01 16 2014 Supply chain the tiers that a product goes through to get to the shelf Different companies involved Material end product Collection of organizations that work together to make materials into consumable products sustainable competitive advantage advantage that is continuous i e Apple Logistics the Supply Chain and Competitive Strategy LESSON 1 01 16 2014 How a firm can use supply chain for competitive advantage o Competitive advantage differentiation 2 ways price Walmart and service Example of competitive advantage through supply chain management Walmart o Logistics network design strategy Disciplined in putting stores within a couple days travel time from the distribution center Fewer stock out days Get products there quicker replenish shelves quicker than competitors Lower travel transportation costs Economies of scope economies of scale the more you make the less it costs when you do a lot more things and spreading your cost on doing more increasing volume you reduce costs selling a greater variety of products Lead time shorter less safety stock and or fewer stock outs Less safety stock Inventory you use to prevent stock outs inventory in the back Carrying costs opportunity costs stock just sitting Big cities land expensive lower ROI Lower transportation costs Lower cost of building another store because resources are close by ROA how well a company is doing return on assets profit gives a measure of their performance o Increase your ROA by doing good supply chain management o Gross margins how much we are making on the sales we o Reduce assets then you can get a better return on your assets Slide 6 chapter 1 A 25 improvement in sales plus a 1 reduction in costs and inventory drives a 23 3 Improvement in make ROA Also compete based on quality Multiplicative effect impacts multiple things at the same time LESSON 2 Logistics o An aspect of SCM o Primarily within a particular company o Flow o Storage o Management of materials transportation distribution centers about movement manufacturing etc for a company o Managing the flow of inventory and the storage of the inventory within a company o Core concepts of managing logistics is managing total logistics costs and the idea of keeping total logistics cost low total logistics costs cost of distribution and warehouse management if you have more of them then it increases your costs for them by having more facilities you have them closer to your stores and lowers your transportation costs o Trade offs in order to increase performance in one area it will result in a decrease in performance in another area Managing total logistics costs by managing trade off costs Decrease total costs transportation decrease more than your warehouse storage costs o Total costs the area in increasing costs is overshadowing the area that is reducing costs o Customer service o Movement and storage Supply Chain Management o Larger concept than logistics o Involves multiple organizations o Managing business process weaving these things together o Integrating across multiple organizations o Business processes integration functions and companies Chapter 1 01 16 2014 Supply Chain Management KPI Impact Gartner top 25 companies of SCM Represents that small changes in SCM can have an effect on ROA o Transportation efficient lower costs Then your logistics costs goes down Your gross margins go up Your net income goes up o Which makes your ROA go up Economies of Scale Higher volume lower costs 05 bottle x 2 000 bottles pallet x 10 pallets 1 000 transportation cost o 2 000 20 000 bottles 10 bottle 05 bottle x 2 000 bottles pallet x 20 pallets 2 000 o 3 000 40 000 bottles 08 bottle Economies of scale in transportation To buy the extra 10 pallets you would need the storage cost to be less than the original price of the bottle 0 10 o cost of holding that water is not more than the savings of the water Process Improvement Redesign Process ordered set of activities Activity inputs outputs controls mechanisms Process improvement v redesign o Improved process efficiency lower production costs cost efficiencies learning curve do something over and over again and you are learning to do it better so it is cheaper time efficiency increased efficiencies o Process redesign is there a way to redo the process so that we do it better implementing new technologies o CPFR Collaborative Planning Forecasting and Replenishment Vendor teams stores and the product seller get together and collaborate on the planning forecasting and replenishment of the product for that certain store Outsourcing Logistics Activities 3PL o Third Party logistics Companies that specialize in logistics and SCM Hired to deal with logistics for others Work with another company that has that ability that they need Company that interacts with the primary company and 3rd party to manage logistics Another company making your transportation decisions get you where you need to go and make the decision for you Risk o Lose control of the ability to manage your own performance you re a retailer and you are out of stock but you can t do anything about it Cost Asset Performance Maintain Competence Not every company does all of its logistics itself LESSON 3 Learning Objectives 4 R s of the principles of supply chain competition calculate and explain standard deviation and coefficient of variation 4 R s of SC Competition Plus 1 Responsiveness o Reacting to trends o Responding to your customers wants needs o Responding to weather road conditions o Responsive to changing trends effectively o Keep things on the shelves are you doing what you said you o Getting there on time o Are things going the way they are supposed to go without a Reliability can do lot of variability Resilience o Be able to bounce back from unexpected situation important after 9 11 o Have the ability to bounce back o Keep moving o Have to bounce back from something you did not foresee o Example 9 11 or Katrina Bounce back when your supply chain has been interrupted by an unforeseen event o Important to become competitive o Must be done to deal with others and maintain good Relationships relationships Costs o Process Reliability Standard Deviation o A variability from average o Mean or average o Low standard deviation is good because you are consistent o On average not a lot of variability from the mean o Processes are more consistent Coefficient of variation Using statists to help determine whether our processes are reliable Shouldn t have a lot of