UMMC – Supply Chain Mgmt.
Course 1
Introduction to Supply Chain
Management Concepts
Mike Almich and Tony Bucko
Course List
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Intro to SC Concepts
Financials
Logistics and Distribution
Purchasing
Inventory Management 1
Inventory Management 2
SC Technology
Production Management
Quality Control and Improvement
What will we cover today?
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Importance of SC Management
Development of the SC Concept
Components of SC Management
Flow of Materials and Information
Issues and Challenges
Opportunities
What is SCM
• Supply chain management can be
viewed as a pipeline or conduit for
the efficient and effective flow of
products/materials, services,
information, and financials
Importance of SCM
• Dollars
• SCM expenses average 25% of U.S. corporate budgets
• Dollar value of U.S. inventory in 2004 equal to U.S. federal budget
• Leverage
• Cost reductions in SCM go directly to bottom line
• Efficiency is amplified in ROA
• SCM have direct effect on customer perceptions (timely
delivery, quality, etc)
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Opportunity
• SCM has much opportunity for improvement in most organizations
• http://www.youtube.com/watch?v=_8sB
uBcCGs8
Development of the Supply Chain
Concept
Physical
Distribution
Concept
Logistics
Management
Concept
Value
Chain
Concept
SCM
Physical Distribution Concept
• 1950s and 1960s
• Focused on outbound logistics
• Logical due to value of finished
goods
• Total systems costs and analyzing
tradeoff scenarios
Logistics Management
Concept
• 1970s and 1980s
• LMC integrated inbound logistics into
the Physical Distribution Concept
• Came about due to deregulation of
transportation
• More international sourcing also led to
focusing on inbound side
Logistics Management Concept
Physical supply
materials management
inbound logistics
Physical distribution
outbound logistics
Value Chain Concept
• 1990s
• Further deregulation in the areas of
finance and communication
• Developed as a tool for evaluating
competitive advantage
• Integrated sales, marketing,
purchasing, and manufacturing with
logistics.
Supply Chain Management
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Mid 1990’s to present
Globalization
Technology
Organizational consolidation
The empowered consumer
Manufacturing Supply Chain
Supply Chain Management
Globalization
Supply Chain Management
• Organizational Consolidation
• Move from adversarial
relationships with suppliers to
collaborative relationship
Supply Chain Management
• The Empowered
Consumer
• Technology and
globalization has shifted
power to the consumer
• This increases pressure on
supply chain
An example in Fairview System
terms…
SCM Components
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Financials
Inventory Management
Logistics and Distribution
Supply/Demand Management
SC Technology
Production Management
Quality Control and Improvement
Purchasing
Financials
• Basic Business
Financials
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Income Statement
Balance Sheet
Cash Flow Statement
General Ledger
• Accounting Practices
• ROA/ROI
Financials
The Supply Chain Financial Impact
• A major financial objective for any organization is to produce
a satisfactory return for stockholders.
• The absolute size of the profit must be considered in relation
to the stockholders’ net investment, or net worth.
• An organization’s financial performance is also judged by the
profit it generates in relationship to the assets utilized, or
return on assets (ROA).
• The supply chain plays a critical role in determining the level
of profitability in an organization.
Inventory Management
• In U.S. Inventory investment averages
about 14% of GDP or $2.1 Trillion
• When to Order/How much to Order
• Balancing Supply with Demand
• Large Impacts on Financials and
Customer Service
http://www.investopedia.com/video/play/what-isgdp#axzz1cjqs0ph6
Inventory Management
• Critical Decision-making for Inventory
Control
• Quantity Issues
• Classifying Inventory
• Timing Issues
• Systems for Inventory Control
• Continuous/Periodic
• Two Bin/Kanban
Inventory Management
• Approaches of Inventory
Management
• JIT
• MRP and DDMRP
• EOQ
• Fixed Order
Quantity/Order Interval
• Condition of
certainty
• Condition of
Uncertainty
Logistics/Distribution
• In U.S. Logistics and Distribution accounts for
8.3% of GDP or $1.2 Trillion (2010)
• The physical flow of goods and services up and
down the supply chain
• Critical to demand fulfillments
Supply/Demand Management
• Focused efforts to manage input
fluctuations
• Focused efforts to process, influence,
manage, and anticipate customer
demand
• http://www.youtube.com/watch?v=Huuw
eJmSXlg
Supply/Demand Management
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VMI
EDI
CPFR
Bullwhip Effect
Buyer/Seller
Relationships
http://www.youtub
e.com/watch?v=w
LNdDSYqhNw
SC Technology
• Supports critical
supply chain
capabilities and
strategies
• A well-designed SCIS
framework links
people, processes,
and technology in a
manner that provides
actionable
information and
enhances decision
making.
SC Technology
Production Management
• Production Systems
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Made to Stock (MTS)
Assemble to Order (ATO)
Make to Order (MTO)
Engineer to Order (ETO)
• Push/Pull Systems
Quality Control and Improvement
• Service Process Design/Analysis
• Factors Influencing Process Design
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Strategic Importance
Continuous Process Improvement
Pareto Analysis
Ishikawa Diagrams
Modeling Principles
Quality Control and Improvement
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Lean Principles
6 Sigma
Benchmarking
Just-In-Time
TQM (Total Quality
Management)
• ISO:9000
Quality Control and
Improvement
Purchasing
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Purchasing Activities
Strategic Sourcing
Vendor Management
Total Cost of
Ownership
Supply Chain Issues
So what can we do?
• Control our costs
• Reduce Pricing to reduce
cost
• Reduce
variation/standardize
product to reduce costs
• Manage our Inventory
6 Drivers of Supply Chain
Excellence