14

Supply Chain Management

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 Learning Outcomes

LO 1 Define the terms supply chain and supply chain

management, and discuss the benefits of supply chain
management

LO 2 Discuss the concept of supply chain integration and explain

why each of the six types of integration is important

LO 3 Identify the eight key processes of excellent supply chain

management and discuss how each of these processes
impacts the end customer
 Learning Outcomes

LO 4 Discuss the key strategic decisions supply

chain managers must make when designing
their companies’ supply chains

LO 5 Discuss new technology and emerging

trends in supply chain management
 Supply Chains and
Supply Chain Management

Define the terms supply chain

and supply chain management,
and discuss the benefits
of supply chain management
 Supply Chains

The connected chain of

Supply Chain all of the business
entities, both internal
and external to the
company, that perform or
support the logistics
function
 Supply Chains

A management system that

coordinates and integrates
Supply Chain all of the activities
performed by supply chain
Management members into a seamless
process, from the source to
the point of consumption,
resulting in enhanced
customer and economic
value
Supply Chain Managers

The philosophy behind supply chain

management is that by visualizing the entire
supply chain, supply chain managers can
maximize strengths and efficiencies at each
level of the process to create a highly
competitive, customer-driven supply system
that is able to respond immediately to
changes in supply and demand.
Supply Chain Management

Communicator of customer demand

from point of sale to supplier

Physical flow process that engineers the

movement of goods
 Benefits of Supply
Chain Management
Supply chain oriented companies
commonly report:
• Lower inventory, transportation,
warehousing, and packaging costs
• Greater supply chain flexibility
• Improved customer service
• Higher revenues
• Increased performance and profitability
Supply Chain Integration

Discuss the concept of

supply chain integration
and explain why each
of the six types of
integration is important
Supply Chain Integration
Relationship Integration Firm-to-Firm Social
Interactions
Measurement
Integration Operational
Planning and
Technology and Control
Planning Integration
Material and Service
Supplier Integration
Internal Operations Customer
Integration Integration

Customer Integration
Supply Chain Integration
The ability of two or more
companies to develop social
Relationship
connections that serve to guide
Integration
their interactions when working
together.

The performance assessment of

Measurement the supply chain as a whole that
Integration also holds each individual firm or
business unit accountable for
meeting its own goals
Supply Chain Integration
The creation and maintenance of
Technology information technology systems
and planning that connect managers across
integration and through the firms in the
supply chain

Requires firms to link seamlessly

Material and to those outsiders that provide
service goods and services to them so
supplier that they can streamline
integration processes and provide quality
customer experiences.
Supply Chain Integration
Internal Links internally performed work
Operations into a seamless process that
Integration stretches across departmental
and/or functional boundaries,
with the goal of satisfying
customer requirements

A competency that enables firms to

Customer offer long-lasting, distinctive, value-
Integration added offerings to those customers
who represent the greatest value to
the firm or supply chain
 Key Processes of
Supply Chain Management

Identify the eight key processes

of excellent supply chain
management and discuss
how each of these processes
impacts the end customer
Key Business Processes
1. Customer relationship management
2. Customer service management
3. Demand management
4. Order fulfillment
5. Manufacturing flow management
6. Supplier relationship management
7. Product development and
commercialization
8. Returns management
Customer Relationship
Management

Customer Allows companies to prioritize

Relationship their marketing focus on
Management different customer groups
(CRM) Process according to each group’s
long-term value to the
company or supply chain
 Customer
Service Management
Customer Presents a multi-company,
Service unified response system to
Management the customer whenever
Process complaints, concerns,
questions, or comments
are voiced
Demand Management

Seeks to align supply and

Demand
demand throughout the supply
Management
chain by anticipating customer
Process
requirements at each level and
create demand-related plans of
action prior to actual customer
purchasing behavior
 Order Fulfillment

a highly integrated process,

Order
Fulfillment often requiring persons from
Process multiple companies and
multiple functions to come
together and coordinate to
create customer satisfaction at
a given place and time
 Manufacturing Flow
Management
Manufacturing Concerned with ensuring
Flow that firms in the supply
Management chain have the needed
Process resources to manufacture
with flexibility and to
move products through a
multi-stage production
process
Supplier Relationship
Management
Supplier Closely related to the
Relationship manufacturing flow
Management management process and
Process
contains several
characteristics that
parallel the customer
relationship management
process
Product Development and
Commercialization

Product Includes the group

Development and activities that facilitates
Commercialization
Process the joint development and
marketing of new
offerings among a group
of supply chain partner
firms
Returns Management

Enables firms to manage

Returns volumes of returned product
Management efficiently, while minimizing
Process returns-related costs and
maximizing the value of the
returned assets to the firms in
the supply chain
 Managing the Logistical
Components of the Supply Chain

Discuss the key strategic

decisions supply chain
managers must make when
designing their companies’
supply chains
 Logistics

Logistics is…
the process of strategically managing
the efficient flow and storage of raw
materials, in-process inventory, and
finished goods from point of origin to
point of consumption.
 Logistical Components
of the Supply Chain

Sourcing & Procurement

Logistics Information System Production Scheduling

Supply Order Processing

Chain
Team Inventory Control

Warehouse & Materials Handling

Transportation
Sourcing and Procurement

The Role of Purchasing:

 Plan purchasing strategies

 Develop specifications

 Select suppliers

© iStockphoto.com/Maria Toutoudaki
 Negotiate price and service levels

 Reduce costs
Production Scheduling
Traditional Focus Customer Focus

Push / Pull
Push Pull
Strategy
Start of Inventory- Customer-Order
Production Based Based

Manufacturing Mass Production Mass Customization

Just-in-Time Manufacturing

JIT
A process that redefines and
simplifies manufacturing by
reducing inventory levels and
delivering raw materials at the
precise time they are needed
on the production line.
 Benefits of JIT

 For manufacturers: reduces raw

material inventories; immediate
shipping of products
 For suppliers: daily or hourly deliveries
rather than weekly
 For customers: lower costs; shorter
lead times; products tailored to
customer needs
 Order Processing
An Order Processing
System is…
a system whereby orders are
entered into the supply chain
and filled.

Order processing is becoming more automated

through the use of computer technology known
as ELECTRONIC DATA INTERCHANGE (EDI).
Inventory Control

A method of developing and

Inventory maintaining an adequate
Control assortment of materials or
System products to meet a
manufacturer’s or a
customer’s demand
 Inventory Control
Tools for managing inventory include:
 materials requirement planning (MRP) or
materials management – supplier to
manufacturer
 distribution resource planning (DRP) –
manufacturer to end user
 automatic replenishment programs –
minimal forecasting
 Warehousing and
Materials Handling
A Materials-Handling
System is…
a method of moving inventory into, within,
and out of the warehouse.

Most manufacturers today have moved to

AUTOMATED materials-handling systems to
minimize the amount of handling.
 Transportation
Airways

Water

Pipelines

Motor Carriers

Railroads
Transportation Mode Choice

 Cost
 Transit time
 Reliability
 Capability
 Accessibility
 Traceability
Exhibit 14.1
Criteria for Ranking Modes
of Transportation
Trends in Supply Chain
Management

Discuss new technology

and emerging trends in
supply chain management
Trends in Supply Chain
Management

Advanced computer technology

Outsourcing of logistics functions

Electronic distribution
Advanced Computer
Technology

 Automatic identification systems

- Bar coding
- Radio frequency technology

 Communications technology

 Supply chain software systems

Outsourcing Logistics
Functions
Outsourcing Benefits

 Reduce inventories

 Locate stock at fewer plants and distribution

centers

 Provide same or better levels of service

 Electronic Distribution

Electronic Distribution is…

a distribution technique that includes
any kind of product or service that
can be distributed electronically,
whether over traditional forms such
as fiber-optic cable or through
satellite transmission of electronic
signals.
 Green Supply Chain
Management
• Requires integrating green thinking into all
phases of the supply chain
– Green materials sourcing
– Environmental impact of packaging,
shipment, use
– Incorporate end-of-life management
• Recycling
• Clean disposal
Global Logistics and Supply
Chain Management

Logistical challenges of global markets:

• Understanding and coping with the
legalities of trade in other countries
• Uncertainty regarding shipping
 Chapter 14 Videos

Sephora – Supply Chain

Beyond the Book

Management
How does Sephora manage its supply chain?
What information goes into deciding which
suppliers become incorporated?

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