Supply Chain Management #1

business boundaries include one-time suppliers and customers

alliances with suppliers, transportation, distributors, and customers

return products, obtain warranty repairs, throw product away/recycle

Middle company with first-tier suppliers and customers on either side

• Product-related activities
• improve operating efficiencies, quality, and customer service
• sustainable competitive advantage
• all collaborating organizations.

firms most important direct boundaries

Small changes ripple through and create larger changes in supply chian

safety stock, forecasting, and production problem

radical rethinking and redesigning of business processes to reduce waste and increase performance

• most crucial issue
• Supplier eval
• Supplier certification
• Strategic pertnerships
• Purchasing
• Supplier relationships
• Strategic Sourcing

Purchasing:Upstream

determining the current capabilites

Coordinating all aspects

• Performance measurement
• Risk magmt

Logistics

• Transportation mgmt. & models
• CRM
• Warehousing

• Suppliers manage buyer inventories
• Reduces carrying and stockout costs

• Supplier track inventories
• Determines delivery schedules & order quantities
• Buyer can take ownership at stocking location

• Supply Mgmt
• Operations
• Distribution
• Integration

Production: adding value

• Forecasting
• Inventory mgmt
• Resource planning
• Process mgmt

buers to assume the supplier will meet certain product quality and service requirements covered by the certification

• minimizes costs for forecasting being different from actual demand
• match demand to available capacity

• Raw materials manufacturers
• Compoenent/intermediate manufacturers
• Final Product manufacturers
• Wholesalers/distributors
• Retailers

Product, Service, Credit Flow

Orders, cash, recycling, and returns flow

total quality management strategy

• Globalization & Increase competition
• Increasing customer expectations
• Product proliferation
• Shorter product life cycles
• New Tech
• environmental Issues

Cost Savings and better coordination of resources

• Price Fluctuations
• Periodic ordering of wholesalers/manufacturers
• Rationing/shortage gaming

• Base production on wholesaler demand, not consumer demand:
• Actual Demand available to suppliers
• Vendor-managed inventory
• Reduce SC
• Reduce order to deliver time

• Breadth-other manufacturers
• Depth- 2nd/3rd tier suppliers/customers

Improve over competitors' performance

75% consumers influenced by CSR

• Six Sigma
• Reduce:
• purchasing costs
• waste
• excess inventory
• non-value added activies

wholesalers and retailers who resell

by raw to make service/product

Maintenace Repair Operating

Aquiring materials, services & equipment

acquisition of services

all acquisition activites

• 1. uninterrupted flows or raw materials at lowest total cost (Total Cost Analysis)
• 2. Improve quality
• 3. Optimize customer satisfaction

• Triggers Order
• State: product quantity and delivery date

• Getting Proposal
• Buyer identifies suppliers & issues a RFQ for routine items or RFP for demanding products

• Contract Formed
• buyer's offer accepted by supplier

acquiring sources of supply

Acquiring customer's operations

• Cost advantage
• Insufficient capacity
• Lack of expertise
• Quality

• Strategic benefit of BEST IN CLASS supplier
• Greater flexibility in new tech
• Reduce cycle times
• Risk transferred
• Less capital required
• Technology

• Protect Patent
• No competent supplier
• Quality control
• Existing capacity
• Control lea-time, tansport, and warehouse cost
• Lower cost

Fixed Cost + Variable Cost

• Cost to Make = Cost to Buy
• > make
• < buy

New relationships with suppliers

• Outsourcing
• Focus on Operations
• Single sourcing
• Long-term Buyer-Supplier relations
• Partnerships vs adversarial trading

• List of org you purchase from
• Many are consolidating

• earlier involvement: info on trends, materials, processes or designs
• Info on markets
• Capacity for unexpected demand
• Cost efficiency- economies of scale

• Good relationship
• Less quality variability
• Lower cost
• Transporation economies
• Proprietary product/process
• Volume too small to split

• Need capacity
• Spread interruption risk
• Create competition
• Information
• Special kinds of business

• Technologies
• Willingness to share tech & Info
• Quality
• Cost
• Reliability
• Order system & cycle time
• Capacity
• Communication capability
• Location
• Service

• (often overlooked)
• Unit cost
• Tooling
• Transportation
• Ordering
• Carrying
• Quality

annual demand * price

set amount

(order cost * annual demand * weight * TL) /pound per mile

order cost * (annual demand/order quantity)

(Order quantity/2) * price * carry %

Unit cost * quality%

• 1. Key dimensions
• 2. performance data
• 3. assign weights
• 4. evaluate performance
• 5. score
• 6. classify vendors
• 7. Audit regularly

Rating * Weight = final value

Weights must sum to 1

• Trust
• Shared vision & objectives
• Relationships
• Mutual benefits & needs
• Commitment & to mgmt support
• Change mgmt
• Info sharing
• Capabilites

• 1. understandable
• 2. easy to measure
• 3. focused on real value-added results

• Avoids ill-advised customer orders
• Supplier decides inventory setup & shipment
• Opportunity for supplier to educate customers about other products

• located at corporate office
• makes all purchasing decisions

always hybrid

• local departments
• make own purchasing decisions

always hybrid

• Concentrated volume
• Leveraging purchase volume
• Avoid duplication
• Specialization
• Lower transportation costs
• No competition within units
• Common supply base

• Closer knowledge of requirements
• Local sourcing
• Less bureaucracy

• 3m
• decentralized corporate
• centralized business unit

• Volume discounts
• central large national contracts
• decentral items specific to business unit

can improve quality, cost and delivery performance

• additional skill & knowledge with:
• international suppliers
• logistics
• communication
• political environment

Finished Goods

• Raw materials
• Component parts
• Sub-assemblies

• Opinion
• Used when data is limited, unavailable, or not currently relevant

• Mathematical
• Using old data to predict new data

Period of time

whether it is increasing or decreasing

• longer than a year
• wave-like
• due to business cycle

• peaks and valleys
• consistent interval

• unexpected/unpredictable events
• Natural disasters

• Consumer Survey- focus groups
• Sales Force Composite- survey sales force
• Dlphi Method
• Historical Analogy
• Jury of Executive Opinion

• 1. Experts
• 2. Questionnaire
• 3. Sum results & redistribute with new questions
• 4. Sum again, refining forescases & conditions, new questions
• 5. Repeat 4 if needed thatn distribute final results to all participants

• Time Series:
• Moving average
• Exponential smoothing
• Trend projection
• Casual models:
• Linear Regression

Next period = past period

average of past periods

• how far above or below actual demand
• Defined in real terms

Indicates bias- tendency to be consistently higher or lower than actual demand

*Sum of errors

• average absolute error
• 0 is best
• larger less desirable

• Unequal weighting on prior time periods
• Weights must add to one
• t= last

• true average of forecast error
• Ideal 0
• Average of abs(e/a)

average e^2

• Forecast in acceptable limits
• +- 4
• is forecast average keeping pace
• Use when other figures are both really large

• Coordinate demand forecasting, production and purchase planning, and inventory replenishment
• Used to integrate multi-tier SC
• Objective: exchange internal info to give reliable, longer term future view
• Uses cyclic & interative approach

• 1. Collaboration Arrangement
• 2. Joint Business Plan
• 3. Sales Forecasting
• 4. Order Planning/Forecasting
• 5. Order Generation
• 6. Order Fulfillment
• 7. Exception Management
• 8. Performance Assessment

• Strengthens partner relationships
• Analysis of sales & order forecasts
• Improve forecast accuracy
• Integrates planning, forecasting and logistics
• Efficient category management & customer purchasing patterns