Supply Chain Management
Course Facilitator: Kamran Khan
Restaurant Supply Chain
• When you buy a burger from McDonald or a Zinger from KFC,
have you thought where all of the ingredients came from that
produced your sandwich?
•
Depending on the restaurant’s location, McDonald’s and KFC
source their ingredients from both local and global suppliers.
• The challenge is to ensure that all restaurants in their network
have enough ingredients to meet customer demand.
•
This requires planning, implementing, and controlling the
efficient, effective flow and storage of goods and services to
deliver the burger to you
Brief Historical Background
•
Academic study of logistics management could be dated back to the
1859S, WHEN Henry Adams, an economist who was president of Yale
University, Offered a course “Economics of Transportation”
•
In 1962, Peter Ducker argue that Logistics was unexplored and left
behind as a “Dark Continent”
•
In 1970s and 80s importance of logistics brought to the surface
•
In early 1980, Logistics penetrated into a broader management
philosophy known as Supply Chain Management
•
The Term “Supply Chain Management” used for the first time in
Financial Times by Oliver and Webber in 1982, questioning that “When
will Supply Chain Management Grow Up”
Cont…
• The distinction between supply chain
management and logistic is blurry in the
literature and the terms often used
interchangeably.
• Today it focuses more on dynamic buyersupplier relationships towards the entire
supply chain integration, of which the
implementation of e-business is the new
dimension
Fighting a War is not easy
• Planning and carrying out the movement and
maintenance of forces....
• Those aspects of military operations that deal with
the design and development, acquisition, storage,
movement, distribution, maintenance, evacuation
and
disposition
of
material;
movement,
evacuation, and hospitalization of personnel;
acquisition
of
construction,
maintenance,
operation and disposition of facilities
a gigantic task indeed
Logistics
• The word logistics was first associated with
the military in 1905 as a branch of war that
pertains to the movement and the supply for
armies.
• Now, Logistics is not only used in military but also
by managers in almost all spheres of activity to
fine tune the process of delivery through various
supply lines with the primary objective of being
able to deliver not just 'in time‘ but also at 'the
desired place'.
Definition of Logistics
• Logistics - ...the process of planning,
implementing, and controlling the efficient,
effective flow and storage of goods,
services, and related information from
point of origin to point of consumption for
the purpose of conforming to customer
requirements." (Reference: Council of
Logistics Management)
Cont…
• It is a fallacy to assume that the best
logistics strategy is to get the product from
the supplier to the customer the fastest
and always be in stock for all
organizations.
• If this were true, most organizations would
not be profitable today.
Getting into the Core of SCM
•
Simply, SCM comprises cross-functional and inter-enterprise logistics
processes. Here's how these unique processes overlap and intertwine:
•
Demand planning and sales forecasting.
Who is responsible for forecasting the needs of the supply chain?
Where does demand/usage begin?
These are just two questions supply chain professionals might ask when
focusing on the end user or consumer
•
SCM manufacturing and operations strategies.
PLC strategies come into play when SCM addresses integrated research and
Process Design targeted at getting products manufactured and to market as
fast as possible.
Cont…
•
Purchasing and supply management
– Suppliers need to be linked to production schedules
– Aware of demand throughout the supply chain
– It's knowing where and how much inventory already exists.
•
Reverse business and supply chain systems
– The recycling of automobile batteries illustrates the role of reverse business systems
– An end user orientation for Reverse Business system has both environmental and
economical advantages
•
END USER METRICS
– Businesses need to develop and manage metrics that can measure order fill rates
Defining Supply Chain Management
• Supply Chain Management is primarily concerned with the
efficient integration of suppliers, factories, warehouses and
stores so that merchandise is produced and distributed in the
right quantities, to the right locations and at the right time, and
so as to minimize total system cost subject to satisfying
service requirements. Simchi-Levi
• Call it distribution or logistics or supply chain management. By
whatever name, it is the sinuous, gritty, and cumbersome
process by which companies move, materials, parts, and
products to customers. Fortune (1994)
Cont…
• "Supply chain management incorporates the field of logistics.
Logistics is a number of sub-processes within SCM."
—Michael Kirby, National Distribution Centers
• "SCM optimizes the flow information and product shipment
events in transit and at rest from the product's conception to
the product's consumption. The objective is to align logistics
with actual and forecasted consumer response."
—Rick Wen, OOCL (USA) Inc.
•
Cont…
• "SCM is truly a closed loop pipeline that
starts with customer needs and raw materials
and ends with customer satisfaction and a
sustained environment. SCM is a pipeline
that moves all its outcomes in two
directions—not only product-flow but also
information-flow and financial-flow."
—Dan Kraska, NC State
Simplistic Supply Chain
•
•
•
•
•
Customer
Retailer
Distributor
Manufacturer
Supplier
Flows in a supply chain
Information
Product
Customer
Funds
Why is SCM Important?
• At the company level, supply chain management
impacts
* COST – For many products, 20% to 40% of
total product costs are controllable
logistics costs.
* SERVICE – For many products, performance
factors such as inventory availability
and speed of delivery are critical to
customer satisfaction.
SCM Goals
Operational: Get the right product,
in the right quantity, to the right customer at
the right time with minimum cost, proper
documentation and financial reconciliation.
In short: satisfy the customer
Strategic: Maximize profits of all supply
chain partners.
Decision Phases in
a Supply Chain
• Supply chain strategy or
design
• Supply chain planning
• Supply chain operation
Process view of a supply
chain
• Cycle view
• Push/pull
view
Cycle View of Supply
Chains
Customer
Customer Order Cycle
Retailer
Replenishment Cycle
Distributor
Manufacturing Cycle
Manufacturer
Procurement Cycle
Supplier
Push/Pull View of
Supply Chains
• Pull processes: execution
is initiated in response to
a customer order
• Push processes:
execution is initiated in
anticipation of customer
orders
Push/Pull View of Supply
Chains
Procurement,
Manufacturing and
Customer Order
Cycle
Replenishment cycles
PUSH PROCESSES
PULL PROCESSES
Customer
Order Arrives
Operations Management
The planning, scheduling, and control
of the activities that transform inputs
into finished goods and services
Viewing Operations as a
Transformation Process
Transformation
Process
Manufacturing operations
Inputs
✓Materials
✓People
✓Equipment
✓Intangible needs
✓Information
Outputs
Service operations
✓Tangible goods
✓Fulfilled requests
✓Information
✓Satisfied Customers
Chapter 1, Slide 25
Cross-Functional Linkages
MIS
Finance
What IT solutions
to make it all work
together?
Budgeting.
Analysis.
Funds.
Design
Sustainability.
Quality.
Manufacturability.
Operations and
Supply Chain
Accounting
Performance measurement systems.
Planning and control.
Human
Resources
Skills? Training?
# of Employees?
Marketing
What products?
What volumes?
Costs? Quality?
Delivery?
Chapter 1, Slide 26
WEB-CENTRIC SUPPLY
CHAIN
• E-commerce
It uses advanced technology to assist business
transactions in a web-based environment and
facilitates the transaction of information flow and
fund flow. E-commerce involves:
–
–
–
–
Business-to-business transaction (B2B)
Business-to- Customer transaction (B2C)
Customer-to-business (C2B)
Customer-to-customer transaction (C2C)
Supply Chain Collaboration
• E-COLLABORATION facilitates coordination of various decisions
and activities beyond transactions include value-added services
like transportation, warehousing, customs clearing, payment, quality
validation, and documentation.
Retailers
Suppliers
Manufacturer
Synchronized
Production
Scheduling
Collaborative
Demand
Planning
Distributors/
Wholesalers
Collaborative
Product
Development
Collaborative Logistics Planning
•Transportation services
•Distribution center services
Logistics Providers
28
E-Procurement
• Direct purchase from suppliers over the Internet
• E-marketplaces
– web sites where companies and suppliers conduct
business-to-business activities
• Reverse auction
– a company posts orders on the Internet for suppliers
to bid on
What is Lean?
A Japanese approach to management that focuses on cutting
out waste, whilst ensuring quality.
This approach sets out to cut out all activities that do not add
value to the production process, such as holding of stock,
repairing faulty product and unnecessary movement of people
and product around the plant.
Toyota had a ‘lean’ production, they did not store car seats
in the factory, Instead they phone the order through & get
deliveries in 5 hours
Just-In-Time (JIT)
Production
• Just in time is a ‘pull’ system of production, so actual
orders provide a signal for when a product should be
manufactured. Demand-pull enables a firm to produce
only what is required, in the correct quantity and at the
correct time.
Advantages of JIT
• Lower stock holding means a reduction in storage space
• Less working capital is tied up in stock
• Less likelihood of stock perishing, becoming obsolete or
out of date
• Avoids the build-up of unsold finished product that can
occur with sudden changes in demand
• Less time is spent on checking
Kanban Production
Control System
• A System Toyota developed to ensure that inventory
was based on actual customer orders rather than
managerial forecasts
• 1. Production Kanban: signals the need to produce
more parts
• 2. Withdrawal Kanban (also called a "move" or a
"conveyance” kanban): signals the need to withdraw
parts from one work center and deliver them to the next
work center.
Chapter 1, Slide 33
Total Quality Management
(TQM)
Managing the entire organization so that it
excels in all dimensions important to the
customer
 Product development
 Marketing
 Operations
 Supply chain
 Support services
Chapter 4, Slide 34
ENTERPRISE RESOURCE
PLANNING
• Enterprise resource planning (ERP)
• A process by which a company (often a
manufacturer) manages and integrates the
important parts of its business. An ERP
management
information
system
integrates areas such as planning,
purchasing, inventory, sales, marketing,
finance, human resources, etc.
Value vs. Supply Chain
• Value chain
– every step from raw materials to the eventual end
user
– ultimate goal is delivery of maximum value to the end
user
• Supply chain
– activities that get raw materials and subassemblies
into manufacturing operation
• Terms are used interchangeably