PRESENT BY :

NG SI LING B050810253LEE WEN HAU B050810183LIM WENG KEAT B050810181

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Suppliers Manufacturers Warehouses &Distribution Centers

Customers

Material CostsTransportation

CostsTransportation

Costs TransportationCostsInventory CostsManufacturing Costs

What is Supply Chain Management?

SUPPLY CHAIN MANAGEMENT (SCM)

SUPPLY CHAIN

The sequence of organizations – their facilities, functions and activities- that are involving in producing and delivering a product or service.

SCM is a strategic coordination of the supply chain for the purpose of integrating supply and demand management.

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The Supply Chain

Suppliers Manufacturers Warehouses &Distribution Centers

Customers

Material Costs

TransportationCosts

TransportationCosts

TransportationCostsInventory CostsManufacturing Costs

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Information In The Supply Chain

Order Lead Time

Delivery Lead Time

Production Lead Time

Source Source Make Make Deliver Deliver Return Return

Suppliers Manufacturers Warehouses &Distribution Centers

Retailer

Plan

5 Importance Elements 5 Importance Elements in SCMin SCM

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Why We need Supply Chain Management???

Inventory and back-order levels fluctuate considerably across the supply chain even when customer demand doesn’t vary

The variability worsens as we travel “up” the supply chain

Forecasting doesn’t help!

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Supply Chain Management and Uncertainty

Manufacturer

Wholesale Distributor

sConsume

rs

Multi-tier

SuppliersRetailer

s

Time

Sale

s

Sale

sTime

Sale

s

Time

Sale

s

Time

Bullwhip Effect

Inventory Oscillations become progressively larger looking backward through supply chain

Demand forecasting practices Min-max inventory management (reorder points to

bring inventory up to predicted levels) Lead time

Longer lead times lead to greater variability in estimates of average demand, thus increasing variability and safety stock costs

Batch ordering Peaks and valleys in orders Fixed ordering costs Impact of transportation costs (e.g., fuel costs) Sales quotas

Price fluctuations Promotion and discount policies

Lack of centralized information

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Factors Contributing to the Bullwhip

Inventory Hides the Problems

Inventory

VolatileDemand

InaccurateForecasts

UnreliableSuppliers

QualityProblems

Bottlenecks

A

B

Cost of holding inventory - globally companies are beginning to use 25% of inventory value: Cost of capital Opportunity cost (what we could have done with

the money if we had it in our hands) Obsolescence Storage and handling costs Management and overhead Potential: losses/theft

Why is inventory a waste?

Demand Predictability and Lead-time

ForecastError

Lead-Time

+

-totn

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Methods for Improving Forecasts

AccurateForecasts

Panels of Experts

• Internal experts• External experts• Domain experts• Delphi technique

• Moving average• Exponential smoothing• Trend analysis• Seasonality analysis

Judgment Methods

Time-Series Methods

Causal Analysis

Market Research Analysis

• Relies on data other than that being predicted• Economic data, commodity data, etc.

• Market testing• Market surveys• Focus groups

First noticed by Procter & Gamble executives examining the order patterns for Pampers disposable diapers. They noticed that order variation increased dramatically as one moved from retailers to distributors to the factory.

Problem: increases the difficulty of planning at the factory level

Example of the Bullwhip Effect

What is the SOLUTION?

Reduce uncertainty in the supply chain Centralize demand information Keep each stage of the supply chain provided with up-to-

date customer demand information More frequent planning (continuous real-time planning

the goal) Reduce variability in the supply chain

Every-day-low-price strategies for stable demand patterns

Reduce lead times Use cross-docking to reduce order lead times Use EDI techniques to reduce information lead times

Eliminate the bullwhip through strategic partnerships

Vendor-managed inventory (VMI) Collaborative planning, forecasting and replenishment

(CPFR)16

Four critical methods for reducing the Bullwhip effect:

Uncertainty is inherent to every supply chain Travel times Breakdowns of machines and vehicles Weather, natural catastrophe, war Local politics, labor conditions, border issues

Barriers to integration of organizations Getting top management on board Dealing with trade-offs Small businesses Variability and uncertainty Long lead times

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Why Is SCM Difficult?

Plan Source Make Deliver Return

Dealing with uncertain environments – matching supply and demand

Shorter product life cycles of high-technology products

Less opportunity to accumulate historical data on customer demand

Wide choice of competing products makes it difficult to predict demand

The growth of technologies such as the Internet enable greater collaboration between supply chain trading partners

If you don’t do it, your competitor will Major buyers such as Wal-Mart demand a level of “supply

chain maturity” of its suppliers Availability of SCM technologies on the market

Firms have access to multiple products (e.g., SAP, Baan, Oracle, JD Edwards) with which to integrate internal processes 18

The Importance of Supply Chain Management

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Supply Chain Management Operations Strategies

STRATEGY WHEN TO CHOOSE

BENEFITS

Make to Stock standardized products, relatively predictable demand

Low manufacturing costs; meet customer demands quickly

Make to Order customized products, many variations

Customization; reduced inventory; improved service levels

Configure to Order many variations on finished product; infrequent demand

Low inventory levels; wide range of product offerings; simplified planning

Engineer to Order complex products, unique customer specifications

Enables response to specific customer requirements

Source: Simchi-Levi

Lower inventories Higher productivity Greater agility Shorter lead times Higher profits Greater customer loyalty

Benefits of Supply Chain Management

Strategy Formulation In the Supply Chain

There are two major step for strategy development in the SCM.

In the first step, managers should prepare the organization for move toward apply SCM strategically.

The second Step is related to the developing strategies and encompassed the following cases:

Step 1 – Energize the Organization Establishment of SCM and e-Business educational

courses. Ensure top management that supply chain and e-

Business strategies are integrated. Pursue the executive team to act as a sponsor. Enhance the ways in which people work.

Step 2 – Enterprise Vision Defining the nature of the competitive

competencies possessed within the current infrastructure and outside the supply chain network.

Preliminary steps in SCM strategy development

Step 3 – Supply Chain Value Assessment Identify and then prioritize which supply chain

values should be undertaken that would provide the greatest enterprise and trading partner benefits.

Focused on improving core business functions and sustaining the competitive advantages they drive.

Step 4 – Opportunity identification Provide the collaborative with a map of possible

choices for the application of SCM strategies. Detailing and prioritizing the possible supply chain

solution and alternatives

Step 5 – Strategy Decision Focus on expected advantages whether on:

automating and integrating processes reducing costs increasing the flow of information through the supply

chain to amplify existing market realize new ways of providing value to customer

Constructing the Business Value Proposition An effective value proposition must be ready to

respond to three possible service values expected by customer: Super Service (speed and reliable delivery) Variety of Product and Service solutions Mass Customization

Developing the SCM strategy

Defining the Value Portfolio The following process development need to be

structured to support the business value proposition: Design (product and services) Effective cost management (able to squeeze the time it

takes from idea conception to sales) Services (accompanied with a matrix of value added

services) Quality (standard dimensions of performance and reliability)

Structuring the Scope of Collaboration Decide the scope of the firm’s processes and

activities and level of collaboration with trading partners to supply missing resources and competencies.

Ensuring Effective Resource Management The enterprise’s resources can be divided into three

major areas: Human knowledge (creation of products, technologies,

systems, processes and relationships) The capital invested in physical assets (warehouses, offices,

information systems, and transportation equipment) The value found in physical assets and human knowledge of

customers, suppliers, and business partners (synchronized delivery and production, outsourcing, and creating collaborative solutions)

SCM Implementation Puts the new strategies, processes and systems to

work according to the project plan in SCM strategy report.

Pursuing Growth Management Structuring a set of meaningful and focused

performance measurements that allow corporate planners to gauge the effectiveness of their supply chain solutions.

Reviews business context, strategies and current supply chain

Identify whether current setup is helping or hurting your business and to determine how to improve it.

Distribution and Warehouse

Management

Often called logistics.Movement of materials, services, cash, and

information in a supply chain.Two types of logistics:Forward logisticsReverse logistics

Distribution

Forward Raw materials, parts and finished goods flowing from suppliers to producers, distributors and, finally, to consumers.

Reverse Wastes, packages, and defective/obsolete products are "climbing back" the supply chain.

Goal: Recapture/create value in returned goods/to properly dispose of goods that cannot be sold.

Distribution (cont…)

Warehouse:  Commercial building for storage of goods.

Warehouse management to optimize: Inventory Labor Physical Space Time Costs

Warehouse Management

To control the movement and storage of materials within an operation and process the associated transactions.

Utilize technology (Barcode scanner, mobile computer,  Radio-frequency identification (RFID) )

Warehouse Management System

RFID: Uses radio waves to identify objects in supply chains.

RFID tag is attached to an object. Provide unique identification, enabling

businesses to identify, track, monitor, or locate practically any object in the supply chain that is within range of a tag reader.

Warehouse Management System (Cont…)

Yodobashi Camera is one of the largest Japanese retailers of electronic goods.

Challenge: Managing An Inventory Of More Than 850,000 different Items.

Solution: RFID Warehouse Management Solution From Motorola And Mighty Card.

Result:Improved Yodobashi Camera’s efficiency and real-

time stock visibility.Dramatically reduced workloads in the warehouse.Reduced operational costs and helped the

company to move towards its ‘zero-inventory’ goal.

Case Study

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