C hapter 13

1. Chapter 13 Supply chain planning and control Source: Tibbett and Britten

2. Operations strategy Improvement Design Supply chain planning and control Supply chain planningand control The market requires …specified time, quantity and quality of products and services Operations management The operation supplies …the coordinated delivery of products and services from the supply chain Planning and control

3. What is supply chain management? ‘Supply chain management is the management of the interconnection of organizations that relate to each other through upstream and downstream linkages between the processes that produce value to the ultimate consumer in the form of products and services.’

4. Flow between processes Supply network management concerns flow between operations Flow between processes Flow between processes Flow between processes Flow between processes Flow between processes Flow between processes Supply chain management concerns flow between a string of operations Supply chain management is concerned with managing the flow of materials and information between a string of operationsthat form the strands or ‘chains’ of a supply network

5. Long-term plans and requirements • Market research information • Individual orders • Payment • Potential new products and services ‘Upstream’ flowof customer requirements Flow between processes Flow between processes Flow between processes Consumer ‘Downstream’ flowof products and servicesfor customer fulfilment • Products and services • New products and services • Delivery information • Payment request / Credit Supply chain management is concerned with the flow of information as well as the flow of products and services

6. Physical distribution management Purchasing and supply management Information flow Logistics Physical flow Materials management Supply chain management Second-tier supplier First-tier supplier First-tier customer Second-tier customer End customer Supply side Demand side

7. Taking a customer perspective of supply performancecan lead to very different conclusions Customer requirements Customer satisfaction From the customer’s perspective – 8% satisfaction 100 N 8 20 From the operations perspective – 90% satisfaction N Product/ service appropriate? Y 80 N 10 40 N N Product/ service available? Y Y 1 50 N 70 10 Y 1 9 Y Meets price and delivery requirements? Y N 8 20 10 N Customer orders? Y 10 1 N Y Produced as promised? 9 1 Received as promised? Y 8

8. Suppliers Purchasing function The operation Request for quotations Prepare quotation for specification, price, delivery, etc. Requests Request for products and services Demand from customers Liaison between purchasing and the operation Select supplier(s) Quotations Prepare purchase order Produce products and services Supply to customers Receive products and services Order Deliver The purchasing function brings togetherthe operation and its suppliers

9. Factors for rating alternative suppliers

10. Weighted supplier selection criteria for the hotel chain

11. B2B B2C Relationship: Most common, all but the last link in the supply chain E-commerce examples: EDI networks Tesco information exchange Relationship: Retail operations Catalogue operations, etc. E-commerce examples: Internet retailers Amazon.com, etc. C2B C2C Relationship: Consumer ‘offers’, business responds E-commerce examples: Some airline ticket operators Priceline.com, etc. Relationship: Trading ‘swap’ and auction transactions E-commerce examples: Specialist ‘collector’ sites eBay.com, etc. Supply chain relationships Consumer Business Business Consumer

12. Do everything Traditional supply management Do everything important Character of internal operations activity ‘Partnership’ supply management Do nothing Transactional – many suppliers Close – few suppliers Type of inter-firm contact Types of supply relationship Vertically integrated operation Virtual spot trading Long-term virtual operation

13. Attitudes Trust Sharing success Long-term expectations Multiple points of contact Joint learning Joint co-ordination of activities Few relationships Joint problem solving Information transparency Dedicated assets Actions Elements of process partnership relationships Closeness of relationship

14. Schedule changes impact market faster Forecasts made closer to demand time New products and service faster to market Defects are detected faster so can respond to market changes better so reduced risk of obsolescence so fewer lost sales from delayed launch so improved forecasts so easier to improve quality so less need for safety stocks so less discounted sales so reduced stockholding costs so reduced wastage costs so revenues are maximized so revenues are maximized The effects of supply chain compression Supply chain time compression Improved profitability

15. Prodn. Prodn. Prodn. Prodn. Stock Stock Stock Stock 100 60 100 80 100 90 20 60 80 100 95 100 90 95 60 120 80 100 90 95 180 120 100 95 95 95 95 120 90 100 95 60 90 95 95 95 95 95 95 95 95 95 95 95 95 95 95 95 95 95 95 95 95 95 95 90 95 100 95 95 95 95 95 95 95 95 MARKET The bullwhip effect Original equipment manufacturer Third-level supplier Second-level supplier First-level supplier Period Demand 100 100 100 100 100 100 100 100 1 100 100 100 100 100 2 3 4 5 6 3 2 1 OEM ALL OPERATIONS HOLD ONE PERIOD’S STOCK

16. Prodn. Prodn. Prodn. Prodn. Stock Stock Stock Stock MARKET The bullwhip effect Original equipment manufacturer Third-level supplier Second-level supplier First-level supplier Period Demand 100 100 100 100 100 100 100 100 1 100 100 100 100 100 100 2 95 3 105 4 95 5 105 6 95 3 2 1 OEM ALL OPERATIONS HOLD ONE PERIOD’S STOCK

17. Wholesaler’s orders to manufacturer Manufacturer’s orders to its suppliers Store’s orders to wholesaler Sales from store Orders Orders Orders Orders 0 0 0 0 Time Time Time Time Time Manu-facturer Whole-saler Retail Store Supplier Consumers

18. Supply chain dynamics Supply chains with different end objectives need to be managed in different ways

19. Nature of demand Functional products Innovative products Predictable Few changes Low variety Price stable Long lead-times Low margin Unpredictable Many changes High variety Price markdowns Short lead-times High margin Efficient Low throughput times High utilization Deployed inventory Flexible suppliers Mismatch Supply chain objectives Responsive Mismatch Low cost High utilization Minimum inventory Low-cost suppliers Matching the supply chain with market requirements Lean supply chain management Agile supply chain management

20. Depot Information Products Supplier Manufacturer Customer-responsive supply Depot Outlets Depot Products Information Supplier Manufacturer Efficient fast-throughput supply Depot Outlets

21. Nature of demand Functional products Innovative products Predictable Unpredictable Few changes Many changes Low variety High variety Price stable Price markdowns Long lead-time Short lead-time Low margin High margin Match Mismatch Fast response Low cost Low throughput time High utilization Deployed inventory Minimum inventory Flexible suppliers Low-cost suppliers Supply chain objectives Responsive Efficient Mismatch Match Matching supply chain characteristics to the nature of demand

22. Supply network The network of supplier and customer operations that have relationships with an operation; all the operations linked together to provide goods and services. Supply chain A linkage or strand of operations that provides goods and services through to end customers; within a supply network several supply chains will cross through an individual operation. Supply chain risk A study of the vulnerability of supply chains to disruption. Key Terms Test

23. Purchasing The organizational function, often part of the operations function, that forms contracts with suppliers to buy in materials and services. Single-sourcing The practice of obtaining all of one type of input product, component or service from a single supplier, as opposed to multi-sourcing. Multi-sourcing The practice of obtaining the same type of product, component or service from more than one supplier in order to maintain market bargaining power or continuity of supply. Key Terms Test

24. E-procurement The use of the Internet to organize purchasing; this may include identifying potential suppliers and auctions as well as the administrative tasks of issuing orders, etc. Logistics A term in supply chain management broadly analogous to physical distribution management. Physical distribution management Organizing the integrated movement and storage of materials. Key Terms Test

25. Order fulfilment All the activities involved in supplying a customer’s order; often used in e-retailing but now also used in other types of operation. Merchandising A term used to describe a role in retail operations management that often combines inventory management and purchasing with organizing the layout of the shop floor. Virtual operation An operation that performs few, if any, value-adding activities itself; rather it organizes a network of supplier operations, seen as the ultimate in outsourcing. Key Terms Test

26. Partnership relationship A type of relationship in supply chains that encourages relatively enduring cooperative agreements for the joint accomplishment of business goals. Bullwhip effect The tendency of supply chains to amplify relatively small changes at the demand side of a supply chain such that the disruption at the supply end of the chain is much greater. Key Terms Test