1

Production Operations Production Operations ManagementManagement

Supply Chain ManagementU. Akinc

Supply Chain ManagementU. Akinc

2

Supply ChainsSupply Chains

A supply chain encompasses all the facilities, activities and functions in the delivery of products to customers from the raw material to the finished product stages.

Modern supply chain management is to manage the facilities, activities and functions in an integrated and coordinated way so as to maximize customer satisfaction.

A supply chain encompasses all the facilities, activities and functions in the delivery of products to customers from the raw material to the finished product stages.

Modern supply chain management is to manage the facilities, activities and functions in an integrated and coordinated way so as to maximize customer satisfaction.

3

Supply chain management:Supply chain management:

is a strategic area of management involves strategic investments in

facilities, technologies and relationships significantly impacts the way the

company competes Efficiency (cost) Delivery speed and reliability Quality Customization/flexibility

is a strategic area of management involves strategic investments in

facilities, technologies and relationships significantly impacts the way the

company competes Efficiency (cost) Delivery speed and reliability Quality Customization/flexibility

4

Structure of Supply ChainStructure of Supply Chain

5

I. FacilitiesI. FacilitiesI. FacilitiesI. Facilities Involve Involve plantsplants, , warehouseswarehouses, , distributiondistribution

centerscenters, , transportation infrastructuretransportation infrastructure and and communication links.communication links.

ChallengeChallenge: How should these be aligned and : How should these be aligned and realigned across the members of the SC to realigned across the members of the SC to maximize efficiency, speed and maximize efficiency, speed and responsiveness for the whole chain.responsiveness for the whole chain.

Involve Involve plantsplants, , warehouseswarehouses, , distributiondistribution centerscenters, , transportation infrastructuretransportation infrastructure and and communication links.communication links.

ChallengeChallenge: How should these be aligned and : How should these be aligned and realigned across the members of the SC to realigned across the members of the SC to maximize efficiency, speed and maximize efficiency, speed and responsiveness for the whole chain.responsiveness for the whole chain.

6

II. FunctionsII. Functions

Traditional functional organization around

marketing, manufacturing, finance etc. does

not foster an integrated approach to the

challenges of the Modern Supply Chain

Management

A more of an inter-functional, team

approach to management is needed.

Traditional functional organization around

marketing, manufacturing, finance etc. does

not foster an integrated approach to the

challenges of the Modern Supply Chain

Management

A more of an inter-functional, team

approach to management is needed.

7

III. Activities:III. Activities:

Traditional Materials management involve: purchasing shipping/receiving inventory management production scheduling transportation/distribution customer service

Traditional Materials management involve: purchasing shipping/receiving inventory management production scheduling transportation/distribution customer service

8

Supply-Chain DecisionsSupply-Chain Decisions Sourcing:

– Quality of materials/parts– Supplier selection– Location of suppliers– Ordering practices– In-bound transportation channels

Production– Plant Location– Make versus Buy– Capacity of Plants – Product Quality

Sourcing:– Quality of materials/parts– Supplier selection– Location of suppliers– Ordering practices– In-bound transportation channels

Production– Plant Location– Make versus Buy– Capacity of Plants – Product Quality

9

SC Decisions (cont.)SC Decisions (cont.) Inventory

– How much safety stock?

– JIT practices

– Replenishment policies

Distribution– Channels of distribution

– Transportation modes

– In-house vs. out-sourced

– DC locations

– Recycling/recovery practices

Inventory– How much safety stock?

– JIT practices

– Replenishment policies

Distribution– Channels of distribution

– Transportation modes

– In-house vs. out-sourced

– DC locations

– Recycling/recovery practices

10

State of IntegrationState of Integration Stage IStage I: : traditional managemet where all

facilities, functions and activities are managed independently (prior to 1960’s)

Stage II: A company integrates its material management activities and functions within its own 4 walls (1960’s)

Stage III: Enterprise Extension-- couple, coordinate and integrate all facilities, functions and activities for the entire supply chain (1990’s and beyond)

Stage IStage I: : traditional managemet where all facilities, functions and activities are managed independently (prior to 1960’s)

Stage II: A company integrates its material management activities and functions within its own 4 walls (1960’s)

Stage III: Enterprise Extension-- couple, coordinate and integrate all facilities, functions and activities for the entire supply chain (1990’s and beyond)

11

Three FlowsThree Flows Physical goods, components, materials, re-

cycling and recovery

Information -- both upstream and downstream.. Main means of integration

Financial

Physical goods, components, materials, re-cycling and recovery

Information -- both upstream and downstream.. Main means of integration

Financial

12

Bull Whip EffectBull Whip Effect Demand uncertainty is the main cause of

inefficiencies on the supply chain

Small variations in demand at the customer end often produce dramatic and violent fluctuations in orders down stream (bullwhip)

Integrating the supply chain tries to dampen these fluctuations-- often by sharing information

Demand uncertainty is the main cause of inefficiencies on the supply chain

Small variations in demand at the customer end often produce dramatic and violent fluctuations in orders down stream (bullwhip)

Integrating the supply chain tries to dampen these fluctuations-- often by sharing information

13

Supply Chain StrategiesSupply Chain Strategies

Responsive supply chains: Great variety of short life cycle, customized

products --Innovative Products

Efficient supply chains: Highly stable and predictable demand --Functional

products

A trade-off to be resolved

Responsive supply chains: Great variety of short life cycle, customized

products --Innovative Products

Efficient supply chains: Highly stable and predictable demand --Functional

products

A trade-off to be resolved

14

RelationshipsRelationships Creating a trusting, mutually beneficial

relationships among the members of the supply chain is essential

Contrary to the traditional approach, in modern SCM, the suppliers are not considered as adversaries but as trusted partners

Creating a trusting, mutually beneficial relationships among the members of the supply chain is essential

Contrary to the traditional approach, in modern SCM, the suppliers are not considered as adversaries but as trusted partners

15

SC ChallengesSC Challenges Involves a number of different companies with

diverse objectives, philosophies and management styles

Information systems used by different members may not be compatible for seamless information sharing

Sharing the benefits and risks is not always easy Lack of universally accepted performance

measures

Involves a number of different companies with diverse objectives, philosophies and management styles

Information systems used by different members may not be compatible for seamless information sharing

Sharing the benefits and risks is not always easy Lack of universally accepted performance

measures