EDS Asia Pacific / Thai Nguyen University, Vietnam Facilitated by: Dr.

Lee Kar Ling

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Supply Supply Chain Chain Management Management

Overview
To manage the entire supply chain operations from end consumer through to the extractor Involves : Planning, Organizing, Directing & Motivating, and Control Flow of materials, information, finance and other scarce and critical resources
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Supply Chain Management (SCM)Concept(1)

Each organization MUST try to find a business model that differentiates itself from its competitors & to maximize customer satisfaction. The following are key areas for differentiation: Design, Research, & Development Capabilities Service Integration Capabilities Logistics / Supply chain capabilities
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Supply Chain Management Concept(2)

To stay focused & gain a strong comparative advantage, the organizations MUST: Be CLEAR about the SCM objectives & the roles that each employee play in providing flexibility to deliver the best products & services to continuously delight, surprise, and satisfy customer needs and wants

Definition of SCM
SCM relates to the seamless design and management of the organizations value added activities and processes to satisfy the needs and wants of customers and consumers regardless of organization boundaries.
[SCM Association]
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Basic Flow of SCM

VISA

Material Flow

Credit Flow

Supplier Supplier

Manufacturing

Retailer Wholesaler

Consumer Retailer Cash Flow

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Schedules

Order Flow

SCM: the linkages between manufacturer, customers, & suppliers

Market research data scheduling information Engineering and design data Order flow and cash flow Ideas and design to satisfy end customer Material flow Credit flow

Supplier

Customer

Inventory

Supplier

Manufacturer
Inventory

Customer

Supplier

Inventory

Distributor
Inventory

Customer

Exercise 1
Break into groups Each group to develop an SCM flow for
highlighting the SCM system for the following types of businesses: Banks Supermarkets Universities Manufacturing companies

3 Key Areas in SCM Supply Management: focuses on purchasing & supply management Value chain management: focuses on the organizations internal value chain

activities

Demand chain management: focuses

on managing demand, distribution, & logistics

Key Requirements for the 3 areas in SCM

Demand management (Forecasting demand, distribution management, WMS) Value chain management (PPC, WIPs, Operations management, support systems) Supply management (supply management evaluation, Costing, negotiations, global sourcing, development of suppliers etc)

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Integrate

internal processes Inputs--Transformation---Outputs Integrate Backward processes: 1st , 2nd tier supplier management, warehousing Integrate Forward processes: work with 1st tier customers (information management) Comprehensive integration: From consumers to extractors

How to integrate the Supply Chain?

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Exercise 2
Break into groups Each group to create the THREE
key areas of integration We will then combine

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l Global Supply Chain environment: MUST be flexible, adaptive to facilitate fast responses WHY? MUST harness most advance technologies & medias for the management of logistics WHY? MUST utilize local expertise for customs management, taxation, tariffs, trading, and other local government issues WHY?

Global SCM issues & challenges

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SCM key area 1: Demand management

Customer expectations (High, medium, Low) affects sales & satisfaction [market positioning] Sales forecasting (Seasonality index, customer demands & needs, types of products & demand) Inventory holding costs & stock levels (Affects cashflow & profits) Stock lead time, cost, processes Production cycle time, cost, processes Transportation lead time, freight charges, methods etc WMS, store procedures, handling & movement

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Demand Management
Market positioning: premium, value for $$,
standard, Rip-off Types of demand: consistent, seasonal, sporadic Inventory holding cost: many types Lead & cycle time management WMS: design layout, management system etc.

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Exercise 3
Group work: Each group to select a company of choice Create a demand management system for the company focusing on ALL the areas involved in demand management

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Summary, Review, Refresh

Overview on SCM SCM flows Three key areas of focus Global SCM challenges Demand management

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SCM key area 2: Purchasing & Supply management

Focuses on materials, costs, quality, & service: Key Strategies: Make or Buy decisions Sourcing decisions (Local? Global? Affects purchasing & supply management) Supplier selection, costing, negotiations, & contract management Evaluation and control of supplier performance Criticality to organization: Material costs highest costs for most types of organizations Strong impact on product & service quality and customer satisfaction

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6 main objectives for purchasing

Right Price

Right Supplier Right Place

Right Time

Right Quality

Right Service
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END END of of DAY DAY ONE! ONE!

See you all tomorrow!

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Welcome Welcome back back to to DAY DAY TWO! TWO!

Recap on Day One before proceeding

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Costs of materials for different businesses

Wholesale Manufacturing
31% 11% 58% Material
Dir Wages

8% 9% 83%

COGS Payroll Other

Other

Retail
13% 16%

Materials, FG (COGS) expensive

COGS Payroll Other

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71%

Do you AGREE?

Dollars of Additional Sales Needed to Equal 1$ Saved Through Purchasing

Percent of Sales Spent for Purchases Firm's 30% Percent Net Profit 2 $2.78 4 6 8 10 $2.70 $2.63 $2.56 40% 50% 60% 70% 80% 90%

$3.23 $3.13 $3.03 $2.94

$3.85 $3.70 $3.57 $3.45

$4.76 $6.25 $4.55 $5.88 $4.35 $5.56 $4.17 $5.26

$9.09 $8.33 $7.69 $7.14

$16.67 $14.29 $12.50 $11.11

23 $10.11

$2.50 $2.86 $3.33 $4.00 $5.00 $6.67 Purchasing savings rationale demonstration

Group Analyses
Review the scenarios Calculate the percentage (%) of savings
in relations to the percentage (%) of sales Which is lower? Provide suggestions to reduce purchasing costs
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Areas for reducing purchasing & supply costs

Supply Management Materials Management -High costs -High transportation cost -Scarcity: national or -High inventory costs international Purchasing Management -Commodity items -Standard products

Source Management -Unique items -Custom-made items -High technology items

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Traditional Purchasing Processes

Customer Purchase Order
Receivables Report Accounts Payable Reconcile

Mail
Receiving Dock

Supplier Order Processing

Packing List Invoice

Mail Mail

Check

Accounts Receivable
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Todays strategies

Drop shipping and special packaging Blanket orders Invoiceless purchasing petty cash

etc. Electronic ordering and funds transfer Electronic data interchange (EDI) Stockless purchasing vendor holds Standardization value analysis
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Supply strategies

Assist organizations internal operations Affects long term competitiveness & comparative advantages Choice in supply management: Multiple /many suppliers (standard parts, common materials etc) Few Suppliers (3-5 for each material) Keiretsu network Integrative strategies (forward / backward) Virtual organization

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Supply Management
THREE Phases:

Material planning & decision

making Pre-award; set criteria, evaluate, decide Post-award: continuous monitoring & measurements (pricing/costs, quality, service)
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Negotiation Strategies
Three types: Cost/Profit based supplier open the books for customers. Set a targeted profit for supplier, then work on materials and pricing. Market based follow market price, usually for commodities Competitive bidding invite potential suppliers to provide quotations/ bid for the contract
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 FOB FAS CF CIF Ex-works

Common Shipping terms negotiated

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Practical exercise

Read the scenario, decide how your group plans to negotiate with the other group as the opponent.
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Value Value Chain Chain management management

Internal operations efficiency and effectiveness critical Can affect the entire supply chain management

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The value chain

Sales & customer service

Support activities
INBOUND
management

TRANSFORMATION / Operations

OUTBOUND Logistics

Marketing / customer service

Customer satisfaction
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Effects of SCM on companies

Meets customer requirements Enhance customer service Better asset management Maintain count accuracy Manage deliveries

Will lead to: Improved profitability

Provide safe storage

Improve overall SC efficiency

Provide suppliers with future demand 35 information

Practical SCM Game

Divide into groups THREE major groups
specific amount start the business The group with the most cash and most well managed supply chain WINS!
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to be given of cash to

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Thank Thank you you

Kindly follow the prescribed format to complete your assignment SKYPE:karling668
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