Intro to Supply Chain UARK

Parts of Logistics
Management
flow
storage
total costs
customer service
Parts of Supply Chain Management
Business Processes
Integration
Functions
Companies
Supply Chain Management =
Logistics + Purchasing
4 R’s of Competition
Responsiveness
Reliability
Resilience
Relationships
Who is known for reliability?
Toyota
Who is best at reducing costs in the supply chain?
Walmart
The Promise of Supply Chain Management
.25 improvement in sales + 1% reduction in costs and inventory = 23.2% improvement in ROA
Sales / Inventory =
42$/$7=
Inventory turns per year
=6 Inventory turns per year
1/6 turn/years =
1/6 years of supply
1/6 x 365 days per year =
= 61 days of supply
Inventory carrying cost =
Inventory x carrying cost factory
PIIS
Percent of Inventory In Stock
PTIS
Percentage of time an item is in stock
SKU A has a demand of 10 per day.
Out of stock every 4th day
PTIS =
IFR =
PTIS = 75% (3days/4 days)
IFR = 75 % (30 units/40 units)
SKU B has a demand of 1 every day but every 4th day has a demand of 7.
PTIS =
IFR =
PTIS = 75% (3 days/4 days)
IFR = 30% (3 units/10 units)
Safety Stock
Expected number of units on hand just before a replenishment is received and available for use or sale
On-Shelf Availability
when a product is in stock and in the specific location available to purchase
Out-of-Stock
When an item is unavailable to purchase
Consumer response to Out-Of-Stock
wait
go somewhere else
buy a substitute
Cost of a stockout per unit of lost sale =
1$ item
(1$ x .5) + (0 x .5) = .50
Planning Horizon and Uncertainty
The longer the length of time that is being forecasted the more inaccurate the estimate becomes
Lead time
The time the order is made until the time the order is received
Qualitative Forecasting
Judgmental and Market Research
Quantitative Forecasting
Causal and Time Series
Moving Average Method
ex. 2 periods
Add the 2 previous demands and then divide that by the amount of periods you are forecasting for (2)
Weighted Moving Average
Using 2 periods
weights of 2 and 3
2nd demand times 2 + most recent demand by 3
add the weights then divide the demand by the weights
Exponential Smoothing
refer to slide
Sense + Respond =
Agility
Lean Management matches?
Functional Products
Agile Management matches?
Innovative Products
Continuous Review Replenishment
Review Graph
Periodic Review with Order-Up-To Level
Review Graph
Facility Location Issues
Land,labor,capital, supply sources, production, markets, logistics
The Ownership Decision
1) Public warehousing costs mostly all variable
2) Private warehousing cost have a higher fixed cost component
3) Thus private warehousing virtually requires a high and constant volume
The Number of Warehouses
Items:
A
B
C
A: items most accessible increase velocity and more innovative order
B: Less accessible than A
C: least accessible

Re-slot frequently

Modes of Transit: Railroad
largest mode in terms of ton-miles moved
High capability
moderate speed
cheap
reliable
low accessibility
Modes of Transit: Motor Carrier
Largest mode in terms of
1) Pure Tonnage
2) Share of transportation spending in U.S.
Fast
Accessible
Reliable
Secure
Expensive
Modes of Transit: Air Cargo Carriers
Smallest mode in terms of ton-miles moved
fast
reliable
secure
expensive
low accessibility
Intermodal Transportation
Use of two or more modes of in the movement of freight from its origin to destination
1) Ocean and Rail “COFC”
2) Truck and Rail “TOFC”
International Distribution System
domestic manufacturing; international distribution
International Suppliers
foreign suppliers for raw materials and components; domestic final assembly; perhaps international distribution
Offshore manufacturing
product is sourced and manufactured internationally; domestic distribution
fully integrated global supply chain
products are supplied, manufactured, and distributed from various facilities throughout the world
What is so different about global supply chain?
CompaniesH
People
Complexity
It’s difficult to plan and execute
Companies – sometimes abandon basic decision making processes and underestimate differences
People – are extremely different across cultures and countries (CAGE: Cultural, Administrative, Geographical, Economical Distances)
Complexity – is exponentially higher due to differences
Global SCM Trade-Offs
Configuration:
Coordination:
Configuration: where and in how many nations each supply chain activity is performed

Coordination: how dispersed activities or activities performed in several different nations, are coordinated

Variability and Uncertainty
2 Challenges
1) You are serving two different markets
2) Still have to manage global supply chain to optimize your costs and risks
Off-shoring/Near-Shoring
Driven by trends and labor costs
Many companies make poor decisions with offshoring.
Global Infrastructure
Network Structure (Postponement)
HP uses mass production of printers without power supplies (this is the part that needs customized for each regions)
Supply Chain Security
Flow?
Moving of transportation (65%-70%) of logistics costs
Cost has an effect on:
margins which then has an effect on ROA
Safety Stock
expected number of units on hand just before a replenishment is received and available for use of sale
Cycle Stock
normal stock that is used to replenish orders and fill demand
A,B,C Customers
A: 20% of customers 80% profit
B: 50% customers 15% profit
C: 30% customers 5% profit
4 P’s of Productions
Product, Price Promotion, Place
IFR =
Received Quantity/Ordered Quantity
ROA:
the overall efficiency of a company, reflective of all assets, looks into the past
ROI:
efficiency of a company’s specific investment, more narrow in scope and looks into future
GMROI =
gross margin return on inventory investment

GMROI= Price – (Cost/AVG.Inventory)

Perfect Order =
# of orders perfect on all elements/total orders
Lead Time Gap =
time it takes to procure, make and deliver the finished product
LTG=SC Lead Time-Customers’s order cycle time
Inventory Position =
(On Hand+On Order)-Backorders
Anticipatory Stock
represents a supply of goods held to buffer against planned disruptions of anticipated demand