Notice to End Supply Contract

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					             Supply Chain Management




Lally School of Management and Technology   1
             17 Supply Chain Management
    • Project Draft due April 2
    • Review Items from Last Class
    • Basic Supply Ideas and Terminology
    • Video
            – UPS Supply Chain Management

    • Supply Chain Strategy
    • Electronics and Computer Supply Chains
    • Case Discussion – Trouble in Paradise




Lally School of Management and Technology   2
                                   Supply Chain Strategy
                                 and the Course Organization




            Operations As a Competitive
                     Weapon
               Operations Strategy
               Project Management                Process Strategy
                                                 Process Analysis
                                          Process Performance and Quality
                                              Constraint Management
                                                                               Supply Chain Strategy
                                                  Process Layout
                                                                                       Location
                                                   Lean Systems
                                                                                Inventory Management
                                                                                     Forecasting
                                                                            Sales and Operations Planning
                                                                                  Resource Planning
                                                                                      Scheduling




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                                  Supply Chain

         (goods)
         • The sequence of processes from raw
           materials through manufacturing and
           distribution to the ultimate consumer.
         • A “process” takes place at a single site or
           least within the same firm
         (services)
         • Some analogies for services



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                     Supply Chain Example




   Raw materials
                                                          End users
                       upstream                 downstream
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                        A Global Supply Chain
                          Zipper Maker
                             in China

    Fiber supplier       Textile Maker     Apparel Maker    Apparel Designer
                                                                                   Retailer in US
     in Australia           in Italy        in Mauritius   and Marketer in US

                Carriers and          Carriers and
               Intermediaries        Intermediaries


                     Material flow


                     Information flow
  Raw materials
                                                                                End users
                         upstream                          downstream

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               Definitions and Terminology I

         •   Supply Chain
         •   Supply Chain Management
         •   Upstream and Downstream
         •   Information and Material Flow




Lally School of Management and Technology   7
              Definitions and Terminology II

         •   Logistics management
         •   Distribution Channel
         •   Demand management
         •   Supplier Tiers
         •   Outsourcing
         •   Off-Shoring



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                     Logistics Management

       • Broad definition = supply chain
         management
       • Narrowly definition = transport and
         storage (not production, sourcing, etc.)




Lally School of Management and Technology   9
                        Distribution Channel

             The route from the producer forward
             (down stream) through the distributors
                         to the customer




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                      Demand Management

       • Managing the demand for goods or
         services along the supply chain.
       • Demand can be managed through such
         mechanisms as product availability
         promises, pricing, promotion, and
         distributor incentives.



Lally School of Management and Technology   11
     Supplier Tiers




                              Tier 3


                            Legend          Supplier of services   Supplier of materials
     Figure 8.2
Lally School of Management and Technology            12
     Supplier Tiers




                              Tier 2




                              Tier 3


                            Legend          Supplier of services   Supplier of materials
     Figure 8.2
Lally School of Management and Technology            13
     Supplier Tiers




                              Tier 1




                              Tier 2




                              Tier 3


                            Legend          Supplier of services   Supplier of materials
     Figure 8.2
Lally School of Management and Technology            14
     Supplier Tiers


                                                              Manufacturer




                              Tier 1




                              Tier 2




                              Tier 3


                            Legend          Supplier of services       Supplier of materials
     Figure 8.2
Lally School of Management and Technology            15
     Supply Chain
     Including                              Distribution                        Distribution
                                               center                              center
     Distribution
                                                              Manufacturer




                              Tier 1




                              Tier 2




                              Tier 3


                            Legend          Supplier of services       Supplier of materials
     Figure 8.2
Lally School of Management and Technology             16
     Supply                            Customer        Customer           Customer           Customer




     Chain                                   Distribution
                                                center
                                                                                  Distribution
                                                                                     center




                                                                Manufacturer




                              Tier 1




                              Tier 2




                              Tier 3


                            Legend            Supplier of services       Supplier of materials
     Figure 8.2
Lally School of Management and Technology              17
                                  Outsourcing
         • Buying a part or service that previously
           was provided internally
              – Make-or-buy decision
              – Allows management to focus on firms “core
                competencies” (same as “distinctive
                competencies” we talked about earlier)
              – +other reasons
         • Insourcing
              – Undoing an outsourcing decision




Lally School of Management and Technology   18
                                 Offshoring
          • Moving a process or operation that had been
            done in the “home country” to another country
               –   Comparative labor costs
               –   Logistics costs
               –   Tariffs and trade barriers
               –   Better access to offshore markets
               –   Local subsidies
               –   …
          • Offshoring can be In-house or Outsourced




Lally School of Management and Technology   19
                                            Video
       • UPS Supply Chain Services
       • What services are they talking about?
            – Package delivery
            – What else?
            – “Economy of Scope”
       • Importance of Information Technology




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          E-Commerce and Supply Chains

       • Supply chain information movement is
         increasingly electronic:
            – Order, Invoice, Ship Notice, Payment, etc
            – EDI, other protocols
       • e-Procurement – slow adoption
            – Business “E-bay”



Lally School of Management and Technology   21
                    Types of e-procurement


       • On-line catalogs listing products, prices,
         etc.
       • Third-part auctions—reverse auctions
       • Private exchanges to connect suppliers




Lally School of Management and Technology   22
      Supply Chain
      links in Enterprise
      Resource
      Planning Systems
      (like SAP in the
      this picture)




Lally School of Management and Technology   23
                      Supply Chain Strategy

       • Starts with “make or buy”
       • Partner vs vendor
       • Lowest cost vs highest quality vs fast vs
         reliable delivery vs quickest response to
         changing needs
       • Can be a key strategic differentiator
            – Example: Wal-Mart


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                             Single Sourcing

       •   Purchase from very few (or one) supplier
       •   More control of quality
       •   Partnering for development
       •   Partnering for production investments




Lally School of Management and Technology   25
                         Global Supply Chain

       • Look for best
         sources anywhere
              – Provide supplier
                with technology if
                necessary
       • Assess transport
         and import costs
         and supply
         disruption risk



Lally School of Management and Technology   26
               Uncertainty In Supply Chains
        •   Wrong forecasts
        •   Supplier Stock-outs
        •   Late deliveries
        •   Poor quality/wrong product
        •   Breakdowns and strikes
        •   Canceled orders
        •   Erroneous information



Lally School of Management and Technology   27
                    Supply Chain Objectives

        •   Cost
        •   Quality
        •   Delivery
        •   Speed
        •   Flexibility




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                           Virtual Corporation
         A corporation that has:
              No hard assets (contract for production, etc.)
                   Might supply capital
              No employees (contract for services, even
               management services and product design)
         But controls the brand and supply chain for its
           products or services
         Core competencies
              Structuring and Managing a Supply Chain and Brand
              Raising capital (maybe)

    There are no corporations that match this definition, but
    many businesses are moving in this direction

Lally School of Management and Technology   29
         Supply Chain / Industry Structure for US
          Electronics and Computer Companies

 Individuals,
 Bulk buyers                                         End Users

  PC Warehouse,
  Comp USA                                   Retailers / Distributors

   Dell, HP, Apple,
                                            Brand Owner / Designers
   Lenovo
   SCI, Flextronics,                        Contract Manufacturers
   Solectron
  Intel, Kingston,
  Intex Tech,                               Tiers of Parts Suppliers
  Seagate
Lally School of Management and Technology       30
                                   Dell’s
                         Order Fulfillment Process




Lally School of Management and Technology   31
         Some Reasons for Contract Mfg.
                   Growth
         • Brand owner focus on product definition and
           design
         • Contract manufacturer has economy of scale
              – Greater automation and process R&D investment
         • Contract manufacturer has less vulnerability
           to ups and downs of brand owners




Lally School of Management and Technology   32
                                                 (From T. Sturgeon)
Lally School of Management and Technology   33
                            Trouble in Paradise
       • Background
       • What is the key issue?
              a. Conflict in goals of JV partners; structure of the
                 JV
              b. Conflict between Chinese and US ways of
                 management; hard to transplant Six Sigma, etc
              c. Cut throat competition in the Chinese market
              d. Mikes lack of leadership in implementing Six
                 Sigma, establishing outside relationships
       • Team group discussion:
              – How can operations be improved?
              – What should Mike do?
       • Report out


Lally School of Management and Technology   34

				
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