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Intl. Supply Chain Mgmt. (Competitive Advantage
Customers drive not…
Intl. Supply Chain Mgmt.
The supply chainall organisations and activities associated with the flow and transformation of good from raw materials through to the end user as well as associated information and monetary benefitsSupply Chain Mgmt
- Coordination and collaboration with all supply partners including suppliers, intermediaries, third party service providers, customers, etc (CSMP)
- Planning and mgmt of all activities involved in sourcing and procurement, conversion and all logistic mgmt activities
Evolution of SCM
- Fragmented in the 60s (manufacturing, purchasing, production planning, warehousing, etc)
- Evolving integration in 80s (materials mgmt and physical distribution)
- Total Integration in 90s
- SCM in 2000 (Total Integration + marketing, sales and IT)
SC in practice = decision making
- Strategic = decisions concerning the whole org, based on reliability
- Tactical = mainly about cost benefits
- Operational = day to day decisions, based on time
Definitions and Performance Aspects
- Capacity and Variability
The output of the system can never equal or exceed its capacity due to variability.
Capacity = Base capacity - DetractorsEg: Base Capacity = 10 units per hour, Detractors = coffee every two hours,Bottleneck constraints the capacity of the system
Eg: Bottleneck = The person who needs the coffee
- Utilization
The cycle time increases with utilization and does so sharply as utilisation approached 100%.
- Thoroughput
Rate at which entities are processed by the system
- Work in progress
- No: of entities in a system at any given time
- Cycle time:
Time it takes an entity to traverse the system
Performance Aspects
- Can be compared on quality, speed, convenience and variety but always compared against Cost
What does supply chain look like? 
- For some products the supply chain functions are cyclic or go back and forth, for example coffee beans are first stored, transported, roasted and stored again. There is a broad order to this but not always on the micro level.
Supply Chain Structure
- Network Structure (manufacturers, retailers, etc)
- Business Structure (Processes involved:
- Management Component (Management functions involved)
Members of the Chain
- Primary members
- Involved in value adding services
- Secondary members
- Information, data, process oriented for support functions
Types of Structures
- Horizontal Structure
Number of tiers
- Vertical Structure
Number of suppliers/customers represented within each tier
- Horizontal Position
Nearer the supplier, nearer the customer (demand)
Management of Process Links
- Managed PL
FC finds imp to integrate
- Monitored PL
Not as important but good to keep an eye (Tier 2 suppliers)
- Not Managed PL
- Non-member PL
Degree of SCM
- Level of supply chain complexity
- Intensity of market penetration
- Extent of integrative intensity
Global SC
- spans borders
- regluations
- transport modes
*Complex process involving 3rd party and 4th party logistic operators
*Embraces managing mobile assets-goods in transit along the entire supply chain
Logistics
- Globalization influences
- Time related positioning of resources (perishable goods)
- Right people, R. operations, R. quantity, R. quality, etc at the Right Time.
Actors - Services in logistics
- Cargo owners - Manufacturers, retailers
- Carriers - Transporters
- Logistics Service Providers - Logistics (eg: manpower on-ground from port to location)
- Lead logistics providers & consultants - Supply chain managers
Globalization and its Effects
- Trade barriers
- Fewer restrictions on flow of goods
- Increased movement of labour
- Increasing IP
- Development of e-commerce
- Continual expansion of trade routes
Other Factors that sophisticate the Global SC
- Remodelled container services
- Development of hub ports
- Extension of hub/spoke air freight systems
- Development of new airports
- Development of 3 PL/4 PL
- Rise of Emerging Markets
Competitive AdvantageCustomers drive not only drive competitive change but also in the SC
- Significantly lower overall costs
- Reduction in lead times (LT = time for the order to be placed and shipped; either b/w distributors and customer or manufactures and distributors.. etc)
- Higher quality service
- More value-added service
- Smaller, more frequent orders and delivery
- More flexibility and better response times
- Availability of daily delivery services
Performance drivers for a successful supply chain:
- cost
- quality
- speed
- dependability
- flexibility
- resiliance - aversion or protection against crisis
COSTTrying to avoid:
- Scrap Costs: not just wastage but also in case one order is defective in the third stage, then labour is also scrapped.
- Rework Costs
- Process Failure
- Process Downtime Costs
- Price Downgrading Costs
- Customer Complaint Cost
- Product Return Cost, etc
Performance Driver objectives are met through:
- Customization
- Innovation
- Scalability
- Multichannels
- Security
- Culture of flexibility
INVENTORYIt costs money to have inventory.
- SCM analyses the time when inventory is needed until it is received, sold and sales payment is received.
- The longer the cycle time (from raw materials to distributors), larger the amount of inventory that will be carried to balance against uncertainty.
- Firm-specific software
- Drop-shipping is a retail fulfilment method where a store does not keep the products it sells in stock. Instead, when a store sells a product, it purchases the item from a third party and has it shipped directly to the customer. The merchant never sees or handles the project. Less capital, fewer overheads, flexibilty
- Inventory often has limited shelf life. Limited window of opportunity to sell the product
- Once the window closes, the sales value falls, and the level of profitability and inventory yield are not maximised.
ASSET MGMT.It is a key area in warehouse mgmt.
- RFID (Radio freq. identification) provides a range of benefits in inventory control, asset utilisation, manufacturing work-in-process, loss prevention
- Used to identify, track, sort or detect a wide variety of objects.
Good Logistics
Logistics contribute strongly to a company's relative cost position and create a basis for differentiation
E.G. : Kuehne + Nagel supports automotive manufacturers' supply chain with sequencing centres which are located close to the manufacturing plants in a sequenced order to be able to provide goods as and when reqd.
RETAIL MANAGEMENT
Introducing an adaptive strategy
E.G. : Zara - ramp fashion within 2 weeks in stores.
Shorter lead times, locus of control, own the entire supply chain to be able to integrate all processes very quickly.
Export Sales ContractUsually covers:
- Cargo insurance certificate
- Contract of carriage found in the bill of lading (special shipping document proving ownership), airway bill or consignment
- Payment arrangements (involving presentation of the bill of lading to the bank to confirm shipment)
Components of Export Sales Contract
- Exporter Name and Address
- Importer Name and Address
- Short title of each party
- Purpose of contract
- Number and quantity of goods
(Precisely and fully described, must mention details of any batches, etc)
- Price(currency selected and stable and convertible including currency risk, credit terms
- Terms of Delivery
- Terms of Payment
- Delivery Date/Shipment date
- Methods of Shipment: Type of container...
- Method of packing (E.g. bananas and temperature state)
- Cargo Insurance Terms
- Import or Export licence details
- Shipping, freight and documentary requirements
- Contract conditions (which country will disputes be settled in, usually London)
- Signature
IncotermsThe basis of a price quotation depends on the correct interpretation of the delivery trade terms, i.e. : IncotermsExport marketing manager is responsible for quoting accurately. It needs to have 3 basic elements:
- Stage at which title to the merchandise passes from exporter to importer.
- A clear definition of the charges and expenses to be borne by the exporter and importer
- The stage and location where the goods are to be passed over to the importer
Incoterm RulesA set of pre-defined commercial terms by the International Chamber of Commerce*Must be ensured by the SELLER
-
The role of Information in SCM
Information acts like the 'glue' to create a coordinated SCInfo needs to be:
- Accurate
- Accessible in a timely manner
- Info must be of the right kind
- Info must be able to be shared
Info provides the basis for SCM decisions regarding:
- Inventory Sourcing
- Transportation Pricing
- Facilities Revenue Mgmt
SC decision making requires a single version of data encompassing:
- Demand
- Demand capability alignment
- Production and processes
- Logistics
- Delivery
- Supplier Intelligence
Info-Technology in Supply Chain needs to:
- Enable collection
- processing
- access
- manipulation
-
Lean Management
- Improve bus perf in quality, cost, delivery and people contribution through practical, simple tools and techniques implementation
- Lean is a socio-technical system with the main objective to eliminate waste by concurrently reducing or minimising supplier, customer and internal variability. (SHAH & WARD, 2007)
- Originates from the Toyota Production System (1950's)
- one piece flow in production.
5 principles of Lean:
- Specify Value
- Identify the value stream
- Avoid interruptions in value
- Let customers pull value
- Start pursuing perfection again.
Lean Characteristics:
- Continues improvement approach
- Focussed at incremental changes in existing processes
a planned change approach
- Can be implemented in teams, organisations, and entire supply chains
- Can be used in various industry verticals
What to change?
- The main objective of lean is to execute operations at minimum cost, with no waste
- Can be achieved by eliminating non-value adding activities and overburden
- To reduce process variability inconsistency needs to be designed out
- This is done by designing a process that is capable of delivering results smoothly
Waste in Lean Mgmt:
- Muda = activity that consumes resources but doesn't create any actual value for the customer
- Mura = variation in the operation of a process not caused by the end customer
- Muri = overburden caused on equipment, facilities and people caused by Mura and Muda
7 types of Waste:
- Delay - customers waiting for service
- Duplication - having to re-enter data, repeat details, etc
- Unnecessary Movement - Poor ergonomics in the service encounter
- Unclear communication - Having to seek clarification, confusion overuse of product/service
- Incorrect Inventory - out of stock
- Opportunity Lost - to retain or win customers
- Errors - in the transaction, lost/damaaged goods caused by Mura & Muda
Buffering & Flexibility
Handling variability required buffering in:
EG. Inventory, Capacity, Time
(in slide 32 Demand Driven SCM):
Buffer in red zone, green is contingency zone, and blue is crisis mgmt, purple is no action
Lean ManagementProduction of goods or services is lean if there are minimal buffering costs. (HOPP, 2011)Suggested Steps:
- Eliminate direct waste
- Substitute capacity for inventory buffers
- Reduce Variability
- Reduce capacity buffers
- Go back to step 3
Agile SCM:It is the ability to implement short-term changes in demand or supply quickly and to handle external disruptions smoothly.Can be done by:
- Introduction of new products, or upgrades for existing products
- New processes or upgrades in existing processes
- Allocation of new or reallocation of existing resources
- Selection of new suppliers or deselection of existing ones
- Changes in demand patterns for products manufactured
- Changes in Lead Times