Supply Chain Integration

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Supply Chain Integration

The effective coordination of supply chain processes through the seamless flow of information up and down the supply chain A river that flows from raw material suppliers to consumers
Upstream Downstream

Mitigating the effects of supply chain disruptions

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Supply Chain Integration

Upstream Tier 3 Tier 2 Tier 1 Downstream

Tomato suppliers

Tomato grading stations

Tomato paste factories

Ketchup factory

Retail sales

Consumers

Information flows
Cash flows

Figure 10.1 Supply Chain for a Ketchup Factory

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Supply Chain Dynamics

Bullwhip effect
Upstream

members must react to the demand

Slightest

change in customer demand can ripple through the entire chain

External causes Internal causes

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Supply Chain Dynamics

Manufacturers weekly orders to package supplier Retailers daily orders to manufacturer Consumers daily demands Package suppliers weekly orders to cardboard supplier

9,000 Order quantity

7,000

5,000

3,000

0 Day 1 Day 30 Day 1 Day 30 Day 1 Month of April Day 30 Day 1 Day 30

Figure 10.2 Supply Chain Dynamics for Facial Tissue

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Supply Chain Dynamics

Integrated supply chains
High

degree of functional and organizational integration minimizes disruptions must include linkages between the firm, its suppliers, and its customers

Integration

SCOR

model

Plan Source Make Deliver Return

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Supply Chain Dynamics

First-Tier Supplier Support Processes Service/Product Provider Support Processes

External Suppliers

New service/ product development process

Businessto-business (B2B) customer relationship process

New service/ product development process

Businessto-business (B2B) customer relationship process

External Consumers

Supplier relationship process

Order fulfillment process

Supplier relationship process

Order fulfillment process

Figure 10.3 External Supply Chain Linkages

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New Service or Product Development

Design Service or product not profitable

Analysis

Need to rethink the new offering or production process

Development Post-launch review

Figure 10.4 New Service/Product Development Process

Full Launch

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Supplier Relationship Process

Sourcing
Supplier

selection
Annual material costs = pD

Material costs

Freight costs Inventory costs

Cycle inventory = Q/2 Pipeline inventory = dL Annual inventory costs = (Q/2 + dL)H

Administrative costs

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Supplier Relationship Process

The total annual cost for a supplier is the sum of these costs:
Total Annual Cost = pD + Freight costs
+ (Q/2 + dL)H + Administrative costs
Other

supplier selection criteria

Green purchasing
Supplier certification and evaluation

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Supplier Relationship Process

Design collaboration
Early

supplier involvement analysis

Presourcing Value

Negotiation
Obtain

an effective contract that meets the price, quality, and delivery requirements
orientation

Competitive Cooperative

orientation

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Supplier Relationship Process

Buying

Procurement of the service or material from the supplier e-purchasing Loss of control Radio frequency identification (RFID) Vendor managed inventories (VMI)

Information exchange

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Order Fulfillment Process

Customer demand planning

Facilitates collaboration Demand forecasts Inventory management Operations planning and scheduling Resource planning

Supply planning

Production Logistics

Ownership Facility location Mode selection Capacity Cross-docking

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Order Fulfillment Process

1 (a) Web site 2 JIT Inventory 3 Traveler Sheet

1 (b) Voice-to-voice

1 (d) Direct relationship sales

4 Kitting

1 (c) Face-to-face

5 Assemble to order

6 Testing and system integration

7 Boxing and shipping

8 Delivery

Figure 10.5 Dells Order Fulfillment Process

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The Customer Relationship Process

Customer relationship management (CRM) programs identify, attract, and build relationships with customers Marketing

Electronic commerce (e-commerce) Business-to-Consumer (B2C) systems Business-to-Business (B2B) systems

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The Customer Relationship Process

Order placement

Execute a sale, register the specifics, confirm acceptance, and track progress Internet provides advantage

Customer service

Helps customers with answers to questions, resolves problems, and, provides general information Call centers

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Levers for Improved Supply Chain Performance

The levers

Sharing data
Collaborative activities Reduce replenishment lead times

Reduce order lot sizes

Ration short supplies Use everyday low pricing (EDLP)

Be cooperative and trustworthy

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Levers for Improved Supply Chain Performance

Performance measures

Costs Time Quality Environmental impact

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Performance Measures
TABLE 10.1 | SUPPLY CHAIN PROCESS MEASURES Order Fulfillment Percent of incomplete orders shipped Percent of orders shipped on-time Time to fulfill the order Percent of botched services or returned items Cost to produce the service or item Customer satisfaction with the order fulfillment process Inventory levels of workin-process and finished goods Amount of greenhouse gasses emitted into the air Supplier Relationship Percent of suppliers deliveries on-time Suppliers lead times Percent defects in services and purchased materials Cost of services and purchased materials Inventory levels of supplies and purchased components Customer Relationship Percent of orders taken accurately Time to complete the order placement process Customer satisfaction with the order placement process Customers evaluation of firms environmental stewardship

Evaluation of suppliers collaboration on streamlining and waste conversion

Amount of transfer of environmental technologies to suppliers

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Supply Chains and the Environment

Sustainability

Environmental stewardship Environmental protection Productivity improvement Risk minimization Innovation Planning, implementing, and controlling flows from consumption back to origin Closed-loop supply chain
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Reverse logistics

Closed Loop Supply Chain

Production process Distribution/Retailers Customers

New service/product development process

Direct reuse Returns processor

Repair

Remanufacture Recycle parts and materials

Product information

Waste disposal

Forward logistics flow

Figure 10.6 Flows in a Closed-Loop Supply Chain

Reverse logistics flow

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