Operation management assignment

Name: Class: MBA(G) Section : Topic: Supply chain management Date: IInd Sem.

Submitted to:

Supply chain management (SCM) is the management of a network of interconnected

businesses involved in the ultimate provision of product and service packages required by end customers (Harland, 1996).Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption (supply chain).

Supply chain objectives may differ from situation to situation. For functional products, cost efficiency is the critical factor. For innovative products, responsiveness is the important factor.

Supply Chain for Service Providers

    More difficult than manufacturing Does not focus on the flow of physical goods Focuses on human resources and support services More compact and less extended

Supply Chain Integration

 Information sharing among supply chain members 1. 2. 3. 4. Reduced bullwhip effect Early problem detection Faster response Builds trust and confidence

 Collaborative planning, forecasting, replenishment, and design 1. Reduced bullwhip effect 2. Lower Costs (material, logistics, operating, etc.) 3. Higher capacity utilization 4. Improved customer service levels  Coordinated workflow, production and operations, procurement 1. Production efficiencies 2. Fast response 3. Improved service 4. Quicker to market  Adopt new business models and technologies 1. Penetration of new markets 2. Creation of new products 3. Improved efficiency 4. Mass customization

Supply chain management must address the following problems:

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Distribution Network Configuration: number, location and network missions of suppliers, production facilities, distribution centers, warehouses, cross-docks and customers. Distribution Strategy: questions of operating control (centralized, decentralized or shared); delivery scheme, e.g., direct shipment, pool point shipping, cross docking, DSD (direct store delivery), closed loop shipping; mode of transportation, e.g., motor carrier, including truckload. Trade-Offs in Logistical Activities: The above activities must be well coordinated in order to achieve the lowest total logistics cost. Trade-offs may increase the total cost if only one of the activities is optimized. Information: Integration of processes through the supply chain to share valuable information, including demand signals, forecasts, inventory, transportation, potential collaboration, etc. Inventory Management: Quantity and location of inventory, including raw materials, work-in-progress (WIP) and finished goods. Cash-Flow: Arranging the payment terms and methodologies for exchanging funds across entities within the supply chain.

Supply chain execution means managing and coordinating the movement of materials, information and funds across the supply chain. The flow is bi-directional.

What Is Supply Chain Management (SCM)?

A set of approaches used to efficiently integrate Suppliers Manufacturers Warehouses Distribution centers So that the product is produced and distributed In the right quantities To the right locations And at the right time System-wide costs are minimized and Service level requirements are satisfied

The Importance of Supply Chain Management

Dealing with uncertain environments matching supply and demand Boeing announced a $2.6 billion write-off in 1997 due to raw materials shortages, internal and supplier parts shortages and productivity inefficiencies U.S Surgical Corporation announced a $22 million loss in 1993 due to larger than anticipated inventories on the shelves of hospitals IBM sold out its supply of its new Aptiva PC in 1994 costing it millions in potential revenue Hewlett-Packard and Dell found it difficult to obtain important components for its PCs from Taiwanese suppliers in 1999 due to a massive earthquake

U.S. firms spent $898 billion (10% of GDP) on supply-chain related activities in 1998 Shorter product life cycles of high-technology products Less opportunity to accumulate historical data on customer demand Wide choice of competing products makes it difficult to predict demand

The growth of technologies such as the Internet enable greater collaboration between supply chain trading partners If you dont do it, your competitor will Major buyers such as Wal-Mart demand a level of supply chain maturity of its suppliers Availability of SCM technologies on the market Firms have access to multiple products (e.g., SAP, Baan, Oracle, JD Edwards) with which to integrate internal processes

Supply Chain Decisions

The decisions for supply chain management into two broad categories -- strategic and operational. Strategic decisions are made typically over a longer time horizon. On the other hand, operational decisions are short term, and focus on activities over a day-to-day basis. There are four major decision areas in supply chain management: 1) location 2) production 3) inventory 4) transportation (distribution)

Location Decisions
The geographic placement of production facilities, stocking points, and sourcing points is the natural first step in creating a supply chain. The location of facilities involves a commitment of resources to a long-term plan. Once the size, number, and location of these are determined, so are the possible paths by which the product flows through to the final customer. These decisions are of great significance to a firm since they represent the basic strategy for accessing customer markets, and will have a considerable impact on revenue, cost, and level of service.

Production Decisions
The strategic decisions include what products to produce, and which plants to produce them in, allocation of suppliers to plants, plants to DC's, and DC's to customer markets. As before, these decisions have a big impact on the revenues, costs and customer service levels of the firm.

Inventory Decisions
These refer to means by which inventories are managed. Inventories exist at every stage of the supply chain as either raw materials, semi-finished or finished goods. They can also be inprocess between locations.

Transportation Decisions
The mode choice aspect of these decisions are the more strategic ones. These are closely linked to the inventory decisions, since the best choice of mode is often found by trading-off the cost of using the particular mode of transport with the indirect cost of inventory associated with that mode.

Information flows in Supply Chain Management

Information is overriding element Need for databases Master files: Information about customers, products, materials, suppliers, transportation, production and distribution data- do not require frequent processing Status files- heart of transaction processing- track orders and infrastructure statusupdated daily. Essentially using the same information to make all plans right from structuring the network to processing every day supply chain tasks.

Example:Italian clothing manufacture

Warehousing and transportation Inventory Late delivery returns Obsolescence Lost sales 6 5 2 20 60

Need to minimize obsolescence costs Minimize product range flexibility Reduce product development cycle