Professional Documents
Culture Documents
SCM
SCM
Definitions
and the
Material Costs
Transportation Costs
Transportation Costs
Manufacturing Costs
Plan
Source
Make
Deliver
Buy
Suppliers
Manufacturers
Customers
Material Costs
Transportation Transportation Costs Transportation Costs Manufacturing Costs Inventory Costs Costs
System-wide costs are minimized and Service level requirements are satisfied
U.S. firms spent $898 billion (10% of GDP) on supply-chain related activities in 1998
9
The growth of technologies such as the Internet enable greater collaboration between supply chain trading partners
If you dont do it, your competitor will Major buyers such as Wal-Mart demand a level of supply chain maturity of its suppliers
Firms have access to multiple products (e.g., SAP, Baan, Oracle, JD Edwards) with which to integrate internal processes
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Sales
Sales
Time
Sales
Time
Time
Sales Time
Bullwhip Effect
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Lead time
Batch ordering
Peaks and valleys in orders Fixed ordering costs Impact of transportation costs (e.g., fuel costs) Sales quotas
Promotion and discount policies
Nevertheless, forecasts (or plans, if you prefer) are important management tools when some methods are applied to reduce uncertainty
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Low inventories
Low transportation
SOURCE
MAKE
DELIVER
SELL
15
What are our core supply chain capabilities and which are not? Does our product design mandate different outsourcing approaches? Risk management How are inventory holding and transportation costs affected by product design? How does product design enable mass customization?
Source: Simchi-Levi
16
BENEFITS
Low manufacturing costs; meet customer demands quickly Customization; reduced inventory; improved service levels Low inventory levels; wide range of product offerings; simplified planning Enables response to specific customer requirements
Engineer to Order
Source: Simchi-Levi 17
16%-28% Improvement 25%-60% Improvement 30%-50% Improvement 25%-80% Improvement 10%-16% Improvement 25%-50% Improvement 20%-30% Improvement 10%-20% Improvement
Create unique supply chain configurations that align with your companys strategic objectives
Operations strategy Outsourcing strategy Channel strategy Customer service strategy Asset network Forecasting Collaboration Integration
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Reduce uncertainty
20
Source
Make
Deliver
Sell
Each facility further away from actual customer demand must make forecasts of demand Lacking actual customer buying data, each facility bases its forecasts on downstream orders, which are more variable than actual demand To accommodate variability, inventory levels are overstocked thus increasing inventory carrying costs
Its estimated that the typical pharmaceutical company supply chain carries over 100 days of product to accommodate uncertainty
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Centralize demand information Keep each stage of the supply chain provided with up-to-date customer demand information More frequent planning (continuous real-time planning the goal)
Every-day-low-price strategies for stable demand patterns Use cross-docking to reduce order lead times Use EDI techniques to reduce information lead times Vendor-managed inventory (VMI) Collaborative planning, forecasting and replenishment (CPFR)
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Panels of Experts Internal experts External experts Domain experts Delphi technique Accurate Forecasts Causal Analysis
Time-Series Methods
Relies on data other than that being predicted Economic data, commodity data, etc.
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Fast information flow mechanisms Decreased lead times Decreased retailer inventory Decreased variability in the supply chain and especially at manufacturers Decreased manufacturer inventory More efficient use of resources More difficult to take advantage of scale opportunities Examples: Dell, Amazon
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Final product assembly is done based on customer demand for specific product configurations Supply chain timeline determines push-pull boundary
Generic Product Push Strategy Raw Materials
PushPull Boundary
Industries where:
Demand is uncertain Scale economies are High Low economies of scale
Where do the following industries fit in this model: Automobile? Aircraft? Fashion? Petroleum refining? Pharmaceuticals? Biotechnology? Medical Devices?
Demand Uncertainty
Furniture
Industries where:
Standard processes are the norm Demand is stable Scale economies are High
Grocery, Beverages
High Push
Economies of Scale
Source: Simchi-Levi
28
PUSH
PULL
Maximize Service Level
Objective
Complexity Focus Lead Time
Minimize Cost
High
Low
Resource Allocation
Responsiveness
Long
Short
Processes
Order Fulfillment
Source: Simchi-Levi 29
Why collaborate?
30
Manufacturer
Distributors/ Wholesalers
Logistics Providers
31
CUSTOMERS
Reduced inventory Increased revenue Lower order management costs Higher Gross Margin Better forecast accuracy Better allocation of promotional budgets
MATERIAL SUPPLIERS
Reduced inventory Lower warehousing costs Lower material acquisition costs Fewer stockout conditions
SERVICE SUPPLIERS
Lower freight costs Faster and more reliable delivery Lower capital costs Reduced depreciation Lower fixed costs
Extent of Collaboration
Coordinated Collaboration
Cooperative Collaboration
Limited
Transactional Collaboration
Low Return
Higher levels of collaboration imply the need for both trading partners to have equivalent (or close) levels of supply chain maturity Synchronized collaboration demands joint planning, R&D and sharing of information and processing models
Movement to real-time customer demand information throughout the supply chain
Few
33
34
35
36
SCC sponsors and supports educational programs including conferences, retreats, benchmarking studies, and development of the Supply-Chain Operations Reference-model (SCOR), the process reference model designed to improve users' efficiency and productivity Promotes research and thought leadership in the supply chain management area Adoption of common standards for reference to process, information and material goods flows is essential to enable trading partner collaboration
37
Benchmarking
Characterize the management practices and software solutions that result in bestin-class performance
38
SCOR Structure
Plan
Deliver Return
Source Return
Make
Deliver Return
Source Return
Make
Deliver Return
Source Return
Make
Deliver Return
Source
Return
Suppliers Supplier
Supplier
Internal or External
Your Company
Customer
Internal or External
Customers Customer
SCOR Model
Building Block Approach Processes Best Practice Metrics Technology
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Suppliers
Source
S1 Source Stocked Products S2 Source MTO Products
Make
M1 Make-to-Stock
Deliver
D1 Deliver Stocked Products
M2 Make-to-Order
M3 Engineer-to-Order
Return Source
Return Deliver
Enable
40
Customers
SCOR Level 1
Material Flow
AS IS Geographic Map AS IS Thread Diagram Design Specifications TO BE Thread Diagram TO BE Geographic Map
SCOR Level 2
SCOR Level 3
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Plan
Patients
Source Return
Make
Deliver
Source Make Deliver Source Return Return
Return
Return
Suppliers Supplier
Supplier
Your Company
Customer
Customers Customer
Internal or External
Internal or External
Doctors, Hospitals
43
Sales
Deliver Return
Source Return
Make
Deliver Return
Source
Make
Deliver
Source Make Deliver Return Source Return
Return
Return
Return
Suppliers Supplier
Supplier
Your Company
Customer
Customers Customer
Plan
Internal or External Internal or External
Deliver Return
Source Return
Make
Deliver Return
Source
Make
Deliver
Source Make Deliver Return Source Return
Return
Return
Return
Suppliers Supplier
Supplier
Your Company
Customer
Customers Customer
44
Internal or External Internal or External