Supply Chain Management FBLA

4 Foundations of Supply Chain Management

- Supply

- Operations

- Logistics

- Integration

Supply Chain Management

The centralized management of the flow of goods and services and includes all processes that transform raw materials into final products. By managing the supply chain, companies can cut excess costs and deliver products to the consumer faster.

5 Areas of Supply Chain Management

1. Supply planning

2. Production planning

3. Inventory planning

4. Capacity planning

5. Distribution planning

4 Channels of Distribution

1. Wholesaler

2. Retailer

3. Distributor

4. Ecommerce

5 Qualities of a Supply Chain Manager

1. math skills combined with strong analytical and statistical capabilities to understand supply and demand issues.

2. ability to use data to track orders and shipments, sales trends, demand and any weaknesses and inefficiencies

3. understanding of technology—artificial intelligence, machine learning, Internet of Things, analytics software and apps

4. soft skills to negotiate and build relationships with suppliers, customers and team members

5. attention to detail to understand the business and the environment in which it operates

Logistics Operations

The processes of moving finished goods, including from the manufacturer a distribution center, and then to the end user. The entire logistics process consists of managing inventory, fulfilling orders, and shipping packages.

Inventory Management

Helps companies identify which and how much stock to order at what time. It tracks inventory from purchase to the sale of goods. The practice identifies and responds to trends to ensure there's always enough stock to fulfill customer orders and proper warning of a shortage

Warehousing

The process of storing physical inventory for sale or distribution

Inventory Tracking

The process of a business continuously monitoring all of the inventory that it owns

Stockouts

A situation in which an item is out of stock.

Backorder

A retailer's order for a product that is temporarily out of stock with the supplier --> Will get the product once it is in stock

Carrying Costs

various costs a business pays for holding inventory in stock

Inventory Forecasting

the practice of using past data, trends and known upcoming events to predict needed inventory levels for a future period

Shipping

the act of physically transporting goods or materials between locations

Business Analyst

Collects and analyzes data to help improve an organization's supply chain operations, reporting to department heads or upper management. They make sure supply meets the business demand of a company and work to make the process smoother.

Commodity Specialist

Oversees inventory purchases for a company. As a commodity specialist, you research market costs of supplies, identify the best suppliers for the company's needs, and negotiate pricing and contracts with those suppliers.

Demand Planning Manager

oversee the daily operations of the planning department as they analyze customer and vendor demand along the supply chain and develop ways to forecast future demand.

Director of Global Procurement

Bullwhip Effect

How small fluctuations in demand at the retail level can cause progressively larger fluctuations in demand at the wholesale, distributor, manufacturer and raw material supplier levels

What factors can contribute to demand fluctuations (bullwhip effect)?

- Distribution Order Lead Times

- Order Batching

- Lack of Communication in the Supply Chain

- Inaccurate Forecasting

Solutions to Bullwhip Effect

1. Improve inventory planning

2. Review safety stock levels

3. Evaluate order batching

4. Stabilize price fluctuations

5. Improve forecast accuracy

Order Batching

A type of inventory control that occurs when small orders are combined into one large order. This amplifies demand variability and adds to the use of safety stock, creating the bullwhip effect.

Solutions to problems in the supply chain

-make actual demand data available to suppliers

-vendor-managed inventory Ex: Pepsi stocks their own products

-reduce the length of the supply chain

-rationing gaming...trade deals offered by manufactures to wholesalers

-Reduce lead times from order to delivery

External Drivers of Change

-globalization

-increasing customer expectations

-product proliferation

-shorter product life cycles

-new technologies

-environmental issues

Current Trends in SCM

-increasing supply chain responsiveness

-the supply chain greening effect

Supply Chain Greening Effect

The operational management method and optimization approach to reduce the environmental impact along the life cycle of the green product, from the raw material to the end product

Primary goals of purchasing

1. Uninterrupted flows of raw materials at low costs

2. Quality of finished goods

3. Optimize customer satisfaction

Outsourcing

Buying materials and components from suppliers instead of making them in house

Backward Integration

When a company buys another company that supplies the products or services needed for production.

ex: bakery business bought a wheat processor and wheat farm.

Forward Integration

A company to move forward in the supply chain, increasing its overall ownership of the industry

Ex. a farmer sells his/her crops at the local market rather than to a distribution center

Reasons for Buying or Outsourcing

Cost advantage

Insufficient capacity

Lack of expertise

Quality

Reasons for Making

Lower costs

Break even point

Total cost to make = Total cost to buy

Preferred suppliers provide what?

- Early supplier involvement

- Information on the supply market

- Capacity for meeting unexpected demand

- Cost efficiency due to economies of scale

Cost of a product

- Unit cost

- Ordering cost

- Logistics cost

- Inventory cost

- Maintenance cost

Third Party Logistics Provider

-An external supplier that performs all or part of a companies logistics functions

-Many include transportation, warehousing, distribution, related financial services, vendor managed inventory

TCO

total cost of ownership

Single-Sourcing

The business practice of buying a particular product from only one supplier

Multi-Sourcing

Purchasing a good or service from more than one supplier. Companies may use multi-sourcing to create competition between suppliers in order to achieve higher quality and lower price.

Single-Sourcing Advantages

1. Lower pricing due to consolidation of all requirements with one supplier.

2. More consistent quality.

3. Lower purchasing workload due to communication with fewer suppliers.

4. Easier to manage supplier performance because you are tracking fewer suppliers.

5. Easier to track down the source of problems as well as affected products in the event of a quality investigation/recall.

Multi-Sourcing Advantages

1. less reliance on any one supplier providing a safety net if a supplier runs into difficulties

2. more flexibility to cope with unexpected events that could jeopardize capacity

3. fewer bottlenecks as more suppliers are able to meet peak demand

4. competition often provides an incentive for suppliers to improve cost and service

5. competition between suppliers also often provides the buyer with more bargaining power

Multi-Sourcing Disadvantages

1. information sharing may become more complex

higher costs for contract negotiation, management, and process execution

2. lower order volumes reduce bargaining power

the ability to save through economies of scale in reduced

3. challenges can come up in terms of quality control and efficacy

Single-Sourcing Disadvantages

1. increased vulnerability of supply

2. increased risk of supply interruption

3. greater dependency between your business and the supplier

Purchasing organization

is dependent on many factors, such as market conditions and types of materials

centralized

-efficient regarding business decision

-one mission

-suffer from several layers of bureaucracy

-business owners responsible for making ALL decision

decentralized

-closer to demand

-utilize individuals with a variety of expertise and knowledge for various business operations

-buy local, less bureaucracy

-multiple individuals decisions

Demand forecasting-4 underlying basis of all business decisions

-production

-inventory

-personnel

-facilities

*goal is to minimize forecast error

Forecasting techniques

qualitative and quantitative

quantitative (judgement)

-based on opinion and intuition

-delphi method-group of experts on a particular topic. They'd respond and put them out anonymously. Then resurvey them

Quantitative

-uses mathematical models and historical data. Historical data is used to predict future demand.

Components of demand:

-average demand for a time

-trend-increasing or decreasing

-cyclical variations-wavelike movements that is longer (yearly)

-seasonal element-peaks and valleys that stay constant overtime.

-random variation -due to unexpected or unforeseen events (tornadoes, strike)

Inventory

the stock of any item or resource used in an organization

-finished goods

-raw materials

-work in process

-maintenance

Two primary functions of inventory

1. Buffer uncertainty in the marketplace (safety customer demand)

-meet independent demand

2. Decouple dependencies in the supply chain (facilitate production)

-meet dependent demand

EOQ

-economic order quantity

-after factoring all the different costs how many items do we want to order.

ROP

average demand x lead time

inventory turnover

cost of revenue/average inventory

continuous review system

-fixed order quantity model

-Walmart allows bar codes to tell them when to order

-assume demand is random

-order up to the 'target' level at a specified time

Aggregate planning

specify the optimal demand

Scheduling goals

-need demand

-use capacity efficiently

-meet inventory policy

-minimize cost

-labor

-inventory

-plan and equipment

chase strategy

match production to costumer order rate by hiring and firing employees

level strategy

stable workforce with constant output, inventory and backlogs absorb fluctuations in demand. LEvel production every month

combination

stable workforce, variable hours-vary output through overtime or flexible schedules

bill of materials (BOM)

document that shows an inclusive listing of all component parts needed to produce an item.

distribution centers

emphasizes rapid movement of products through the facility

cross docking

is the practice of unloading an inbound vehicle and reloading the product onto an outbound vehicle with little or no storage

allocating

reducing quantity "break bulk"

repacking

"make bulk" items repacked for specific customer needs

Private warehouse

reduces the purchasing and transportation costs

you can customize it to your system, provides better workforce utilization, take advantages through leasing or excess capacity and or asset depreciation, higher fixed cost

Public warehouse

transportation

adds value to customers in two general ways

-time utility-products are delivered at the right time

-place utility-products are delivered at the right place

modes of transportation

-motor carrier

-rail

-air

-water pipeline

-intermodal transportation-uses more than one mode of transportation

Bill of lading

common carrier liable for all loses, damages, or delays in shipments

freight bill

carriers invoice for a given shipment

NAFTA

created in 1994 and removes most barriers to trade and investment among US, Canada, and Mexico

Reverse logistics

-backwards flow of goods *returning clothes

Process management

application of knowledge, skills, tools, techniques and systems to define, visualize, measure, control, report, and improve processes with the goal to meet customer requirements effieciently

Key elements of process management

1. lean production

2. 6 Sigma

Lean production

refers to the operating philosophy of waste reduction and value enhancement

7 wastes

1. overproduction-producing more than the demand for customers resulting in unnecessary inventory, handling, paperwork, and warehouse source

2. Waiting time

3. transportation

4. excess inventory

5. over processing

6. excess motion-wasted movement of people or extra walking

7. defects/rework-use of materials, labor and capacity for production of defects, sorting out bad warranty costs with customers

Kan Ban production control

a pull production system

workforce commitment

managers must support lean production by providing subordinates with the skills, tools, and time, and other necessary resources.

DPMO

(# of defects/3 of opportunities for error per unit # of units ) 1,000,000

Pure product

self contained team works full time on a project

-the project manager has full authority of the project

-shortened communication lines

-duplication of resources

-lack of technology transfer

-team members have no function "home"

Functional product

-a team member can work on several projects

-technical expertise is maintained within the functional area.

-critical mass of specialized knowledge

-aspects of the project are not related to functional area

six sigma

allows firms to:

-visually monitor process performance

-compare the performance to desired levels or standards

-take corrective action

Basic assumption of process quality control

-every process has random variation in it

-production processes are visually not found in a state of control

6 Sigma of variation (SOW)

1. people

2. machines

3. materials

4. methods

5. measurement

6. environment

spc involves monitoring and eliminating variability