ZeePedia

SUPPLY CHAIN MANAGEMENT:Supply Chain Benefits and Drawbacks

<< SUPPLY CHAIN MANAGEMENT:Logistics, Distribution Requirements Planning
SCHEDULING:High-Volume Systems, Load Chart, Hungarian Method >>
img
Production and Operations Management ­MGT613
VU
Lesson 40
SUPPLY CHAIN MANAGEMENT
Learning Objective
In this lecture we will focus on certain important parameters of Supply Chain Management. We will
discuss the Supply Chain Operational Reference Metrics and Collaborative Planning Forecasting
and Replenishment Process, which would help us analyze the Supply chains. This would also help
us an operation manager to design effective supply chains. We will try to understand the concepts of
Velocity and Bullwhip effect and how they pose a serious challenge to the effectiveness of the
Supply Chain.
Supply Chain Operational Reference (SCOR) Metrics
Perspective
Metrics
Reliability
On-time delivery
Order fulfillment lead time
Fill rate (fraction of demand met from
stock)
Perfect order fulfillment
Flexibility
Supply chain response time
Upside production flexibility
Agility to obtain competitiveness
Expenses
Supply chain management costs
Warranty cost as a percent of revenue
Value added per employee
Assets/utilization
Total inventory days of supply
Cash-to-cash cycle time
Net asset turns
Supply chain response time often makes or breaks a supply chain.
CPFR
CPFR is an acronym derived from the first letters of the following phrase: Collaborative Planning,
Forecasting and Replenishment.
1. Focuses on information sharing among trading partners.
2. Forecasts can be frozen and then converted into a shipping plan.
3. Eliminates typical order processing.
CPFR Process consists of the following steps.
Step 1 ­ Front-end agreement
Step 2 ­ Joint business plan
Steps 3-5 ­ Sales forecast
Steps 6-8 ­ Order forecast collaboration
Step 9 ­ Order generation/delivery execution
Creating an Effective Supply Chain
1.
Develop strategic objectives and tactics.
2.
Integrate and coordinate activities in the internal supply chain.
3.
Coordinate activities with suppliers with customers.
4.
Coordinate planning and execution across the supply chain.
181
img
Production and Operations Management ­MGT613
VU
5. Form strategic partnerships.
Supply Chain Performance Drivers
1. Quality
2. Cost
3. Flexibility
4. Velocity
5. Customer service
Velocity
1. Inventory velocity: The rate at which inventory (material) goes through the supply chain.
2. Information velocity: The rate at which information is communicated in a supply chain.
Challenges to an Effective Supply Chain Management
1. Barriers to integration of organizations
2. Getting top management on board
3. Dealing with trade-offs
4. Small businesses
5. Variability and uncertainty
6. Long lead times
Trade-offs
1. Cost-customer service
a. Disintermediation
2. Lot-size-inventory
a. Bullwhip effect
3. Inventory-transportation costs
a. Cross-docking
4. Lead time-transportation costs
5. Product variety-inventory
a. Delayed differentiation
Bullwhip effect represents the real life time situation that Inventories are progressively
larger moving backward through the supply chain.
Cross-docking represents the fact that the goods arriving at a warehouse from a supplier are
unloaded from the supplier's truck and loaded onto outbound trucks. Avoids warehouse
storage.
Delayed differentiation relates to the Production of standard components and
subassemblies, which are held until late in the process to add differentiating features.
Disintermediation is reducing one or more steps in a supply chain by cutting out one or
more intermediaries.
Supply Chain Issues
Strategic Issues
Tactical Issues
Operating Issues
Design of the
Inventory policies
Quality control
supply chain,
Purchasing policies
Production planning and
partnering
Production policies
control
Transportation
policies
Quality policies
182
img
Production and Operations Management ­MGT613
VU
Supply Chain Benefits and Drawbacks
Problem
Potential
Benefits
Possible
Improvement
Drawbacks
Large
Smaller, more
Reduced holding
Traffic congestion
inventories
frequent deliveries
costs
Increased costs
Long lead times
Delayed
Quick response
May not be feasible.
differentiation
May need absorb
Disintermediation
functions
Large number
Modular
Fewer parts
Less variety
of parts
Simpler ordering
Cost
Outsourcing
Reduced cost, higher
Loss of control
Quality
quality
Variability
Shorter lead times,
Able to match supply
Less variety
better forecasts
and demand
Supplier Partnerships
Ideas from suppliers could lead to improved competitiveness
1. Reduce cost of making the purchase
2. Increase Revenues
3. Enhance Performance
Critical Issues
1. Technology management
a. Benefits
b. Risks
2. Strategic importance
a. Quality
b. Cost
c. Agility
d. Customer service
e. Competitive advantage
Operations Strategy
1. SCM creates value through changes in time, location and quantity.
2. SCM creates competitive advantage by integrating and streamlining the diverse range of
activities that involve purchasing, internal inventory, transfers and physical distribution.
Summary
Supply Chain Management dynamics allow an Operations Manager to evolve an effective strategy that
creates value. Logistics and purchasing alone can allow an operations manager to effectively control the
flow of information and materials with in and to and fro from the organization. Organizations aiming for
SCM implementation often fail because of lack of training of their employees as well as top
managements commitment.
183
Table of Contents:
  1. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT
  2. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT:Decision Making
  3. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT:Strategy
  4. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT:Service Delivery System
  5. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT:Productivity
  6. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT:The Decision Process
  7. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT:Demand Management
  8. Roadmap to the Lecture:Fundamental Types of Forecasts, Finer Classification of Forecasts
  9. Time Series Forecasts:Techniques for Averaging, Simple Moving Average Solution
  10. The formula for the moving average is:Exponential Smoothing Model, Common Nonlinear Trends
  11. The formula for the moving average is:Major factors in design strategy
  12. The formula for the moving average is:Standardization, Mass Customization
  13. The formula for the moving average is:DESIGN STRATEGIES
  14. The formula for the moving average is:Measuring Reliability, AVAILABILITY
  15. The formula for the moving average is:Learning Objectives, Capacity Planning
  16. The formula for the moving average is:Efficiency and Utilization, Evaluating Alternatives
  17. The formula for the moving average is:Evaluating Alternatives, Financial Analysis
  18. PROCESS SELECTION:Types of Operation, Intermittent Processing
  19. PROCESS SELECTION:Basic Layout Types, Advantages of Product Layout
  20. PROCESS SELECTION:Cellular Layouts, Facilities Layouts, Importance of Layout Decisions
  21. DESIGN OF WORK SYSTEMS:Job Design, Specialization, Methods Analysis
  22. LOCATION PLANNING AND ANALYSIS:MANAGING GLOBAL OPERATIONS, Regional Factors
  23. MANAGEMENT OF QUALITY:Dimensions of Quality, Examples of Service Quality
  24. SERVICE QUALITY:Moments of Truth, Perceived Service Quality, Service Gap Analysis
  25. TOTAL QUALITY MANAGEMENT:Determinants of Quality, Responsibility for Quality
  26. TQM QUALITY:Six Sigma Team, PROCESS IMPROVEMENT
  27. QUALITY CONTROL & QUALITY ASSURANCE:INSPECTION, Control Chart
  28. ACCEPTANCE SAMPLING:CHOOSING A PLAN, CONSUMER’S AND PRODUCER’S RISK
  29. AGGREGATE PLANNING:Demand and Capacity Options
  30. AGGREGATE PLANNING:Aggregate Planning Relationships, Master Scheduling
  31. INVENTORY MANAGEMENT:Objective of Inventory Control, Inventory Counting Systems
  32. INVENTORY MANAGEMENT:ABC Classification System, Cycle Counting
  33. INVENTORY MANAGEMENT:Economic Production Quantity Assumptions
  34. INVENTORY MANAGEMENT:Independent and Dependent Demand
  35. INVENTORY MANAGEMENT:Capacity Planning, Manufacturing Resource Planning
  36. JUST IN TIME PRODUCTION SYSTEMS:Organizational and Operational Strategies
  37. JUST IN TIME PRODUCTION SYSTEMS:Operational Benefits, Kanban Formula
  38. JUST IN TIME PRODUCTION SYSTEMS:Secondary Goals, Tiered Supplier Network
  39. SUPPLY CHAIN MANAGEMENT:Logistics, Distribution Requirements Planning
  40. SUPPLY CHAIN MANAGEMENT:Supply Chain Benefits and Drawbacks
  41. SCHEDULING:High-Volume Systems, Load Chart, Hungarian Method
  42. SEQUENCING:Assumptions to Priority Rules, Scheduling Service Operations
  43. PROJECT MANAGEMENT:Project Life Cycle, Work Breakdown Structure
  44. PROJECT MANAGEMENT:Computing Algorithm, Project Crashing, Risk Management
  45. Waiting Lines:Queuing Analysis, System Characteristics, Priority Model