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In this assignment, you need to complete two tasks:

2. Read one article in the following link about supply chain management in Walmart

https://www.tradegecko.com/blog/incredibly-successful-supply-chain-management-walmart

3. In the discussion board, there is a forum โ€“ Supply Chain Management. In this forum, create a new threat with the thread name as your name. Based on your preview and reading as well as your experience of shopping in Walmart (like we all do), please write one paragraph of 100 to 150 words to share your thoughts about what Walmart can do to improve their supply chain management and ultimate customer service

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Supply Chain Management 11 PowerPoint presentation to accompany Heizer, Render, Munson Operations Management, Twelfth Edition Principles of Operations Management, Tenth Edition PowerPoint slides by Jeff Heyl Copyright ยฉ 2017 Pearson Education, Inc. 11 - 1 Outline โ–บ Global Company Profile: Darden Restaurants โ–บ The Supply Chainโ€™s Strategic Importance Sourcing Issues: Make-or-Buy and Outsourcing Six Sourcing Strategies โ–บ โ–บ Copyright ยฉ 2017 Pearson Education, Inc. 11 - 2 Outline - Continued โ–บ โ–บ โ–บ โ–บ โ–บ Supply Chain Risk Managing the Integrated Supply Chain Building the Supply Base Logistics Management Distribution Management Copyright ยฉ 2017 Pearson Education, Inc. 11 - 3 Outline - Continued โ–บ โ–บ Ethics and Sustainable Supply Chain Management Measuring Supply Chain Performance Copyright ยฉ 2017 Pearson Education, Inc. 11 - 4 Dardenโ€™s Supply Chain โ–บ One of the largest publicly traded casual dining company in the world โ–บ Serves over 320 million meals annually in more than 1,500 restaurants in the North America โ–บ Flagship brand Olive Garden generates $3.6 billion annual sales โ–บ Operations is the strategy Copyright ยฉ 2017 Pearson Education, Inc. 11 - 5 Dardenโ€™s Supply Chain โ–ถ Sources food from five continents and thousands of suppliers โ–ถ Four distinct supply chains โ–ถ Over $2 billion spent annually in supply chains โ–ถ Competitive advantage achieved through superior supply chain Copyright ยฉ 2017 Pearson Education, Inc. 11 - 6 Learning Objectives When you complete this chapter you should be able to: 11.1 Explain the strategic importance of the supply chain 11.2 Identify six sourcing strategies 11.3 Explain issues and opportunities in the supply chain 11.4 Describe the steps in supplier selection Copyright ยฉ 2017 Pearson Education, Inc. 11 - 7 Learning Objectives When you complete this chapter you should be able to: 11.5 Explain major issues in logistics management 11.6 Compute percentage of assets committed to inventory and inventory turnover Copyright ยฉ 2017 Pearson Education, Inc. 11 - 8 Supply-Chain Management The objective of supply chain management is to structure the supply chain to maximize its competitive advantage and benefits to the ultimate consumer Copyright ยฉ 2017 Pearson Education, Inc. 11 - 9 A Supply Chain for Beer Figure 11.1 Copyright ยฉ 2017 Pearson Education, Inc. 11 - 10 The Supply Chainโ€™s Strategic Importance โ–ถ The coordination of all supply chain activities, starting with raw materials and ending with a satisfied customer โ–ถ Includes suppliers, manufacturers and/or service providers, distributors, wholesalers, retailers, and final customers Copyright ยฉ 2017 Pearson Education, Inc. 11 - 11 The Supply Chainโ€™s Strategic Importance โ–ถ Large portion of sales dollars spent on purchases โ–ถ Supplier relationships increasingly integrated and long term โ–ถ Improve innovation, speed design, reduce costs โ–ถ Managing supplier relationships has added emphasis Copyright ยฉ 2017 Pearson Education, Inc. 11 - 12 Supply Chain Costs TABLE 11.1 Supply Chain Costs as a Percentage of Sales INDUSTRY % PURCHASED Automobiles 67 Beverages 52 Chemical 62 Food 60 Lumber 61 Metals 65 Paper 55 Petroleum 79 Restaurants 35 Transportation 62 Copyright ยฉ 2017 Pearson Education, Inc. 11 - 13 Supply Chain vs. Sales Strategy Hau Lee Furniture 60% of sales $ in supply chain Current gross profit = $10,000 Increase profits to $15,000 (50%) CURRENT SITUATION SUPPLY CHAIN STRATEGY SALES STRATEGY $100,000 $100,000 $125,000 Cost of materials $60,000 (60%) $55,000 (55%) $75,000 (60%) Production costs $20,000 (20%) $20,000 (20%) $25,000 (20%) Fixed costs $10,000 (10%) $10,000 (10%) $10,000 (8%) Profit $10,000 (10%) $15,000 (15%) $15,000 (12%) Sales Copyright ยฉ 2017 Pearson Education, Inc. 11 - 14 Supply Chain Management TABLE 11.2 How Corporate Strategy Impacts Supply Chain Decisions LOW COST STRATEGY RESPONSE STRATEGY DIFFERENTIATION STRATEGY Primary supplier selection criteria โ€ข Cost โ€ข Capacity โ€ข Speed โ€ข Flexibility โ€ข Product development skills โ€ข Willing to share information โ€ข Jointly and rapidly develop products Supply chain inventory โ€ข Minimize inventory to hold down costs โ€ข Use buffer stocks to ensure speedy supply โ€ข Minimize inventory to avoid product obsolescence Distribution network โ€ข Inexpensive transportation โ€ข Sell through discount distributors/ retailers โ€ข Fast transportation โ€ข Provide premium customer service โ€ข Gather and communicate market research data โ€ข Knowledgeable sales staff Product design characteristics โ€ข Maximize performance โ€ข Minimize cost โ€ข Low setup time โ€ข Rapid production ramp-up โ€ข Modular design to aid product differentiation Copyright ยฉ 2017 Pearson Education, Inc. 11 - 15 Sourcing Issues โ–ถ Make-or-buy decisions โ–ถ Choosing between obtaining products and services externally as opposed to producing them internally โ–ถ Outsourcing โ–ถ Transfer traditional internal activities and resources to outside vendors โ–ถ Efficiency in specialization โ–ถ Focus on core competencies Copyright ยฉ 2017 Pearson Education, Inc. 11 - 16 Six Sourcing Strategies โ–ถ โ–ถ โ–ถ โ–ถ โ–ถ โ–ถ Many suppliers Few suppliers Vertical integration Joint ventures Keiretsu networks Virtual companies Copyright ยฉ 2017 Pearson Education, Inc. 11 - 17 Many Suppliers โ–ถ Commonly used for commodity products โ–ถ Purchasing is typically based on price โ–ถ Suppliers compete with one another โ–ถ Supplier is responsible for technology, expertise, forecasting, cost, quality, and delivery Copyright ยฉ 2017 Pearson Education, Inc. 11 - 18 Few Suppliers โ–ถ Buyer forms longer term relationships with fewer suppliers โ–ถ Create value through economies of scale and learning curve improvements โ–ถ Suppliers more willing to participate in JIT programs and contribute design and technological expertise โ–ถ Cost of changing suppliers is huge โ–ถ Trade secrets and other alliances may be at risk Copyright ยฉ 2017 Pearson Education, Inc. 11 - 19 Vertical Integration Vertical Integration Examples of Vertical Integration Raw material (suppliers) Tree Harvesting Backward integration Chipmakers Pulpmaking Current transformation Pepsi Apple International Paper Forward integration Bottling Retail stores End-User Paper Conversion Finished goods (customers) Copyright ยฉ 2017 Pearson Education, Inc. Figure 11.2 11 - 20 Vertical Integration โ–ถ Developing the ability to produce goods or services previously purchased โ–ถ Integration may be forward, towards the customer, or backward, towards suppliers โ–ถ Can improve cost, quality, delivery, and inventory but requires capital, managerial skills, and demand โ–ถ Risky in industries with rapid technological change Copyright ยฉ 2017 Pearson Education, Inc. 11 - 21 Joint Ventures โ–ถ Formal collaboration โ–ถ Enhance skills โ–ถ Secure supply โ–ถ Reduce costs โ–ถ The challenge is to cooperation without diluting brand or conceding competitive advantage Copyright ยฉ 2017 Pearson Education, Inc. 11 - 22 Keiretsu Networks โ–ถ A middle ground between few suppliers and vertical integration โ–ถ Supplier becomes part of the company coalition โ–ถ Often provide financial support for suppliers through ownership or loans โ–ถ Members expect long-term relationships and provide technical expertise and stable deliveries โ–ถ May extend through several levels of the supply chain Copyright ยฉ 2017 Pearson Education, Inc. 11 - 23 Virtual Companies โ–ถ Rely on a variety of supplier relationships to provide services on demand โ–ถ Fluid organizational boundaries that allow the creation of unique enterprises to meet changing market demands โ–ถ Relationships may be short- or long-term โ–ถ Exceptionally lean performance, low capital investment, flexibility, and speed Copyright ยฉ 2017 Pearson Education, Inc. 11 - 24 Supply Chain Risk โ–ถ More reliance on supply chains means more risk โ–ถ Fewer suppliers increase dependence โ–ถ Compounded by globalization and logistical complexity โ–ถ Vendor reliability and quality risks โ–ถ Political and currency risks Copyright ยฉ 2017 Pearson Education, Inc. 11 - 25 Risk and Mitigation Tactics โ–ถ โ–ถ โ–ถ โ–ถ โ–ถ โ–ถ Research and assess possible risks Innovative planning Reduce potential disruptions Prepare responses for negative events Flexible, secure supply chains Diversified supplier base Copyright ยฉ 2017 Pearson Education, Inc. 11 - 26 Risk and Mitigation Tactics TABLE 11.3 Supply Chain Risks and Tactics RISK RISK REDUCTION TACTICS EXAMPLE Supplier failure to deliver Use multiple suppliers; effective contracts with penalties; subcontractors on retainer; pre-planning McDonald's planned its supply chain 6 years before its opening in Russia. Every plantโ€”bakery, meat, chicken, fish, and lettuceโ€”is closely monitored to ensure strong links. Supplier quality failures Careful supplier selection, training, certification, and monitoring Darden Restaurants has placed extensive controls, including third-party audits, on supplier processes and logistics to ensure constant monitoring and reduction of risk. Copyright ยฉ 2017 Pearson Education, Inc. 11 - 27 Risk and Mitigation Tactics TABLE 11.3 RISK Supply Chain Risks and Tactics RISK REDUCTION TACTICS EXAMPLE Outsourcing Take over production; provide Tyson took over chicken farm or perform the service production in China to mitigate yourself product quality and safety concerns related to using independent farmers Logistics delays or damage Multiple/redundant transportation modes and warehouses; secure packaging; effective contracts with penalties Copyright ยฉ 2017 Pearson Education, Inc. Walmart, with its own trucking fleet and numerous distribution centers located throughout the U.S., finds alternative origins and delivery routes bypassing problem areas. 11 - 28 Risk and Mitigation Tactics TABLE 11.3 RISK Supply Chain Risks and Tactics RISK REDUCTION TACTICS EXAMPLE Distribution Careful selection, monitoring, and effective contracts with penalties Toyota trains its dealers around the world, invoking principles of the Toyota Production System to help dealers improve customer service, used-car logistics, and body and paint operations. Information loss or distortion Redundant databases; secure IT systems; training of supply chain partners on the proper interpretations and uses of information Boeing utilizes a state-of-the-art international communication system that transmits engineering, scheduling, and logistics data to Boeing facilities and suppliers worldwide. Copyright ยฉ 2017 Pearson Education, Inc. 11 - 29 Risk and Mitigation Tactics TABLE 11.3 Supply Chain Risks and Tactics RISK RISK REDUCTION TACTICS EXAMPLE Political Political risk insurance; crosscountry diversification; franchising and licensing Hard Rock Cafeฬ reduces political risk by franchising and licensing, rather than owning, when the political and cultural barriers seem significant. Economic Hedging to combat exchange rate risk; purchasing contracts that address price fluctuations Honda and Nissan are moving more manufacturing out of Japan as the exchange rate for the yen makes Japanese-made autos more expensive. Copyright ยฉ 2017 Pearson Education, Inc. 11 - 30 Risk and Mitigation Tactics TABLE 11.3 Supply Chain Risks and Tactics RISK RISK REDUCTION TACTICS EXAMPLE Natural catastrophes Insurance; alternate sourcing; cross-country diversification Toyota, after its experience with fires, earthquakes, and tsunamis, now attempts to have at least two suppliers, each in a different geographical region, for each component. Theft, Insurance; patent protection; vandalism, security measures including and terrorism RFID and GPS; diversification Domestic Port Radiation Initiative: The U.S. government has set up radiation portal monitors that scan nearly all imported containers for radiation. Copyright ยฉ 2017 Pearson Education, Inc. 11 - 31 Security and JIT โ–ถ Shipments get misrouted, stolen, damaged, or excessively delayed โ–ถ Technological innovations are improving security and inventory management โ–ถ Location, motion sensors, broken seals, temperature โ–ถ Tracking can help expedite shipments Copyright ยฉ 2017 Pearson Education, Inc. 11 - 32 Managing the Integrated Supply Chain โ–ถ Issues โ–ถ Local optimization can magnify fluctuations โ–ถ Incentives push merchandise into the supply chain for sales that have not occurred โ–ถ Large lots reduce shipping and production costs but increase inventory holding and do not reflect actual sales Copyright ยฉ 2017 Pearson Education, Inc. 11 - 33 Managing the Integrated Supply Chain โ–ถ Issues โ–ถ Local optimization can magnify fluctuations โ–ถ Incentives push merchandise into the supply chain for sales that have not occurred โ–ถ Large lots reduce shipping costs but increase inventory holding and do not reflect actual sales Copyright ยฉ 2017 Pearson Education, Inc. 11 - 34 Managing the Integrated Supply Chain โ–ถ Opportunities โ–ถ Accurate โ€œpullโ€ data, shared information โ–ถ Lot size reduction, shipping, discounts, reduced ordering costs โ–ถ Single stage control of replenishment โ–ถ Single supply chain member responsible for ordering โ–ถ Vendor managed inventory (VMI) Copyright ยฉ 2017 Pearson Education, Inc. 11 - 35 Managing the Integrated Supply Chain โ–ถ Opportunities โ–ถ Collaborative planning, forecasting, and replenishment (CPFR) throughout the supply chain โ–ถ Blanket orders against which actual orders are released โ–ถ Standardization Copyright ยฉ 2017 Pearson Education, Inc. 11 - 36 Managing the Integrated Supply Chain โ–ถ Opportunities โ–ถ Postponement withholds modification as long as possible โ–ถ Electronic ordering and funds transfer speed transactions and reduce paperwork โ–ถ Drop shipping and special packaging bypasses the seller and reduces costs Copyright ยฉ 2017 Pearson Education, Inc. 11 - 37 Building the Supply Base โ–ถ Supplier evaluation โ–ถ Finding potential suppliers โ–ถ Determine likelihood of their becoming good suppliers โ–ถ Supplier certification 1) Qualification 2) Education 3) Certification Copyright ยฉ 2017 Pearson Education, Inc. 11 - 38 Building the Supply Base โ–ถ Supplier development โ–ถ Integrate the supplier into the system โ–ถ Quality requirements โ–ถ Product specifications โ–ถ Schedules and delivery โ–ถ Procurement policies โ–ถ Training โ–ถ Engineering and production help โ–ถ Information transfer procedures Copyright ยฉ 2017 Pearson Education, Inc. 11 - 39 Building the Supply Base โ–ถ Negotiation โ–ถ A significant element in purchasing โ–ถ Highly valued skills โ–ถ Cost-based price model โ–ถ Supplier opens books โ–ถ Market-based price model โ–ถ Based on published, auction, or indexed prices โ–ถ Competitive bidding โ–ถ Common policy for many purchases โ–ถ Does not generally foster long-term relationships Copyright ยฉ 2017 Pearson Education, Inc. 11 - 40 Building the Supply Base โ–ถ Contracting โ–ถ Share risks, benefits, create incentives โ–ถ Centralized purchasing โ–ถ โ–ถ โ–ถ โ–ถ โ–ถ โ–ถ โ–ถ Leverage volume Develop specialized staff Develop supplier relationships Maintain professional control Devote resources to selection and negotiation Reduce duplication of tasks Promote standardization Copyright ยฉ 2017 Pearson Education, Inc. 11 - 41 Building the Supply Base โ–ถ E-Procurement โ–ถ Speeds purchasing, reduces costs, integrates supply chain โ–ถ Online catalogs and exchanges โ–ถ Standard items or industry-specific web sites โ–ถ Online auctions โ–ถ Low barriers to entry โ–ถ Reverse auctions for buyers โ–ถ Price not always the most important factor Copyright ยฉ 2017 Pearson Education, Inc. 11 - 42 Logistics Management โ–ถ Objective is to obtain efficient operations through the integration of all material acquisition, movement, and storage activities โ–ถ Is a frequent candidate for outsourcing โ–ถ Allows competitive advantage to be gained through reduced costs and improved customer service Copyright ยฉ 2017 Pearson Education, Inc. 11 - 43 Shipping Systems โ–ถ Trucking โ–ถ Moves the vast majority of manufactured goods โ–ถ Chief advantage is flexibility โ–ถ Railroads โ–ถ Capable of carrying large loads โ–ถ Little flexibility though containers and piggybacking have helped with this Copyright ยฉ 2017 Pearson Education, Inc. 11 - 44 Shipping Systems โ–ถ Airfreight โ–ถ Fast and flexible for light loads โ–ถ May be expensive โ–ถ Waterways โ–ถ Typically used for bulky, low-value cargo โ–ถ Used when shipping cost is more important than speed Copyright ยฉ 2017 Pearson Education, Inc. 11 - 45 Shipping Systems โ–ถ Pipelines โ–ถ Used for transporting oil, gas, and other chemical products โ–ถ Multimodal โ–ถ Combines shipping methods โ–ถ Common, especially in international shipments โ–ถ Aided by standardized containers Copyright ยฉ 2017 Pearson Education, Inc. 11 - 46 Cost and Speed of Shipments โ–ถ Faster shipping is generally more expensive than slower shipping โ–ถ Faster methods tend to involve smaller shipment sizes while slower methods involve very large shipment sizes Copyright ยฉ 2017 Pearson Education, Inc. 11 - 47 Warehousing โ–ถ May be expensive, but alternatives may be more so โ–ถ Fundamental purpose is to store goods โ–ถ May provide other functions โ–ถ Consolidation โ–ถ Break-bulk โ–ถ Cross-docking โ–ถ Postponement Copyright ยฉ 2017 Pearson Education, Inc. 11 - 48 Warehousing โ–ถ Channel assembly โ–ถ Implementation of postponement โ–ถ Ship components or modules โ–ถ Distributors become manufacturing partners โ–ถ Finished goods inventory reduced โ–ถ Better market response with less investment Copyright ยฉ 2017 Pearson Education, Inc. 11 - 49 Third-Party Logistics (3PL) โ–ถ Outsourcing logistics can reduce inventory, costs, and improve delivery reliability and speed โ–ถ Coordinate supplier inventory with delivery services โ–ถ May provide warehousing, assembly, testing, shipping, customs Copyright ยฉ 2017 Pearson Education, Inc. 11 - 50 Distribution Management โ–ถ The outbound flow of products 1) Rapid response 2) Product choice 3) Service โ–ถ Increasing the number of facilities generally improves response time and customer satisfaction Copyright ยฉ 2017 Pearson Education, Inc. 11 - 51 Distribution Management โ–ถ Total costs are important โ–ถ Inventory costs โ–ถ Transportation costs โ–ถ Facility costs โ–ถ Total logistics costs Copyright ยฉ 2017 Pearson Education, Inc. 11 - 52 Distribution Management Figure 11.3 (b) Cost $ (a) Response Time Response time Total logistics cost $ Time Lowest cost Facility costs Inventory costs Transportation costs 1 2 3 4 5 Number of facilities Copyright ยฉ 2017 Pearson Education, Inc. 1 2 3 4 5 Number of facilities 11 - 53 Distribution Management (c) Cost, Revenue, and Profit Figure 11.3 Revenue Total logistics cost $ Max profit 1 2 3 4 5 Number of facilities Copyright ยฉ 2017 Pearson Education, Inc. 11 - 54 Distribution Management โ–ถ Facilities, packaging, and logistics โ–ถ Selection and development of dealers or retailers โ–ถ Downstream management as important as upstream management Copyright ยฉ 2017 Pearson Education, Inc. 11 - 55 Ethics and Sustainable Supply Chain Management โ–ถ Personal ethics โ–ถ Critical to long-term success of an organization โ–ถ Supply chains particularly susceptible โ–ถ Ethics within the supply chain โ–ถ Ethical behavior regarding the environment Copyright ยฉ 2017 Pearson Education, Inc. 11 - 56 Institute for Supply Management Principles and Standards โ–ถ Promote and uphold responsibilities to one's employer; positive supplier and customer relationships; sustainability and social responsibility; protection of confidential and proprietary information; applicable laws, regulations, and trade agreements; and development of professional competence โ–ถ Avoid perceived impropriety; conflicts of interest; behaviors that negatively influence supply chain decisions; and improper reciprocal agreements Copyright ยฉ 2017 Pearson Education, Inc. 11 - 57 ISM Ethical Standards 1. PERCEIVED IMPROPRIETY. Prevent the intent and appearance of unethical or compromising conduct in relationships, actions and communications 2. CONFLICTS OF INTEREST. Ensure that any personal, business or other activity do not conflict with the lawful interests of your employer 3. ISSUES OF INFLUENCE. Avoid behaviors or actions that may negatively influence, or appear to influence, supply management decisions Copyright ยฉ 2017 Pearson Education, Inc. 11 - 58 ISM Ethical Standards 4. RESPONSIBILITIES TO YOUR EMPLOYER. Uphold fiduciary and other responsibilities using reasonable care and granted authority to deliver value to your employer 5. SUPPLIER AND CUSTOMER RELATIONSHIPS. Promote positive supplier and customer relationships 6. SUSTAINABILITY AND SOCIAL RESPONSIBILITY. Champion social responsibility and sustainability practices in supply management Copyright ยฉ 2017 Pearson Education, Inc. 11 - 59 ISM Ethical Standards 7. CONFIDENTIAL AND PROPRIETARY INFORMATION. Protect confidential and proprietary information 8. RECIPROCITY. Avoid improper reciprocal agreements 9. APPLICABLE LAWS, REGULATIONS AND TRADE AGREEMENTS. Know and obey the letter and spirit of laws, regulations and trade agreements applicable to supply management Copyright ยฉ 2017 Pearson Education, Inc. 11 - 60 ISM Ethical Standards 10. PROFESSIONAL COMPETENCE. Develop skills, expand knowledge and conduct business that demonstrates competence and promotes the supply management profession Copyright ยฉ 2017 Pearson Education, Inc. 11 - 61 Establishing Sustainability in Supply Chains โ–ถ Return or reverse logistics โ–ถ Sending returned products back up the supply chain for resale, repair, reuse, remanufacture, recycling, or disposal โ–ถ Closed-loop supply chain โ–ถ Proactive design of a supply chain that tries to optimize all forward and reverse flows โ–ถ Prepares for returns prior to product introduction Copyright ยฉ 2017 Pearson Education, Inc. 11 - 62 Establishing Sustainability in Supply Chains TABLE 11.4 Management Challenges of Reverse Logistics ISSUE FORWARD LOGISTICS REVERSE LOGISTICS Forecasting Relatively straightforward More uncertain Product quality Uniform Not uniform Product packaging Uniform Often damaged Pricing Relatively uniform Dependent on many factors Speed Often very important Often not a priority Distribution costs Easily visible Less directly visible Inventory management Consistent Not consistent Copyright ยฉ 2017 Pearson Education, Inc. 11 - 63 Measuring Supply-Chain Performance โ–ถ Assets committed to inventory Percentage Average inventory investment invested in = Total assets inventory โ–บ x 100 Home Depot had $11.4b inventory, total assets of $44.4b Percentage invested in = inventory Copyright ยฉ 2017 Pearson Education, Inc. 11.4 44.4 x 100 = 25.7% 11 - 64 Measuring Supply-Chain Performance TABLE 11.5 Inventory as Percentage of Total Assets (with examples of exceptional performance) Manufacturer (Toyota 5%) 15% Wholesale (Coca-Cola 2.9%) 34% Restaurants (McDonaldโ€™s .05%) 2.9% Retail (Home Depot 25.7%) 27% Copyright ยฉ 2017 Pearson Education, Inc. 11 - 65 Measuring Supply-Chain Performance โ–ถ Inventory turnover Cost of goods sold Inventory turnover = Average inventory investment โ–บ Inventory investment โ–บ Average of several periods โ–บ (beginning plus ending)/2 โ–บ Ending inventory Copyright ยฉ 2017 Pearson Education, Inc. 11 - 66 Measuring Supply-Chain Performance โ–ถ From PepsiCo, Inc. Annual Report Net revenue $32.5 Cost of goods sold $14.2 Inventory: Raw material inventory $.74 Work-in-process inventory $.11 Finished goods inventory $.84 Total inventory investment Inventory turnover = Copyright ยฉ 2017 Pearson Education, Inc. $1.69 14.2 1.69 = 8.4 11 - 67 Measuring Supply-Chain Performance TABLE 11.6 Examples of Annual Inventory Turnover FOOD, BEVERAGE, RETAIL Anheuser Busch 15 Coca-Cola 14 Home Depot 5 McDonaldโ€™s 112 MANUFACTURING Dell Computer 90 Johnson controls 22 Toyota (overall) 13 Nissan (assembly) Copyright ยฉ 2017 Pearson Education, Inc. 150 11 - 68 Measuring Supply-Chain Performance โ–ถ Weeks of supply Average inventory investment Weeks of = supply Annual cost of goods sold 52 weeks โ–บ For PepsiCo Inventory investment = $1.69b Average weekly cost of goods sold = $14.2b / 52 = $.273b Weeks of supply = 1.69 / .273 = 6.19 weeks Copyright ยฉ 2017 Pearson Education, Inc. 11 - 69 Benchmarking the Supply Chain โ–ถ Comparison with benchmark firms TABLE 11.7 Supply Chain Metrics in the Consumer Packaged Goods Industry Order fill rate Order fulfillment lead time (days) Cash-to-cash cycle time (days) Inventory days of supply Copyright ยฉ 2017 Pearson Education, Inc. TYPICAL FIRMS BENCHMARK FIRMS 71% 98% 7 3 100 30 50 20 11 - 70 The SCOR Model โ–ถ Processes, metrics, and best practices Figure 11.4 Plan: Demand/Supply planning and Management Source: Identify, select, manage, and assess sources Return: Raw material Copyright ยฉ 2017 Pearson Education, Inc. Make: Manage production execution, testing, and packaging Deliver: Invoice, warehouse, transport and install Return: Finished goods 11 - 71 The SCOR Model TABLE 11.8 SCOR Model Metrics to Help Firms Benchmark Performance Against the Industry PERFORMANCE ATTRIBUTE SAMPLE METRIC CALCULATION Supply chain reliability Perfect order fulfillment (Total perfect orders) / (Total number of orders) Supply chain responsiveness Average order fulfillment cycle time (Sum of actual cycle times for all orders delivered) / (Total number of orders delivered) Supply chain agility Upside supply chain flexibility Time required to achieve an unplanned 20% increase in delivered quantities Supply chain costs Supply chain management costs Cost to plan + Cost to source + Cost to deliver + Cost to return Supply chain asset management Cash-to-cash cycle time Inventory days of supply + Days of receivables outstanding โ€“ Days of payables outstanding Copyright ยฉ 2017 Pearson Education, Inc. 11 - 72 Benchmarking the Supply Chain โ–ถ Benchmarking useful โ–ถ May not be adequate โ–ถ Audits may be necessary โ–ถ Continuing communication, understanding, trust, performance, corporate strategy โ–ถ Foster a mutual belief that "we are in this together" Copyright ยฉ 2017 Pearson Education, Inc. 11 - 73 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright ยฉ 2017 Pearson Education, Inc. 11 - 74
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