Chapter 11 Supply Chain Management

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Chapter 11 Supply Chain Management

• Definition, issues, logistics, EDI, E-commerce,
  purchasing, make or buy, DRP

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Definition of SCM

• Definition chain consisting of multiple
  organizations and organization units operating as
  customer/supplier links
• Includes external suppliers and subcontractors
• Involves internal manufacturing plants,
  warehouses, and distribution centers
• Extends to final (external) customers

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Supply Chain Example

• Contract manufacturer
• Hewlett-Packard
• Ingram Micro
• CompUSA
• You or me

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Factors Leading to SCM

• Globalization
• Competitive pressure
• Move to e-commerce
• Cost reduction opportunities
• Ability to share information
• Greater use of contract manufacturers
• Desire to manage vertical markets

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Key Elements of SCM

• Determine customer needs
• Forecast demand
• Design products to meet customer needs and
  minimize costs
• Control operations processes
• Minimize inventory
• Strengthen supplier relationships
• Optimize facility location
• Improve handling and storage of material

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SCM Issues

• Strategic
• Building the chain (suppliers, manufacturing
  facilities, distribution centers, customers)
• Establishing partnerships
• Tactical
• Inventory, procurement, logistics, quality
  policies
• Operational
• Production and inventory planning and control
• Outsourcing
• Quality control

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Integration

• Horizontal Integration
• Acquisition of complementary product lines
• Example HP and Compaq
• Vertical Integration
• Backward integration (upstream)
• Control of supply
• Example Ford
• Forward integration (downstream)
• Control of customers
• Example Apple

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Focused Factories

• Focused factories
• Emphasis on niche, distinctive competency
• Limited products and functions
• Example HP casting plant
• HP Carly Fiorina comments (SJMN 10/24/02)
• in contrast to IBM, HP is not going to be a
  vertically integrated company
• Focus less and less on component-level innovation
• Work with key partners (e.g., Intel and Canon)
• Position itself as broad-based technology company

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Logistics

• Managing movement of materials within the supply
  chain
• Traffic management
• Scheduling, carrier selection, rate and tariff
  management
• Electronic Data Interchange (EDI)
• Internet (B2B, exchanges)
• Distribution Requirements Planning (DRP)
• JIT deliveries

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Communications

• Traditional
• Mail, Phone, Fax
• EDI
• Transmission of forecasts, orders, etc.
• Individual supplier/customer agreements
• Internet (E-Commerce)
• Buying and selling using the Internet
• Business-to-business, business-to-consumer
• Exchanges

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Creating an Effective Supply Chain

• Key is external and internal partnerships
• Steps
• Strategic objectives and tactics
• Integrate internal part first
• Extend to suppliers and customers
• Optimize data management across chain
• Develop strategic partnerships

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SCM Software Vendors

• Supply Chain Management (SCM)
• SAP
• Oracle
• I2 Technologies
• Manugistics

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Internet Applications (B2B)

• Ariba (Sunnyvale)
• BEA (San Jose)
• Siebel (San Mateo)
• (acquired by Oracle 06/01/06) (Redwood Shores)
• BroadVision (Redwood City)
• Many others

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Internet Applications (B2C)

• Oracle (Redwood Shores)
• Including Siebel (San Mateo)
• Acquired by Oracle 06/01/06)
• BroadVision (Redwood City)
• Many others

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Purchasing - 1

• Purchasing activities and interfaces
• Purchasing cycle
• Requisition from user or inventory control
• Supplier selection
• Order placement
• Order monitoring and follow-up
• Order receipt
• Outsourcing
• Contract manufacturers

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Purchasing - 2

• JIT purchasing
• Fewer suppliers
• More contracts
• Traditional vs. partnership relationships
• Supplier selection
• Supplier audits and certification

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Supplier Relationships 1Source Schonberger
Knod, Operations Management, Fourth Edition, 1991
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Supplier Relationships 2Source Schonberger
Knod, Operations Management, Fourth Edition, 1991
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Purchasing - 3

• Supply Chain Tools
• Bar coding
• EDI (Electronic Data Interchange)
• RFID (Radio Frequency Identification)
• E-commerce

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Purchasing - 4

• Make or buy (breakeven analysis)
• QBEP FC / (p v)
• Distribution requirements planning (DRP)
• Aggregate requirements from stores
• Assign through warehouses to factories

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E-Commerce Areas

• CRM - Oracle (including Seibel), BroadVision
• B2B - SAP, Oracle
• B2C - BroadVision
• SCM - SAP, i2
• E-Procurement - SAP, Ariba