Supply Chain Management
Lecture 9
Enterprise systems
• An organisational wide enterprise system consists
of (e.g. E.R.P.):
• Based on suite of integrated software modules and
common central database
• Integrate information from across company’s
divisions, departments, key business processes in the
four functional areas
• Updated information made available to all business
processes
• Generate enterprise-wide data for management
analyses
How enterprise systems “should”work
Business value of enterprise systems
• Providing firm-wide information to help managers make better
decisions; including the formulation/implementation and
evaluation of organisational strategy
• Increasing operational efficiency
• Helping respond to customer requests rapidly
• Producing, procuring, shipping right amounts
• Enforcing standard practices and data throughout company
• Allowing senior management to easily find out at any moment
how a particular organizational unit is performing or to
determine which products are most or least profitable
What is Supply Chain
• Network of organizations and business processes
for:
• Procuring raw materials
• Transforming them into intermediate and finished products
• Distributing finished products to customers
• Includes secondary and tertiary suppliers
• Upstream portion: Suppliers
• Downstream portion: Distributors
Nike’s Supply Chain
What is supply chain management
• Supply chain management (SCM) is the flow of
materials, information, and finances as they
move in a process from supplier to manufacturer
to wholesaler to retailer to consumer.
• Supply chain management involves coordinating
and integrating these flows both within and
among companies.
• The ultimate goal of any effective supply chain
management system is to reduce inventory (with
the assumption that products are available when
needed)
Push V Pull based supply chain models
Components or steps of SCM
•
•
•
•
•
Plan
Source
Make
Deliver
Return
Plan
• The strategic portion of SCM.
• Companies need a strategy for managing all
the resources that go toward meeting
customer demand for their product or service.
• A big piece of SCM planning is developing a
set of metrics to monitor the supply chain so
that it is efficient, costs less and delivers high
quality and value to customers.
Source
• Companies must choose suppliers to deliver the goods
and services they need to create their product.
• Therefore, supply chain managers must develop a set
of pricing, delivery and payment processes with
suppliers and create metrics for monitoring and
improving the relationships.
• SCM managers can put together processes for
managing their goods and services inventory, including
receiving and verifying shipments, transferring them to
the manufacturing facilities and authorizing supplier
payments.
Make
• The manufacturing step.
• Supply chain managers schedule the activities
necessary for production, testing, packaging
and preparation for delivery.
• This is the most metric-intensive portion of
the supply chain—one where companies are
able to measure quality levels, production
output and worker productivity.
Deliver
• Also may be referred to as logistics
• Companies coordinate the receipt of orders
from customers
• Develop a network of warehouses, pick
carriers to get products to customers and set
up an invoicing system to receive payments.
Return
• Supply chain planners have to create a
responsive and flexible network for receiving
defective and excess products back from their
customers and supporting customers who
have problems with delivered products..
Information and supply chain
management
• Supply chain inefficiencies due to poor planning
include:
• parts shortages,
• Can waste up to 25% of operating costs
• Caused by inaccurate or untimely information
• Uncertain product demand
• Late shipments from suppliers
• excessive inventory
• Safety stock: Kept as buffer for lack of flexibility in supply chain
adds to costs- ideally a just in time strategy should be adopted.
Supply chain management software
• Used to track demand, supply, manufacturing
status, logistics (i.e. where things are in the
supply chain), and distribution
• To share data with supply chain partners at an
ever increasing rate.
• Two main categories of software:
– Supply chain planning systems
– Supply chain execution systems
•
Supply chain planning systems
•
•
•
•
•
Demand planning
Order planning
Scheduling and manufacturing planning
Distribution planning
Transportation planning
An example of Supply Chain Management Systems
A decision support “modelling” system ; refer to lecture
An important use of
SmartForecasts demand
planning software from
Smart Software is to
forecast future demand for
products where demand is
intermittent or irregular.
Shown here is a forecast
graph for the distribution
of total cumulative
demand for a spare part
over a four-month lead
time.
Supply chain execution systems
Manage flow of products through distribution
centres and warehouses to ensure products
delivered to right locations in most efficient manner
• Order commitments
• Final production
• Replenishment
• Distribution management
• Reverse distribution (products/raw material that
is returned)
Benefits of information sharing on the
supply chain
• The payoff of timely and accurate supply chain
information is the ability to make or ship only as
much of a product as there is a market for. This is the
practice known as just-in-time manufacturing, and it
allows companies to reduce the amount of inventory
that they keep. This can cut costs substantially, since
you no longer need to pay to produce and store
excess goods
• Requires: Retailers and manufacturers sharing
information
Wal-Mart and Procter and Gamble
• These two companies started collaborating back in the '80s
when retailers shared very little information with
manufacturers.
• The two giants built a software system that hooked Proctor
& Gamble up to Wal-Mart's distribution centres. When
Proctor & Gamble's products run low at the distribution
centres, the system sends an automatic alert to Proctor &
Gamble to ship more products.
• In some cases, the system goes all the way to individual
Wal-Mart stores. It lets Proctor & Gamble monitor the
shelves through real-time satellite up-links that send
messages to the factory whenever a Proctor & Gamble item
swoops past a scanner at the Wal-Mart register.
Wal-Mart and Procter and Gamble
• With this kind of up-to-date information, Proctor
& Gamble knows when to make, ship and display
more products at the Wal-Mart stores.
• No need to keep products piled up in warehouses
awaiting Wal-Mart's call. Invoicing and payments
happen automatically too.
• The system saves Proctor & Gamble so much in
time, reduced inventory and lower orderprocessing costs that it can afford to give WalMart "everyday, low prices" without putting itself
out of business.
Obstacles to installing and using supply
chain software
• Gaining trust form suppliers and partners
• Internal resistance to change
• Many mistakes after implementation
Business value of supply chain
management systems
• Matching supply to demand and reducing inventory levels
• Improving delivery service and speeding product time to
market
• Using assets more effectively
• Increasing sales by assuring availability of products
• Increased profitability
• Supply chain costs can approach 75% of total operating
budgets
Real world examples
• Wal-Mart
– http://www.cio.com/article/143451/How_Wal_Mart_
Lost_Its_Technology_Edge
• Nike
– http://www.cio.com/article/32334/Nike_Rebounds_H
ow_and_Why_Nike_Recovered_from_Its_Supply_Chai
n_Disaster
• Nintendo
– http://www.cio.com/article/445316/Nintendo_Wii_Sh
ortage_Shrewd_Marketing_or_Flawed_Supply_Chain
_
Question
• Describe, the steps in implementing a, typical,
supply chain.
(12 marks)
•
What are issues of the modern supply chain?
(6 marks)
•
• Explain, using a suitable example, how the use of
a supply chain management system can
overcome these issues. (12 marks)