Supply Chain

Supply Chain

A network of organizations and business processes for procuring materials, transforming raw materials into intermediate and finished products, and distributing the finished products to customers

Links suppliers, manufacturing plants, distribution centers, retail outlets, and people

A Supply Chain
Materials, information, and payments flow in the supply chain in both directions

Types of Supply Chain Product

Functional Products

Products with predictable demand, high lifecycles, and low profit margins E.g., gasoline, goods in supermarkets Require efficient supply chains that coordinate activities to meet predictable demand with minimal inventories at the lowest cost

Types of Supply Chain Product

Innovative Products

Products with more unpredictable demand, short product lifecycles, higher profit margins E.g., new clothing fashions, new leading-edge electronics Require responsive supply chains with greater inventory buffer stock deployed strategically to minimize order lead time and maximize order fill rates

Supply Chain Models

Supply Chain Performance Measurement

Fill rate (ability to fill orders by the due date) On-time deliveries Average time from order to delivery Total supply chain costs Number of days of supply in inventory Asset turns Supply chain response time Forecast accuracy Source/make cycle time Cost-to-cycle time

Problems along the Supply Chain

Uncertainties in demand forecast

Bullwhip effect Erratic shifts in orders up and down the supply chain Uncertainties in delivery times - Machine failures, road conditions, shipment delay
Quality problems

Problems along the Supply Chain

Results in:
Inefficiencies Excessive inventories Poor customer service Lost revenues Ineffective shipments Missed production schedules

Control the effect by reducing uncertainties about demand and supply when all members of the supply chain have accurate and up-to-date information

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Supply Chain Management (SCM)

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Supply Chain Management

The close linkage and coordination of activities involved in buying, making, moving a product from point of origin to point of consumption Integrate cross-functional and inter-enterprise business processes to speed information, product, and fund flows up and down a supply chain to reduce time, redundant effort, and inventory cost
A firm: -has the right product -In the right place -At the right price -At the right time -In the right condition
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* Figure was obtained using Google Search Engine 13

Key SCM Processes

Requires free flow of information within its organizational boundary & timely sharing of the right information with the right business partners
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5 Capabilities of SCM
Business Process Management Collaborative workflow technologies help individuals in different organizations work together in crossenterprise business processes.

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5 Capabilities of SCM
Units

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Visibility

Inbound Order Warehouse

These technologies provide tracking of inventory and orders as they move through the extended value chain

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5 Capabilities of SCM
Business Activity Monitoring

These tools enable systems to notify users of imminent problems in the supply chain.

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5 Capabilities of SCM
Analytics

These technologies enable the collection and computation of analytics across the extended supply chain.

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5 Capabilities of SCM
Optimization

These technologies solve complex problems and help organizations quantitatively understand the impact of contemplated actions.

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Supply Chain Management Systems

Automate information flow between a company and its supply chain partners to optimize the planning, sourcing, manufacturing, and delivery of products and services make better decisions to optimize performance

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SCM Vendors

Acquired by JDA Software Group on July 5, 2006

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Benefits of SCM

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Benefits of SCM

Increase visibility

Provide visibility into critical supply chain processes, such as order fulfillment and distribution management, and critical information, such as orders, supplies, and inventories Able to respond more quickly to changes in demand

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Benefits of SCM

Improve control

Integrate and manage processes across company boundaries to collaborate with partners and close the gap between planning and execution activities Enable monitoring and analysis of the performance of the network to support proactive improvement Reduce uncertainty and risks along the supply chain

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Benefits of SCM

Stay ahead of business change

Improved visibility Better information sharing Closer collaboration The ability to manage integrated, extended processes enable quick adaptation to ever-changing business environment

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Benefits of SCM

Reduce cost
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Reduce costs associated with moving a product through the supply chain such as material acquisition, inventory carrying, and planning cost Achieve through the exchange of inventory information to reduce inventories, make better use of assets, and reduce cycle times

Improve customer service and responsiveness

Make sure products are available when a customer wants it

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Benefits of SCM

Tangible benefits:

Inventory reduction Personnel reduction Productivity improvement Order management improvement Financial-close cycle improvements IT cost reduction Procurement cost reduction Cash management improvements Revenue/profit increases Transportation logistics cost reduction Maintenance reduction On-time delivery improvement.

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Benefits of SCM

Intangible benefits:

Information visibility New/improved processes Customer responsiveness Standardization Flexibility Globalization Business performance Reduction in duplication of entries Controls and reconciliation are enhanced Rapid assimilation of data into the organization

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Challenges of SCM

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Challenges of SCM

Implementation

If the software is implemented atop flawed processes, it can actually make matters worse Organizations must identify exactly how processes must change to take advantage of the software

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Challenges of SCM

Compatibility with existing ERP

SCM is rarely 100% compatible with their existing ERP systems. In many cases, the ERP will need to be modified or at least tweaked in order to accommodate the new SCM system

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Challenges of SCM

Collaboration among the firms

Resistance
SCM requires close coordination among different functional groups and different organizations and extensive business process change Organizations need to trust each other and work cooperatively All members in the supply chain must change the way they work

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Challenges of SCM

Difficult to bring suppliers on board

Part of the SCM processes may involve pushing the ownership of a company's inventory over to its suppliers

Many suppliers are not willing to make such a change

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SCM Applications

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Vendor-managed Inventory (VMI)

Manufacturers can take on replenishment-planning tasks for their customers using the solutions increased visibility into actual consumer demand and inventory levels. With its optimization and deployment capabilities, SCM can fully support the VMI process and help manufacturers make better decisions about how to deploy goods to various customers.

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Collaborative Planning, Forecasting, and Replenishment (CPFR)

SCM supports the CPFR model Enable manufacturers, retailers, and distributors to collaborate on sales and order forecasts and to perform joint planning and decision making

The solution provides system-to-system connectivity, which limits human intervention

Configurable workflows help an organization and its business partners collaborate on resolving exceptions and reduce administrative effort

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Collaborative Transportation Management

SCM can provide carriers with advance visibility into forecasted shipment volume Enable them to perform more effective equipment planning

Transportation planning and vehicle scheduling tools use the Web to support shipment tendering and allow close monitoring of execution processes
Help to constantly monitor carrier performance

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