Business Plug-In B8 Supply Chain Management

LEARNING OUTCOMES
1. List and describe the four drivers of supply chain management 2. Explain supply chain management strategies focused on efficiency 3. Explain supply chain management strategies focused on effectiveness 4. Summarize the future of supply chain management
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INTRODUCTION
Supply chain consists of all parties involved, directly or indirectly, in the procurement of a product or raw material Supply chain management (SCM) involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability
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Supply Chain Planning and Supply Chain Execution

Supply Chain Planning

Payment Flows

Supplier

Manufacturer

Distributor

Retailer

Consumer

Information Flows

Supply Chain Execution

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Case: Nikes Supply Chain

www.Nike.com
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SUPPLY CHAIN DRIVERS

The four primary drivers of supply chain management
1. 2. 3. 4. Facilities Inventory Transportation Information

Organizations use these four drivers to support either a supply chain strategy focusing on efficiency or a supply chain strategy focusing on effectiveness B8-6

SUPPLY CHAIN DRIVERS

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FACILITIES DRIVER
Facility processes or transforms inventory into another product, or it stores the inventory before shipping it to the next facility Three primary facilities components
1. Location 2. Capacity 3. Operational design
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FACILITIES 1: Location
Location efficiency centralize the location to gain economies of scale, which increases efficiency Location effectiveness decentralize the locations to be closer to the customers, which increases effectiveness
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FACILITIES 2: Capacity
Capacity efficiency minimal excess capacity with the ability to produce only what is required Capacity effectiveness large amounts of excess capacity which can handle wide swings in demand

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FACILITIES 3: Operational Design

Operational design efficiency product focus design allows the facility to become highly efficient at producing one single product, increasing efficiency Operational design effectiveness functional focus design allows the facility to perform a specific function on many different types of products, increasing effectiveness

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FACILITIES DRIVER

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INVENTORY DRIVER
Inventory offsets discrepancies between supply and demand Inventory management and control software provides control and visibility to the status of individual items maintained in inventory Two primary inventory components
1. Cycle inventory 2. Safety inventory
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INVENTORY 1: Cycle Inventory

Cycle inventory the average amount of inventory held to satisfy customer demands between inventory deliveries
Cycle inventory efficiency holding small amounts of inventory and receiving orders weekly or even daily Cycle inventory effectiveness holding large amounts of inventory and receiving inventory deliveries only once a month
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INVENTORY 2: Safety Inventory

Safety inventory extra inventory held in the event demand exceeds supply
Safety inventory efficiency holding small amounts of safety inventory Safety inventory effectiveness holding large amounts of safety inventory

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INVENTORY DRIVER

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TRANSPORTATION DRIVER
Transportation moves inventories between the different stages in the supply chain Two primary inventory components
1. Method of transportation 2. Transportation route

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TRANSPORTATION 1: Method of Transportation

Global inventory management system provides the ability to locate, track, and predict the movement of every component or material anywhere upstream or downstream in the supply chain
Method of transportation efficiency Method of transportation effectiveness

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TRANSPORTATION 2: Transportation Route

Transportation planning software tracks and analyzes the movement of materials and products to ensure the delivery of materials and finished goods at the right time, the right place, and the lowest cost Distribution management software coordinates the process of transporting materials from a manufacturer to distribution centers to the final customer
Transportation route efficiency Transportation route effectiveness
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TRANSPORTATION DRIVER

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INFORMATION DRIVER
Information an organization must decide how and what information it wants to share with its supply chain partners Two primary information components
1. Information sharing 2. Push verses pull strategy
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INFORMATION 1: Information Sharing

Information sharing efficiency freely share lots of information to increase the speed and decrease the costs of supply chain processing

Information sharing effectiveness share only selected information with certain individuals, which will decrease the speed and increase the costs of supply chain processing

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INFORMATION 2: Push vs. Pull Information Strategy

Pull information strategy (efficiency) supply chain partners are responsible for pulling all relevant information
Pull technology pulls information

Push information strategy effectiveness organization takes on the responsibility to push information out to its supply chain partners
Push technology sends information
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INFORMATION DRIVER

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APPLYING A SUPPLY CHAIN DESIGN

Wal-Marts supply chain management strategy emphasizes efficiency, but also maintains adequate levels of effectiveness
Facilities focus Efficiency Inventory focus Efficiency Transportation focus Effectiveness Information focus Efficiency
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APPLYING A SUPPLY CHAIN DESIGN

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Future Trends
Fastest growing SCM components
Supply chain event management (SCEM) Selling chain management Collaborative engineering Collaborative demand planning

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Todays Supply Chain Reality

Increased outsourcing Large global supply networks Increased competition Consumer driven

Lack of visibility reduces suppliers ability to handle variability Suppliers use inventory buffers to compensate increasing costs Errors in manual replenishment (filling) processes can cause stock-outs revenue issues can increase costs, lower customer service and reduce All of these
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Collaboration is Key for Adaptiveness

1. Share data and information to create visibility

2. Interact to match expectations 3. Synchronize resources and processes to perform as one

Outsourcing Partner

Suppliers

My Company

Customers

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