1、Operations ManagementChapter 11 Supply Chain ManagementPowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 7eOperations Management, 9e OutlineGlobal Company Profile: Darden RestaurantsThe Supply Chains Strategic ImportanceGlobal Supply Chain IssuesSupply Chain Eco

2、nomicsMake-or-Buy DecisionsOutsourcingOutline ContinuedEthics in the Supply ChainSupply Chain StrategiesMany SuppliersFew SuppliersVertical IntegrationKeiretsu NetworksVirtual CompaniesOutline ContinuedManaging the Supply ChainIssues in an Integrated Supply ChainOpportunities in an Integrated Supply

3、 ChainE-ProcurementOnline CatalogsAuctionsRFQsRealtime Inventory TrackingOutline ContinuedVendor SelectionVendor EvaluationVendor DevelopmentNegotiationsOutline ContinuedLogistics ManagementDistribution SystemsThird-Party LogisticsCost of Shipping AlternativesLogistics, Security, and JITMeasuring Su

4、pply Chain PerformanceLearning ObjectivesWhen you complete this chapter you should be able to:Explain the strategic importance of the supply chainIdentify five supply chain strategiesExplain issues and opportunities in the supply chainDescribe approaches to supply chain negotiationsLearning Objectiv

5、esWhen you complete this chapter you should be able to:Evaluate supply chain performanceCompute percent of assets committed to inventoryCompute inventory turnoverDarden RestaurantsLargest publicly traded casual dining company in the worldServes over 300 million meals annually in more than 1,400 rest

6、aurants in the US and CanadaAnnual sales of $2.4 billionOperations is the strategyDarden RestaurantsSources food from five continents and thousands of suppliersFour distinct supply chainsOver $1.5 billion spent annually in supply chainsCompetitive advantage achieved through superior supply chainThe

7、Supply Chains Strategic Importance Supply chain management is the integration of the activities that procure materials and services, transform them into intermediate goods and the final product, and deliver them to customersCompetition is no longer between companies; it is between supply chainsSuppl

8、y Chain ManagementTransportation vendorsCredit and cash transfersSuppliersDistributors Accounts payable and receivableWarehousing and inventoryOrder fulfillmentSharing customer, forecasting, and production informationImportant activities include determiningA Supply Chain for BeerFigure 11.1Global Su

9、pply Chain IssuesReact to sudden changes in parts availability, distribution, or shipping channels, import duties, and currency ratesUse the latest computer and transmission technologies to schedule and manage the shipment of parts in and finished products outStaff with local specialists who handle

10、duties, freight, customs and political issuesSupply chains in a global environment must be able toHow Supply Chain Decisions Impact StrategyLow-Cost StrategyResponse StrategyDifferentiation StrategySuppliers goalSupply demand at lowest possible cost (e.g., Emerson Electric, Taco Bell)Respond quickly

11、 to changing requirements and demand to minimize stockouts (e.g., Dell Computers)Share market research; jointly develop products and options (e.g., Benetton)Primary selection criteriaSelect primarily for costSelect primarily for capacity, speed, and flexibilitySelect primarily for product developmen

12、t skillsTable 11.1How Supply Chain Decisions Impact StrategyLow-Cost StrategyResponse StrategyDifferentiation StrategyProcess charact-eristicsMaintain high average utilizationInvest in excess capacity and flexible processesModular processes that lend themselves to mass customizationInventory charact

13、-eristicsMinimize inventory throughout the chain to hold down costDevelop responsive system with buffer stocks positioned to ensure supplyMinimize inventory in the chain to avoid obsolescenceTable 11.1How Supply Chain Decisions Impact StrategyLow-Cost StrategyResponse StrategyDifferentiation Strateg

14、yLead-time charact-eristicsShorten lead time as long as it does not increase costsInvest aggressively to reduce production lead timeInvest aggressively to reduce development lead timeProduct-design charact-eristicsMaximize performance and minimize costsUse product designs that lead to low setup time

15、 and rapid production ramp-upUse modular design to postpone product differentiation as long as possibleTable 11.1Supply Chain EconomicsSupply Chain Costs as a Percent of SalesTable 11.2Industry% PurchasedAll industry52Automobile67Food60Lumber61Paper55Petroleum79Transportation62Supply Chain Economics

16、Dollars of additional sales needed to equal $1 saved through the supply chainPercent of Sales Spent in the Supply ChainPercent Net Profitof Firm30%40%50%60%70%80%90%2$2.78$3.23$3.85$4.76$6.25$9.09$16.674$2.70$3.13$3.70$4.55$5.88$8.33$14.296$2.63$3.03$3.57$4.35$5.56$7.69$12.508$2.56$2.94$3.45$4.17$5.

17、26$7.14$11.1110$2.50$2.86$3.33$4.00$5.00$6.67$10.00Table 11.3Make-or-Buy DecisionsMaintain core competenceLower production costUnsuitable suppliersAssure adequate supply (quantity or delivery)Utilize surplus labor or facilitiesObtain desired qualityRemove supplier collusionObtain unique item that wo

18、uld entail a prohibitive commitment for a supplierProtect personnel from a layoffProtect proprietary design or qualityIncrease or maintain size of companyReasons for MakingTable 11.4Make-or-Buy DecisionsFrees management to deal with its core competenceLower acquisition costPreserve supplier commitme

19、ntObtain technical or management abilityInadequate capacityReduce inventory costsEnsure alternative sourcesInadequate managerial or technical resourcesReciprocityItem is protected by a patent or trade secretReasons for BuyingTable 11.4OutsourcingTransfers traditional internal activities and resource

20、s of a firm to outside vendorsUtilizes the efficiency that comes with specializationFirms outsource information technology, accounting, legal, logistics, and productionEthics in the Supply ChainOpportunities for unethical behavior are enormous and temptations are highMany companies have strict rules

21、 and codes of conduct that define acceptable behaviorInstitute for Supply Management has developed a detailed set of principles and standards for ethical behaviorPrinciples and Standards for Ethical Supply Management ConductLOYALTY TO YOUR ORGANIZATIONJUSTICE TO THOSE WITH WHOM YOU DEALFAITH IN YOUR

22、 PROFESSIONTable 11.5Principles and Standards for Ethical Supply Management ConductAvoid the intent and appearance of unethical or compromising practice in relationships, actions, and communicationsDemonstrate loyalty to the employer by diligently following the lawful instructions of the employer, u

23、sing reasonable care and granted authorityAvoid any personal business or professional activity that would create a conflict between personal interests and the interests of the employerTable 11.5Principles and Standards for Ethical Supply Management ConductAvoid soliciting or accepting money, loans,

24、credits, or preferential discounts, and the acceptance of gifts, entertainment, favors, or services from present or potential suppliers that might influence, or appear to influence, supply management decisionsHandle confidential or proprietary information with due care and proper consideration of et

25、hical and legal ramifications and government regulationsPromote positive supplier relationships through courtesy and impartialityAvoid improper reciprocal agreementsTable 11.5Principles and Standards for Ethical Supply Management ConductKnow and obey the letter and spirit of laws applicable to suppl

26、y managementEncourage support for small, disadvantaged, and minority-owned businessesAcquire and maintain professional competenceConduct supply management activities in accordance with national and international laws, customs, and practices, your organizations policies, and these ethical principles

27、and standards of conductEnhance the stature of the supply management professionTable 11.5Supply Chain StrategiesNegotiating with many suppliersLong-term partnering with few suppliersVertical integrationKeiretsuVirtual companies that use suppliers on an as needed basisMany SuppliersCommonly used for

28、commodity productsPurchasing is typically based on priceSuppliers compete with one anotherSupplier is responsible for technology, expertise, forecasting, cost, quality, and deliveryFew SuppliersBuyer forms longer term relationships with fewer suppliersCreate value through economies of scale and lear

29、ning curve improvementsSuppliers more willing to participate in JIT programs and contribute design and technological expertiseCost of changing suppliers is hugeVertical IntegrationFigure 11.2Raw material (suppliers)Iron oreSiliconFarmingBackward integrationSteelCurrent transformationAutomobilesInteg

30、rated circuitsFlour millingForward integrationDistribution systemsCircuit boardsFinished goods (customers)DealersComputers Watches CalculatorsBaked goodsVertical IntegrationExamples of Vertical IntegrationVertical IntegrationDeveloping the ability to produce goods or service previously purchasedInte

31、gration may be forward, towards the customer, or backward, towards suppliersCan improve cost, quality, and inventory but requires capital, managerial skills, and demandRisky in industries with rapid technological changeKeiretsu NetworksA middle ground between few suppliers and vertical integrationSu

32、pplier becomes part of the company coalitionOften provide financial support for suppliers through ownership or loansMembers expect long-term relationships and provide technical expertise and stable deliveriesMay extend through several levels of the supply chainVirtual CompaniesRely on a variety of s

33、upplier relationships to provide services on demandFluid organizational boundaries that allow the creation of unique enterprises to meet changing market demandsExceptionally lean performance, low capital investment, flexibility, and speedManaging the Supply ChainMutual agreement on goalsTrustCompati

34、ble organizational culturesThere are significant management issues in controlling a supply chain involving many independent organizationsIssues in an Integrated Supply ChainLocal optimization - focusing on local profit or cost minimization based on limited knowledgeIncentives (sales incentives, quan

35、tity discounts, quotas, and promotions) - push merchandise prior to saleLarge lots - low unit cost but do not reflect salesBullwhip effect - stable demand becomes lumpy orders through the supply chainOpportunities in an Integrated Supply ChainAccurate “pull” dataLot size reductionSingle stage contro

36、l of replenishmentVendor managed inventoryBlanket ordersOpportunities in an Integrated Supply ChainStandardizationPostponementDrop shipping and special packagingPass-through facilityChannel assemblyRadio Frequency TagsRadio Frequency Tags: Keeping the Shelves StockedSupply chains work smoothly when

37、sales are steady, but often break down when confronted by a sudden surge in demand. Radio frequency ID (or RFID) tags can change that by providing real-time information about whats happening on store shelves. Heres how the system works for Proctor & Gambles Pampers.E-ProcurementUses the internet to

38、facilitate purchasingElectronic ordering and funds transferElectronic data interchange (EDI)Advanced shipping noticeE-ProcurementOnline catalogsCatalogs provided by vendorsCatalogs published by intermediariesExchanges provided by buyersInternet Trading ExchangesHealth care products Retail goods Defe

39、nse and aerospace products Food, beverage, consumer products Steel and metal products Hotels E-ProcurementAuctionsMaintained by buyers, sellers, or intermediariesLow barriers to entryIncrease in the potential number of buyersE-ProcurementRFQsCan make requests for quotes (RFQs) less costlyImproves su

40、pplier selectionReal-time inventory trackingVendor SelectionVendor evaluationCritical decisionFind potential vendorsDetermine the likelihood of them becoming good suppliersVendor DevelopmentTrainingEngineering and production helpEstablish policies and proceduresVendor SelectionNegotiationsCost-Based

41、 Price Model - supplier opens books to purchaserMarket-Based Price Model - price based on published, auction, or indexed priceCompetitive Bidding - used for infrequent purchases but may make establishing long-term relationships difficultVendor EvaluationCriteriaWeightsScores (1-5)Weight x ScoreEngin

42、eering/research/innovation skills.2051.0Production process capability (flexibility/technical assistance).154.6Distribution/delivery capability.054.2Quality systems and performance.102.2Facilities/location.052.1Financial and managerial strength (stability and cost structure).154.6Information systems

43、capability (e-procurement, ERP).102.2Integrity (environmental compliance/ ethics).2051.0Total1.003.9Logistics ManagementObjective is to obtain efficient operations through the integration of all material acquisition, movement, and storage activitiesIs a frequent candidate for outsourcingAllows compe

44、titive advantage to be gained through reduced costs and improved customer serviceDistribution SystemsTruckingMoves the vast majority of manufactured goodsChief advantage is flexibilityRailroadsCapable of carrying large loadsLittle flexibility though containers and piggybacking have helped with thisD

45、istribution SystemsAirfreightFast and flexible for light loadsMay be expensiveDistribution SystemsWaterwaysTypically used for bulky, low-value cargoUsed when shipping cost is more important than speedDistribution SystemsPipelinesUsed for transporting oil, gas, and other chemical productsThird-Party

46、LogisticsOutsourcing logistics can reduce costs and improve delivery reliability and speedCoordinate supplier inventory with delivery servicesMay provide warehousing, assembly, testing, shipping, customsCost of Shipping AlternativesProduct in transit is a form of inventory and has a carrying costFas

47、ter shipping is generally more expensive than slower shippingWe can evaluate the two costs to better understand the trade-offCost of Shipping AlternativesValue of connectors = $1,750.00Holding cost = 40% per yearSecond carrier is 1 day faster and $20 more expensiveDaily cost of holding product=x/365

48、Annual holding costProduct value= (.40 x $1,750)/ 365 = $1.92Since it costs less to hold the product one day longer than it does for the faster shipping ($1.92 $20), we should use the cheaper, slower shipperLogistics, Security, and JITBorders are becoming more open in the U.S. and around the worldMo

49、nitoring and controlling stock moving through supply chains is more important than everNew technologies are being developed to allow close monitoring of location, storage conditions, and movementMeasuring Supply Chain PerformanceTable 11.6Typical FirmsBenchmark FirmsLead time (weeks)158Time spent placing an order42 minutes15 minutesPercentage of late deliveries33%2%Percentage of rejected material1.5%.0001%Number of shortages per year4004Measuring Supply Chain PerformanceAssets committed to inventoryPercent invested in inventory= x 100Total inventory