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Fundamentals of SCM & Logistics
Transcript of Fundamentals of SCM & Logistics
Supply Chain Management
Section 1 :
Supply Chain Management Concepts
Supply Chain Alignment with Business Strategy
Supply Chain Design and Improvement Considerations
Section 4 :
Section 5 :
Customer Relationship Management (CRM) Concepts
Section 6 :
Supply Management Concepts
Stages of SCM
and Financial Statement Basics
Supply Chain entities, strategies, flow, and processes
The SCOR Model
Types and Stages of Supply Chain management
SCM objectives, key terms, and benefits
Accounting and finance overview
is "a global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash."
Basic Supply Chain
3 Supply Chain Structures
Focused on Execution, efficiency and cost
Simple Technology and No real-time information
Demand fulfillment from partners' sales and mkt
Chain is a cost center
Minimal connectivity technologies and capital assets
Focus on Throughput
Competitive positioning serving as an efficient, low-cost and integrated unit
Focused on total delivered cost of finished goods
Uses High Technology and new equipment to reduce labor costs and improve capacity and Throughput
Guarantee steady flow
Reduce Supply Chain costs
PRIMARY PRODUCT FLOW
PRIMARY CASH FLOW
REVERSE PRODUCT FLOW *
Invoices, sales lit, specs, blueprints, receipts,orders,rules and regs, etc.
Material, components, supplies, services, energy, finished products
Payments for products, supplies, etc.
Returns for repair, replacement, recycling, disposal, etc
Basic Supply Chain: 4 Flows
* Reverse Supply Chain managed by Reverse Logistics
Service Supply Chain Example
A FIRM IN SERVICE INDUSTRY
is "an organization that provides an intangible product such as medical or legal advice." Includes retail trade, wholesale trade, transportation and utilities, finance, insurance and real state, construction, social services and goverment.
Manufacturing Supply Chain Model
Demand History - Business Focus - Needs Connectivity/Technology
SCOR - SUPPLY CHAIN OPERATIONS REFERENCE MODEL
is "a process reference model developed and endorsed by the Supply Chain Council (SCC), as the cross-industry standard diagnostic tool for SCM."
Focus on SCM processes :
Plan, Source, Make, Deliver and Return
Direct control (ownership) of multiple links in the supply chain from raw material extraction to retail sales.
Coordinated management of separately owned links in the supply chain: "Outsourcing". Each link focus on own core competences.
Raw Materials Extraction
Raw Materials Extraction
Benefits of vertical integration
No competitors for supplies
Enhanced visibility into operations
Same ownership and management for all activities
Benefits of lateral integration
Economies of scale and scope
Improved business focus
Leveraging communication and production competences
2 Types of SCM
4 Stages of SCM
No planning, Blurry Mission, No Forecast
Warehousing Close to markets, excess Inventory and workers with little training
Very Basic MRP with BOM, Master Schedule, on-hand and Order data
Basic Material Handling
Inventory management, Purchasing, Traffic functions enhanced
Effective Hard Skills/Training
Reliable Forecast by Marketing area and MRPII software in Place
Focus on business processes supported by software
ERP (Enterprise Resource Planning)
Product / service design is a teamwork
Improvements in customer service due to market segmentation and replenishment policies
Warehousing and transportation decisions focused on cost effectiveness and customer service
Automated warehousing equiment
Initial Exploratory collaboration channel master and partners
MRP II merged with ERP enterprisewide planning
Networked enterprise built over Internet platforms - synchronized ERPs
CPFR (Collaborative Planning Forcasting and Replenishment) and Periodic S&OP meetings
Start Integration With External Members.
SUPPLY CHAIN MANAGEMENT
is "the design, planning, execution, control, and monitoring of SC activities with the objective of creating net value, building competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally (Globally in this case, mean worldwide or in the entire chain)."
SCM is about creating net values
There should be value-creating activities that transcend particular entities' activities
SCM requires a balancing act among competing interests.
is made up of "the functions within a company that add value to the goods or services that the organization sells to customers and for which it receives payment."
is "the processes of creating, producing, and delivering a good or service to the market. For a good, the value stream encompasses the ram material supplier, the manufacture and assembly of the good, and the distribution network."
VALUE STREAM MAPPING
is "drawing the current production process/flow and then attempting to draw the most effective production process/flow."
1. Add Value for customers and Stakeholders
2. Improve Customer Service
3. EFFECTIVELY use systemwide resources
4. EFFICIENTLY use systemwide resources
5. Leverage partner strenghts
TBL (Triple Bottom Line)
GREEN SUPPLY CHAIN
is "a SC that considers environmental impacts on its operations and takes action along the supply chain to comply with environmental safety regulations and communicate this to customers and partners."
Government and regulatory pressures (pollution prevention and control)
Good environmental management and sustainability concerns (Conserve energy, reduce waste and recycle)
Public opinion and the power of consumer choice (Consumer awareness to preserve Earth resources)
Potential for competitive advantage (Increased resource efficiency and reduced costs builds eco-friendly reputation)
Cut costs to yield net gain at the bottom line
It takes money to make money - improvements require investments to realize profits and/or revenues (ROI/ROA)
Gains should be equitably distributed
Quality of product or service -right design, right production, and right materials
Affordability -appropriate price level
Availability -On time delivery
Service -(from design phase)
Sustainability -Environmental and socially responsible
Creating a positive good by delivering socially desirable and useful product or services
Avoiding or reducing negative environmental side effects from extraction, processing, and construction
Integrating sustainability into the supply chain
is "the ability of a company to address the needs, inquiries, and request from customers. Also, the measure of the delivery of a product to the customer at the time specified."
Availability to have the product when it is wanted by a customer
Time needed to deliver a customer order
Meet customer expectations in terms of quality, price and delivery
Getting the right product and the right amount to the right customer at the right time
Focused on customer's needs and wants!
Tools and metrics:
A measurement of the actual output compared to the standard output expected; measures how well something is performing relative to existing standards
Inward-focused, how process can be done less expensively, in less time, and with fewer resources
is "all about what can be accomplished by employing all the resources in the SC." Also :
(1) The ability of a system to perform its expected function
(2) The ability of a worker, machine, work center, plant, or organization to produce output per time period
(3) Required mental ability to enter into a contract
is "a relationship based on trust, shared risk, and rewards aimed toward achieving a competitive advantage."
Add value to products (shorter time to market)
Improving market access (new channels)
Build financial strength (shared costs)
Add technological strength
Strengthen operations (lower cost / cycle time)
Enhancing strategic growth
Improve organizational skills (shared learning)
Improved market knowledge
The 3 V's : Velocity, Visibility, Variability
Improved management of risk
The 3 V's
is "the ability to view important information throughout a facility or supply chain no matter where in the facility or supply chain the information is located."
is "a term used to indicate the relative speed of all transactions, collectively, within a supply chain community. A maximum velocity is most desirable because it indicates a higher asset turnover for stockholders and faster order-to-delivery response for customers"
is the natural tendency of the results of all business activities to fluctuate above and below an average value.
is "the worth of an item, good, or service."
is "the actual increase of utility from the viewpoint of the customer as a part is transformed from raw material to finished inventory. It is the contribution made by an operation or a plant to the final usefulness and value of a product, as seen by the customer."
time to completion
number of defects
Networks : intranet, extranet, ERP
SUPPLY CHAIN RISK
is based "on decisions and activities that have outcomes that could negatively affect information or goods within SC."
RISK RESPONSE PLANNING
is "the PROCESS of developing a plan to avoid risks and to mitigate the effect of those that cannot be avoided."
RISK RESPONSE PLAN*
is "a WRITTEN DOCUMENT defining known risks, including description, cause, likelihood, costs, and proposed responses that also identifies the current status of each risk."
is "the PROCESS of identifying risk, analyzing exposures to risk, and determining how to best handle those exposures."
* Also know as BUSINESS CONTINUITY PLAN
Flow of funds
Reduces cash-to-cash cycle time
Improves customer-supplier relationship
Reduces imbalances between larger and smaller supply chain players
Consolidates internal demand across the business and partners to find areas for discounts
Manages the outflow of funds in order to buy goods and services
Coordinates closely with accounts payable
CASH-TO-CASH CYCLE TIME
is "an indicator of how efficiently a company manages its assets to improve the speed or turnover of cash flows."
is "managing purchases of goods and services in a supply chain, including outsourcing and procurement activities."
is "the target of costs of an operation, process, or product, including DIRECT MATERIAL, DIRECT LABOR, and OVERHEAD charges."
STANDARD COST ACCOUNTING SYSTEM
is "a cost accounting system that uses cost units determined before production for estimating the cost of an order or product. For management control purposes, the standards are compared to actual cost, and variances are computed."
COST OF GOODS SOLD (COGS)
is "an accounting classification useful for determining the amount of direct materials, direct labor, and allocated overhead associated with the products sold during a given period of time ."
is "the price currently being paid as opposed to standard cost. (A related term is market price, which is the going price for an item on the open market."
is "the deviation of the actual consumption of materials as compared to the standard."
is "the difference between what has been budgeted for an activity and what it actually costs."
Standard Hours of Work
Hours Actually Worked
1. Balance Sheet
A financial Statement showing the resources owned, the debts owed, and the owners' share of a company at a given point in time
Assets = Liabilities + Owners' Equity
are "the value of goods shipped or services redered to a customer on which payment has not been yet received and usually includes an allowance for bad debts."
are "the value of goods and services acquired for which payment hat not yet been made."
is "the current assets of a firm minus its current liabilities."
2. Income Statement
A financial Statement showing the net income over a given period of time
is "the difference between the sales and cost of goods sold...sometimes expressed as a percentage of sales. In traditional accounting, the product profit margin is the product selling price minus the direct material, direct labor, and allocated overhead for the product, sometimes expressed as a percentage of selling price."
Income = Revenues - Expenses
GROSS PROFIT MARGIN
is "the difference between total revenue and the costs of goods sold."
3. Statement of
is "the net flow of dollars into or out of the proposed project. The algebraic sum, in any time period, of all cash receipts, expenses, and investments."
Cash-to-cash cycle time = Inventory + accounts receivable - accounts payable
3 Generic Strategies:
1. Least Cost
is "a PLAN that describes how to marshal and determine actions to support the mission, goals and, objectives of an organization. It generally includes an organization's explicit MISSION, GOALS and OBJECTIVES and the specific actions needed to achieve those goals."
Hybrid Business Strategies
Focused Low Cost
creates a hybrid, low-cost approach for providing a differentiated product or service
focuses on delivering low price and no-frill basics with prices that are hard to match
creates products and service attributes that appeal to many buyers looking for variety of goods
develops unique strategies for target market niches to meet unique buyer needs
designed to meet well-defined buyer needs at a low cost
Provides the same benefits from a product or service at a lower cost that a competitor
Delivers benefits that exceed those of a competitor's product or service
Creates a product or service that is better suited to a given customer segment that what the competition can offer
A plan for choosing how to compete
A plan for how a company will function in its environment.
A plan for how the supply chain will function in its environment to meet the GOALS of the business and its STRATEGIES.
Relationships between business, organizational, and supply chain strategies
Strategic partners and building collaborative relationships
Alignment of capabilities and Strategies.
Specifies how to:
- Satisfy Customers
- Grow the business
- Compete in its environment
- Manage the organization and develop capabilities
- Achieve financial Objectives
Customer focus and alignment
4 Organizational Strategies
Supply Chain Strategy aligned to deliver
Right Time and place
Nucleus firm utilizes a Forecast and
safety stocks in Supply chain to minimize Bullwhip effect
The production process is based on real demand data, not in forecast
- In production, the production of items only as demanded for use or to replace those taken
- In material control, the withdrawal of inventory as demanded by the using operations. Material is not issued until a signal comes from the user.
- In distribution, a system for replenishing field warehouse inventories where replenishment decisions are made at the field warehouse itself, not at the central warehouse.
- In production, the production of items at required times based on a given schedule planned in advance
- In material control, the issuing of material to a job order at its start time.
- In distribution, a system for replenishing field warehouse inventories where replenishment decision making is centralized, usually at the manufacturing site or central supply facility.
1. Provide ACCESS TO REAL DEMAND data along the chain for greater visibility of the end customer
2. Establish TRUST and promote collaboration among suppy chain partners
3. Increase AGILITY of trade partners
High average utilization rate
Minimal inventory with high turns
Short lead time
Suppliers chosen for cost, quality
Products with maximum performance, minimal cost
Buffer capacity (safety stock)
Aggressive reduction of lead times
suppliers chosen for speed, flexibility, quality (rather than cost)
Modular design with postponement of differentiation.
Emphasize predictability and low cost
Emphasize market responsiveness
A statement of long-range strategy and revenue, cost, and profit objectives usually accompanied by budgets, a projected balance sheet, and a cash flow statement
TIME DISTANCE COLLABORATION
Improve Market Access
Add technological strength
Enhance Strategic Growth
Share Insights and Learning
Increase Financial strength
Features & Benefits of Collaboration
Joint development of shared processes
Open sharing of information and knowledge
Joint development of metrics
Open two-way communication
Clear roles and responsibilities
Joint problem solving
Commitment to the relationship
Better customer Service
Rapid project results
Reduced cycle times and lead times
More effective working relationships
Enhanced Commitment to one another
Alignment of Organizational Capabilities
SUPPLY CHAINS are made of:
SUPPLY CHAINS capabilities are based on its:
Systems and Technology
Metrics (measurement techniques)
Change in market conditions
Change in business direction
Anticipate change in market
-SC must be prepared to adapt quickly
-New products may require complete recasting of SC
-Innovative SC strategies and processes can anticipate and respond in advance of market changes
Understanding the marketplace as it relates to SC
SC design considerations
Continuous Improvement model and tools
Marketing's role in understanding the Marketplace
Current Market Position (market size, share, characteristics)
Objectives, strategies, action, plans
Programs and Projects
Proforma P&L statements
SUPPLY CHAIN DESIGN
is "the determination of how to structure a supply chain. Design decisions include partner selection, location and capacity of warehouses and production facilities, the products, the modes of transportation, and supporting information systems."
Support Organizational Strategy
Support SC Strategy
Accurately reflect organization's capabilities
Balancing efficiency with responsiveness
Inventory location and levels
Least-cost manufacturing/supply chain
Relatively stable demand
Reasonably accurate forecast
Ability to be flexible in response to changing demand
More volatile demand
Make-to-order or assemble-to-order strategy
Number, location, and capacity of warehouses
Location of plants and production level for each product
Transportation between all facilities: Plant to warehouse, warehouse to retailers
Balancing Efficiency with Responsiveness
and Change Mgmt
Reasons to adopt continuous improvements
Metrics & Measurement
SC is process-oriented
SC are dynamic
CI can reduce Costs of Poor Quality
Expands and contracts with new stakeholders
From functional isolation to cross-functional multi-organizational collaboration
Cost of Poor Quality
Develop master plan and project plans
Communicate plans and measurements to all participants
Conduct a pilot to build confidence
Address change management issues
Monitor results and adjust
Lean JIT 6 sigma
The relationship of logistics to supply chain strategy
The functions within logistics
The goals and tactics of logistics
Effectively use of 3PL & 4PL providers
Design considerations and advantages for using a reverse logistics supply chain
Role of Logistics in SC
Role of Logistics in SCM
3PL & 4PL
Goals and Tactics of Logistics
Integrating the Supply Chain
Reducing number of partners
Cross-functional approach to add value
Locate in the right country
Develop an effective export-import strategy
Select warehouse locations
Select transportation modes and carriers
Select the right number of partners
Develop state-of-the-art information systems
Substituting information for inventory
3 echelons between factory and consumers
- Add to operating expenses
- Hold inventory
- Add to cycle time
- Expect to make a profit
Collaborate with suppliers
Track inventory precisely
Keep inventory in transit
Use postponement centers
Mix shipments to match customer needs
Don't wait in line at customs
3PL & 4PL
is "a buyer and supplier team with a third-party that provides product delivery services."
is "a logistics specialist who takes over the entire logistics operation and subcontracts some or all specific functions."
Potential benefits vs. Risks
Improved focus on areas of competence
More current technology; more technological flexiblity
More efficient warehousing (economies of scale)
Improved customer service
More workforce flexibility
Less control over some aspects of logistics, including overall strategy
Potential for inefficient service
Improved focus on areas of competence
Higher-quality logistics, reduced costs, or both
Greater business flexibility
Less control over ALL aspects of logistics, including strategy
Potential loss of effectiveness or higher cost if 4PL deals with favored providers
is "a complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repairs, remanufacture and/or recycle."
Why have a Reverse Supply Chain?
After market savings
Sell recovered metals, etc. from returned product, containers.
Woo customers with promise of excellent customer service
Comply with "green" pressure from shareholders, consumers, regulators.
Sell into market for "organic", "natural", chemical-free products with premium
Do the right thing!
SC Design for Reverse Logistics
Reverse flows require their own systems
Reverse revenues minus reverse expenses can bring profits
Life-cycle design considers the 4 Rs in all phases of product life
Definition and scope of customer relationship management (CRM)
The relationship between CRM and the lifetime customer
Benefits of CRM
Steps to implement CRM
Total Cost of ownership
Outsourcing vs Offshoring
CRM and SRM
Definition of total cost of ownership and how it can be used in supply chain investments
Outsourcing and offshoring decisions
The buyer-supplier relationship
SRM definition and how it relates to CRM
Ford - Nutrilite*
CRM and the Need for it
CUSTOMER RELATIONSHIP MANAGEMENT (CRM)
is "a philosophy based on putting customer first.The collection and analysis of information designed for sales and marketing decision support to understand and support customers and prospects needs."
Competitive Survival Strategy
: Responding to change quickly is a differentiator between winners and losers.
is "a repository for customer data to provide consistency in service interactions
Scope and elements of CRM
Multiple SC for different customer segment
Field service visits
Aggregation into segments
Association of segments with specific products/services or product-service package
Timely and focused information to the right groups
Develop lifetime customers
Acquire and retain customers
Lifetime customers lower total marketing cost
It is increasingly easy to satisfy lifetime customers
Lifetime customers offer increased revenue and profit opportunities
Increase Customer satisfaction and loyalty to generate a "win-win" dependency
Benefits for Customers
Benefits for Organization
Increased Customer Retention
Better customer visibility
Better monitoring and controlling
Align business to customer focus : mission statement, goals, organizational structure, and jobs
Identify customer needs
Create customer segment map
Implement CRM Strategy
Monitor, measure and report
is "the substitution of internal capacity and production by that of the supplier."
is "outsourcing or opening a branch in another country than corporate country."
Economies of scale
Increased capital available for investment
Access to latest technologies
Faster development cycle times
Supplier Relationship Management
Logistics and Logistics Management
3PL & 4PL
is "a comparison of all the costs associated with making an item versus the cost of buying and item."
Choosing activities to outsource
Is the activity a core competence?
What are the consequences of losing related skills or knowledge?
What is the landed cost?
Is the activity a core competence?
Does the market need it?
What is the relationship between market need and enterprise capability?
Develop core competency to meet market need or outsource?
SUPPLIER RELATIONSHIP MANAGEMENT
is "a comprehensive approach to suppliers' interactions.The goal is to streamline organization-supplier processes and make them more effective. Includes E-procurement"
Strategic Sourcing vs. Tactical Buying
Comprehensive approach for locating and sourcing key material suppliers
Focus on development of long-term relationships with trading partners who can help the purchaser meet profit and customer satisfactions goals
Purchasing processes focused on transactions and nonstrategic material buying
Stable, limited fluctuations
Defined standard specifications
Non critical to production
No delivery issues
Initiate Management Tasks
Overcome barriers to collaboration
Build Levels of communication
Determine Levels of collaborative intensity
Examine strategic importance vs difficulty to determine product categories
Modes of Transportation
Break-Bulk and Cross Dock
Value Added Functions
Towlines & Tractors
Material Handling Systems
AGVS Automated Guided Vehicle Systems
Automated sorting Systems
AS/RS Automated Storage and Retrieval Systems
Manufacturing Supply Chain Model