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.
