BUSSPP 0200 1st Edition Lecture16 Outline of Last Lecture I Promotion II Example Outline of Current Lecture I Introduction to supply chain management II The Basic Supply Chain Model III Having Estimated Demand IV Manufacturer to End User Current Lecture I Introduction to supply chain A Has moved from an engineering focus to a business function 1 Area useful for cost reduction if utilized efficiently 2 Used as a way of driving business in general provide competitive advantage B Many terms used to identify this area 1 Logistics math modeling of supply chains now just generally refers to supply chain mgmt 2 Distribution concept of linking any two particular parts of a supply chain 3 Distribution System distribution of entire chain from raw material to finished good II Basic Supply Chain Model A Raw material s Intermediate goods Finished product Manufacturer Possible Wholesaler Possible Retailer End User B Goal of Supply Chain Management right amount right stuff right place right time at the minimum possible cost C Example American Eagle Retailer These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute 1 60 SKUs of sweaters a You want an XL navy crew neck sweater b 2 situations have it don t have it i don t have it excess inventory of something else lost sale 2 Right amount right stuff right place right time at the minimum possible cost D Manufacturer needs design fabric thread E Any delay ANYWHERE in the system can throw things off all the way down the line F Retailer must estimate demand 1 Eyeball method 2 Statistical based on history both apply statistical rules to historical data to estimate a prediction of the future a Econometric Time series yApril xMarch xFebruary xJanuary i General flux cyclicality but increase over time b Regression build cross section of variables assuming a relationship c General linear model Combination of Econometric and Regression methods III Having estimated demand A Retailer looking at end user 1 More SKUs more chance of missing the mark on accuracy a Most estimates made 6 8 months in advance i Damn near anything and everything can change b Reduced accuracy due to i more skus ii More locations iii Weather iv Actual sales B Overestimated 1 Leftover inventory a incurred excess expense i storage space labor other resources 2 Clearance sales decreases effective contribution margin a Again storage for sales next year b Products go to secondary markets TJMaxx Marshalls etc c Everyone now waits for sales not purchasing at regular price C Underestimated 1 Loss of revenue 2 Customer reaction a annoy lose customer 3 Rival may gain revenue 4 Repeat underestimation loss of other customers a reduction of brand value brand equity 5 Empty shelves paying for resources that aren t needed Right amount right stuff right place right time at the minimum possible cost D Effects of supply chain management 1 Bad estimations mistakes higher up the chain the more catastrophic the effect on the rest of the chain IV Manufacturer to End User A Manufacturer End User B Manufacturer Retailer End User C Manufacturer Whole Saler Retailer End User 1 B C are most common End user buys from retailer without knowledge of existence non existence of wholesaler 2 So what kind of value does the intermediary wholesaler retailer add for the customer a INFORMATION AVAILABLE THROUGH RETAILER i returns more convenient through retailers 3 What value does the manufacturer receive from the intermediary a less customer volume b receive more experienced end users purchasing directly 4 What value does a wholesaler add to a retailer a Cardinal McKesson b Less to deal with potentially thousands of manufacturers for one retail store i One truck shows up with everything c Food Restaurant business Sysco
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