Unit4Bigbusinesses

UnderstandingtheSupplyChain,1,LearningObjectives,Discussthegoalofasupplychainandexplaintheimpactofsupplychaindecisionsonthesuccessofafirm.Identifythethreekeysupplychaindecisionphasesandexplainthesignificanceofeachone.Describethecycleandpush/pullviewsofasupplychain.Classifythesupplychainmacroprocessesinafirm.,WhatisaSupplyChain?,Allstagesinvolved,directlyorindirectly,infulfillingacustomerrequestIncludesmanufacturers,suppliers,transporters,warehouses,retailers,andcustomersWithineachcompany,thesupplychainincludesallfunctionsinvolvedinfulfillingacustomerrequest(productdevelopment,marketing,operations,distribution,finance,customerservice),WhatisaSupplyChain?,CustomerisanintegralpartofthesupplychainIncludesmovementofproductsfromsupplierstomanufacturerstodistributorsandinformation,funds,andproductsinbothdirectionsMaybemoreaccuratetousetheterm“supplynetwork”or“supplyweb”Typicalsupplychainstages:customers,retailers,distributors,manufacturers,suppliersAllstagesmaynotbepresentinallsupplychains(e.g.,noretailerordistributorforDell),WhatisaSupplyChain?,Figure1-1,Stagesofadetergentsupplychain,FlowsinaSupplyChain,Figure1-2,QuickQuiz,Whatissupplychainmanagement?Willasupplychainalwayslooklikeachain?Supplychainmanagementisthemanagementofactivitiesfromrawmaterialstofinalproductdeliverytocustomers.Thesupplychainincludesanumberofdifferentmembers,includingbutnotlimitedtosuppliers(andmanufacturers),transporters,warehouses,retailers,andcustomers.Asupplychainwilllooklikeachainifasingleagentisinvolvedateachstage.However,inmostcases,therearemultiplesuppliersateachstageandthesupplychainbecomesanetworkandmayevenlooklikeasupplywebinsteadofachain.,TheObjectiveofaSupplyChain,Maximizeoverallvaluecreated,SupplyChainSurplus=CustomerValueSupplyChainCost,TheObjectiveofaSupplyChain,Example:acustomerpurchasesawirelessrouterfromBestBuyfor$60(revenue)Supplychainincurscosts(information,storage,transportation,components,assembly,etc.)Differencebetween$60andthesumofallofthesecostsisthesupplychainprofitSupplychainprofitabilityistotalprofittobesharedacrossallstagesofthesupplychainSuccessshouldbemeasuredbytotalsupplychainprofitability,notprofitsatanindividualstage,TheObjectiveofaSupplyChain,CustomertheonlysourceofrevenueSourcesofcostincludeflowsofinformation,products,orfundsbetweenstagesofthesupplychainEffectivesupplychainmanagementisthemanagementofflowsbetweenandamongsupplychainstagestomaximizetotalsupplychainsurplus,QuickQuiz,Shouldthemembersofasupplychainmaximizeindividualprofitsinordertoraisetheoverallsupplychainsurplus?Supplychainsurplus=CustomerValueSupplyChainCost.Supplychainsurpluswillbesharedacrossallsupplychainmembers;however,focusingonindividualprofitabilitymayleadtoreductioninoverallsupplychainsurplus.Hence,membersshouldworktogethertomaximizeoverallsupplychain,ImportanceofSupplyChainDecisions,Wal-Mart,$1billionsalesin1980to$408billionin2010Seven-ElevenJapan,1billionsalesin1974to3trillionin2009WebvanfoldedintwoyearsBorders,$4billionin2004to$2.8billionin2009Dell,$56billionin2006,adoptednewsupplychainstrategies,DecisionPhasesofaSupplyChain,SupplychainstrategyordesignHowtostructurethesupplychainoverthenextseveralyearsSupplychainplanningDecisionsoverthenextquarteroryearSupplychainoperationDailyorweeklyoperationaldecisions,SupplyChainStrategyorDesign,DecisionsaboutthestructureofthesupplychainandwhatprocesseseachstagewillperformStrategicsupplychaindecisionsLocationsandcapacitiesoffacilitiesProductstobemadeorstoredatvariouslocationsModesoftransportationInformationsystemsSupplychaindesignmustsupportstrategicobjectivesSupplychaindesigndecisionsarelong-termandexpensivetoreversemusttakeintoaccountmarketuncertainty,SupplyChainPlanning,Definitionofasetofpoliciesthatgovernshort-termoperationsFixedbythesupplyconfigurationfrompreviousphaseStartswithaforecastofdemandinthecomingyear,SupplyChainPlanning,Planningdecisions:WhichmarketswillbesuppliedfromwhichlocationsPlannedbuildupofinventoriesSubcontracting,backuplocationsInventorypoliciesTimingandsizeofmarketpromotionsMustconsiderinplanningdecisionsdemanduncertainty,exchangerates,competitionoverthetimehorizon,SupplyChainOperation,TimehorizonisweeklyordailyDecisionsregardingindividualcustomerordersSupplychainconfigurationisfixedandoperatingpoliciesaredeterminedGoalistoimplementtheoperatingpoliciesaseffectivelyaspossibleAllocateorderstoinventoryorproduction,setorderduedates,generatepicklistsatawarehouse,allocateanordertoaparticularshipment,setdeliveryschedules,placereplenishmentordersMuchlessuncertainty(shorttimehorizon),QuickQuiz,WhataresomestrategicplanningandoperationaldecisionsthatmustbemadebyanapparelretailerlikeTheGap?AsTheGapplanssupplychainstrategyitmustfirstconsiderthemarketingfunctionspricingplansinordertostructureasupplychainconsistentwiththeseplans.Strategicconsiderationssuchasthecapacityofeachsupplierandassemblyoperations,sourcingdecisionsandhowlogisticsaretobehandledareallpartofthedesign.Thesupplychainmustalsosettleoncommunicationchannelsandfrequencies.Supplychainplanningtakesthestrategicdecisionsasagivenandseekstoexploit,QuickQuiz,efficienciesinthechaintomaximizesupplychainsurplus.Theentirechainshouldcollaborateinforecastingandplanningproductiontoachieveaglobaloptimum.Theforecastsshouldtakeintoaccountplannedpromotionsandknownseasonalfluctuationsindemand.Theoperationaldecisiontakestheplansasagivenandmakesday-to-daydecisionstoprocesscustomerorders,allocateresourcestocertaincustomers,triggerordersfromsupplychainmembers,anddeliverproduct.,ProcessViewofaSupplyChain,CycleView:processesinasupplychainaredividedintoaseriesofcycles,eachperformedattheinterfacesbetweentwosuccessivesupplychainstagesPush/PullView:processesinasupplychainaredividedintotwocategoriesdependingonwhethertheyareexecutedinresponsetoacustomerorder(pull)orinanticipationofacustomerorder(push),CycleViewofSupplyChainProcesses,Figure1-3,CycleViewofSupplyChainProcesses,Figure1-4,Push/PullViewofSupplyChains,Figure1-5,Push/PullViewofSupplyChainProcesses,SupplychainprocessesfallintooneoftwocategoriesdependingonthetimingoftheirexecutionrelativetocustomerdemandPull:executionisinitiatedinresponsetoacustomerorder(reactive)Push:executionisinitiatedinanticipationofcustomerorders(speculative)Push/pullboundaryseparatespushprocessesfrompullprocesses,Push/PullViewofSupplyChainProcesses,UsefulinconsideringstrategicdecisionsrelatingtosupplychaindesignmoreglobalviewofhowsupplychainprocessesrelatetocustomerordersCancombinethepush/pullandcycleviewsL.L.BeanDellTherelativeproportionofpushandpullprocessescanhaveanimpactonsupplychainperformance,Push/PullViewofL.L.Bean,Figure1-6,Push/PullViewDell,Figure1-7,SupplyChainMacroProcesses,SupplychainprocessesdiscussedinthetwoviewscanbeclassifiedintoCustomerRelationshipManagement(CRM)InternalSupplyChainManagement(ISCM)SupplierRelationshipManagement(SRM)Integrationamongtheabovethreemacroprocessesiscriticalforeffectiveandsuccessfulsupplychainmanagement,SupplyChainMacroProcesses,Figure1-8,QuickQuiz,ConsiderthesupplychaininvolvedwhenacustomerordersabookfromAmazon.Identifythepush/pullboundaryandtwoprocesseseachinthepushandpullphases.InAmazonsoriginaloperationsdesignthepush/pullboundaryexistedbetweentheretailer(Amazon)andtheirdistributor.Amazonorderedproductfromthedistributorandthecustomerorderarrived.Today,Amazonhassixwarehouseswhereitstocksaninventoryofitemsitisconfidentthatwillsell.Inthisscenario,thepush/pullboundaryexistsbetweenthecustomerandtheretailer.Processesinthepullphasearetheorderfulfillment,shipping,customerreturns,andcustomerbilling.Processesinthepushphaseareproduction,stockreplenishments,shipping,andpayment.,ExamplesofSupplyChains,GatewayandAppleZaraW.W.GraingerandMcMaster-CarrToyotaAmazon,GatewayandApple,WhydidGatewaychoosenottocarryanyfinished-productinventoryatitsretailstores?WhydidApplechoosetocarryinventoryatitsstores?Shouldafirmwithaninvestmentinretailstorescarryanyfinished-goodsinventory?Whatarethecharacteristicsofproductsthataremostsuitabletobecarriedinfinished-goodsinventory?Whatcharacterizesproductsthatarebestmanufacturedtoorder?Howdoesproductvarietyaffectthelevelofinventoryaretailstoremustcarry?Isadirectsellingsupplychainwithoutretailstoresalwayslessexpensivethanasupplychainwithretailstores?WhatfactorsexplainthesuccessofAppleretailandthefailureofGatewaycountrystores?,Zara,WhatadvantagedoesZaragainagainstthecompetitionbyhavingaveryresponsivesupplychain?WhyhasInditexchosentohavebothin-housemanufacturingandoutsourcedmanufacturing?WhyhasInditexmaintainedmanufacturingcapacityinEuropeeventhoughmanufacturinginAsiaismuchcheaper?WhydoesZarasourceproductswithuncertaindemandfromlocalmanufacturersandproductswithpredictabledemandfromAsianmanufacturers?WhatadvantagedoesZaragainfromreplenishingitsstoresmultipletimesaweekcomparedtoalessfrequentschedule?Howdoesthefrequencyofreplenishmentaffectthedesignofitsdistributionsystem?DoyouthinkZarasresponsivereplenishmentinfrastructureisbettersuitedforonlinesalesorretailsales?,W.W.GraingerandMcMaster-Carr,HowmanyDCsshouldbebuiltandwhereshouldtheybelocated?HowshouldproductstockingbemanagedattheDCs?ShouldallDCscarryallproducts?Whatproductsshouldbecarriedininventoryandwhatproductsshouldbeleftwiththesuppliertobeshippeddirectlyinresponsetoacustomerorder?WhatproductsshouldW.W.Graingercarryatastore?HowshouldmarketsbeallocatedtoDCsintermsoforderfulfillment?Whatshouldbe,W.W.GraingerandMcMaster-Carr,doneifanordercannotbecompletelyfilledfromaDC?Shouldtherebespecifiedbackuplocations?Howshouldtheybeselected?Howshouldreplenishmentofinventorybemanagedatthevariousstockinglocations?HowshouldWebordersbehandledrelativetotheexistingbusiness?IsitbettertointegratetheWebbusinesswiththeexistingbusinessortosetupseparatedistribution?Whattransportationmodesshouldbeusedfororderfulfillmentandstockreplenishment?,Toyota,Whereshouldplantsbelocated,whatdegreeofflexibilityshouldeachhave,andwhatcapacityshouldeachhave?Shouldplantsbeabletoproduceforallmarkets?Howshouldmarketsbeallocatedtoplants?Whatkindofflexibilityshouldbebuiltintothedistributionsystem?Howshouldthisflexibleinvestmentbevalued?Whatactionsmaybetakenduringproductdesigntofacilitatethisflexibility?,A,WhyisAmazonbuildingmorewarehousesasitgro