anupindi mbpf3 ch06

Managing Business Process Flows:
Ch 6
Supply
Chain
Management
 Managing the Supply
Chain




Key to matching demand with supply
Managing materials waiting time
Cost and Benefits of inventory

 Inventory Analysis: Economies of Scale (Ch 6)




Palu Gear: Inventory management of a retailer: EOQ +
ROP
Levers for improvement

Copyright © 2013 Pearson Education Inc. publishing as Prentice Hall

1

Key Financial Indicators of Supply Chain Performance
Return on Assets
 Net Present Value
 …
 …


These are LAGGING indicators. What must the supply chain do to achieve this? Copyright © 2013 Pearson Education Inc. publishing as Prentice Hall

2

Accurately Matching Demand with Supply is the Key
Challenge: Inventories


2008 Logistics costs (US economy)
– Freight Transportation
– Inventory Expense
– Administrative Expense
– Logistics related activity



$864Billion
$420 Billion
$60 Billion
9.4% of GDP

Inventory = Working capital
– Reduced inventory implies less working capital



Why do inventories arise?
– Mismatch between demand and supply

Copyright © 2013 Pearson Education Inc. publishing as Prentice Hall

3

Costs of not Matching Supply and Demand


Cost of overstocking
– liquidation, obsolescence, holding



Cost of under-stocking
– lost sales and resulting lost margin

Copyright © 2013 Pearson Education Inc. publishing as Prentice Hall

4

Where is the Flow Time?

Buffer

Waiting
Copyright © 2013 Pearson Education Inc. publishing as Prentice Hall

Operation

Processing
5

Flow Times in White Collar Processes
Source: J. Blackburn

Industry

Process

Average
Flow Time

Theoretical
Flow Time

Flow Time
Efficiency

Life Insurance

New Policy
A pplication

72 hrs.

7 min.

0.16%

Consumer
Packaging

New
Graphic
Design
Consumer
Loan

18 days

2 hrs.

0.14%

24 hrs.

34 min.

2.36%

Hospital

Patient
Billing

10 days

3 hrs.

3.75%

A utomobile
Manufacture

Financial
Closing

11 days

5 hrs

5.60%

Commercial
Bank

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