SUPPLY CHAIN MANAGEMENT Value Chain Supply side-
CB
Published · 52 slides · 0 views
1 / 1
Description
SUPPLY CHAIN MANAGEMENT Value Chain Supply side- raw materials, inbound logistics and production processes Demand side- outbound logistics, marketing and sales. WHAT IS SUPPLY CHAIN MANAGEMENT Leads to Business Process Integration Supply
Related Topics
Download this presentation From Below
"SUPPLY CHAIN MANAGEMENT Value Chain Supply side-" is the property of its rightful owner. Permission is granted to download and print the materials on this website for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Share
Embed code
Presentation Transcript
01
SUPPLY CHAIN MANAGEMENT Value Chain
Supply side- raw materials, inbound logistics and production processes
Demand side- outbound logistics, marketing and sales.<br>
Supply side- raw materials, inbound logistics and production processes
Demand side- outbound logistics, marketing and sales.<br>
02
WHAT IS SUPPLY CHAIN MANAGEMENT Leads to Business Process Integration<br>
03
Supply chain is the system by which organizations source, make and deliver their products or services according to market demand.
Supply chain management operations and decisions are ultimately triggered by demand signals at the ultimate consumer level.
Supply chain as defined by experienced practitioners extends from suppliers’ suppliers to customers’ customers.<br>
Supply chain management operations and decisions are ultimately triggered by demand signals at the ultimate consumer level.
Supply chain as defined by experienced practitioners extends from suppliers’ suppliers to customers’ customers.<br>
04
SUPPLY CHAIN INCLUDES :
MATERIAL FLOWS
INFORMATION FLOWS
FINANCIAL FLOWS<br>
MATERIAL FLOWS
INFORMATION FLOWS
FINANCIAL FLOWS<br>
05
SUPPLY CHAIN MANAGEMENT IS FACILITATED BY :
PROCESSES
STRUCTURE
TECHNOLOGY<br>
PROCESSES
STRUCTURE
TECHNOLOGY<br>
06
Supply chain serves two functions:
Physical
Market mediation<br>
Physical
Market mediation<br>
07
Supply chain objectives may differ from situation to situation.
For functional products, cost efficiency is the critical factor.
For innovative products, responsiveness is the important factor.
Leanness + Agility together make up Leagility<br>
For functional products, cost efficiency is the critical factor.
For innovative products, responsiveness is the important factor.
Leanness + Agility together make up Leagility<br>
08
Supply Chain Structure<br>
09
Supply Chain and Demand Chain
Demand chain is defined as the system by which organizations manage sales and distribution of products and services to end users.
Conceptually incorrect to look at demand chain separately
Look at the pipe as a whole.<br>
Demand chain is defined as the system by which organizations manage sales and distribution of products and services to end users.
Conceptually incorrect to look at demand chain separately
Look at the pipe as a whole.<br>
10
But is there a pipe at all?
More a network
Not necessarily linear
Value chain orchestration rather than controlling the flow through the pipe
A network of independent and interdependent organizations mutually and cooperatively working together to control, manage and improve the flow of materials and information from suppliers to end users<br>
More a network
Not necessarily linear
Value chain orchestration rather than controlling the flow through the pipe
A network of independent and interdependent organizations mutually and cooperatively working together to control, manage and improve the flow of materials and information from suppliers to end users<br>
11
SUPPLY CHAIN DRIVERS
Not new. Value system of Michael Porter
Why sudden interest?
Demanding customers
Shrinking product life cycles
Proliferating product offerings
Growing retailer power in some cases
Doctrine of core competency
Emergence of specialized logistics providers
Globalization
Information technology<br>
Not new. Value system of Michael Porter
Why sudden interest?
Demanding customers
Shrinking product life cycles
Proliferating product offerings
Growing retailer power in some cases
Doctrine of core competency
Emergence of specialized logistics providers
Globalization
Information technology<br>
12
SUPPLY CHAIN ELEMENTS<br>
13
Supply Chain Goals
Efficient supply chain management must result in tangible business improvements. It is characterized by a sharp focus on
Revenue growth
Better asset utilization
Cost reduction.<br>
Efficient supply chain management must result in tangible business improvements. It is characterized by a sharp focus on
Revenue growth
Better asset utilization
Cost reduction.<br>
14
Reduce Overall Cycle Time : Improve Response Supply Chain Management
Underlying Principles Compression Conformance Co-operation Communication (Planning/Manufacturing/Supply) (Forecasts/Plans/Distribution) (Cross -Functional) (Real Time Data) C<br>
Underlying Principles Compression Conformance Co-operation Communication (Planning/Manufacturing/Supply) (Forecasts/Plans/Distribution) (Cross -Functional) (Real Time Data) C<br>
15
Changing Paradigm
Functional vs Process
Products vs Customers
Revenues vs Performance
Inventory vs Information
Transactions vs Relationships<br>
Functional vs Process
Products vs Customers
Revenues vs Performance
Inventory vs Information
Transactions vs Relationships<br>
16
Critical Success Factors today
Cross functional management and planning skills
Ability to define, measure and manage service requirements by market segment
Information systems
Relationship management and win win orientation<br>
Cross functional management and planning skills
Ability to define, measure and manage service requirements by market segment
Information systems
Relationship management and win win orientation<br>
17
PUTTING IN PLACE A WELL OILED SUPPLY CHAIN
Supply chain as an efficient customer satisfying process
Effectiveness of the whole supply chain is more important than the efficiency of each individual department.<br>
Supply chain as an efficient customer satisfying process
Effectiveness of the whole supply chain is more important than the efficiency of each individual department.<br>
18
. The steps involved Step1- Designing the supply chain
Determine the supply chain network
Identify the levels of service required<br>
Determine the supply chain network
Identify the levels of service required<br>
19
Step 2 - Optimizing the supply chain
Determine pathways from suppliers to the end customer
Customer markets to Distribution centers
Distribution centers to production plants
Raw material sources to production plants
Identify constraints at vendors, plants and distribution centers
Get the big picture
Plan the procurement, production and distribution of product groups rather than individual products in large time periods- quarters or years<br>
Determine pathways from suppliers to the end customer
Customer markets to Distribution centers
Distribution centers to production plants
Raw material sources to production plants
Identify constraints at vendors, plants and distribution centers
Get the big picture
Plan the procurement, production and distribution of product groups rather than individual products in large time periods- quarters or years<br>
20
Step 3- Material flow planning
Determine the exact flow and timing of materials
Arrive at decisions by working back from the projected demand through the supply chain to the raw material resources
Techniques
ERP<br>
Determine the exact flow and timing of materials
Arrive at decisions by working back from the projected demand through the supply chain to the raw material resources
Techniques
ERP<br>
21
Step 4 - Transaction processing and
short term scheduling
Customer orders arrive at random
This is a day to day accounting system which tracks and schedules every order to meet customer demand
Order entry, order fulfillment and physical replenishment<br>
short term scheduling
Customer orders arrive at random
This is a day to day accounting system which tracks and schedules every order to meet customer demand
Order entry, order fulfillment and physical replenishment<br>
22
Information flows in Supply Chain Management
Information is overriding element
Need for databases
Master files: Information about customers, products, materials, suppliers, transportation, production and distribution data- do not require frequent processing
Status files- heart of transaction processing- track orders and infrastructure status- updated daily.
Essentially using the same information to make all plans right from structuring the network to processing every day supply chain tasks.<br>
Information is overriding element
Need for databases
Master files: Information about customers, products, materials, suppliers, transportation, production and distribution data- do not require frequent processing
Status files- heart of transaction processing- track orders and infrastructure status- updated daily.
Essentially using the same information to make all plans right from structuring the network to processing every day supply chain tasks.<br>
23
THE VIRTUAL VALUE CHAIN The value chain connects a company’s supply side with its demand side.
Traditionally information has been a supporting function.
Information however can be managed far more creatively.
There are various stages of using value added information processes.<br>
Traditionally information has been a supporting function.
Information however can be managed far more creatively.
There are various stages of using value added information processes.<br>
24
Visibility : See physical operations more effectively through information. Information can be used for effective coordination of value chain activities.
Mirroring capability : In this stage, virtual activities are substituted for physical ones. A parallel value chain is created.
New customer relationships : The company can draw on the flow of information in the virtual value chain to deliver value to customers in new ways.<br>
Mirroring capability : In this stage, virtual activities are substituted for physical ones. A parallel value chain is created.
New customer relationships : The company can draw on the flow of information in the virtual value chain to deliver value to customers in new ways.<br>
25
Dealer Management Conventional functions
Inventory ownership and management
Sales and technical support
Order handling
Credit<br>
Inventory ownership and management
Sales and technical support
Order handling
Credit<br>
26
Contemporary Trends
Channels being divided into two- Fulfillment and Franchised agent
Fulfillment channel- responsible for getting the manufacturer’s product from the plant to the end user through a highly efficient logistics and inventory management system<br>
Channels being divided into two- Fulfillment and Franchised agent
Fulfillment channel- responsible for getting the manufacturer’s product from the plant to the end user through a highly efficient logistics and inventory management system<br>
27
Contemporary Trends
Fulfillment channel may not take ownership of the product but may perform these functions on a per box fee structure
Franchised agents responsible for sales and sales support but will not write the order or supply the product<br>
Fulfillment channel may not take ownership of the product but may perform these functions on a per box fee structure
Franchised agents responsible for sales and sales support but will not write the order or supply the product<br>
28
Issues in customer management
Penetration vs Spread
Concentration is necessary to commit the necessary resources for true customer integration
Depth of customer contact
R&D - sharing information vs developing new products together
Logistics - Pros and cons of methods of transportation vs reengineering the logistics process<br>
Penetration vs Spread
Concentration is necessary to commit the necessary resources for true customer integration
Depth of customer contact
R&D - sharing information vs developing new products together
Logistics - Pros and cons of methods of transportation vs reengineering the logistics process<br>
29
Implementation: Points to keep in mind
Recognize the difficulty of change.
Prepare a blueprint for change that maps linkages among initiatives.
Assess the entire supply chain from supplier relationships to internal operations to the market place, including customers, competitors and industry as a whole.<br>
Recognize the difficulty of change.
Prepare a blueprint for change that maps linkages among initiatives.
Assess the entire supply chain from supplier relationships to internal operations to the market place, including customers, competitors and industry as a whole.<br>
30
IS THE SUPPLY CHAIN WORKING? Does our manufacturing strategy increase product line flexibility while continuing to drive down overall production costs?
When was the last time we measured lost sales to end customers?
Do we have an efficient system to get POS data from retailers?
Are we testing our products with end customers? Do we use the resulting data to adjust our forecasting and supply positions?
Is the ratio of returned orders to sales increasing?<br>
When was the last time we measured lost sales to end customers?
Do we have an efficient system to get POS data from retailers?
Are we testing our products with end customers? Do we use the resulting data to adjust our forecasting and supply positions?
Is the ratio of returned orders to sales increasing?<br>
31
The New Model of Relationships
Hard bargaining vs shared destiny
Exit vs Voice
Arms length relations vs Involving dealers and suppliers in product development
Piling up vs Replenishing dealer inventory more frequently
In short working together as partners to cut costs, boost efficiencies, innovate and share value<br>
Hard bargaining vs shared destiny
Exit vs Voice
Arms length relations vs Involving dealers and suppliers in product development
Piling up vs Replenishing dealer inventory more frequently
In short working together as partners to cut costs, boost efficiencies, innovate and share value<br>
32
Adversarial vs partnerships
Short term vs long term contracts
Large vs small order quantity
Full truck load vs small parcels
Inspection vs no inspection<br>
Short term vs long term contracts
Large vs small order quantity
Full truck load vs small parcels
Inspection vs no inspection<br>
33
Written order vs understanding
Many vs few suppliers
Design and then invite quote from vendor vs involving vendor in development
Bargaining, holding cards close to chest vs Shared destiny, transparency<br>
Many vs few suppliers
Design and then invite quote from vendor vs involving vendor in development
Bargaining, holding cards close to chest vs Shared destiny, transparency<br>
34
Summary
Segmentation of customers based on service needs
Customization of logistics network
Listen to signals of market demand and plan accordingly.
Differentiate product close to the customer
Source strategically
Develop a supply chain wide technology strategy
Accept channel spanning performance measures<br>
Segmentation of customers based on service needs
Customization of logistics network
Listen to signals of market demand and plan accordingly.
Differentiate product close to the customer
Source strategically
Develop a supply chain wide technology strategy
Accept channel spanning performance measures<br>
35
The Bullwhip Phenomenon
Volatility amplification along the network
Increase in demand variability as we move upstream away from the market
Mainly because of lack of communication and coordination
Delays in information and material flows<br>
Volatility amplification along the network
Increase in demand variability as we move upstream away from the market
Mainly because of lack of communication and coordination
Delays in information and material flows<br>
36
Bullwhip effect occurs because of various reasons:
Order Batching - Accumulate orders
Shortage gaming- Ask for more than what is needed
Demand forecast updating<br>
Order Batching - Accumulate orders
Shortage gaming- Ask for more than what is needed
Demand forecast updating<br>
37
Important points to keep in mind
Segment customers based on service needs.
Modify the supply chain to meet these service requirements profitably.
Customize the logistics network.
Develop forecasts collaboratively involving every link of the supply chain.
Locate the leverage point where the product is unalterably configured to meet a single requirement
Delay product differentiation till the last possible moment.<br>
Segment customers based on service needs.
Modify the supply chain to meet these service requirements profitably.
Customize the logistics network.
Develop forecasts collaboratively involving every link of the supply chain.
Locate the leverage point where the product is unalterably configured to meet a single requirement
Delay product differentiation till the last possible moment.<br>
38
Assess options such as modularized design or modification of manufacturing processes that can increase flexibility.
Cultivate warm relationships with suppliers.
Efficient supply chain management has to be accompanied by a technology strategy.<br>
Cultivate warm relationships with suppliers.
Efficient supply chain management has to be accompanied by a technology strategy.<br>
39
ITALIAN CLOTHING MANUFACTURE Warehousing and transportation 6
Inventory 5
Late delivery returns 2
Obsolescence 20
Lost sales 60
Need to minimize obsolescence costs
Minimize product range flexibility
Reduce product development cycle<br>
Inventory 5
Late delivery returns 2
Obsolescence 20
Lost sales 60
Need to minimize obsolescence costs
Minimize product range flexibility
Reduce product development cycle<br>
40
Dell’s Direct Business Model of Virtual Integration Advantages of a tightly coordinated supply chain traditionally facilitated by vertical integration.
Combined with focus and specialization.
Leveraging on investments others have made and focusing on delivering solutions and systems to customers
Fewer things to manage - fewer things go wrong
Suppliers’ engineers part of Dell’s Design team
Have only a few partners<br>
Combined with focus and specialization.
Leveraging on investments others have made and focusing on delivering solutions and systems to customers
Fewer things to manage - fewer things go wrong
Suppliers’ engineers part of Dell’s Design team
Have only a few partners<br>
41
Dell’s Direct Business Model of Virtual Integration Share information with partners in Real time fashion.
Stitch together a business with partners that are treated as if they are inside the company.
Change focus from how much inventory there is to how fast it is moving
Assets collect risks around them one way or the other.
Limited or no testing - Eg. Sony Monitors<br>
Stitch together a business with partners that are treated as if they are inside the company.
Change focus from how much inventory there is to how fast it is moving
Assets collect risks around them one way or the other.
Limited or no testing - Eg. Sony Monitors<br>
42
Dell’s Direct Business Model of Virtual Integration Only three Manufacturing centers - Austin, Ireland and Malaysia.
Inventory levels and replenishment needs sometimes conveyed to vendors on hourly basis.
Substitute information for inventory and ship only when we have real demand from real end customers
Clever segmentation - Focus on institutional markets - 70% to very large customers with annual purchases exceeding $1 million.<br>
Inventory levels and replenishment needs sometimes conveyed to vendors on hourly basis.
Substitute information for inventory and ship only when we have real demand from real end customers
Clever segmentation - Focus on institutional markets - 70% to very large customers with annual purchases exceeding $1 million.<br>
43
Dell’s Direct Business Model of Virtual Integration Exit from retail business after wrong entry in 1989.
Segmentation - closeness to customers and access to valuable information.
Demand forecasting as a critical sales skill
Help global customers, manage their total purchase of PCs by selling them a standard product
Dell server loads software on customers’ computers
Meet customers’ needs faster and more efficiently than any other model.<br>
Segmentation - closeness to customers and access to valuable information.
Demand forecasting as a critical sales skill
Help global customers, manage their total purchase of PCs by selling them a standard product
Dell server loads software on customers’ computers
Meet customers’ needs faster and more efficiently than any other model.<br>
44
Li and Fung, Hong Kong Founded in 1906
Today 35 offices in 20 countries
1997 revenues of $ 1.7 billion
Largest export trading company in Hong Kong
Customers- American and European retailers
Sources clothing and other consumer goods ranging from toys to fashion accessories to luggage<br>
Today 35 offices in 20 countries
1997 revenues of $ 1.7 billion
Largest export trading company in Hong Kong
Customers- American and European retailers
Sources clothing and other consumer goods ranging from toys to fashion accessories to luggage<br>
45
Order from Europe
Buy yarn from Korea
Weave and dye in Taiwan
Buy Japanese zippers made in China
Make the garments in Thailand in five different factories
Pulling apart the value chain and optimizing at each step<br>
Buy yarn from Korea
Weave and dye in Taiwan
Buy Japanese zippers made in China
Make the garments in Thailand in five different factories
Pulling apart the value chain and optimizing at each step<br>
46
Victor Fung
“ Today, assembly is the easy part. The hard part is managing your suppliers and the flow of parts.“ Good supply chain management strips away time and cost from product delivery cycles. Our customers have become more fashion driven, working with six or seven seasons a year instead of just two or three. Once you move to shorter life cycles, the problem of obsolete inventory increases dramatically. With customer tastes changing rapidly and markets segmenting into narrow niches, it’s not just fashion products that are becoming increasingly time sensitive.”<br>
“ Today, assembly is the easy part. The hard part is managing your suppliers and the flow of parts.“ Good supply chain management strips away time and cost from product delivery cycles. Our customers have become more fashion driven, working with six or seven seasons a year instead of just two or three. Once you move to shorter life cycles, the problem of obsolete inventory increases dramatically. With customer tastes changing rapidly and markets segmenting into narrow niches, it’s not just fashion products that are becoming increasingly time sensitive.”<br>
47
Endorsement by Stan Shih, CEO, Acer
Buying right things
Reaching into suppliers to ensure that certain things happen on time and at the right quality level.<br>
Buying right things
Reaching into suppliers to ensure that certain things happen on time and at the right quality level.<br>
48
Buyer informs five weeks before delivery.
Reserve undyed yarn from yarn supplier.
Lock up capacity in weaving and dyeing mills.
Outsourcing not same as leaving suppliers to do the worrying.
Single factories are too small to have much buying power and to demand faster deliveries from suppliers.
To shorten delivery cycle, need to go upstream to organize production.
Li & Fung able to delay commitment to a particular fashion trend.<br>
Reserve undyed yarn from yarn supplier.
Lock up capacity in weaving and dyeing mills.
Outsourcing not same as leaving suppliers to do the worrying.
Single factories are too small to have much buying power and to demand faster deliveries from suppliers.
To shorten delivery cycle, need to go upstream to organize production.
Li & Fung able to delay commitment to a particular fashion trend.<br>
49
Integrated logistics management
Elimination of consolidators in container shipments
Smokeless factory
Design
Procurement
Inspection of raw materials
Production planning
Line balancing
Inspection of finished goods
No worker ownership
No labour management<br>
Elimination of consolidators in container shipments
Smokeless factory
Design
Procurement
Inspection of raw materials
Production planning
Line balancing
Inspection of finished goods
No worker ownership
No labour management<br>
50
“ If we don’t own factories, can we say we are in manufacturing? Absolutely, because of the 15 steps in the manufacturing value chain, we probably do 10.”
Basic operating unit is the division.
Divisions focused on serving single customers or groups of small customers.
Less emphasis on geographic grouping
Merchandising decisions decentralized
Financial controls and operating procedures tightly centralized.
Strong focus on inventory and working capital management.<br>
Basic operating unit is the division.
Divisions focused on serving single customers or groups of small customers.
Less emphasis on geographic grouping
Merchandising decisions decentralized
Financial controls and operating procedures tightly centralized.
Strong focus on inventory and working capital management.<br>
51
“As far as I am concerned, inventory is the root of all evil. At a minimum, it increases the complexity of managing any business. So it’s a word we don’t tolerate around here.”
Need for sophisticated information systems. Li & Fung working to create a database to systematically track all supplier relationships.
“ Someone might steal our database but when they call up a supplier, they don’t have the long relationship with the supplier that Li & Fung has. It makes a difference to suppliers when they know that you are dedicated to the business, that you have been honoring your commitments for 90 years.”<br>
Need for sophisticated information systems. Li & Fung working to create a database to systematically track all supplier relationships.
“ Someone might steal our database but when they call up a supplier, they don’t have the long relationship with the supplier that Li & Fung has. It makes a difference to suppliers when they know that you are dedicated to the business, that you have been honoring your commitments for 90 years.”<br>
52
Broadening the middle
Better prices and better margins for customers
Tackling the soft $3 in the cost structure. $3 represents the inefficiency in the supply chain for a consumer product priced at $4. Look at costs throughout distribution channels than just in factory<br>
Better prices and better margins for customers
Tackling the soft $3 in the cost structure. $3 represents the inefficiency in the supply chain for a consumer product priced at $4. Look at costs throughout distribution channels than just in factory<br>