Chapter 10 – Supply Chain Management

What is a Supply Chain?
the set of entities and relationships that cumulatively define materials and information flows both downstream toward the customer and upstream toward the very first supplier
Definition of Supply Chain?
the design and management of seamless, value-added processes across the organizational boundaries to meet the real needs of the end customer
Measuring Supply Chain Performance – Delivery
-On time delivery

-fill rate (% of the order that can be filled immediately)

-lead time(time from order–> delivery)

Measuring Supply Chain Performance – Quality
-product or service performance

-conformance to specifications

-customer satisfaction

Measuring Supply Chain Performance – Flexibility
-time to change volume of output by a fixed amount

-time to change the mix of products or service

Measuring Supply Chain Performance – Time
-total supply chain throughput time
-cash-to-cash cycle time= Days in inventory + days in Accounts Receivable – days in accounts payable
Measuring Supply Chain Performance – Cost
-unit cost=materials + labor + overhead / # of units

-distribution, inventory carrying, accounts receivable

-total supply chain cost= suppliers (materials and components) + producer (fabrication and assembly) + logistics (shipping and WIP between firms)

Dynamics: Bullwhip Effect
-supply chain is a highly interactive system, decisions in one part affect other entities

-Accelerator (bullwhip) effect: upstream orders become increasingly variable, resulting in more inventory upstream

-even with perfect information, replenishment lead times lead to an accelerator effect

-improve supply chain by reducing total replenishment time, share real demand information

Improving Supply Chain Performance – Change Structure
-product/service, types/location of facilities, process technology/layout, vertical integration
Improving Supply Chain Performance – Change Infrastructure
-people’s roles/responsibilities, information systems, production and inventory control, quality control systems
Supply Chain Structural Improvements
-forward and backward integration
-major processes simplification
-working with third party logistics providers
-major product redesign (postponement, component swapping modularity)
-change configuration of factories, warehouses, or retail locations (outsource, off-shoring, total cost of ownership)

-cross functional teams
-partnerships with suppliers and customers
-setup time reduction to reduce lot sizes
-integrated information systems
-cross docking (move goods from factory truck directly to store truck; no warehouse storage)

Supply Chain Resilience
-ability to respond to unexpected disruptions in supply/demand either natural/manmade

-Risk Mitigation
1) Proactive Plan
2) Minimize damage during disruption
3) Post disruption recovery