Supply Chain Management

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1 Supply Chain Management

2 Contents A. Definition and Terminologies B. Evolution of SCM C. Supply Chain Management D. Integrated Logistics E. Fulfillment Process F. Specialized Supply Chains G. Supply Chain Operations Reference (S.C.O.R) Model

3 A. Definition and Terminologies Definition Product Flow Credit Flow VISA Vendor Producer Retailer Consumer Vendor Production Plan Production Order Wholesaler Finance Flow Retailer

4 A. Definition and Terminologies Raw materials Overseas producers The Product Flow in Supply Chain Production HQ Raw materials Domestic producers Producer s warehouse/distribution center 3 rd party warehouse/distribution center Consumers Retailer HQ Retail stores Wholesaler Retailer warehouse/distribution center

5 A. Definition and Terminologies Global Supply Chain: A Complex Subject Vendor Customer Raw Materials Vendor Components Vendor Distribution Center Retailers Assembly Manufacturer

6 A. Definition and Terminologies What is Supply Chain Management (SCM)? Definition A total systems view of the links in the chain that work together efficiently to create customer satisfaction. Service Level From the customer s perspective, service level is how well can a company provide much needed and attractive products in stock at a reasonable price. Customer demand is a driving force. Hence, SCM is sometimes referred to as Demand Chain Management. Raw Material Supllier 制 造 商 零 售 商 消 费 者

7 A. Definition and Terminologies Definition of SCM SCM focuses on a network (of companies, suppliers, customers, partners, etc.) Competition between producers are competition between supply chains. Vendor s Vendor Vendors Customers Indirect customers Supply Source Companies Demand Source SCM SRM ERM CRM

8 A. Definition and Terminologies Definition of SCM SCM focuses on a process ( to coordinate the planning, organization, synchronization and control of the flow of products, information and finances). Efficiency can be improved through technology. Better decision making with information sharing. Logistics vs. SCM Vendor Distribution System Customer Factory Retailer

9 A. Definition and Terminologies Definition of Process SCOR is based on five core management processes Plan Source Make Deliver Processes that balance aggregated demand and supply to develop a course of action which best meets sourcing, production and delivery requirements. Processes that procure goods and services to meet planned or actual demand. Processes that transform products to finished state to meet planned or actual demand. Processes that provide finished goods or services to meet planned or actual demand, typically including order management, transportation management and distribution management. Return Processes associated with returning or receiving returned products for any reason. These processes extend to post-delivery customer service.

10 A. Definition and Terminologies SCM Decisions Basic Decisions Strategic Long-term decisions related to numbers, location, capacity, network structure and logistics of factories/warehouses/sales nodes. Tactical Decisions related to Sourcing, production, inventory, distribution, and transportation, etc. Operational Day-to-day planning, distribution, collection & analysis of sales data, lead time forecast, distribution & transportation arrangement.

11 A. Definition and Terminologies Basis of SCM Basis of effective SCM Mutual trusts based on common interests! A collection of parties of interest, to share the interests and the risks A mechanism is needed to effectively distribution interests and benefits Without the basis Lack of trust, work uncoordinatedly, increased uncertainty had to increase inventory to compensate Out-stock risks Zero-inventory risks Probably partial lean but not lean for the whole chain, merely shifting the stock to upstream or downstream and still baring the cost.

12 A. Definition and Terminologies Supply Chain Variability Manufacturer Forecast of Sales Volumes Retailer Orders Retailer Warehouse to Shop Actual Consumer Demand Production Plan Time Source: Tom McGuffry, Electronic Commerce and Value Chain Management, 1998

13 A. Definition and Terminologies Challenges Challenges in SCM Supply chain is a complex system with multiple members (nodes). Members have conflicts among each others (based on their goals and interests pursuit). It is therefore challenging to match supply with demand, because of too many variables and changes over time. The production cycle is becoming shorter, and marketing is becoming more flexible and diversified.

14 A. Definition and Terminologies Traditional Upstream & Downstream Relationships Producer Customer No Contact Finance IT System Top Management Advertisement & Promotion Production Distribution Customer Service Marketing & Sales Sales Reps Sourcing Staff Inventory Store Operations Buy & Sales Finance IT System Advertisement & Marketing Top Management R&D Planning No Contact

15 A. Definition and Terminologies New Upstream & Downstream Partnership Sales Reps Sourcing Staff Marketing Buy & Sale Production & Distribution Finance Customer Service Store Management Buy & Sale Warehousing IT System IT System Finance Ad & Promotion R&D Planning AD & Promotion Top Management Top Management

16 B. Evolution of SCM Components Makers Final Assembly Distribution Center Retailer Consumer Traditional supply chain in the 1980s Assembly Demand Distribution Demand Retail Demand User Demand Push Push Push Pull Months Months Weeks Weeks

17 B. Evolution of SCM SCM Development Components Makers Final Assembly Distribution Center Retailer Consumer Precision supply chain in the 1990s Kanban Kanban Kanban User Demand Pull Pull Pull Pull Months Months 5-7 Weeks 3-5 Weeks

18 B. Evolution of SCM SCM Development Components Makers Final Assembly Distribution Center Retailer Consumer Integrated Agile Supply Chain in the 1995 Push Planning Inventory Info. 库 存 信 息 Push Global Material Planning System Push Overall User Demand Inventory Info. Push User Demand Pull Months 2 Weeks One week One Week

19 B. Evolution of SCM SCM Development Components Makers Final Assembly Distribution Center Retailer Consumer Customized Agile Supply Chain in 2000 User Demand Internet IT System Individual User Demand Pull Pull Pull Pull Weeks One Day Four Days

20 C. Supply Chain Management Strategic Sourcing 1 st Stage 2 nd Stage Process Proposed R&D Spec. Select vendor Production vendor Preparation & Contract Checks Order & Acceptance Settlement Management of goods & Payment & Expediting Delivery Progress Review Cost analysis, capacity assessment vendor communication & relations Strategic Options Resource Optimization Operation Review Sourcing Dpt. to organize other dpt. and complete the work Support Organization development, HR development An integrated information system

21 C. Supply Chain Management Supply Positioning Model Impact Opportunity Risk Bottleneck Day-to-Day Key Leverage 80% items = 20% value 20% items = 80% value Expenses

22 Strategic Supply Goals Develop and optimize supply network system Supply adequate quality products at the lowest cost Improve SCM and increase supply flexibility Establish and maintain a high level supply management team GOAL

23 D. Integrated Logistics MRP Material Requirements Planning MRP II Manufacturing Resource Planning ERP Enterprise Resource Planning DRP Distribution Resource Planning JIT Just in Time (Zero-Inventory Production) QR Quick Response ECR Effective Customer Response VMI Vendor Managed Inventory JMI Jointly Managed Inventory

24 D. Integrated Logistics Excessive Paperwork Logistic Coordination Highly coordinated logistics enables effective and efficient customer respond in the whole supply chain. Excessive Unnecessary Services Mis- Delivery Out of stock Lack of Coordination Term Wars Excessive Inventory Repetitive Works Over Stock Coordinated Effective & Efficient Customer Response

25 D. Integrated Logistics Logistic Coordination Breakdown the boundaries along the SC to enable inter-company coordination Present: Members of SC work independently, no mutual transparency Producer Logistic operator Distribution/Reta il Customer Future: Integrated SC Cooperation Producer Logistic operator Increase transparency Increase efficiency Distribution/Reta il Customer

26 E. Fulfillment Process Stage 1: Basic development Sourcing Material Control Production Sales Distribution Stage 2: Function Integration Material Mngt. Production Mngt. Distribution Stage 3: Internal SC Integration Production Mngt. Material Mngt. Distribution Stage 4: External SC Integration Stage 5: Dynamic SC Alliance Vendor Internal SC Distribution SC Alliance

27 SC Performance Customer Internal SCOR level 1 Performance Reliability Respons Agility iveness Payment 3 Delivery Speed 3 Perfect order fulfillment 3 Lead time 3 SC Response Time 3 Product Agility 3 SCM Cost 3 Sales Cost 3 Value-Added Productivity 3 Warranty/Return Cost 3 Cash to Cash cycle 3 Inventory Days of Supply 3 Inventory Turnover 3 Cost Assets

28 F. Specialized Supply Chains Cold chain Consumer electronics Military cargoes Reverse logistics Furniture logistics..

29 F. Specialized Supply Chains Cold Chain

30 F. Specialized Supply Chains Consumer Electronics SC

31 F. Specialized Supply Chains Reverse SC

32 F. Specialized Supply Chains Furniture SC

33 Cold Chain Operation Requirements The market (consumption location) can provide appropriate conditions meet with the product features. Integrity of the goods The shipping condition should ensure that the product will maintain its value during transit, including appropriate internal and external packages, and pre-transportation processing (e.g. fruits need to be cleaned and cooled). Integrity of transportation In the transportation chain, the temperature has to maintain stable during transit, at warehouses and distribution centers.

34 G. Supply Chain Operations Reference (S.C.O.R) Model SCOR is based on five different management processes

35 Four Pillars of SCOR The SCOR Model has integrated business process reengineering, benchmarking, best practice analysis into the SCOR framework.

36 CAREC Supply Chain Central Asia East Asia South Asia Southeast Asia 3750km from Pacific Ocean 1100km from Arabian Sea 1600km from Arctic Ocean 1100km from Black Sea

37 CAREC Supply Chain CAREC countries mostly focuses on energy, raw materials processing and heavy chemical industry. They are at the top of global supply chain. Industry is relatively underdeveloped. Processing and light industry are relatively weak, apart from agriculture and food processing. Goods such as garments are mostly imported. Their economy is somewhat dependent on China. In 2012, the trade volume between CAREC countries and XUAR accounted for 78.76% in XUAR s total trade.

38 CAREC Supply Chain 2012 XUAR Border Trade Breakdown 2012 XUAR Border Trade Breakdown

39 CAREC Supply Chain CAREC logistic corridors are transforming into economic corridors. The industrialization of cities along the corridors is the key. To improve CAREC industry structure and develop light industry. Industry restructuring that is driven by CAREC s internal demand. To meet the internal demand, to develop internal supply chain instead of a global supply chain.

40 CAREC Supply Chain Value chain Smile Curve OBM Independent channels Improved R&D Move up in the value chain

41 Thank You

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