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SUPPLY CHAIN MANAGEMENT

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Russell Jan Pontillas

on 22 February 2015

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Transcript of SUPPLY CHAIN MANAGEMENT

MANAGEMENT
SUPPLY CHAIN
Thank You!!!
Good Luck....
__________
- Is a set of entities and relationships that cumulatively define materials and information flows both downstream toward the customer and upstream toward the very first supplier.
JIT Purchasing
Supply Chain
- It is the design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the customer.
Purchasing Cycle
A series of steps that start with a purchasing order/request and end with a notification of delivery of the goods/services in good condition.

Receives the request Select a supplier Places the order Monitoring orders Receiving orders
Traffic Management

the process of overseeing the shipment / delivery of incoming and outgoing goods
Logistics Management

movement of materials and supplies within a production facility.

Distribution Systems
Trucking

Moves the vast majority of manufactured goods
Chief advantage is flexibility

Railroads

Capable of carrying large loads.
Little flexibility though containers and piggybacking have helped with this.

Airfreight

Fast and expensive.
Small, light, expensive items are most appropriate for this mode of transportation.

Use the
elements
to create
your own
layout

Waterways
Pipelines
Typically used for bulky, low-value cargo.
Used when shipping cost is more important than speed.
Used for transporting oil, gas, and other chemical products
No packaging is needed, and the costs per mile are low.
The initial cost to build a pipeline is very high.

Distribution Systems
An approach to purchasing that requires long-term relationship with few suppliers. Cooperative spirit is emphasized here more than low price.
Vendor Analysis
The process in evaluating the credentials of the suppliers in terms of the price, quality of goods and services it renders, and its reputation.

Factors to consider when choosing the right vendor:
Price
Quality
Services
Location
Inventory policy of supplier
Flexibility

Supply Chain Strategies
Negotiating with many suppliers
Create a virtual company
Keiretsu
Vertical integration
Long-term partnering with few suppliers
Many Suppliers
Few Suppliers
Vertical integration Strategy
Keiretsu Network Strategy

Commonly used for commodity products

Supplier is responsible for technology, expertise, forecasting, cost, quality, and delivery
Suppliers compete with one another
Purchasing is typically based on price
Buyer forms longer term relationships with fewer suppliers
Create value through economies of scale and learning curve improvements
Suppliers more willing to participate in JIT programs and contribute design and technological expertise
Cost of changing suppliers is huge
Buy the actual supplier or take control of the market.
The process in which several steps in the production and/or distribution of a product or service are controlled by a single company or entity, in order to increase that company's or entity‘s power in the marketplace.
- a grouping or family of affiliated companies that form a tight-knit alliance to work toward each other's mutual success
horizontal keiretsu
- headed by major Japanese banks: Mitsui, Mitsubishi, Sumitomo, Fuyo, Sanwa, and Dai-Ichi Kangyo Bank Groups

vertical keiretsu
- include car and electronics producers: Toyota, Nissan, Honda--Matsushita, Hitachi, Toshiba, Sony and their "captive" subcontractors
Virtual Companies
employees work in geographically separated locations and are linked by technology.
System Dynamics
Four Key Points about Supply Chain Dynamics:
The supply chain is a highly interactive system.
There is an accelerator effect of demand changes known as the bullwhip effect.
Even with perfect information available to all levels, an accelerator effect in the supply chain will still be observed due to replenishment lead times.
The best way to improve the supply chain is to reduce the total replenishment time and to feed back actual demand information to all levels.
Reasons for Vertical Integration
Coordination in the Supply Chain
Buyer-Vendor Coordination

Production- Distribution Coordination

Inventory-Distribution Coordination
An industry forms a partnership of retailers, wholesalers, and manufacturers to implement is called Efficient Consumer Response (ECR)

The basic elements of ECR program are aimed at managing both demand and the supply chain.
Coordination can be increased in several ways including:
1.) Cross Functional Teams,

2.) Partnership with customers and suppliers,

3.) Better information system,

4.) A flatter organizational structure , and so on.
Measuring Supply Chain Performance
Cost
Total Supply Chain Cost
is the sum of all supply chain costs for all products processed through a supply chain during a given period

Inventory Turnover
is the ratio of the cost of goods sold to the value of average inventory.

Weeks of inventory
is the ratio of average inventory to the average weekly sales.

Customer Service
Average Response Time
is the sum of delays of ordering, processing, and transportation between the time an order is placed at a customer zone and the time the order arrives at the customer zone.
1. Delivery

On-time:
In make-to-order situations in-time delivery is the percentage of orders delivered complete and on date requested by the customer.

Fill rate:
In make-to-stock situations, the fill rate is measured as the percentage of orders filled complete from inventory.

Lead time:
In make-to-stock situations, the fill rate is measured as the percentage of orders filled complete from inventory.

2. Quality
-Can be measured in a number of ways, including the performance of the product or service, conformance to specifications and customer satisfaction.
Examples of specific measures of performance include:
3. Flexibility
-It is difficult to measure because it has a variety of definitions.
There are two common measures of flexibility:

Volume Flexibility
- the time it takes to increase or decrease output by a fixed amount (say, time to increase volume by +20 percent).

Mix flexibility
- the time it takes to change the mix of products or services delivered.

4. Time
-Can be measured not only for an individual company but also for the entire supply chain.

5. Cost
-From an operations point of view, generally refers to the unit cost of the product or service.

Structural Improvement
There are two basic ways to improve supply chain by changing:

1. Structure, or
2. Infrastructure

Structural
changes include capacity, facilities, process technology, and vertical integration.

Infrastructure
includes people, information system, organization, production and inventory control, and quality control
There are many ways to bring about change in Supply Chain Structure:
1. Engaging in forward and backward integration

2. Pursuing major process simplification

3. Changing the configuration of factories, warehouses, or retail locations

4. Pursuing major product redesign

5. Working with third-party logistics providers.
Forward and Backward Integration


Forward
Integration


Finished Goods
(Customers)

Raw Material
(Suppliers)



Backward
Integration
Improvement in Infrastructure
To remove sources of uncertainty, time, and cost from supply chain.
This can be done in Five Ways:
1. Cross-Functional Teams
5. Cross-docking
4. Information System
3. Set-up the reduction
2. Partnership
The Internet, E-business, and Supply Chains
The internet impacts two fundamental processes in all supply chain.

1. Order Placement

2. Order Fulfillment
Request
Requirement Selection Requisition Approval

Buy
Requisition Source Negotiate Contract

Supply
Confirm Process Order Skip Invoice

P
ayment
Receive Deliver Match Pay
The Internet, E-business, and Supply Chains
There are generally three types of E-Procurement services:

1. Online catalogs listing products, prices, specification, sales, and delivery terms.

2. Third-party auctions for buyers and sellers.

3. Private exchanges conducted by major corporations.
The Supply Chain and the Internet
Because of the internet, firms are able to conduct many more global comparisons among suppliers and select from a wider variety of choices.

When customers have the ability to access a company through the internet, the company must be prepared for 24-hour order-taking and customer service.
E-business and Supply Chain
Gaining global access to markets, suppliers, and distribution channels
Cost savings and price reductions
Reduction or elimination of the role of intermediaries
Shortening supply chain response and transaction times
Gaining a wider presence and increased visibility for companies
Greater choices and more information for customers
Improved service as a result of instant accessibility to services
Collection and analysis of voluminous amounts of customer data and preferences
Creation of virtual companies
Leveling playing field for small companies
Supplier Manufacturer Distributor Retailer Customers
Supply Chain
Full transcript