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Chapter 7: Supply Chain and Logistics Management
MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Supply Chain
A supply chain represents all the stages at which value is
added in producing and delivering a product or service from
suppliers (and their suppliers) to customers (and their
customers).
supply chain is a term that describes how organizations
(suppliers, manufacturers, distributors, and customers) are linked
together.
Supply Chain Management has an important role to play in
moving goods more quickly to their destination.
Supply Chain Management is a total system approach to
managing the entire flow of information, materials, and
services from raw-material suppliers through factories and
warehouses to the end customer.
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Value Chain
Supply chains are sometimes called value chains.
Supply
o This starts at the begining of the chain and ends with the
internal operations of the organization.
Demand
o It starts at the point where the organizations output is delivered
to its immediate customer and ends with the final customer in
the chain.
o The demand chain is the sales and distribution portion of the
value chain.
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Managing procurement
Managing Suppliers
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Production Inventory
Information
Trasportation Location
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Reasons to Outsorcing
Organizationally-driven
Improvement-driven
Financially-driven
Revenue-driven
Cost-driven
Employee-driven
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
The Wal-Mart supply Chain
To succeed in the competitive
markets that make up todays
economy, companies must
learn to align their supply
chains with the demands of
the markets they serve.
Supply chain performance is
now a distinct competitive
advantage for companies
who excel in this area.
One of the largest companies in North America is a testament to the power of effective
supply chain management. Wal-Mart has grown steadily over the last 20 years and
much, if not most, of its success is directly related to its evolving capabilities to
continually improve its supply chain.
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
= $160/$35
= 4.57
Since the companys normal inventory turnover ration is 10,
a drop to 4.57 means that the inventory is not turning over as
quickly as it had in the past. Without knowing the industry
average of turns for this company it is not possible to
comment on how they are competitively doing in the
industry, but they now have more inventory relative to their
cost of goods sold than before.
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Operations Accounting
Purchasing
Supplier (vendor)
Purchasing Cycle
Excluded from the exam topics
Purchasing Cycle: Series of steps that begin with a request for purchase and
end with notification of shipment received in satisfactory condition.
Requisition Supplier
Purchasing Cycle
Monitor orders
Order with a vendor
Receiving orders
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Purchasing Cycle
Purchasing Cycle: Series of steps that begin with a request for purchase
and end with notification of shipment received in satisfactory condition.
Requisition
A description of the item
The quantity and quality
Desired delivery dates
Supplier
They should have the capability of supplying the desired goods
Purchasing Cycle
Purchasing Cycle: Series of steps that begin with a request for purchase
and end with notification of shipment received in satisfactory condition.
Monitor orders
They follow up on orders, especially larger orders with lengthy lead
time.
Receiving orders
It must notify purchasing, accounting, and the operating unit that
requested the goods.
Purchasing Strategies
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Supply-Chain Strategies
Negotiate with many suppliers; play one supplier against
another
Develop long-term partnering arrangements with a
few suppliers who will work with you to satisfy the end
customer
Keiretsu - have your suppliers become part of a company
coalition.
Vertically integrate; buy the actual supplier
Create a virtual company that uses suppliers on an as-
needed basis.
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Integrated Current
Automobiles
Circuits Transformation
Distribution Forward
Circuit Boards
System Integration
Computers
Finished Goods
Dealers Watches Baked Goods
(Customers)
Calculators
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Logistics
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Logistics Management
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Logistics Functions
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Logistics Organization
Purchasing System
Production System
Distribution System
Examples for logistics companies
Craft Inc. :
o Sales of volume is 10 billion per annum for food staffs.
Bayer AG:
o Sales of volume is 25 billion per annum for food staffs...
3000 distribution points... Logistics budget is 5 billion dollar
per annum...
Excluded from the exam topics
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Logistics Organization
Examples for logistics companies
Canon Inc.:
o It is the 100th biggest company about photograph machines.
FedEx:
o Sales of volume is 12 billion per annum for delivery staffs...
3 billion parcels distributed... Number of customers is 2
million..
United Parcel Service:
o Sales of volume is 22 billion per annum for delivery
staffs... 3.1 billion packets distributed to the point...
Number of transportation vehicles is 2 million..
Excluded from the exam topics 41
MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Facility Location
Proximity to Customers
Business Climate
Total Costs
Infrastructure
Quality of Labor
Suppliers
Other Facilities
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Facility Location
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Cx =
d V ix i d V iy i
V i
Cy =
V i
Where:
Cx = X coordinate of centroid (facility location)
Cy = Y coordinate of centroid (facility location)
dix = X coordinate of the ith location (destination)
diy = Y coordinate of the ith location (destination)
Vi = volume of goods moved to or from ith location
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
D
(250,580)
A
(100,200)
(0,0) X
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
(0,0) X
No of Truckload
You must also have the Shipment
volume information
(number of shipment/trip)
on the business activity at
the existing facilities.
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
You then take the coordinates and place them on the map:
Y
Q No of Truckload
(790,900)
New Shipment
location
D Z
(250,580) of facility
A Z about
(100,200)
(443,627)
(0,0) X
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Where:
Cx = X coordinate of computed facility location
Cy = Y coordinate of computed facility location
dx = X coordinate of destination
dy = Y coordinate of destination
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
where
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Facility Location
Example 2
Consider, for example, The Clayton County Rescue Squad and Ambulance service
which serves five rural town as shown in the following table. The Rescue Squad
wants to construct a centralized facility and garage to minimize its total annual
mileage to the towns. The locations of towns in terms of their graphical X,Y
coordinates measured in miles relative to x=0, y=0 and the expected number of
annual trips the Squad will have to make to each town are as follows:
Coordinates
# of Annual
Town x y
Trips
Abbeville 20 20 75
Benton 10 35 105
Clayton 25 9 135
Dunnig 32 15 60
Eden 10 8 90
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Facility Location
Example 2
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
dA=sqroot[(20-18.80)2+(20-16.69)2]=3.52
dB=20.31
dC=9.87
dD=13.30
dE=12.36
D(v)=3.52(75)+....+12.36(90)=5642.20 total miles travelled to the
towns (total distance).
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Facility Location for example 2- d
Facility Location
Example 3
We have 4 suppliers to transport goods to the Lahma
company and the other information is given in the following
table:
Coordinates
# of truckload
City x y shipment
Izmir 200 200 65
Istanbul 100 500 120
Ankara 250 600 90
Bursa 500 300 75
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Facility Location
Example 3
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Facility Location
Example 3-a
Location centers:
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Facility Location
Example 3- b/c
d (V)Induvid ual distance/v olume = (X - Cx) 2 (Y - Cy) 2 d (V) totaldistance/volume = d (v) t
dL=sqroot[(200-242.85)2+(200-427.14.)2]=231.14
diz 231.14
dis 491.34
dan 173.00
dbu 286.86
D(v)=231.14(65)+...+286.86(75)=111071.97 total distance.
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Facility Location
Example 3- d, e
Location
700
600 ANKARA
500 ISTANBUL
FL
400
300 BURSA
200 IZMIR
100
0
0 100 200 300 400 500 600
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.
Supply Chain Management; Chapter 7
Thanks
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MGMT 405, POM, 2014/15. Lec Notes Stevenson, McGraw Hill, 2010- Prof. Dr. Sami Fethi, EMU, All Right Reserved.