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Basics of Supply Chain Managment

An educational presentation about basics of supply chain managment SCM

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Basics of Supply Chain Managment

  1. 1. Business English Logistics & Transportation EngineeringSeminar : Basics of Supply Chain Management By Youssef Serroukh 15/11/2011 ~ 22/11/2011 Y.Serroukh – Anglais Commercial 1
  2. 2. Contents Part 1 What is SCM? Part 2 The Evolving Supply Chain Y.Serroukh – Anglais Commercial 2
  3. 3. What is SCM? Y.Serroukh – Anglais Commercial 3
  4. 4. 1.1 Overview of Supply ChainSupply chain (also called value chain or demand chain), isthe network of the involved companies, through upstreamand downstream linkages, in the different processes andactivities that produce value in the form of products andservices in the hands of the ultimate consumer. Forexample, a shirt manufacturer is a part of a supply chainthat goes upstream through the weavers of fabrics to themanufacturers of fibers, and downstream throughdistributors and retailers to the final consumer. Each ofthese organizations in the chain is dependent upon eachother. Y.Serroukh – Anglais Commercial 4
  5. 5. 1.2 The Definition of SCMThere are various definitions of different edition. But in general, Supplychain management means the management of upstream anddownstream relationships with suppliers and customers to deliversuperior customer value at less cost to the supply chain as a whole. Thesupply chain arrangement links a firm and its distributive and suppliernetwork to end customers.The integrated value-creation process must be managed from materialprocurement to end-customer product delivery. The integrated supplychain management shifts traditional channel arrangements fromloosely linked groups of independent businesses that buy and sellinventory to each other toward a coordinated initiative to increasemarket impact, overall efficiency, continuous improvement, andcompetitiveness. Y.Serroukh – Anglais Commercial 5
  6. 6. 1.3 The Supply Chain Suppliers Manufacturers Warehouses & Customers Distribution Centers Transportation Transportation Costs CostsMaterial Costs Transportation Manufacturing Costs Inventory Costs Costs Y.Serroukh – Anglais Commercial 6
  7. 7. Plan Source Make Deliver Buy• A set of approaches used to efficiently integrate – Suppliers – Manufacturers – Warehouses – Distribution centers• So that the product is produced and distributed – In the right quantities – To the right locations – And at the right time• System-wide costs are minimized• Service level requirements are satisfied Y.Serroukh – Anglais Commercial 7
  8. 8. 1.4 Difficulties• Uncertainty is inherent to every supply chain – Travel times – Breakdowns of machines and vehicles – Weather, natural catastrophe, war – Local politics, labor conditions, border issues• The complexity of the problem to globally optimize a supply chain is significant – Minimize internal costs – Minimize uncertainty – Deal with remaining uncertainty Y.Serroukh – Anglais Commercial 8
  9. 9. 1.5 History of SCM• 1960’s - Inventory Management Focus, Cost Control• 1970’s - MRP & BOM - Operations Planning• 1980’s - MRPII, JIT - Materials Management, Logistics• 1990’s - SCM - ERP - “Integrated” Purchasing, Financials, Manufacturing, Order Entry• 2000’s - Optimized “Value Network” with Real-Time Decision Support; Synchronized & Collaborative Extended Network Y.Serroukh – Anglais Commercial 9
  10. 10. 1.6 Reasons for Developing Supply Chains Greater competitive advantage Greater value to consumers Reduces the lead time gap Faster and smaller deliveries to intermediate customers Introduces the concept of increased shareholder value These reasons give rise to the notion that in future, we will see supply chains competing with supply chains rather than competition between organizations. Y.Serroukh – Anglais Commercial 10
  11. 11. 1.7 The Goal of SCMSince World War II, with the development of the operationsresearch and management science, there has been an increasinginterest in supply chain planning and management. Workingtogether, supply chain planners/managers and all members ofthe front, middle and back end of the supply chain may enhancerevenue, cost control, and asset utilization as well as customersatisfaction. Furthermore, software for optimization has been embraced byall of these parties, as it offers mathematical modeling solutionsto supply chain problems. For example, a software packagemight provide an optimum delivery route of the products, fromsupplier to manufacture. In conclusion, the goal is to optimizeefficiency through supply chain management. Y.Serroukh – Anglais Commercial 11
  12. 12. 1.8 Summary of SCM A supply chain consists of Supplier Manufacturer Distributor Retailer Customer Upstream Downstream aims to Match Supply and Demand, profitably for products and services SUPPLY SIDE DEMAND SIDE achieves The right Product + + + + + The right Price The right Store The right Quantity The right Customer = The right Time Higher Profits Y.Serroukh – Anglais Commercial 12
  13. 13. The Evolving Supply Chain Y.Serroukh – Anglais Commercial 13
  14. 14. 2.1 Supply Chain Integration : Push Strategies• Classical manufacturing supply chain strategy• Manufacturing forecasts are long-range – Orders from retailers’ warehouses• Longer response time to react to marketplace changes – Unable to meet changing demand patterns – Supply chain inventory becomes obsolete as demand for certain products disappears• Increased variability (Bullwhip effect) leading to: – Large inventory safety stocks – Larger and more variably sized production batches – Unacceptable service levels – Inventory obsolescence• Inefficient use of production facilities (factories) – How is demand determined? Peak? Average? – How is transportation capacity determined?• Examples: Auto industry, large appliances, others? Y.Serroukh – Anglais Commercial 14
  15. 15. 2.2 Supply Chain Integration : Pull Strategies• Production and distribution are demand-driven – Coordinated with true customer demand• None or little inventory held – Only in response to specific orders• Fast information flow mechanisms – POS data• Decreased lead times• Decreased retailer inventory• Decreased variability in the supply chain and especially at manufacturers• Decreased manufacturer inventory• More efficient use of resources• More difficult to take advantage of scale opportunities• Examples: Dell, Amazon Y.Serroukh – Anglais Commercial 15
  16. 16. 2.3 Supply Chain Integration : Push/Pull Strategies • Hybrid of “push” and “pull” strategies to overcome disadvantages of each • Early stages of product assembly are done in a “push” manner – Partial assembly of product based on aggregate demand forecasts (which are more accurate than individual product demand forecasts) – Uncertainty is reduced so safety stock inventory is lower • Final product assembly is done based on customer demand for specific product configurations • Supply chain timeline determines “push-pull boundary” Push- “Generic” Product Pull “Customized” Product Boundary Push Strategy Pull Strategy Raw EndMaterials Consumer Supply Chain Timeline Y.Serroukh – Anglais Commercial 16
  17. 17. 2.4 Choosing Between Push/Pull Strategies Pull High Industries where: Industries where: Where do the following • Customization is High • Demand is uncertain • Demand is uncertain • Scale economies are High industries fit in this model: Demand Uncertainty • Scale economies are Low • Low economies of scale Computer Furniture • Automobile? equipment • Aircraft? • Fashion? Industries where: Industries where: • Petroleum refining? • Pharmaceuticals? • Uncertainty is low • Standard processes are the • Low economies of scale norm • Biotechnology? • Push-pull supply chain • Demand is stable • Medical Devices? • Scale economies are High Books, CD’s Grocery,Push Low Beverages Low Economies of Scale High Pull Push Y.Serroukh – Anglais Commercial 17
  18. 18. 2.5 Characteristics of Push, Pull and Push/Pull Strategies PUSH PULL Objective Minimize Cost Maximize Service Level Complexity High Low Focus Resource Allocation Responsiveness Lead Time Long Short Processes Supply Chain Planning Order Fulfillment Y.Serroukh – Anglais Commercial 18
  19. 19. 2.6 Supply Chain Collaboration• Cornerstone of effective SCM• The focus of many of today’s SCM initiatives• The only method that has the potential to eliminate or minimize the Bullwhip effect Retailers Suppliers Synchronized Manufacturer Production Scheduling Collaborative Distributors/ Demand Planning Collaborative Wholesalers Product Development Collaborative Logistics Planning •Transportation services •Distribution center services Logistics Providers Y.Serroukh – Anglais Commercial 19
  20. 20. 2.7 Flows in a Supply Chain Material InformationSupplier Customer Funds The flows resemble a chain reaction. Y.Serroukh – Anglais Commercial 20
  21. 21. 2.8 Importance of SCM Frequent Supply shortages Low order fill Inefficient rates logistics High Manufacturer Distributor Retailer Customer stockouts SupplierGlitch-Wrong Material, Ineffective Machine is Down – High inventories High landed costs through the chain promotions to the shelf effect snowballs Y.Serroukh – Anglais Commercial 21
  22. 22. Exercise 1. Match the words (1-6) with correct definition (a-f).1.Outsourcing2.comprehensive3.consolidation4.requirements5.demand6.Competitiona. including a wide range of services.b. details of what is expected and neededc. the need for particular goods or servicesd. companies trying to sell the same or similar products to customerse. the grouping of small shipments into one container.f. contracting functions out to third-party providers Y.Serroukh – Anglais Commercial 22
  23. 23. Thank you for your attention Y.Serroukh – Anglais Commercial 23