Key drivers of supply chain performance
•Descargar como PPTX, PDF•
16 recomendaciones•12,507 vistas
Walmart revolutionized supply chain management through an emphasis on information. By replacing inventory with information sharing across its supply chain, Walmart was able to dramatically reduce costs and improve responsiveness. This allowed everyday low pricing and high in-store variety. Key aspects included efficient transportation and facilities networks, minimal inventory levels managed through up-to-date sales data, and collaborative planning with suppliers. The Tata Nano similarly achieved breakthrough low costs through a target costing approach and extensive supply chain optimization to remove waste.
Recomendados
Más contenido relacionado
La actualidad más candente
La actualidad más candente (20)
Destacado
Similar a Key drivers of supply chain performance
Similar a Key drivers of supply chain performance (20)
Último
Último (20)
Key drivers of supply chain performance
- 1. DRIVERS OF SUPPLY CHAIN PERFORMANCE Prepared By: Group 2
- 2. Supply Chain A system of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer.
- 3. Supply Chain Drivers Logistical 1. Inventory 2. Transportation 3. Facilities Cross functional 1. Information 2. Sourcing 3. Pricing
- 4. Framework for structuring drivers • Company strategy a b c • Supply chain strategy • Drivers
- 5. Supply chain strategy & Drivers Responsiveness Efficiency
- 7. INVENTORY WHAT -Raw materials, work in process, finished goods, and supplies required for creation of a company's goods and services. The number of units and/or value of the stock of goods held by a company. WHY- Exists because of mismatch in demand and supply and to support a firm’s competitive strategy. IMPACT – On material flow time.
- 8. Inventory : Role in Supply Chain Trade off ??? Responsiveness Vs Efficiency as a strategic competitive priority. inventory responsiveness inventory cost responsiveness cost
- 9. Role in competitive strategy If responsiveness is a strategic competitive priority –locate larger amount of inventory closer to customers. If cost is more important , inventory can be reduced to gain efficiency .
- 10. Inventory in different Domains Manufacturing : From Financial perspective: The largest asset often seen on manufacturer’s sheet. Management emphasis – Keep inventories down so that cost is not much consumed.
- 11. Wholesale : Accurate records are needed to evaluate product popularity Retail : Keep the track of “turns”.
- 12. Components of inventory Decisions Transit Stock / Pipeline inventory Cycle stock Safety Stock Anticipation Inventory Hedge inventory Seasonal Inventory
- 13. Inventory Drivers Why Do we need Drivers for Inventory ??? Inventory drivers are consequences of certain supply & demand characteristics like : Product desirability Responsiveness Supplying complete & accurate information Customer collaboration Getting visibility as much as we can from our customers Defining drivers brings to light optimism to
- 14. Drivers… Demand Variation/ forecast accuracy/demand planning Supply Planning Demand & Supply synchronization Service levels capacity Lot sizes/order sizes Lead times Speculation Customer service level segmentation Network Design Data Accuracy
- 15. Inventory Related Metrics Average inventory Products with more than a specified no of days of inventory Average replenishment batch size Average safety inventory Seasonal inventory Fill rate Fraction of time out of stock
- 17. TRANSPORTATION Transportation moves the product between different locations in a supply chain Transportation is prominent in a company's competitive strategy Faster transportation makes supply chain more responsive
- 18. Role in the competitive strategy If company targets a customer who demands a very high level of responsiveness and that customer is willing to pay for this responsiveness, then company can make transportation as one driver to make supply chain more responsive. Opposite holds true as well. If the customers are concerned only with money not responsiveness then company can lower the cost of product. Both depend on company’s competitive strategy.
- 19. Components of transport decisions Design of transportation network Choice of mode of transportation Load Factor
- 20. Metrics Average inbound transportation cost: cost of bringing product into a facility as percentage of sales or cost of goods sold. Average incoming shipment size: average number of units or dollars in each incoming shipment at a facility. Average inbound transportation cost per shipment: average transportation cost of each incoming delivery. Average outbound transportation cost: average number of units or dollars in each outbound shipment at a facility. Fraction transported by mode: measures fraction of transportation using each mode of transportation. This enables analysis on which all modes are overused and underused.
- 21. Leveraging Transport Costs Load Factor Fuel Equipment Drivers Distributed Systems and Network
- 22. Responsiveness v/s Efficiency The fundamental trade-off for transportation is cost (efficiency) versus speed (responsiveness). A transportation cost analysis must consider the effects of speed on inventory required. Use of fast modes of transport raises responsiveness and transportation cost but lowers inventory holding cost.
- 25. FACILITIES Facilities include all locations in the supply chain to store, assemble, or fabricate inventory. Two major types of Facilities are: Manufacture/Repair Sites Storage (warehouse, distribution) Sites
- 26. Role in Supply Chain If we think of inventory as what is being passed along the supply chain and transportation is how it is passed along, then facilities are the where of the supply chain. Facilities include all locations in the supply chain to store, assemble, or fabricate inventory.
- 27. Role in Competitive Strategy Facilities are a key driver of supply chain performance. Factors such as location, capacity, manufacture/repair methodology, and warehousing methodology also affect supply chain performance by way of the facilities component.
- 28. Components of facilities decisions Decisions regarding facilities are crucial part of supply chain.. The components that the companies must analyze are: Role Location Capacity
- 29. Facility Related Metrics Following are some facility related metrics: Capacity Utilization Theoretical flow/cycle time of production Actual average flow/cycle time Flow time efficiency Product Variety Volume Contribution of top 20% SKU’s and customers Processing/setup/down/idle time Average production batch size Production service level
- 30. Responsiveness vs. Efficiency The fundamental trade off that managers face when making facilities decisions is between the cost of the number, location and type of facility & the level of responsiveness they provide to the company’s customers.
- 33. INFORMATION It consists of data and analysis concerning facilities, inventory and transportation. It is the biggest driver of performance. Presents management with the opportunity to make supply chain more responsive and efficient.
- 34. Role in the supply chain Deeply affects every part of supply chain. Serves as a connection between different stages of supply chain. Also crucial to daily operations of each stage in a supply chain.
- 35. Role in competitive strategy Impact of IT in Supply Chain Management. Helps in taking key decisions which help in reducing cost and improving responsiveness.
- 36. Components of Information Decisions Push versus Pull Coordination and Information Sharing Forecast and aggregate planning
- 37. Information related metrics Forecast horizon Frequency of update Forecast Error Seasonal factors Variance from plan Ratio of demand variability to order availability
- 38. Trade Off: Responsiveness VS efficiency Improves Responsiveness and efficiency. Improves performance of other drivers. Accurate information can help a firm improve efficiency by decreasing inventory and transportation costs. Improves responsiveness by matching supply and demand.
- 39. Impact on E-commerce Cost Efficiency Changes in the distribution system Customer orientation Shipment Tracking Shipping Notice Shipping Documentation and labeling Online Shipping inquiry
- 40. CASE STUDY
- 41. "People think we got big by putting big stores in small towns. Really, we got big by replacing inventory with information." Sam Walton, Founder of Wal-Mart
- 42. BACKGROUND Sam Walton founded the company in 1962 • First store opened in Rogers, Arkansas Walmart is the largest grocery retailer in U.S. • It is headquartered in Bentonville, Arkansas(U.S.) In 2009, it generated 51% of its US$258 billion sales in the U.S. from grocery business. • The company employs 2.2 million associates worldwide and serves 200 million customers each week at more than 10,000 stores in 27 countries.
- 45. Key Factors • Pricing • Logistics • Inventory • Transportation
- 46. Pricing Walmart practices every day low pricing (EDLP) for its products. Customer demand stays steady and does not fluctuate with price variations.
- 47. Inventory Walmart set up its own satellite communication system in 1983. Allows the management to monitor each and every activity at any point of day. Allows stores to manage their own stock. The order management and store replenishment of goods are entirely executed with the help of computers through the Pointof-Sales (POS) system.
- 48. Transportation Involves fast and responsive transportation system. More than 7000 company owned trucks services the distribution centers. Shipping of goods to stores within 2 days. Use idea of Back-Hauling
- 49. Facilities There are 140 Walmart distribution centres within US. Walmart’s distribution centers by Facility type: Regional General Merchandise Distribution Centers Import/Redistribution Centers Fashion Distribution Centers Full line Grocery and perishables Food Distribution Centers Speciality Distribution Centers
- 50. Cross Docking Finished goods are directly picked up from the manufacturing site of supplier, sorted out and directly supplied to the customers. Reduces handling and storage of finished goods System shifted from “supply chain” to “demand chain”
- 51. Information Use of bar codes and RFID to label different products, shelves and bins in the center. Use of handheld computer (Magic Wand) Use of computers to track movement of goods and stock levels. Order management and store replenishment of goods is entirely executed with the help of computers through Point of Sale (POS) system. Use of centralized Inventory database
- 52. Case Study: Tata Nano
- 53. Tata Nano
- 54. Tata Nano
- 55. Tata Nano
- 56. Tata Nano The secret of designing the Tata Nano is a concept called Target Pricing or Target Costing. Once the features and functions are finalized target costs are assigned to each and every component/system – transmission system, instruments, engine, body, interiors, electri cal systems. The sub-teams then design the components/systems within the target cost. They look at every bolt and nut and keep driving cost out of the components/ system.
- 57. Tata Nano Cost and waste is driven out of supply chains by reducing inventory, eliminating waiting times and delays, increasing utilization of warehouse and trucks, optimizing location of warehouses and plants, drawing up the optimum transportation network, utilizing backhauls etc. Reducing inventory reduces the working capital cost , reduces warehousing costs and obsolescence costs. To reduce inventory, demand fluctuation will have to be reduced, reliability of inventory replenishment will have to increased, Inventory Record Accuracy will have to be above ~95% and supply chain length will have to be reduced. Reducing supply chain times reduces inventory and increases responsiveness. To eliminate waiting times and delays the complete supply chain process will have to be mapped. For this a lead time map is used. Delays like waiting for loading or unloading and waiting for documents can be minimized. Transit times can be reduced [ not by fast and rash driving ] but by using AC cabins and double-drivers. Also, backhauls are a way to reduce costs.
- 58. Tata Nano Truck utilization can be improved by using truck optimization softwares. Similarly, warehouse space can be utilized more efficiently by increasing storage height- by increasing the rack heights or having a mezzanine. On a strategic level, Supply Chain Network Design - locating plants, contract manufacturers, Distribution Centres and warehouses- is important because 70% of the cost of a supply chain is fixed at the design stage. So while Tata Nano has created a breakthrough in car manufacture by reducing the cost of a car significantly, it has led me to think about doing a Tata Nano with my supply chain.
- 59. Conclusion Lower product costs Reduced inventory carrying costs Improved in-store variety and selection Highly competitive pricing for the consumer
Notas del editor
- Supply chain activities transform natural resources, raw materials, and components into a finished product that is delivered to the end customer. In sophisticated supply chain systems, used products may re-enter the supply chain at any point where residual value is recyclable. Supply chains link value chains.
- Cross functional are those processes whose impact spans more than one functional boundary. Logistics is concerned with managing business process concerned with a department or functional portion.
- Companies begin with competitive strategy and then decide what their supply chain strategy ought to be.Supply chain strategy determines how the supply chain would perform with respect to efficiency and effectiveness.Supply chain employs all its drivers to reach the performance level the supply chain strategy dictates. Even though the framework is viewed from top down, drivers are potential enough to change the supply chain strategy and even the competitive strategy of the company.
- The responsiveness of supply chains to changing market requirements and their overall efficiency are important issues in supply chain design and management and therefore currently receive wide attention in the scientific community as well as in practice.Responsiveness can be defined as the “ability to react purposefully and within an appropriate time-scale to customer demand or changes in the marketplace, to bring about or maintain competitive advantage.Responsiveness and efficiency are contradicting at somme point but they are complementary at other.
- Material flow time is the time elapsed b/w when material enters supply chain to the time when it exists supply chain.Inventory is synonyms to throughput.
- Exchange that occurs as a compromise is called a trade off ! If responsiveness is a strategic competitive priority , a firm can locate larger amounts of inventory closer to customers.If cost is more important , inventory can be divided to make firm more efficient.
- Pipeline inventory - Pipeline inventory exists because material cannot be transported instantaneously between the point of supply and the point of demand.Cycle stock - Occurs because one or more stages in the process cannot supply all the items it produces simultaneously. This type of inventory only results from the need to produce products in batches and the amount of it depends on volume decisions.Anticipation inventory -Inventory that is accumulated to cope with expected future demand or interruptions in supply.Hedge inventory -A form of inventory buildup to buffer against some event that may not happen. Hedge inventory planning involves speculation related to potential labor strikes, price increases, unsettled governments, and events that could severely impair a company’s strategic initiatives. Risk and consequences are unusually high, and top management approval is often required.Seasonal Inventory- Inventory built up in anticipation of a seasonal peak of demand in order to smooth production..
- I would explain myself !
- Transportation moves the product between different locations in a supply chain and significantly affects both responsiveness and efficiency. Quicker methods (modes of transport, different amounts) increase supply chain responsiveness but decrease efficiency. The type of transportation can also affect inventory and facility location. For example, international transactions are the current commercial trend, but the supply chain manager must plan for travel time and customs processing.Transportation is prominent in a company's competitive strategy when considering customer need. If a firm's competitive strategy targets a customer that demands high responsiveness and that customer is willing to pay for this level, then they can use transportation as a driver for increasing supply chain responsiveness.
- Processes or transforms inventory into another product, or it stores the inventory before shipping it to the next facility.Facilities include all locations in the supply chain to store, assemble, or fabricate inventory. In DoD, it is where personnel repair weapon systems and secondary items.
- Whatever the function, decisions regarding location, capacity, and flexibility of facilities significantly affect supply chain performance. For example, a company can increase responsiveness by setting up warehouses near its customers instead of creating only one remote stock facility. This usually decreases cost while increasing responsiveness. Since facilities are a key driver of supply chain performance, factors such as location, capacity, manufacture/repair methodology, and warehousing methodology also affect supply chain performance by way of the facilities component. For instance auto-parts distributor striving for responsiveness could have many warehousing facilities located close to customers even though this practice reduces efficiency. Alternatively, a high efficiency distributors will have fewer warehouses to increase efficiency despite the fact that this practice will reduce responsiveness. In DoD, depot and field repair facilities are cornerstones of the supply chain.
- IT CONSISTS OF DATA AND ANALYSIS CONCERNING FACILITIES , INVENTORY AND TRANSPORTATION.IT IS THE BIGGEST DRIVER OF PERFORMANCEPRESENTS MANAGEMENT WITH THE OPPORTUNITY TO MAKE SUPPLY CHAIN MORE RESPONSIVE AND EFFICIENT.E.G WITH INFORMATION ON CUSTOMER DEMAND PATTERNS, A PHARMACEUTICAL COMPANY CAN PRODUCE AND STOCK DRUGS IN ANTICIPATION OF CUSTOMER DEMAND, WHICH MAKES SUPPLY CHAIN VERY RESPONSIVE BECAUSE CUSTOMERS WILL FIND DRUGS WHEN THEY WANT THEM. IT MAKES SC MORE EFFICIENT ALSO BCZ THE PHARMA FIRM IS BETTER ABLE TO FORECAST DEMAND AND PRODUCE ONLY THE REQUIRED AMOUNT AND ALSO PROVIDING MANAGERS WITH SHIPPING OPTIONS, FOR INSTANCE ALLLOW THEM TO CHOOSE THE LOWEST COST ALTERNATIVE WHILE STILL MEETING THE NECESSARY SERVICE REQUIREMENTS..
- DEEPLY AFFECTS EVERY PART OF SUPPLY CHAIN.SERVES AS A CONNECTION BETWEEN DIFFERENT STAGES OF SUPPLY CHAIN ALLOWING THEM TO COORDINATE AND MAXIMIZE TOTAL SUPPLY CHAIN PROFITABILITY.ALSO CRUCIAL TO DAILY OPERATIONS OF EACH STAGE IN A SUPPLY CHAIN. FOR INSTANCE , A PRODUCTION SCHEDULING SYSTEM USES INFORMATION ON DEMAND TO CREATE A SCHEDULE THAT ALLOWS A FACTORY TO PRODUCE THE RIGHT PRODUCTS IN AN EFFICIENT MANNER. A WAREHOUSE MANAGEMENT SYSTEM USES INFORMATION TO CREATE VISIBILITY OF THE WAREHOUSE’S INVENTORY. THE COMPANY CAN THEN USE THIS INFORMATION TO DETERMINE WHETHER NEW ORDERS CAN BE FILLED.
- Information is an important driver that companies have used to become both more efficient and more responsive. The tremendous growth of information technology is a testimony to the impact that information can have on improving a company. Like all the other drivers, however, even with information, companies reach a point when they must make the tradeoff between efficiency and responsiveness. Another key decision involves what information is most valuable in reducing cost and improving responsiveness within a supply chain. This decision will vary depending on the supply chain structure and the market segments served. Some companies, for example, target customers who require customized products that carry a premium price tag. These companies might find that investments in information allow them to respond more quickly to their customers. The following examples illustrate this type of investments. Dell takes orders directly from customers over the phone and via the internet. Building this direct channel required an investment because of the added functions Dell must perform. A large part of the cost can be attributed to information. With the direct channel model, however, Dell is able to view the actual consumer demand much sooner than most PC manufacturers. Therefore, the company can respond more quickly to changes in consumer needs. Dell can then modify its product offering to meet these new needs. Dell is not the low cost provider. The company is, however, the cheapest for its level of responsiveness, and a large part of its responsiveness is due to the information flow between Dell and its customers, and Dell and its suppliers, that is made possible by its investment in information.
- When designing processes of the supply chain, managers must determine whether these processes are part of the push or pull phase in the chain. Push systems generally require information in the form of elaborate material requirements planning systems to take the master production schedule and roll it back, creating schedules fir suppliers with part types , quantities, and delivery dates. Pull systems require information on actual demand to be transmitted extremely quickly throughout the entire chain so that production and distribution of products may reflect the real demand accurately.
- In a typical supply chain, raw materials are procured and items are produced at one or more factories, shipped to warehouses for intermediate storage, and then shipped toretailers or customers.
- 1. As the world’s largest retailer, Walmart has immense amount of money to spend on purchasing manufactured goods.2. By purchasing incredibly large quantities from manufacturers, they are able to pay exceptionally low prices for their goods.3. By driving down the purchase price of their goods, Walmart can resell these goods to the consumers at low prices.The ship point is the point of origin from which the vendor is expected to ship the products to a Wal-Mart DC. Generally, Wal-Mart would like vendors to use common ship points for DCs to keep transportation costs low and ensure that products arrive at the same time. Retail Link also determines which type of carrier will be used for the shipment. Approximately 50% of shipments from vendors to Wal-Mart are made by common carriers and the other 50% is made by Wal-Mart's own private fleet. The vendor works with the carrier to coordinate the actual date and time for pick up. The carrierdelivers the product to three possible destination types: distribution centers, center points or directly to stores.
- Wal-Mart ensures that unproductive inventory is as less as possible, by allowing the stores to manage their own stocks, thereby reducing pack sizes across many categories and timely price markdowns.
- vital implementation of Wal-Marts supply chain is its in-house non-unionized truckdrivers. Using trucks as a mode as transportation will provide flexible point-to-point service,delivering small quantities with less risk.These dedicated truck fleets enables shipping of goods from distribution centers to the stores within 2 days and replenish the store shelves twice a week. since the distribution centers are on average 130 miles away from retail stores its relatively inexpensive. This concept allowstransportation of unsold merchandise back on trucks that have just dropped off inventory to the retail store from the distribution center. This means that the Wal-Mart trucks leaving and coming back to the distribution center are never empty.
- Because of “cross-docking” the system shifted from “supply chain” to “demand chain” which meant, instead of retailers ‘pushing’ the products into the system, the customers could ‘pull’ the products, when & where they required.
- Wal-Mart makes full use of its IT infrastructure to make more inventories available in case of items that customers wanted most, while reducing overall inventory.The hand held computers guide employee to the location of the specific product. The quantity of the product required from the center is entered in the hand held computer, which updates the information on the main central server. Employees use “Magic Wand”, which is linked to in-store terminals through a Radio frequency network, to keep track of the inventory in stores, deliveries and backup merchandise in stock at the distribution centers. Wal-Mart owns the “Massively Parallel Processor (MPP)”, largest & the most sophisticated computer system in private sector, which enables it to easily track movement of goods & stock levels across all distribution centers and stores. For emergency backup, it has an extensive contingency plan in place as well. A Centralized inventory database allows the personnel at the store to find out the level of inventories and location of each product at a given time. It also shows the location of the product like distribution center or transit on the truck. When the goods are unloaded at the store, the inventory system is immediately updated.
- Wal-Mart’s supply chain management strategy has provided the company with several sustainable competitive advantages, including lower product costs, reduced inventory carrying costs, improved in-store variety and selection, and highly competitive pricing for the consumer. This strategy has helped Walmart become a dominant force in a competitive global market.