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s leading capital goods producers, was forced to announce write downs of $ billion in October 1997, due to “Raw material shortages, internal and supplier parts shortages…”. Many opportunities exist to cut costs in the supply chain!169。CopyrightSupply Chain VariabilityVolumesTimeSource: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998ActualConsumerDemandRetailer Warehouseto ShopRetailer OrdersProduction PlanManufacturer Forecastof Sales169。CopyrightConflicting Objectives in the Supply Chain1. Purchasing? Stable volume requirements ? Flexible delivery time ? Little variation ? Large quantities2. Manufacturing? Long run production? High quality? High productivity? Low production cost169。CopyrightNotice? Who is involved?? What is the goal?? What level of activities are involved?? What do we mean by integration? 2SCM ArchitectureSCMSupplySources:plantsvendorsportsRegionalWarehouses:stocking pointsField Warehouses:stockingpointsCustomers,demandcenterssinksProduction/purchase costsInventory warehousing costsTransportation costs Inventory warehousing costsTransportation costs169。Copyright What Is A Supply Chain?? The system of suppliers, manufacturers, transportation, distributors, and vendors that exists to transform raw materials to final products and supply those products to customers.Supplier Manufacturer Distributor Retailer CustomerUpstream DownstreamWhat is SCM? Buying What is SCM? SellingMakingMovingWarehousingSCM is a business work covering from buying, making, moving, warehousing to selling SCM169。 Meditech sells to material managers? Customer preferences change slowlyCase 1External Supply ChainPart suppliersMeditech Assembly plantsMeditechWarehouse:autonomous regional warehousesDomestic DealersInt’l MeditechAffiliatesHospitalsHospitalsCase 1Internal Supply ChainParts Inventory Assembly Bulk Inventory FG InventoryPackaging Sterilization2 16weeks2weeks1 weekCase 1Assembly anized into multiple flexible lines, manual . Packaging and sterilization have adequate capacityProduction PlanningAnnual ForecastMonthly RevisionTransferRequirements MonthlyPlanMRPPartsProcurement PlanWeeklyAssemblyScheduleCase 1Annual forecast determined by marketing and financeRevision done at beginning of month by marketing and central planningTransfer requirements = forecast – FG inventory +safety stock (3 weeks of demand), done by central planningMonthly plan sent to business units, who input it into MRP to get material plans and assembly schedules Production PlanningParts Inventory Assembly Bulk Inventory Packaging Sterilization FG inventoryMonthlyPlanMRPOrder point。CopyrightOutline ? Intent – diagnosis of supply chain? Business overview? Supply chain? Production planning? What’s wrong?? How to fix it?Case 1169。CopyrightWhat to do?? Recognize that demand is stable and predictable? Establish accountability for forecast? Eliminate planning delays and/or reduce time bucket? Alternatively, put assembly within pull system and eliminate bulk inventoryCase 1169。CopyrightDevelopment of the Concept? After 1990s, supply chain management can be viewed as a pipeline or conduit for the efficient and effective flow of products and materials, services, information, and financials (usually cash) from the supplier’s supplier through the various immediate anizations out to the customer’s customer. ? It is a system of connected works between the original vendor and the ultima