Tuesday, June 29, 2021

Traditional View: Supply Chains in the Economy (1990, 1996)


 

Traditional View: Supply Chains in the Economy (1990, 1996)


Ø Freight Transportation   $352, $455 B

      Transportation manager in charge

      Transportation software

Ø Inventory Expense           $221, $311 B

      Inventory manager in charge

      Inventory software

Ø Administrative Expense $27, $31 B

Ø Logistics related activity          11%, 10.5% of GNP

 

Ø $898 B spent domestically for SC activities in 1998.

Ø  $1,160 B of inventory in the US economy in the early 2000s.











Traditional View: Cost breakdown of a manufactured good.

Ø Profit                                     10%

Ø Supply Chain Cost            20%

Ø Marketing Cost                 25%

Ø Manufacturing Cost        45%

Effort spent for supply chain activities are invisible to the

customers. 

What can Supply Chain Management do?

Ø Estimated that the grocery industry could save $30 billion (10% of operating cost) by using effective logistics and supply chain strategies

      A typical box of cereal spends 104 days from factory to sale

      A typical car spends 15 days from factory to the dealership

      Faster turnaround of the goods is better?

Ø Laura Ashley (retailer of women and children clothes) turns its inventory 10 times a year five times faster than 3 years ago

      Inventory is emptied 10 times a year, or an item spends about 12/10 months in the inventory. 

      To be responsive, it relocated its main warehouse next to FedEx hub in Memphis, TE.

      National Semiconductor used air transportation and closed 6 warehouses, 34% increase in sales and 47% decrease in delivery lead time. 


Magnitude of Supply Chain Management.

Ø Compaq estimates it lost $0.5 B to $1 B in sales in 1995 because laptops were not available when and where needed

Ø P&G (Proctor & Gamble) estimates it saved retail customers $65 M (in 18 months) by collaboration resulting in a better match of supply and demand

Ø When the 1 gig processor was introduced by AMD (Advanced Micro Devices), the price of the 800 meg processor dropped by 30%.

Importance of SCM understood by some.

Ø AMR Research:

      "The biggest issue enterprises face today is intelligent visibility of their supply chains-both upstream and down"

Ø Forrester Research:

      "Companies need to sense and proactively respond to unanticipated variations in supply and demand by adopting emerging technologies such as intelligent agents. To boost their operational agility, firms need to transform their static supply chains into adaptive supply networks”

 

 Ø Gartner Group:

 “By 2004, 90% of enterprises that fail to apply supply-chain management technology and processes to increase their agility will lose their status as preferred suppliers”

 Open-ended statement.  Agility can be increased continuously.





Traditional View: Supply Chains in the Economy (1990, 1996)

  Traditional View: Supply Chains in the Economy (1990, 1996) Ø Freight Transportation    $352, $455 B –       Transportation manager in ...