Supply chain management (SCM)
Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers (Harland, 1996).[2] Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption (supply chain).
In other words, Supply chain management means design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building competitive advantage.
Management optimizes the whole process through the development and control of planning, supplying, manufacture scheduling, warehousing and distribution. The supply chain manager's objective is to achieve maximum efficiency through the coordination of each of the steps that comprise the cycle. Supply chain management consists of cost reduction, minimal returns and effective distribution.
DHL operates with Supply chain management including plan, make, source, deliver, return, and store and customize.Plan consist Supply Chain Analysis and Design, Lead Logistics Provider (LLP) Services and Environmental Compliance.
Make consist Industrial Projects Transportation, Inbound to Manufacturing (I2M), In-plant Logistics and Contract Manufacturing.Source consist Procurement Services, Raw Materials Warehousing, Raw Materials Transportation and International Supply Chain Management.
Deliver consist Transportation and Distribution Management, Service Parts Logistics (SPL), Home Delivery, E-Fulfillment and In-store Logistics.Store and Customize consist Finished Goods Warehousing ,and Assembly and Co-packing.
Return consist Reverse Logistics and Environmental Compliance.
DHL through supply chain consulting and network design studies, they help customers with the big picture; what's working and what can be optimized for improved operational efficiency and better customer service.
Logistics Management
Logistics Management is that part of Supply Chain Management that plans, implements, and controls the efficient, effective, forward, and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customer's requirements.
\The Logistics Management covers a segment of the supply chain. A logistics manager is responsible for planning, developing and controlling the complete product flow. The manager also supervises product delivery to customers and the reception of returns from them, as well as warehouse organization and unit control.
We can see DHL operate with logistics management. DHL manage the raw materials transportation, raw materials and the products warehouse, and in-plant logistics.
According to definition from Gereffiin 1999, the value chain is described as a comprehensive set of activities that are required to bring a product from a concept stage to marketing and consumption of end products. A typical value chain includes support activities and primary activities showed as followings.
Nowadays, Globalization has promoted two types of value chains that global production networks are managed and operated. They are producer-driven and buyer-driven value chains.
Nowadays, Globalization has promoted two types of value chains that global production networks are managed and operated. They are producer-driven and buyer-driven value chains.
Producer-driven Value Chains
The producer-driven value chains are those large and usually transnational manufactures play the central roles in coordinating international production networks to access vital and profitable raw materials. These companies have substantial control over the backward and forward linkages in the entire value chain. It is characteristic of capital and technology-intensive industries such as automobiles, aircraft, computers, semiconductors, and heavy machinery, and other advanced technology industrial activities.
Buyer-driven Value Chains
The buyer-driven value chains are those larger retailers, marketers, and branded manufacturers play the central roles in establishing global decentralized production networks. The networks are located in different exporting countries, typically in developing countries. It is characteristic of labour-intensive, consumer goods industries such as garments, footwear, toys, house wares, consumer electronics, and a variety of handicrafts.
The comparison between producer-driven and buyer-driven value chains has been tabulated as following.
Real Life Examples
Producer-driven chain:
Toyota in automobiles and the Samsung Group, play a central role in coordinating geographically distributed network of subsidiaries, affiliates and suppliers. They generally retain control of R & D, basic product design and innovation.
Sony Corporation sourcing worldwide imposes very high standards on suppliers, requiring strong technological capability, flexibility in response, strong customer service orientation and the capacity to work with its ICT-based e-procurement system.
The Ford, Motorola and Intel are also the examples of producer-driven chains which are Capital‐intensive or technology‐intensive industries.
Buyer-driven chain:
Carrefours in food, Leviin garments, play the lead role sourcing from decentralized networks of independent suppliers, defining product and process specifications and standards.
IKEA, the Swedish home furnishing retailer, has a worldwide sourcing strategy involving more than 2,000 suppliers. The sourcing is governed by IKEA’s own technical product and process specifications, as well as by other types of standards such as those that relate to environmental and labour requirements.
Nike, Gap, Wal‐Mart and Dell also apply decentralized production networks in developing countries.
Sources
OEM and OBM both describe the operating format of companies in all kind of industries. The difference will be shown in the following:
OEM
OEM (Original Equipment Manufacturer) manufactures products or components that are purchased by a company and retailed under that purchasing company's brand name. Apart from production, OEM would provide other services, like, delivery and quality control services.
The main responsibility of OEM is producing the assigned product. The products produced need to meet the requirements from their customer. For example, Apple assigned Foxconn to produce particular amount of IPhone. Then Foxconn is the company, which running in OEM format. All the IPhone produced by Foxconn will be marketed as Apple’s product but not Foxconn. Foxconn rely on its mass productivity to earn economies of scales, therefore, drive down the production cost. Foxconn is not required to design the product or involve on the product development. The whole designs and technologies are provided by Apple. However, the performance of the parts needs to fulfill the requirement of Apple, like high resolution of monitors, the thickness of the phone.
There are more international examples of OEM.
In apparel industry, companies like, DKNY, RALPH LAUREN, BURBERRY and CK, own their own design team. Their design team is responsible to design a series of fashionable clothes in every season. Then, after the approval of the design, these designs will be transferred to OEM companies, like TAL, for mass production. The brand name of designing company will be printed on the product as required, rather than TAL’s brand name. In this case, TAL is required to produce the clothes according to the design given by other companies. Also, quality control and delivery services might be needed.
In computer industry, the giant companies like, INTEL, DELL and HP will not produced all parts of the computer. For example, Japanese company, SANYO will produced fans, which help to cool down the computer, for these giant companies.
OBM
An original brand manufacturer, or OBM, is typically a company that sells an entire product made by a second company or including a component thereof from a second company sources as its own branded product. Selling the product of the second company under its own brand just adds a virtual extrinsic value to the product.
OBM actually is responsible to the whole supply chain, like, production, development, delivery and marketing. OBM actually refer to the entire retailers in the market, as they sell the product to the market, no matter they produce the product or not.
OBM vs OEM
OBM need to take more risk as OEM. It is because there is uncertainty of the marketing. OBM need to produce the product before receiving the order. Therefore, It is possible for OBM to produce excessive product and that would create great loss for OBM. On the other hand, OEM will only produce the assigned product after receiving order. Therefore, the possibility of excessive stock for OEM is far below than OBM.
However, because of OBM take care of the whole supply chain; they are able to maximize the profit. OBM responsible most of the operation, therefore, they outsource less operation to other company. Therefore, less profit of the supply chain is shared by other manufacturer. The fewer outsourcing to other company, the higher the profit OEM can earn.
Evolution from OEM to OBM
Sometime, as OEM is experienced with the whole process of production, they are familiar with the production process and technology. Also, they got enough information about the market, like the taste and the trend of the targeted customer. They are able to develop their own brand, in order to increase the potential profit by competing with their existing customer.
There are many example of OEM transfer to OBM. However, they are mostly not directly transfer to OBM from OEM. They would first transfer to be ODM (original design manufacturer), which will responsible to production and also design of product. ODM will sell their product to retailers and wholesalers, but not directly sell
to individual. From ODM to OBM, OBM need to develop their brand name and take care of the whole supply chain process.
Global
Sourcing Network refer to a sourcing network from global market across
countries boundaries. The objective of global souring is to lower cost by fully
uselize different countries' resource and environment.
Real Example : Manufacturing Airbus A380
A380
is the largest jet airplane in the world. The manufacturing process is very
complicated and involve many countries.
The Sourcing network of A380
Major structural sections of the A380 are built in France, Germany, Spain, and the United Kingdom. For example, The wings are built in UK, vertical tail are made in Germany, the head is made in France, the horizontal tail are made is Spain. The final assemble is located at Toulouse, in France. As shown at the figure above, most of the parts are transported by ship and train. The main reason for the company to separate the manufacturing process into different countries and location is, there are better technologies to produce that part and the resource are cheaper.
VMI is a supply chain
management method in which sales information will be send to supplier by
stores, and then the supplier will manage the reorder process. With VMi, a
company reduce inventory level and therefore reduce the cost. Moreover, it can
centralize forecasting, which enable a company to forecast the demand more
accurately.
Benefits to Manufacturers
•Lower inventory investments (raw and finished)
•Better scheduling and planning
•Better market information
•Closer customer ties and preferred status
Benefits to Retailers
•Fewer stock-out with higher inventory turnover
•Better market information
•More optimal product mix
•Less inventory in channels (transfer costs)
•Lower administrative replenishment costs
Implementation Challenge
Although VMI can
improve the inventory turnover, the implementation of VMI is not always
success. VMI require the sales force to share information with supplier and
also give out the control of reorder. Also, the low level of inventory may
lessen the ability to due with a demand strike.
Made-to-measure
system means products will be made according to different a person which is
most fit to the customer. In another word, that means to make a produce before
asking the customer opinions. For garment industry, the tailor will first
measure the size of their customers, and then they will make the clothes which
exactly fit the customer’s size. This kind of measuring method can make the
clothes which are very suit for their customer, not like the clothes which produce
for massive amount. The customer can choose what fabric they want, they can
choose the color and so on. So the customer can have the clothes that fit to
them and also they can use their favorite fabric, buttons, and so on.
The examples
of the company which use made-to-measure system are:
1. Gucci,
they have a made-to-measure service for their customers. The customer can make
an appointment with Gucci and ask for different materials for their customized
clothes. Gucci provided made-to-measure of shirt and shoes.
2. Marks
and Spencer, they have a made-to-measure service for the men. The men can
customize their shirt in Marks and Spencer. They can put their height, weight
and collar size measurements into their website. Also, they can choose fabric;
some customize features like collar, cuffs and so on.
3. G.B
Bertollo Scarpesumisura is a company that made shoes. They can make shoes for
their customer with the size which very suit to the customers. The customers
will have shoes that suitable and they will feel very comfortable.
4. Laura Ashley, they have made-to-measure for curtains and poles which are the home furniture.
The customer can choose the fabric, curtains style. The customer can choose
whatever they want.
Electronic Data Interchange (EDI) is the electronic interchange of business information using a standardized format. In other words, EDI is a process which allows one company to send information to another company electronically rather than with paper. Business entities which conduct business electronically are called trading partners.
Many business documents can be exchanged using EDI, but the two most common are purchase orders and invoices. At a minimum, EDI replaces the mail preparation and handling associated with traditional business communication. However, the real power of EDI is that it standardizes the information communication communicated in business documents, which makes possible a "paperless" exchange.
The traditional invoice illustrates what this can mean. Most companies create invoices using a computer system, print a paper copy of the invoice and mail it to their customers. Upon receipt the customer frequently marks up the invoice and enters it into its own computer system. The entire process is nothing more than the transfer of information from the seller's computer to the customer's computer. EDI makes it possible to minimize or even eliminate the manual steps involved in this transfer.
The process improvements that EDI offers are significant and can be dramatic. For example, consider the difference between the traditional paper purchase order and its electronic counterpart:
A Traditional Document Exchange of a Purchase Order
* Buyer makes a buying decision, creates the purchase order and prints it.
* Buyer mails the purchase order to the supplier.
* Supplier receives the purchase order and enters it into the order entry system.
* Buyer calls supplier to determine if purchase order has been received, or supplier mails buyer an acknowledgment of the order.
This process normally takes between three and five days!
An EDI Document Exchange of a Purchase Order
* Buyer makes a buying decision, creates the purchase order but does not print it.
* EDI software creates an electronic version of the purchase order and transmits it automatically to the supplier.
* Supplier's order entry system receives the purchase order and updates the system immediately on receipt.
* Supplier's order entry system creates an acknowledgment an transmits it back to confirm receipt.
Enterprise Resource Planning (ERP) is actually a process or approach that attempts to consolidate all of a company’s departments and functions into a single computer system that services each department’s specific needs. It is, in a sense, a convergence of people, hardware, and software into an efficient production, service, and delivery system that creates profit for the company.
While the idea is easy to grasp in theory, the reality has been different. Most companies have a conglomeration of different systems and procedures (as well as hardware and software) designed specifically for their own needs. The Human Resources Department holds employee records (including payroll, medical, and other benefits). The Finance Department holds financial data and processing, which includes payroll computations and employee compensation as well as invoicing and billing for company products and services. Manufacturing holds production data, Warehousing holds Inventories, Customer Relations holds customer orders, and so on.
ERP’s dream is to have a single software solution integrating the different functions and activities into a seamless whole where information needed for decision-making is shared across departments, and the action that one department takes results in the appropriate follow-up action up and down the line.
The most often cited example of an ERP software is customer ordering and delivery where a customer’s order moves smoothly from Sales, where the ‘deal’ is consummated, to Inventory and Warehousing, which retrieves and packages the order for delivery, to Finance, where invoicing, billing, and payments are handled, and on to Manufacturing, where purchased product replacement is done.
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