Chapter 1

Introduction to Supply Chain Management

Copyright 2011 John Wiley & Sons, Inc.

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Lecture Outline
What is Supply Chain Management (SCM)? Boundary Spanning Nature of SCM The Rise of SCM

Characteristics of a Competitive Supply Chain

Trends in SCM

Careers in SCM and Professional Organizations

Review
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What is Supply Chain Management?

Supply Chain Management (SCM) is the design and management of flows of products, information, and funds throughout the supply chain

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Supply Chain Stages

A typical supply chain may involve many different trading partners, called stages Stages may include:
Suppliers Producers Wholesalers/Distributors

Retailers
Customers
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SCM Activities
SCM activities include:

Coordination
coordinate the movement of goods, services, and funds through the supply chain

Information Sharing
share forecasts, point-of-sale data, planned promotional campaigns, and inventory levels

Collaboration
jointly plan, operate, and execute business decisions as one entity
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Managing Flows Through the Supply Chain

Managing Flows of Products, Information, and Funds: Flow of Products
from the beginning to the final customer

Reverse Logistics

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Managing Flows Through the Supply Chain Continued

Flow of Information
simplified supply chains utilize data from point-of-sale back to suppliers real time information reduces uncertainty and inventory levels

Flow of Funds
funds are transferred in both directions along the supply chain supply chain compression
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The Bullwhip Effect

Fluctuation and distortion of information increases as it moves up the supply chain
each stage of the chain carries progressively more inventory the longer the supply chain, the greater the opportunity for the Bullwhip Effect

sharing point-of sale information with all members of the supply chain can combat the Bullwhip Effect
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Customer Focus
The final customer is the driving force of the supply chain
products are "pulled" through the supply chain

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The Service Supply Chain

Service Supply Chains
focus more on the interaction between the customer and provider often rely on customers as the supplier of inputs tend to be shorter than manufacturing supply chains

are often more like hubs than chains

do not have inventory as a buffer
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The Boundary-Spanning Nature of SCM

SCM spans and integrates functions within and between enterprises of the supply chain through: Intra Organizational Integration Cross Enterprise Integration

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The Boundary-Spanning Nature of SCM Continued

Intra Organizational Integration
Marketing links the organization to its customers Operations organizes the transformation of raw materials into finished products and services Sourcing links the organization to its suppliers Logistics is responsible for moving and positioning inventory throughout the supply chain company-wide integration supplants silo mentality
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The Boundary-Spanning Nature of SCM Continued

Cross Enterprise Integration
various supply chain organizations functioning as a single entity to satisfy the final customer

Keys:
information technology as an enabler relationship management collaborative planning sharing of risks and rewards win-win strategy
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SCM Versus Logistics

SCM
concerns the collaboration between supply chain partners in a strategic effort to achieve superior competitiveness

SCM manages different aspects of the coordination process such as:

information products

technology
distribution
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finances
relationships
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SCM Versus Logistics Continued

Logistics
the part of SCM that is concerned with managing the flow of inventory

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The Rise of SCM

SCM evolved in the 1990s and has proven to be necessary for successful global competition Contributing to the Trend:
companies found savings by planning and managing their supply chain more effectively advances in information technology

improvement in transportation methods

greater customer empowerment
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Characteristics of a Competitive Supply Chain

Key characteristics of a competitive supply chain include:
Responsiveness
Reliability Relationship Management

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Responsiveness
The ability to move quickly to meet customer demands
Agility Short Supply Chains Demand-Driven rather than Forecast-Driven

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Reliability
Uncertainty
uncertainty is the main reason why companies carry safety stock resulting in higher costs

Visibility
visibility improves reliability in supply chains

Supply Chain Coordination

sharing of real-time data and information through information technology improves visibility and therefore supply chain reliability
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Relationship Management
SCM is primarily about the management of relationships across networks of companies
Traditional Adversarial Relationships Relationship Building and Collaboration

Single-Sourcing

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Trends in SCM
Globalization Outsourcing Supply Chain Security Technology Postponement Managing Supply Chain Disruptions

Sustainability and the Green Supply Chain Innovation

The Financial Supply Chain

The Lean Supply Chain

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Globalization
The concept of the Global Marketplace became possible due to changes in:
Information Technology Transportation

Government Policies

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Outsourcing
Outsourcing
hiring a third party to perform a set of tasks for a fee

Increased Competitive Pressure

forces companies to focus on what they do best and outsource other activities

Core Competencies
create superior value by managing core competencies better than competitors
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Technology
Information Technology can be viewed as an enabler of SCM
Internet Enterprise Resource Planning (ERP) Software Wireless and Satellite Communication

Global Positioning Systems (GPS)

Radio Frequency Identification (RFID)
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Postponement
Postponement
completion of the final product is postponed to the last possible moment till local demands are known strategy for companies to reach diverse geographic areas while still providing local customization

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The Lean Supply Chain

Lean Supply Chain
the set of all organizations directly linked by upstream and downstream flows of products, services, finances, and information that collaboratively work to reduce cost and waste

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Managing Supply Chain Disruptions

Increased Risk
Global Sourcing
Lean Operations

Supply Chain Disruptions

Transportation Delays Industrial Plant Fires

Work Stoppages
Natural Disasters Terrorist Attacks
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Managing Supply Chain Disruptions Continued

Strategies
Backup Suppliers Excess System Capacity Screening Suppliers for Risk Developing Disruption Plans Anticipating Disruption Costs
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Supply Chain Security

The study of ways to protect security while maintaining efficiency is now a key issue Government Regulations
Customs-Trade Partnership Against Terrorism (CTAT) Container Security Initiative (CSI)

Supply Chain Security

Theft and Product Tampering Electronic Seals RFID and GPS
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Sustainability and the "Green" Supply Chain

Environmental Concerns
climate change, energy use, environmental contamination, resource depletion

Sustainable Supply Chains

design processes to use environmentally friendly inputs and create outputs that can be recycled and that do not contaminate the environment

Examples
Smart Packages Filling Trucks as full as Possible
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Innovation
Designing
new products new cost-cutting production processes more efficient product delivery mechanisms

Competing on Innovation
typically shorter supply chains

involve suppliers early in design process

utilize supplier product and process improvement ideas
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The Financial Supply Chain

There is a trend to redesign entire supply chains and search for less costly sources of supply Strategies
Global Sourcing Production Outsourcing Outsourcing Noncore Activities

Cash-to-Cash Cycle
the time it takes to convert an order into cash
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Careers in SCM and Professional Organizations

Examples of SCM job duties: Entry-Level Management Positions
conduct product evaluations, generate forecast reports, perform online replenishment

Middle Level Management Positions

responsible for accurate and timely product movement throughout the supply chain

Senior Executive Positions

document and execute a global SCM plan
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Review
1. SCM is the design and management of flows of products, information, and funds throughout the supply chain. A supply chain is the network of all entities involved in producing and delivering a finished product to the final customer. 2. The bullwhip effect is the fluctuation and distortion of information as it moves up the supply chain, from retailer, manufacturer, to supplier.
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Review Continued
3. SCM activities involve coordination, information sharing, and collaboration. 4. Intra-organizational integration is participation and coordination of activities between different organizational functions within the organization. 5. Cross-enterprise integration is the participation and coordination of activities between different organizations that comprise the supply chain.
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Review Continued
6. Logistics, in contrast to SCM, consists of the tasks involved in moving and positioning inventory throughout the supply chain. 7. Competitive supply chains are responsive, reliable, and engage in relationship management with members of the supply chain. 8. Trends that impact todays supply chain include globalization, outsourcing, technology, postponement, lean, supply chain disruptions, security, sustainability or green, innovation, and the financial supply chain.
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