push verses pull strategy

  33. INFORMATION 1: Information Sharing • Information sharing efficiency – freely share lots of information to increase the speed and decrease the costs of supply chain processing • Information sharing effectiveness – share only selected information with certain individuals, which will decrease the speed and increase the costs of supply chain processing

  34. INFORMATION 2: Push vs. Pull Information Strategy • Pull information strategy (efficiency) – supply chain partners are responsible for pulling all relevant information • Pull technology – pulls information • Push information strategy effectiveness – organization takes on the responsibility to push information out to its supply chain partners • Push technology – sends information

  35. INFORMATION DRIVER

  36. APPLYING A SUPPLY CHAIN DESIGN • Wal-Mart’s supply chain management strategy emphasizes efficiency, but also maintains adequate levels of effectiveness • Facilities focus – Efficiency • Inventory focus – Efficiency • Transportation focus – Effectiveness • Information focus - Efficiency

  37. APPLYING A SUPPLY CHAIN DESIGN

  38. FUTURE SUPPLY CHAIN TRENDS • Fastest growing SCM components • Supply chain event management (SCEM) • Selling chain management • Collaborative engineering • Collaborative demand planning

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