Chapter 1 INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

CHAPTER INTRODUCTION TO SUPPLY CHAIN MANAGEMENT Principles of Supply Chain Management: A Balanced Approach Supply Chain Management: The true story… • Estimated that the grocery industry could save $30 billion (10% of operating cost) by using effective logistics and supply chain strategies – A typical box of cereal spends 104 days from factory to sale – A typical car spends 15 days from factory to dealership • Compaq estimates it lost $0.5 billion to $1 billion in sales in 1995 because laptops were not available when and where needed • P&G estimates it saved retail customers $65 million by collaboration resulting in a better match of supply and demand MBA Nguyen Phi Hoang©2015_SCM Recommended books Principles of Supply Chain Management: A Balanced Approach 3rd E ( Author: Wisner, Leong and Tan,2012) Essentials of Supply Chain Management ( Author: Michael Hugos) Strategic Supply Chain Management ( Author: Cohen and Roussel) Supply Chain Management: Best Practices ( Author: David Blanchard) Operation & Supply Chain Management ( Author: Jacobs & Chase) Supply Chain Excellence ( Author: Bolstorff and Rosenbaun) MBA Nguyen Phi Hoang©2015_SCMu Methods to learn this SCM subject There are 14 chapters in Wisner’s SCM book Introduction to SCM Purchasing Management Supplier relationship Management Strategic sourcing for successful SCM Collaborative, Planning, Forecasting & Replenishing Enterprise Resource Planning System Inventory management Process Management(JIT, Lean, TQM) Logistics Management 10 Customer Relationship Management 11 Location Management 12.Service response Logistics 13 Process Integration 14.Performance Measurement MBA Nguyen Phi Hoangâ2015_SCM Learning Objectives You should be able to: Describe a supply chain and define supply chain management • Describe the objectives and elements of supply chain management • Describe a brief history and some of the trends of supply chain management MBA Nguyen Phi Hoang©2015_SCM Chapter Outline • • • • Introduction Supply Chain Management Defined The objectives of SCM The Importance of Supply Chain Management • The Origins of Supply Chain Management • The Foundations of Supply Chain Management • Some Current Trends in Supply Chain Management MBA Nguyen Phi Hoang©2015_SCM What is a Supply Chain? • • • A supply chain consists of all stages involved, directly or indirectly, in fulfilling a customer request The supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers, and customers themselves – Chopra and Meindl A supply chain is the alignment of firms that bring products or services to market – Lambert, Stock, and Ellram A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers – Ganeshan and Harrison MBA Nguyen Phi Hoang©2015_SCM What is a Supply Chain?(Cont.) A supply chain consists of the flow of products and services from: – – – – – Raw materials manufacturers Component and intermediate manufacturers Final product manufacturers Wholesalers and distributors and Retailers Connected by transportation and storage activities, and Integrated through information, planning, and integration activities MBA Nguyen Phi Hoang©2015_SCM What is a Supply Chain? (Cont.) MBA Nguyen Phi Hoang©2015_SCM Some more supply chain models (cont.) MBA Nguyen Phi Hoang©2015_SCM 10 Importance of Supply Chain Management Cost savings and better coordination of resources are reasons to employ Supply Chain Management – Reduced Bullwhip Effect- the magnified reduction of safety stock costs based on coordinated planning and sharing of information – Collaborative planning, forecasting, and replenishment activities reduce the Bullwhip Effect and lead to better customer service, lower inventory costs, improved quality, reduced cycle time, better production methods, and other benefits MBA Nguyen Phi Hoang©2015_SCM 15 Importance of Supply Chain Management (Cont.) Firms have discovered value-enhancing and long term benefits Who benefits most? Firms with: – Large inventories – Large number of suppliers – Complex products – Customers with large purchasing budgets Ex: In U.S - Cost of purchased materials in 2008 : $3.2 trillion - Cost of inventory among manufacturers : $2.2 trillion - Transportation and inventory carrying cost : $434 Billion MBA Nguyen Phi Hoang©2015_SCM 16 Origins of Supply Chain Management 1950s & 1960s U.S manufacturers focused on mass production techniques as their principal cost reduction and productivity improvement strategies 1960s-1970s Introduction of new computer technology lead to development of Materials Requirements Planning (MRP) and Manufacturing Resource Planning (MRPII) to coordinate inventory management and improve internal communication MBA Nguyen Phi Hoang©2015_SCM 17 Origins of Supply Chain Management (Cont.) 1980s & 1990s Intense global competition led U.S manufacturers to adopt Supply Chain Management along with Just-In-Time (JIT), Total Quality Management (TQM), and Business Process Reengineering (BPR) practices MBA Nguyen Phi Hoang©2015_SCM 18 Origins of Supply Chain Management –Cont 2000s and Beyond Industrial buyers will rely more on third-party service providers (3PLs) to improve purchasing and supply management Wholesalers/retailers will focus on transportation and logistics more & refer to these as quick response, service response logistics, and integrated logistics MBA Nguyen Phi Hoang©2015_SCM 19 Origins of Supply Chain Management –Cont MBA Nguyen Phi Hoang©2015_SCM 20 The Foundations of Supply Chain Management Supplier management, supplier Supply evaluation, supplier certification, Management strategic partnerships, supplier alliance, SRM, ethical & sustainable sourcing Operations Demand management, CPFR, Inventory Management, MRP, ERP, JIT , lean production, Six Sigma Logistics Logistics management, CRM, RFID, distribution network, perfect order fulfillment, global supply chains, service response logistics Integration Barrier to integration, risk & security management, green supply chain MBA Nguyen Phi Hoang©2015_SCM 21 The Foundations of Supply Chain Management (Cont.) Supply or Purchasing Trends: – Long term relationships – Supplier management- improve performance through • Supplier evaluation (determining supplier capabilities) • Supplier certification (third party or internal certification to assure product quality and service requirements) – Strategic partnerships- successful and trusting relationships with top-performing suppliers MBA Nguyen Phi Hoang©2015_SCM 22 Important Elements of Supply Chain Management Operations Trends: – Demand management- match demand to available capacity – Linking buyers & suppliers via MRP and ERP systems – Use JIT to improve the “pull” of materials to reduce inventory levels – Employ TQM to improve quality compliance among suppliers MBA Nguyen Phi Hoang©2015_SCM 23 Important Elements of Supply Chain Management (Cont.) Logistics Trends: – Transportation management- tradeoff decisions between cost & timing of delivery/customer service via trucks, rail, water & air – Customer relationship managementstrategies to ensure deliveries, resolve complaints, improve communications, & determine service requirements – Network design- creating distribution networks based on tradeoff decisions between cost & sophistication of distribution system MBA Nguyen Phi Hoang©2015_SCM 24 Important Elements of Supply Chain Management (Cont.) Integration Trends: – Supply Chain Process Integrationwhen supply chain participants work for common goals Requires intra-firm functional integration Based on efforts to change attitudes & adversarial relationships – Supply Chain Performance Measurement- Crucial for firms to know if procedures are working MBA Nguyen Phi Hoang©2015_SCM 25 Current Trends in Supply Chain Management Expanding the Supply Chain The expansion involves: • breadth- foreign manufacturing, office & retail sites, foreign suppliers & customers • depth- second and third tier suppliers & customers MBA Nguyen Phi Hoang©2015_SCM 26 Current Trends in Supply Chain Management (Cont.) Increasing Supply Chain Responsiveness – Firms will increasingly need to be more flexible and responsive to customer needs – Supply chains will need to benchmark industry performance and meet and improve on a continuous basis – Responsiveness improvement will come from more effective and faster product & service delivery systems MBA Nguyen Phi Hoang©2015_SCM 27 Current Trends in Supply Chain Management (Cont.) The Greening of Supply Chains - Producing, packaging, moving, storing, delivering and other supply chain activities can be harmful to the environment – Supply chains will work harder to reduce environmental degradation(downgrade) – Large majority (75%) of U.S consumers influenced by a firm’s environmental friendliness reputation – Recycling and conservation are a growing alternative in response to high cost of natural resources MBA Nguyen Phi Hoang©2015_SCM 28 Current Trends in Supply Chain Management- Cont Reducing Supply Chain Costs – Cost reduction achieved through: • • • • Reduced purchasing costs Reducing waste Reducing excess inventory, and Reducing non-value added activities – Continuous Improvement through • Benchmarking- improve over competitors’ performance • Trial & error • Increased knowledge of supply chain processes MBA Nguyen Phi Hoang©2015_SCM 29 ... Logistics Management 10 Customer Relationship Management 11 Location Management 12 .Service response Logistics 13 Process Integration 14 .Performance Measurement MBA Nguyen Phi Hoang©2 015 _SCM Learning... Hoang©2 015 _SCM 16 Origins of Supply Chain Management 19 50s & 19 60s U.S manufacturers focused on mass production techniques as their principal cost reduction and productivity improvement strategies 19 60s -19 70s... activities MBA Nguyen Phi Hoang©2 015 _SCM What is a Supply Chain? (Cont.) MBA Nguyen Phi Hoang©2 015 _SCM Some more supply chain models (cont.) MBA Nguyen Phi Hoang©2 015 _SCM 10 Some more supply chain models