Supply-Chain Design Chapter 9

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1 Supply-Chain Design Chapter 9

2 External Value-Chain Linkages First-Tier Supplier Support Processes Service/Product Provider Support Processes External Suppliers Supplier Relationship Process New Service/ Product Development Process Order- Fulfillment Process Business-to- Business (B2B) Customer Relationship Process Supplier Relationship Process New Service/ Product Development Process Order- Fulfillment Process Business-to- Business (B2B) Customer Relationship Process External Customers Figure 9.1

3 Supply Chain for a Florist Home customers Commercial customers Florist Packaging Local delivery service Arrangement materials Maintenance services FedEx delivery service Flowers local/ international Internet services Required for facilitating goods Required for explicit services Required for implicit services Required for supporting facilities Figure 9.2

4 Creation of Inventory Input flow of materials Inventory level Scrap flow Figure 9.3 Output flow of materials

5 Inventory at Different Stocking Points Raw materials Work in process Finished goods Supplier Manufacturing plant Distribution center Retailer Figure 9.4

6 Supply Customer Customer Customer Customer Chain Distribution center Distribution center Manufacturer Tier 1 Tier 2 Tier 3 Figure 9.5 Legend Supplier of services Supplier of materials

7 Supply Chain Dynamics for Facial Tissue Order Quantity 9,000 7,000 5,000 3,000 Consumers daily demand Retailers daily orders to manufacturer Manufacturer s weekly orders to package Package s weekly orders to cardboard Figure Time

8 Materials Management Purchasing domain of responsibility Egg Sugar Flour Chocolate chips Maintenance services Figure 9.7

9 Materials Management FG storage Transformation process and WIP storage Purchasing domain of responsibility Egg Sugar Flour Chocolate chips Maintenance services RM storage Figure 9.7

10 Materials Management FG storage Production domain of responsibility Transformation process and WIP storage RM storage Purchasing domain of responsibility Egg Sugar Flour Chocolate chips Maintenance services Figure 9.7

11 Materials Management FG storage Production domain of responsibility Transformation process and WIP storage RM storage Purchasing domain of responsibility Egg Sugar Flour Chocolate chips Maintenance services Figure 9.7

12 Materials Management Supermarket A distribution center Supermarket B distribution center Distribution domain of responsibility Transportation services FG storage Production domain of responsibility Transformation process and WIP storage RM storage Purchasing domain of responsibility Egg Sugar Flour Chocolate chips Maintenance services Figure 9.7

13 Materials Management Supermarket A distribution center Supermarket B distribution center Distribution domain of responsibility Transportation services FG storage Production domain of responsibility Transformation process and WIP storage RM storage Purchasing domain of responsibility Egg Sugar Flour Chocolate chips Maintenance services Figure 9.7

14 Inventory Measures Average inventory = $2 million Cost of goods sold = $10 million 52 business weeks per year $2 million Weeks of supply = = 10.4 weeks ($10 million)/(52 weeks) $10 million Inventory turns = = 5 turns/year $2 million Example 9.1

15 Inventory Measures Figure 9.8

16 Supply-Chain Process Measures TABLE 9.1 Customer Relationship SUPPLY CHAIN PROCESS MEASURES Order Fulfillment Supplier Relationship Percent of orders taken accurately Time to complete the order placement process Customer satisfaction with the order placement process Percent of incomplete orders shipped Percent of orders shipped on time Time to fulfill the order Percent of botched services or returned items Cost to produce the service or item Customer satisfaction with the order fulfillment process Percent of s deliveries on time Suppliers lead times Percent defects in services and purchased materials Cost of services and purchased materials

17 Supply-Chain Environments TABLE 9.2 ENVIRONMENTS BEST SUITED FOR EFFICIENT AND RESPONSIVE SUPPLY CHAINS Factor Efficient Supply Chains Responsive Supply Chains Demand Predictable, low Unpredictable, high forecast errors forecast errors Competitive Low cost, consistent Development speed, fast priorities quality, on-time delivery times, delivery customization, volume flexibility, variety, top quality New-service/ Infrequent Frequent product introduction Contribution Low High margins Product variety Low High

18 Supply-Chain Design TABLE 9.3 DESIGN FEATURES FOR EFFICIENT AND RESPONSIVE SUPPLY CHAINS Factor Efficient Supply Chains Responsive Supply Chains Operation Make-to-stock or Assemble-to-order, makestrategy standardized services; to-order, or customized emphasize high services; emphasize volume, standardized service or product services or products variety Capacity Low High cushion Inventory Low, enable high As needed to enable fast investment inventory turns delivery time Lead time Shorten, but do not Shorten aggressively increase costs Supplier Emphasize low prices, Emphasize fast delivery selection consistent quality, on- time, customization, time delivery variety, volume flexibility, top quality

19 Pepperidge Farm SCM System Order Commitment Transportation Management Purchasing Management Demand Management Vendor-Managed Inventory Replenishment Planning Configuration Material Planning Scheduling Master Planning Strategic Planning

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