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What is Supply Chain Management

What is Supply Chain Management. Bin Jiang April 2003. Origin of SCM. Two consultants: Oliver and Webber in 1982. But…they stand on Japanese shoulders. Japanese triggered a revolution in 1970s -JIT. Consider a single-product line.

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What is Supply Chain Management

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  1. What is Supply Chain Management Bin Jiang April 2003

  2. Origin of SCM Two consultants: Oliver and Webber in 1982 But…they stand on Japanese shoulders Japanese triggered a revolution in 1970s -JIT

  3. Consider a single-product line Because cost matters, we must consider equipment utilization Since the line is fed by a procurement process, we must consider raw material inventory, vendor management and purchasing When we consider customers, lead time, service and finished goods inventory become relevant measures Since yield loss and rework are often realities, quality is a key performance measure.

  4. Motivation of JIT Japanese believe: Production environment is a control

  5. Different perspectives

  6. Why did JIT come from Japan Because of Japanese history of living with space and resource limitations, the Japanese are inclined toward conservation This has made tight material control policies easier to accept in Japan than in the “throw-away society” of America Japanese industry is spatially concentrated, so delivery of materials from suppliers several times per day are simply easier in Japan than in America with its wide-open spaces

  7. A Single Magic Bullet Some people imagine that Toyota has put on a smart new set of clothes, the JIT system, so they go out and purchase the same outfit and try it on. They quickly discover that they are much too fat to wear it It took about 25 years for Toyota to reduce setups from 3 hours to 3 minutes

  8. Horrible buzzwords Logistics Management Capacity Planning IT TQM SQC MCCF Benchmarking BPR Inventory Control ECR Mass Customization SCM ERP MRP II ISO 9000 Flexible Manufacturing 3PL VMI MRP Lean Manufacturing

  9. Serious SC competition Today’s competition is not really company vs. company, but supply chain vs. supply chain. Warren Hausman, Professor at Stanford University

  10. Where should I look for? My own production line? My customer? My supplier? My counterparts?

  11. Basic idea of SCM SCM is concerned with the relationship between a company and its upstream and downstream players The relationship helps companies: coordinate (working jointly) with their upstream and downstream players to integrate activities along the supply chain to effectively supply product to customers

  12. Conceptual formula of SCM Objective: max (customer satisfaction) or max (competitive advantages) Constraint: SC relationship = f(C,I)

  13. SC relationship = f(C, I) Integration(I): how closely supply chain entities operate as a single unit --- focus on interfaces (structure) Static Coordination(C): how seamlessly information, material and financial flows flow in SC --- focus on movement(process) Dynamic Relationship f(C, I): friendly? hostile? grasp the cake? make the cake bigger? Long-term? Short-term? competitive? win-win?

  14. W/o coordination and integration Inaccurate forecasts Low capacity utilization Excessive inventory Inadequate customer service W/o C&I, there is a horrible relationship (environment)

  15. Recall the tip of JIT Production environment is a control JIT: at right time, at right quantity, at perfect quality SCM: at right time, at right product, at right place, at competitive price.

  16. From JIT to SCM From flow-oriented to interfaces-oriented From plant-oriented to relationship-oriented From production-oriented to customer service-oriented

  17. SCM Integration Coordination ? ? Foundations OR, POM, IE, OB, Marketing, Logistics, IT… Competitiveness (Customer Service)

  18. Integration Coordination Don’t put your wrong hand to SCM issues!!! SCM Leadership Advanced Planning Inter-org. IT Tech Choice of partners Process-oriented

  19. Integration Choice of partners: costs, future potential, organizational culture, specialized know-how, taxes, exchange rates, etc. Interorganization network: independent vs. dependent; secret vs. information/know-how sharing; long-term vs. short-term; win-win strategy vs. maximizing own profits, etc. Leadership: At least some decisions should be made fro the SC as a whole. Aligning strategies along SC requires some form of leadership.

  20. Coordination Utilization of IT: historical mass data, demand forecast, sharing information instantaneously, EDI, B2B, B2C, etc. Process orientation: use performance indicators to figure out weaknesses, bottlenecks and waste within a SC. (productivity, cycle time, safety stock, WIP, ROI, etc) Advanced planning: incorporates long-term, mid-term and short-term planning levels.

  21. Foundations • You should have relevant knowledge to support your SCM: • logistics and transportation • marketing • operations research and POM • organizational behavior, industrial organization and transaction cost economics • purchasing and supply • …

  22. Takeaway • SCM is not a simple procedure or technique • More or less it is a not quiet coherent management strategy • It is an assortment of attitudes, philosophies, priorities, and methodologies that have been collectively labeled “SCM” • You must have a “chain” perspective

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