Supply chain planning and control

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1 13.1 Chapter 13 Supply chain planning and control 13.1

2 13.2 Supply chain planning and control The market requires specified time, quantity and quality of products and services The operation supplies the coordinated delivery of products and services 13.2

3 13.3 Key operations questions In Chapter 13 Supply chain planning and control Slack et al. identify the following key questions: What is supply chain management? What are the activities of supply chain management? What are the types of relationship between operations in supply chains? How do supply chains behave in practice? How can supply chains be improved? 13.3

4 13.4 What is supply chain management? Supply chain management is the management of the interconnection of organizations that relate to each other through upstream and downstream linkages between the processes that produce value to the ultimate consumer in the form of products and services. 13.4

5 13.5 Supply chain planning and control is concerned with managing the flow of materials and information between a string of operations, that form the strands or chains of a supply network Flow between processes Flow between processes Supply network management concerns flow between operations Flow between processes Flow between processes Flow between processes Supply chain management concerns flow between a string of operations Flow between processes Flow between processes 13.5

6 13.6 Supply chains management is concerned with the flow of information and the flow of products and services Upstream flow of customer Requirements Long-term plans and requirements Market research information Individual orders Payment Potential new products and services. Flow between processes Flow between processes Flow between processes Consumer Operation 1 Operation 2 Operation 3 Products and services New products and services Delivery information Payment request/credit. Downstream flow of products and services for customer Fulfilment 13.6

7 13.7 Supply chain planning and control Second tier supplier First tier supplier First tier customer Second tier customer End customer Supply side Information flow Purchasing and supply management Demand side Physical distribution management Logistics Physical flow Materials management Supply chain management 13.7

8 13.8 Taking a customer perspective of supply performance can lead to very different conclusions Customer requirements Product/ service appropriate? 80 N 20 Y Product/ service available? N Y Meets price and delivery requirements? From the customers perspective 8% satisfaction Y 20 N 50 Y N Customer orders? 10 N Produced as promised? 9 From the operation s perspective 90% satisfaction Y N 1 Y Y N Received as promised? Customer satisfaction 8 1 Y 8 1 N Y N

9 13.9 The purchasing function brings together the operation and its suppliers Suppliers Purchasing function The operation Prepare quotation for specification, price, delivery, etc. Requests Quotations Request for quotations Select supplier(s) Liaison between purchasing and the operation Request for products and services Demand from customers Produce products and services Order Prepare purchase order Receive products and services Supply to customers Deliver 13.9

10 13.10 Factors for rating alternative suppliers Short-term ability to supply Range of products or services provided Quality of products or services Responsiveness Dependability of supply Delivery and volume flexibility Total cost of being supplied Ability to supply in the required quantity Longer-term ability to supply Potential for innovation Ease of doing business Willingness to share risk Long-term commitment to supply Ability to transfer knowledge as well as products and services Technical capability Operations capability Financial capability Managerial capability 13.10

11 13.11 Weighted supplier selection criteria for a hotel chain Factor Weight Supplier A score Supplier B score Cost performance 10 8 (8 x 10 = 80) 5 (5 x 10 = 50) Quality record 10 7 (7 x 10 = 70) 9 (9 x 10 = 90) Delivery speed promised Delivery speed achieved 7 5 (5 x 7 = 35) 5 (5 x 7 = 35) 7 4 (4 x 7 = 28) 8 (8 x 7 = 56) Dependability record 8 6 (6 x 8 = 48) 8 (8 x 8 = 64) Range provided 5 8 (8 x 5 = 40) 5 (5 x 5 = 25) Innovation capability 4 6 (6 x 4 = 24) 9 (9 x 4 = 36) Total weighted score

12 13.12 Supply chain relationships To Business Consumer Business From Consumer Business to business (B2B) Most common, all but the last link in the supply chain E-commerce examples: EDI networks Business information exchanges. Consumer to consumer (C2B) or peer to peer (P2P) Consumers offer, business responds E-commerce examples: Some airline ticket operators Priceline.com, etc. Business to consumer (B2C) Retail operations Catalogue operations, etc. E-commerce examples: Internet retailers Amazon.com, etc. Consumer to business (C2B) Trading swap and auction transactions E-commerce examples: Specialist collector sites Ebay.com, etc

13 The character of internal operations activity Do nothing Do everything important Do everything Types of supply relationship Vertically integrated operation Traditional supply management Partnership supply management Virtual spot trading Long-term virtual operation Transactional many suppliers Type of inter-firm contact Close few suppliers 13.13

14 13.14 Elements of process partnership relationships Trust Attitudes Long-term expectations Sharing success Joint learning Joint coordination of activities Closeness of relationship Multiple points of contact Few relationships Joint problem solving Dedicated assets Information transparency Actions 13.14

15 13.15 The effects of supply chain compression Supply chain time compression Schedule changes impact market faster Forecasts made closer to demand time Defects are detected faster New products and service faster to market so can respond to market changes better so improved forecasts so less need for safety stocks so easier to improve quality so fewer lost sales from delayed launch so reduced risk of obsolescence so revenues are maximized so reduced stockholding costs so reduced wastage costs so revenues are maximized so less discounted sales Improved profitability 13.15

16 13.16 The bullwhip effect 3rd LEVEL SUPPLIER 2nd LEVEL SUPPLIER 1st LEVEL SUPPLIER ORIGINAL EQUIPMENT MFG. Prodn. Stock Prodn. Stock Prodn. Stock Prodn. Stock ALL OPERATIONS HOLD ONE PERIODS STOCK OEM MARKET

17 13.17 The bullwhip effect (Continued) 3rd LEVEL SUPPLIER 2nd LEVEL SUPPLIER 1st LEVEL SUPPLIER ORIGINAL EQUIPMENT MFG. Prodn. Stock Prodn. Stock Prodn. Stock Prodn. Stock ALL OPERATIONS HOLD ONE PERIODS STOCK OEM MARKET

18 13.18 The bullwhip effect (Continued) Manufacturer s orders to its suppliers Wholesaler s orders to manufacturer Store s orders to wholesaler Sales from store 0 Time 0 Time 0 Time 0 Time Supplier Manuf acturer Whole saler Retail store Consumers 13.18

19 13.19 Supply chain dynamics Supply chains with different end objectives need to be managed in different ways 13.19

20 Supply chain objectives Efficient Responsive Low cost Low throughput times High utilization Low utilization Minimum inventory Deployed inventory Low cost suppliers Flexible suppliers Matching the supply chain with market requirements Nature of demand Functional products Innovative products Predictable Unpredictable Few changes Many changes Low variety High variety Price stable Price markdowns Long lead-times Short lead-times Low margin High margins Lean supply chain management Mismatch Mismatch Agile supply chain management 13.20

21 Products Information Where is the inventory? Customer responsive supply Depot Supplier Manufacturer Depot Outlets 13.21

22 13.22 Where is the inventory? (Continued) Efficient fast throughput supply Depot Products Supplier Manufacturer Information Depot Outlets 13.22

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