Success in business today is all about Delighting the customer and growing profitably

Definition: Value chain- consists of the major activities that have been added to the product during its creation, development or sale. Primary activities : the creation of product or service inbound logistics - order entry data collection, obtain raw materials, subassemblies Operations order processing, MRP; transformation of inputs to finished goods

 What is Value? The Value Chain concept was developed and popularized in 1985 by Michael Porter,to achieve superior business performance.

 As this name implies, the primary focus in value chains is on the benefits that accrue to customers, the interdependent processes that generate value, and the resulting demand and funds flows that are created. Effective value chains generate profits

 To bring the concept of value into focus, consider for a moment a person walking in the desert, a person who is dying of thirst. As that person walks they have one thing on their mind, and that is water. At that moment there is little consideration for the form of the water, the container, or who will be providing it. Water has a unique value to that person. When they find water, or they are offered some, money would be of little concern

First is that value is a subjective experience that is dependent on context. In the context of a busboy clearing a table, a glass of water sitting there has no value, or even negative value its just more work for him. But for the man dying of thirst, that same glass of water is extremely valuable. Second, value occurs when needs are met through the provision of products, resources, or services usually during some form of transaction or exchange. Finally, value is an experience, and it flows from the person (or institution) that is the recipient of resources it flows from the customer. This is a key difference between a value chain and a supply chain they flow in opposite directions.

Examples of Value Chains are One that takes an order from a customer One that fulfills a customer requirement One that defines a product or service

 As the name implies, the primary focus in supply chains is on the costs and efficiencies of supply, and the flow of materials from theirvarious sources to their final destinations.

Similarities and Differences Between a Supply Chain and a Value Chain

When we talk about supply chains, however, we usually talk about a downstream flow of goods and supplies from the source to the customer. Value flows the other way. The customer is the source of value, and value flows from the customer, in the form of demand, to the supplier. That flow of demand, sometimes referred to as a demand chain is manifested in the flows of orders and cash that parallel the flow of value, and flow in the opposite direction to the flow of supply. Thus, the primary difference between a supply chain and a value chain is a fundamental shift in focus from the supply base to the customer. Supply chains focus upstream on integrating supplier and producer processes, improving efficiency and reducing waste, while value chains focus downstream, on creating value in the eyes of thecustomer. This distinction is often lost in the language used in the business and research literature.

Why Value Chains

Increasing Competition and the Primacy of Strategy The value chain is first and foremost a strategic concept, arising from a strategic theory of firm competition As companies struggle to compete in an environment of globalization and intense competition, the focus shifts to alternative means to remain competitive. This creates an increasing interest in Value Chains as a tool to model the extended enterprise and formulate strategies for how to remain competitive

 A Value Delivery is a company's supply chain and how it partners with specific suppliers and distributors in the process of producing goods and delivering them to market. It involves using competitive advantages external to the firm (suppliers, distributors, customers)

 Value Chain The series of departments that carry out value-creating activities to design, produce, market, deliver, and support a firm's products

 Products pass through all activities of the chain in order, and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of the independent activities' values.[] A diamond cutter, as a profession, can be used to illustrate the difference of cost and the value chain. The cutting activity may have a low cost, but the activity adds much of the value to the end product, since a rough diamond is significantly less valuable than a cut diamond

 Differentiation Develop products & services which are different from what the competition offers superior attributes distinguishing features

 Primary activities : the creation of product or service Outbound logistics - distribution & sales data; storing products, Marketing sales - promotions, discounting; establishing a customer need Service activities - calls, returns, product rotation and maintenance

So, The Thrust Is On...

Enhancing Customer Satisfaction. Reducing Working Capital Ensuring cost-effectiveness Improving competitiveness, being ahead of competition

WHAT IS SUPPLY CHAIN MANAGEMENT

" Is the strategic management of activities involved in the acquisition and conversion of materials to finished products delivered to the customer"

Supplier Management

Material Flow
Information Flow
Stock Deployment

Customer Management

Schedule / Resources

Conversion

Delivery

Leads to Business Process Integration

 Supply chain is the system by which organizations source, make and deliver their products or services according to market demand.

 SUPPLY CHAIN INCLUDES :

MATERIAL FLOWS INFORMATION FLOWS FINANCIAL FLOWS

What is a Supply Chain?

Flow of products and services from Suppliers Raw materials manufacturers Intermediate goods manufacturers Finished goods manufacturers Distributors and wholesalers Retailers Customers Connected through transportation, information, and exchanges of funds
Supplier Manufacturer Distributor Retailer Customer

What Is Supply Chain Management (SCM)?

Plan Source Make Deliver Buy

A set of approaches used to efficiently integrate

Suppliers Manufacturers Warehouses Distribution centers In the right quantities To the right locations And at the right time

So that the product is produced and distributed

Supply Chain Excellence Supports the Realization of the Strategic Objectives of a Business, Through.. Reduced Costs Shorter Lead Time Best Quality Flexibility Enhanced Service Better Product availability

& reliability

The Traditional Vision of Supply Chain Constrained Itself to the Boundaries of an Organization

Production Transportation Purchase

Inventory / Warehousing

SOURCE

MAKE

MOVE

STORE

SELL

The Supply Chain

Suppliers Manufacturers Warehouses & Distribution Centers Customers

Transportation Costs Material Costs

Transportation Costs

Manufacturing Costs

Transportation Costs Inventory Costs

The Supply Chain Another View

Plan Source Make Deliver Buy

Suppliers

Manufacturers

Warehouses & Distribution Centers

Customers

Material Costs

Transportation Transportation Costs Transportation Costs Manufacturing Costs Inventory Costs Costs

Supply Chain Components

Production
How much to produce? Where? What suppliers?

Inventory
Where to store products? How much to store?

Distribution
How should products be moved and stored?

Payments
How (and when) should payments be made?

Why Is SCM Difficult?

Plan Source Make Deliver Buy

Uncertainty is inherent to every supply chain Travel times Breakdowns of machines and vehicles Weather, natural catastrophe, war Local politics, labor conditions, border issues

What Is Supply Chain Management?

Supply chain management is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize system wide costs while satisfying service level requirements.

Globally Dispersed Manufacturing

An Illustration: How Li & Fung Limited Might Make a Dress Product Design [Hong Kong] QC & Shipping [Hong Kong]

Yarn Spinning [Korea]

Weaving [Taiwan] Zippers+ [Japan+]

Stitching [Indonesia]

Cycle View of Supply Chain Processes

Customer
Customer Order Cycle

Cycle view defines the processes involved and the owner of each process

Retailer
Replenishment Cycle

Distributor
Manufacturing Cycle

Manufacturer
Procurement Cycle

Supplier

Cycle View of Supply Chain Processes

Customer Order Process 1. Customer Arrival Customer Order Cycle 2. Customer Order Entry 3. Customer Order Fullfillment 4. Customer Order Receiving

Replenishment Cycle
Manufacturing Process 1. Order Arrival 2. Production Scheduling 3. Manufacturing/Shipping 4. Receiving

Replenishment Process 1. Retail Order Trigger 2. Retail Order Entry 3. Retail Order Fullfillment 4. Retail Order Receiving

Manufacturing Cycle
Procurement Process 1. Component Order Arrival 2. Production Scheduling 3. Manufacturing/Shipping 4. Receiving

Procurement Cycle

Supply Chain Management Key Issues

ISSUE Network Planning CONSIDERATIONS
Warehouse locations and capacities Transportation flows between facilities to minimize cost and time How should inventory be managed?

Inventory Control Distribution Strategies

Selection of distribution strategies Cost/Benefits of different strategies How can integration with partners be achieved?

Integration and Strategic Partnering Outsourcing & Procurement Strategies Product Design

What are our core supply chain capabilities and which are not?

How are inventory holding and transportation costs affected by product design?

According to the Council of Supply Chain Management Professionals (CSCMP), supply chain management encompasses 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 and customers

 Successful SCM requires a change from managing individual functions to integrating activities into key supply chain processes. example : the purchasing department places orders as requirements become known. The marketing department, responding to customer demand, communicates with several distributors and retailers as it attempts to determine ways to satisfy this demand.

SUPPLY CHAIN ELEMENTS

Strategic Supply Chain Design Resource Acquisition Long Term Planning (1 Year ++) Production/ Distribution Planning Resource Allocation Medium Term Planning (Qtrly,Monthly)

Tactical

Operational

Shipment Scheduling Resource Scheduling Short Term Planning (Weekly,Daily)

Companies in any supply chain must make decisions regarding their actions in five areas: 1. ProductionWhat products does the market want? How much of products should be produced and by when? This activity includes the creation of production schedules that take into account plant capacities, workload balancing, quality control

 InventoryWhat inventory should be stocked at each stage in a supply chain? How much inventory should be held as raw materials, semi finished, or finished goods? The primary purpose of inventory is to act as a buffer against uncertainty in the supply chain. However, holding inventory can be expensive, so what are the optimal inventory levels

 LocationWhere should facilities for production and inventory storage be located? Where are the most cost efficient locations for production and for storage of inventory? Should existing facilities be used or new ones built? Once these decisions are made they determine the possible paths available for product to flow through for delivery to the final consumer

 TransportationHow should inventory be moved from one supply chain location to another? Air freight ,truck delivery, Shipping by sea or rail

 Information Timely and accurate information holds the promise of better coordination and better decision making. With good information, people can make effective decisions about what to produce and how much, about where to locate inventory and how best to transport it. The sum of these decisions will define the capabilities and effectiveness of a companys supply chain.

 Supply Chain Goals

Efficient supply chain management must result in tangible business improvements. It is characterized by a sharp focus on
Revenue growth Better asset utilization Cost reduction.

Evolution of Supply Chain Management

Mass production era (1900s 1970s) In the early 1900s, Henry Ford created the first moving assembly line
Lean manufacturing era (1970s 1995)

In the early 1970s, Japanese manufacturers like Toyota changed the rules of production from mass to lean. Lean manufacturing focuses on flexibility and quality more than on efficiency and quantity. Mass customization era (1995 2010?) Beginning around 1995, manufacturers started to mass-produce customized products. Enabling a customer to decide the exact specification of a product or service, and have that product or service supplied to them .

 The term supply chain management was first coined by Keith Oliver in 1982

The Foundations of Supply Chain Management

Supply Management Operations Supplier management, supplier evaluation, partnerships Demand management, ERP,JIT, TQM Transportation management, customer relationship management, distribution network, order fulfillment, Process integration, performance measurement

Distribution

Integration

The Foundations of Supply Chain Management

Purchasing Trends: Long term relationships Supplier management- improve performance through
Supplier evaluation (determining supplier capabilities) Supplier certification (third party or internal certification to assure product quality and service requirements)

Strategic partnerships- successful and trusting relationships with top-performing suppliers

Important Elements of Supply Chain Management (Cont.) Operations Trends:

Demand management- match demand to available capacity Linking buyers & suppliers via MRP and ERP systems Use JIT to reduce inventory levels Employ TQM to improve quality compliance among suppliers

Important Elements of Supply Chain Management (Cont.)

Distribution Trends: Transportation management- decisions between cost & timing of delivery/customer service via trucks, rail, water & air Customer relationship managementstrategies to ensure deliveries, resolve complaints, improve communications, & determine service requirements Network design- creating distribution networks based on decisions between cost & sophistication of distribution system

Important Elements of Supply Chain Management (Cont.)

Integration Trends:
Supply Chain Process Integration- when supply chain participants work for common goals. Requires intra firm functional integration. Supply Chain Performance MeasurementCrucial for firms to know if procedures are working

Current Trends in Supply Chain Management

Expanding the Supply Chain firms are expanding partnerships and building facilities in foreign markets The expansion involves:
breadth- foreign manufacturing, office & retail sites, foreign suppliers & customers depth- second and third tier suppliers & customers

Current Trends in Supply Chain Management (Cont.)

Increasing Supply Chain Responsiveness
Firms will increasingly need to be more flexible and responsive to customer needs Supply chains will need to benchmark industry performance and meet and improve on a continuous basis Responsiveness improvement will come from more effective and faster product & service delivery systems

Current Trends in Supply Chain Management- Cont.

Reducing Supply Chain Costs Cost reduction achieved through:
Reduced purchasing costs Reducing waste Reducing excess inventory, and Reducing non-value added activities

Continuous Improvement through

Benchmarking- improve over competitors performance Trial & error 2009 South-Western, a division of Cengage Learning Increased knowledge of supply chain processes

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