Part 1- Supply chain overview Flashcards
Before early 80s:
Purchasing, transportation and warehousing –> isolated activities within the organization
Early 80´s in the US and Europe:
Increasing the outsourcing of manufacturing, raw materials, components and services to foreign countries to be able to compete against Asian countries –> The development of global economy
Since the early 80´s:
Development of business technologies, speed of information exchange, product lifecycles, communications, collaboration between parties involved ++
The importance of logistics and the supply chain:
- to maintain competitive advantage
- accounts for +9,5% of US GDP
- logistics costs –> 50-70% of company sales
- understanding and implementing an efficient supply chain strategy is very important for employees and company´s success
Definition of the supply chain:
Supply chain is a system of organizations, people, activities, information, and resources involved in the planning, moving, or storage of a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials, and components into a finished product that is delivered to the end customer
Definition of supply chain management:
“includes the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management. It also includes the crucial components of coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers.”
SCM includes:
Logistics + manufacturing + coordination of all activities and processes with marketing, sales, product design, finance and information technology
- SCM is cross-functional and cross-organizational
Functions within SC & Logistics Organization
- procurement
- demand forecasting
- customer service and order management
- inventory planning
- transportation
- warehousing
- materials handling and packaging
- facility network
- operations management
The SCOR model
Developed by the SCC (Supply chain council) in 2014 to teach, understand and manage SC´s.
- it defines and measures the performance of company´s SC.
- it provides broad definition for SC and helps to create metrics to measure performance
- a hierarchical framework that combines business activities, metrics, and practices that can be looked at from different levels of definition
The SCOR models five major management processes:
PLAN: Resources and demand must be aligned
MAKE: Value-added activities within a supply chain operation (ie manufacturing)
SOURCE: Buying raw materials or services
DELIVER: Customer interaction from receiving order to final delivery
RETURN: All processes that reverse material from the customer backward through the SC
The SCOR levels
1) Scope
- business lines
- business strategy
- complete SC
2) Configuration
- specific planning strategy (make to order, make to stock..)
3) Activity
- describes tasks within SC, what people do
4) Workflow
- best practices
- job details
- workflow of activity
5) Transaction
- specific detail transactions to perform a job step
The SCOR metrics
All SCOR metrics have 5 strategic performance attributes.
Measure –> benchmark –> set an objective to improve measure
- reliability
- responsiveness
- agility
- cost
- assets
Objective of the SC
Achieve integration and efficiency through collaboration to achieve visibility towards customers and suppliers and add value to them
The value chain model (Michael Porter)
Shows the value-creating activities of an organization, which are largely connected with SC functions.
Support activities can also add value to the company:
- procurement
- technology development
- human resource management
- business structure
Leveraging effect on the SC
As SC costs represent an important part of a company’s sales, it is easy to understand why there is so much interest on it. This results in a “leveraging” effect, as any dollar saved on supply chain contributes the same to the company’s profit as a much larger increase in sales does.
