Why is the supply chain important? 
 www.supply-chain.org/html/faq.htm#Why is the supply chain important?
"In years past, manufacturers were the drivers of the supply chain -- managing the pace
 at which products were manufactured and distributed. Today, customers are calling the shots, and manufacturers are scrambling to meet customer demands for  options / styles / features, quick order fulfillment, and fast delivery."

an
industry
term !
 
 
 
 
 
 
 

Supply
Chain 
Management

an
industry
term !

Q. What is supply chain management?
"A supply chain is a collection of inter-dependent steps that, when followed, accomplish a certain objective such as meeting customer requirements. Supply-chain management is a generic term that encompasses the coordination of order generation, order taking, and offer fulfillment/distribution of products, services, or information. Numerous, independent firms and customers are involved in a supply chain (e.g., manufacturers and parts suppliers; parcel shippers, senders and receivers; wholesalers and retailers). The WWW and extranets (connected intranets) have  shown a great potential in linking and managing these entities into a virtual organization."

key points

• coordination of order generation
• order taking
• offer fulfillment
• distribution of products, services, or information

• suppliers (at three different levels)
• parcel shippers (documents)
• wholesalers - on the pull side
• retailers - on the pull side

• coordination of materials
• information
• and funds

• coordination of materials
• time of the materials arrival
• location related to the production process
• warehousing
• storage
• packaging of the materials inbound
• information
• information about materials quality
• price fluctuations
• currency exchange rate considerations
• and funds
• borrowing money from the bank to pay for 
• materials before they are assembled then sold
• labour to aseemble the product

• JIT Just in Time 
• quick response 
• vendor managed inventory 
• continuous replenishment 

What has changed in the millenium is the need to quickly share and disseminate information across the supply chain,  - this follows a shift from product orientation, to sales orientation to market orientation. 

Pull versus Push Supply Chain models  
- explained by WTGR on the blackboard with a diagram 

 - Pull based models require a lot of information about the customer 
 - the trend has been away from Push based systems to Pull based systems 
 

Supply
Chain
Component
Parts
 
 
 
 
 
 
 
 
 
 

Supply
Chain
Component
Parts

• Purchasing Activities
• Logistics Activities
• Support Activities, 

• identifying people who will sell parts and materials to you
• evaluating those potential suppliers
• quality
• cost competitiveness
• delivery costs and time of delivery
• selecting particular parts and materials
• placing the order
• resolving issues that arise (ie. late shipment, parts missing, wrong colour etc.)

• managing the inbound movements of parts and materials
• outbound completed products
• warehousing
• inventory control
• vehicle scheduling

• HR resources
• ie. employee travel policies
• document storage
• finance
• payroll processing
• technology development

LOGISTICS
 

Supply
Chain
Component
Parts

LOGISTICS

• managing the inbound movements of parts and materials
• outbound completed products
• warehousing
• inventory control
• vehicle scheduling

logistics = materials management

Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption in order to meet customer's requirements"
 

exploded to see more clearly what this long statement means

"Logistics is that part of the supply chain process that 

• plans, 
• implements, and 
• controls 
• the 
• efficient, 
• effective flow and 
• storage of 
• goods, 
• services and 
• related information 

• point of origin to the 
• point of consumption 

this quote comes from the Council of Logistics Management and is re-quoted in the text page 629

The Council of Logistics Management is quoted from in the text on page 629, sooo, we'll simply go direct to the CLM webpage at  www.clm1.org
 
 

An interesting rant about why logistics has not been respected as an important part of marketing. To read the full essay, go to  http://www.esg.uqam.ca/esg /crg/papers/04-99/04-99.htm [this will not be on the exam - it is just for your information]

LOGISTICS: THE OTHER HALF OF MARKETING Mainstream marketing management, also referred to as sales and promotion-based marketing, with its penchant for demand stimulation is almost entirely concerned with demand stimulation, that is creating and obtaining sales. One need only look at any current marketing management textbook to note that the vast majority of topics discussed deal mainly with what firms need to do in order to get sales. The tools used to obtain sales are promotion-based, i.e., advertising, sales promotion, personnel selling, and so forth. These are all mixed with heavy doses of consumer behavior analysis using the tools of marketing research for market and segmentation analysis as well as understanding what makes the consumer buy.  What is missing in demand stimulation is servicing demand, that is the supply side of marketing, or what Converse (1954) called the other half of marketing. Servicing demand, the other half of selling, assures that customers will get what they bought, is almost never discussed in mainstream marketing thought.

Global 
Manufacturing 
Strategy
 
 
 
 
 
 
 
 
 

Global 
Manufacturing 
Strategy

"The success of a Global Manufacturing Strategy depends on four key factors

1. Manufacturing Compatibility
2. Manufacturing Configuration
3. Coordination
4. and Control"

cost minimization strategies - AKA trying to save money

• economies of scale
• "low-cost labour areas"
• - labour the biggest component so this is how companies save money

three basic configurations

• centralized in one country - like heavy machinery company Caterpillar
• manufacturing facilities in specific regions to service those regions - like IBM
• multidomestic facilities in each country - like Bata shoes

• by geography - Latin America division
• by product - men's clothes, women's clothes
• by customer - wholesalers, government accounts, institutional accounts
• by function - shipping dept. mrkgt dept., accounting dept.

"Once MNEs determine that they will enage in FDI to suply foreign markets, they need to determine which countries to invest in and where within each specific country" text page 633

Textbook discusses General Motors choice of Thailand over the Philippines

text notes "... there are more auto suppliers..."
They don't say this explicitly, but it refers to the fact that in Thailand, there are a critical number of First Tier Suppliers and Second Tier Suppliers - which we in MGTC44 have discussed earlier in this section as being important.

Attracting large MNEs to invest is a bit like a country winning the Olympics - a very contentious issue and raises many questions - some having to do with ethics.

Layout Planning Strategies

Text discusses Samsonite using the manufacturing technique of autonomous cells - which has also been used to great success by Japanese auto manufacturing companies in Japan, and to some small extent in North America.
 

Elements 
of 
Supply-Chain 
Management
 
 
 
 
 
 
 

Elements 
of 
Supply-Chain 
Management

another way of looking at the supply chain

This is a book written by Kalakota and Whinston which was widely used in e-commerce courses in 1999 and 2000. You are note drequired to buy this book. We refer just to one part of one chapter.

Planning Systems Execution Systems Performance Measurement Systems Integrating Functions in a Supply Chain

•   Planning Systems

• means having the right product at the right place at the right time
• requires being able to obtain good "order information" from the customer
• POS - Point of Sale data gathered at the retail terminal is part of this
• Demand Forecasting (cause you can't have some products ready instantly)
• allows you to be more competitive in supplying things 'faster'
• customer demand triggers order movement up the supply chain to the raw material supplier
• the trend has been away from Push based systems to Pull based systems
• Execution Systems
• facilitate the physical movement of goods and services through the supply chain
• focus on operational efficiency
• entails finding new ways to streamline day2day operations
• reduce costs
• improve productivity
• need for cross functional integration
• execution systems are basically the way you do things to make sure everything done the right way !
• Performance Measurement Systems
• keeps track of how things are going well, or poorly
• necessary to evaluate good and bad results in a specific way so you can make changes
• most often this means talking about some specific accounting or financial software package that gives performance numbers
• Integrating Functions in a Supply Chain
• the key thing about integrating is getting all the key functions to work together
• the key functions are
• Managing Information about demand
• Managing the flow of physical goods
• Managing the manufacturing process
• Managing the money

"The key to making a global information system work is information" ... duh
you'd be surprised how many people miss this point
 

We will discuss some of the material on Intranets but in addition, the professor will ask you to note some additional information below.
 

"... 40% of firms had customer extranets... 20-25% had supplier extranets..."

These exact percentages are not so important -  keep in mind one thing: still, in April 2001, a reasonable number of large size companies have corporate intranets, and many medium sized companies are also learning the advantages of intranets, but still only a small portion of SME's actually use extranets for supply chain management. Extranets remain primarily a tool used by large sized companies.
 

"The real attraction of the Internet in the global supply chain management is that it not  only helps automate and speed up internal processes in a company through the intranet but also spreads efficiency gains to the business systems of its customers and suppliers"
Page 636 Text

translated -

it helps our company be more competitive
it also helps our partners be more competitive

Intranets
and 
Extranets

Featured in Chpt 7
is reference to ANX - the Automotive Network Exchange, which is the world's largest extranet

Applications of Intranet page 244- Turban Text
the major functions that an Intranet can provide

• corporate / departmental / individual web pages
• database access
• for better information about customers
• inventory
• assets and resources
• search engines and directories
• for companies handling massive quantities of text documents
• eg. insurance and banking companies
• interactive communication
• chatting, audio, videoconferencing
• in order to save costs
• document distribution and workflow
• very helpful in organizations were more than one person handles a file
• eg. government agencies, eg. licensing agencies, health offices etc.
• groupware
• telephony
• integration with electronic commerce
• internet based sales have to be processed
• processing can be economized with intranet structure for order fulfillment
• eg. Amazon.com
• extranet
• geographically dispersed parts of the organization

• corporate policies
• corporate procedures for caring out complex actions with many variables
• timetables for people and events
• scheduling information
• directories
• people
• names, tel contacts
• titles and functions
• departments
• part of reducing duplication of activity
• enhanced use of existing resources
• departmental "evangelism" (common in large organizations)
• Human Resources
• benefits and services to employees
• performance evaluations guidelines
• employment equity information and guidelines
• stock information
• intra-corporate employment opportunities
• educational information
• corporate training programs
• schedules
• descriptions, curriculum, participation forms
• product catalogs
• purchase orders
• manuals
• to enhance capability of service technicians 
• to empower wholsalers and retailers
• services
• travel services
• in-house services , eg. printing
• archives
• text, stories, documents, records
• images (eg. for a newspaper)
• video clips (eg. for a broadcaster)

TQM
 
 
 

TQM
 
 
 

TQM
 
 
 

TQM
 
 
 
 

TQM
 
 
 
 

TQM

North American companies in the late 1980's and early 1990's got the marketing equivalent of a kick in the face from Japanese companies bringing in consumer products that were low prices AND high quality.  U.S. companies sought to learn how Japanese did the TQM stuff - which is funny, cause the Japanese learned it from an American, Edwards Demming ! WTGR

Demming's 14 Point Plan for TQM
 http://www.educe.dabsol.co.uk/Quality/Q_Demming.htm
(listed, and expanded upon by Mr. Dave Wilson)

• Point 1: Create constancy of purpose toward improvement of the product and service so as to become competitive, stay in business and provide jobs.
• Point 2: Adopt the new philosophy. We are in a new economic age. We no longer need live with commonly  accepted levels of delay, mistake, defective material and defective workmanship.
• Point 3: Cease dependence on mass inspection; require, instead, statistical evidence that quality is built in.
• Point 4: Improve the quality of incoming materials. End the practice of awarding business on the basis of a price alone. Instead, depend on meaningful measures of quality, along with price.
• Point 5: Find the problems; constantly improve the system of production and service. There should be continual reduction of waste and continual improvement of quality in every activity so as to yield a continual rise in productivity  and a decrease in costs.
• Point 6: Institute modern methods of training and education for all. Modern methods of on-the-job training use  control charts to determine whether a worker has been properly trained and is able to perform the job correctly.  Statistical methods must be used to discover when training is complete.
• Point 7: Institute modern methods of supervision. The emphasis of production supervisors must be to help people to  do a better job. Improvement of quality will automatically improve productivity. Management must prepare to take immediate action on response from supervisors concerning problems such as inherited defects, lack of maintenance  of machines, poor tools or fuzzy operational definitions.
• Point 8: Fear is a barrier to improvement so drive out fear by encouraging effective two-way communication and  other mechanisms that will enable 'everybody to be part of change, and to belong to it'. Fear can often be found at all   levels in an organisation: fear of change, fear of the fact that it may be necessary to learn a better way of working and fear that their positions might be usurped frequently affect middle and higher management, whilst on the  shop-floor, workers can also fear the effects of change on their jobs.
• Point 9: 'Break down barriers between departments and staff areas. People in different areas such as research, design, sales, administration and production must work in teams to tackle problems that may be encountered with products or service'.
• Point 10: 'Eliminate the use of slogans, posters and exhortations for the workforce, demanding zero defects and  new levels of productivity without providing methods. Such exhortations only create adversarial relationships
• Point 11: 'Eliminate work standards that prescribe numerical quotas for the workforce and numerical goals for  people in management. Substitute aids and helpful leadership
• Point 12: Remove the barriers that rob hourly workers, and people in management, of their right to pride of  workmanship. This implies, abolition of the annual merit rating (appraisal of performance) and of management by  objective
• Point 13: 'Institute a vigorous programme of education, and encourage self-improvement for everyone. What an   organization needs is not just good people; it needs people that are improving with education.
• Point 14: Top management's permanent commitment to ever-improving quality and productivity must be clearly  defined and a management structure created that will continuously take action to follow the preceding 13 points.

"TQM was the brainchild of the late W. Edwards Deming; it supposedly helped Japan with its postwar economic recovery. But perhaps that was because it meshed with Japanese culture. It does not follow that TQM is a good fit for organizing America...."Quality" sounds like goodness, pure and simple. But with TQM, quality is not the product but the process. To institute the process, corporate trainers must bring about a "total cultural change," wherein all
employees shed their individualism for a unified set of corporate values. Workers undergo hours of group training before they blend into the TQM process.... To tell employees upfront they must adopt an entirely new way of thinking can be frightening..."

TQM was considered, by the Americans in ther mid 1990's, so important to understand, and try to apply to keep up with the Japanese, that they even taught the concept in the U.S. military.

check Naval War College Notes: www.nwc.navy.mil/library/3Publications/Eccles%20Library/LibNotes/libtql.htm

KAIZEN is a culture of sustained continuous improvement focusing on eliminating
waste in all systems and processes of an organisation, starting with the GEMBA (or the
work place). 

Principles: 
 http://www2.umassd.edu/SWPI/processframework/kaizen/kaizen.html 
   1.human resources are the most important company asset, 
   2.processes must evolve by gradual improvement rather than radical changes, 
   3.improvement must be based on statistical/quantitative evaluation of process perform

"As an industrial norm, Japanese practices seemed to embrace belief in multi-skilled, committed  employees who respond flexibly and with know-how to resolve local, operational problems and fluctuations. If sales are low instead of continuing to produce blindly, reviews of practices and  efficiencies, maintenance operations and training would be normal activities for employees in a team.  Rank-and-file employees might participate in other creative endeavours."
 http://sol.brunel.ac.uk/~jarvis/bola/jit/kaizen.html 

Kaizen used by North Americans in their business language
 http://www.edc-see.ca/docs/news/2000/11-30-00_e.htm 

Kaizen can also be used by North American businesses as an excuse to make changes very slowly, or not make changes at all. Read this interesting critique
 http://web.idirect.com/~vfr/!kaizen 
"Bureaucracies love kaizen because the individuals in bureaucracies interpret it to be a most noble and overtly responsible
process of gradual and incremental improvement. Kaizen is contemporary (at least for North American firms), and gradual (read non-threatening and ‘manageable’), and incremental (small, safe, baby steps), and ‘correct’ (we are committed to excellence ... blah, blah, blah). The bottom line is that it is the greatest defence to tampering with anything of significance that might ‘rock the boat.’ Keep it safe. Keep it contained. Keep it under control. Manage the risk. We wouldn’t want anything too dramatic to happen."

Kaizen's importance to the Japanese
Masaaki Imai, author of 'KAIZEN, The Key to Japan's Competitive Success', says "KAIZEN is the single most important concept in  Japanese management - the key to Japanese competitive success."
 

"Customer Relationship Management (CRM) is developing into a major element of corporate strategy for many organisations. CRM, also known by other terms such as relationship marketing and customer management, is concerned with the creation, development and enhancement of individualised customer relationships with carefully targeted customers and customer groups resulting in maximizing their total customer life-time value....Narrow functionally-based traditional marketing is being replaced by a new form of cross functional marketing - CRM.... the focus is shifting from customer acquisition to customer retention"

Why is time and money spent on CRM worthwhile, Payne notes "Research shows that a 5% points increase in customer retention yields a profit, in net present value terms, of between 20% and 125%"

 http://www.ittoolbox.com/peer/AP_website.htm
Professor Adrian Payne, 
Director Centre for Relationship Marketing, Cranfield University
 

CRM for Dummies
 http://www.crmassist.com/peer/docs/crm_dummies.asp
by Sambasivan TN for Origin Information Technology

"...why the sudden talk about CRM?... With a general slowdown of the global economy companies are finding it hard to get going....Gone are the days where you had a technological edge over your archrival. With new and affordable technologies your competitor is just a matter of days behind you in terms of product launch. So what are you left with as a key-differentiating factor? ...customers need to be looked at more seriously than ever before ... information is the key to success. Information about the customer made available to the person coming in contact with the customer can go a long way not only in clinching the deal but also creating a very good relationship with the customer for future business...
Organizations over the past had products as their key focus. The way an entire organization works would be built around this focus area. Since this cannot be used as a key-differentiating factor anymore, companies have begun to focus on the customers. This not only brings about a change in focus, but also changes the way the entire organization works"
 

WTGR - does this mean you torture yourself to satisfy every single customer as best you can? Answer, no. You use various software tools and information tracking methods to determine which customers spend the most money on particular products, and you then focus on them

Sambasivan adds
"not all customers are equally profitable. The key herein lies in identifying the customers who pay you more for the kind of services that you offer and focusing your valuable efforts into taking special care of those customers. This not only helps by improving your bottom line, but also helps you to focus your efforts where it is required the most."
 

WTGR - in the past companies relied on sales people with good personal contacts and networking skills to build up good will with customers and create CLV - Customer Lifetime Value - problem was, whent these people left the organization, all these contacts went with them (in fact many good salespeople are often headhunted to obtain new accounts). These situation became one of the weakness of organizational information structure - that being the point that people possessed information, not institutions. CRM is an attempt to build "institutional knowledge" regardless of the individual salespeople's personal contacts and information.

Sambasivan concludes
"The need for accurate and timely information to the sales team is really important. The advantages being that the knowledge gathered by a particular person who has been interacting with the customer, now lies with the organization and not with the person alone."