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Basics of Supply Chain Management

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					Basics of Supply Chain Management




                                    1
What Is the Supply Chain?

      • Also referred to as the logistics network
      • Suppliers, manufacturers, warehouses, distribution
        centers and retail outlets – “facilities”
                                           Suppliers                  Manufacturers          Warehouses &         Customers
                                                                                          Distribution Centers



      and the

      • Raw materials
      • Work-in-process (WIP) inventory                  Transportation         Transportation


      • Finished products
                                                             Costs                   Costs
                                            Material Costs                                              Transportation
                                                                      Manufacturing Costs      Inventory Costs
                                                                                                             Costs




      that flow between the facilities

                                                                                                                  2
The Supply Chain
  Suppliers                       Manufacturers                         Warehouses &                Customers
                                                                     Distribution Centers




                 Transportation                     Transportation
                     Costs                              Costs
Material Costs                                                                         Transportation
                              Manufacturing Costs                    Inventory Costs       Costs
                                                                                                                3
The Supply Chain – Another View



  Plan         Source                         Make                         Deliver                   Buy



           Suppliers                       Manufacturers               Warehouses &            Customers
                                                                    Distribution Centers




                            Transportation              Transportation
           Material Costs       Costs                        Costs                  Transportation
                                         Manufacturing Costs          Inventory Costs   Costs
                                                                                                           4
Supply Chain Management – Key Issues

     • Overcoming functional silos with conflicting goals

                                                   Customer Service/
      Purchasing   Manufacturing    Distribution
                                                        Sales

                                                       High
                                       Low
       Low            Few                              inventories
                      change-          invent-
       pur-                                            High service
                      overs            ories
       chase                                           levels
       price                                           Regional
                      Stable           Low             stocks
                      schedules        trans-
       Multipl
       e              Long run         portatio
       vendors        lengths          n

       SOURCE          MAKE           DELIVER           SELL

                                                                       5
Supply Chain Management – Key Issues

             ISSUE                                      CONSIDERATIONS
Network Planning            • Warehouse locations and capacities
                            • Plant locations and production levels
                            • Transportation flows between facilities to minimize cost and time
Inventory Control           • How should inventory be managed?
                            • Why does inventory fluctuate and what strategies minimize this?

Supply Contracts            • Impact of volume discount and revenue sharing
                            • Pricing strategies to reduce order-shipment variability

Distribution Strategies     • Selection of distribution strategies (e.g., direct ship vs. cross-docking)
                            • How many cross-dock points are needed?
                            • Cost/Benefits of different strategies
Integration and Strategic   • How can integration with partners be achieved?
Partnering                  • What level of integration is best?
                            • What information and processes can be shared?
                            • What partnerships should be implemented and in which situations?
Outsourcing & Procurement   • What are our core supply chain capabilities and which are not?
Strategies                  • Does our product design mandate different outsourcing approaches?
                            • Risk management
Product Design              • How are inventory holding and transportation costs affected by product
                            design?
                            • How does product design enable mass customization?
                                                                                                           6
Supply Chain Collaboration

     • Cornerstone of effective SCM
     • The focus of many of today’s SCM initiatives
     • The only method that has the potential to eliminate or minimize
       the Bullwhip effect                                  Retailers



       Suppliers   Synchronized      Manufacturer
                   Production
                   Scheduling                            Collaborative
                                                                         Distributors/
                                                         Demand
                   Collaborative                                         Wholesalers
                                                         Planning
                   Product
                   Development




                           Collaborative Logistics Planning
                           •Transportation services
                           •Distribution center services



                                   Logistics Providers
                                                                                         7
Emerging Best Practices in SCM Strategy




                                          8
Why Is SCM Difficult?

       Plan       Source   Make   Deliver   Buy




      • Uncertainty is inherent to every supply chain
              –      Travel times
              –      Breakdowns of machines and vehicles
              –      Weather, natural catastrophe, war
              –      Local politics, labor conditions, border issues


      • The complexity of the problem to globally optimize a supply
        chain is significant
              –      Minimize internal costs
              –      Minimize uncertainty
              –      Deal with remaining uncertainty


                                                                       9
Thank you….

				
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posted:10/14/2012
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Jun Wang Jun Wang Dr
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