1 Chapter 14: Supply Chain Management Prepared by Amit Shah, Frostburg State University Designed by Eric Brengle, B-books, Ltd. Copyright 2010 by Cengage

1

Chapter 14: Supply Chain Management

Prepared by Amit Shah, Frostburg State University

Designed by Eric Brengle, B-books, Ltd.

Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Learning Outcomes

2

LO1

LO2

LO3

Define the terms supply chain and supply chain management, and discuss the benefits of supply chain management

Discuss the concept of supply chain integration and explain why each of the six types of integration is important

Identify the eight key processes of excellent supply chain management, and discuss how each of these processes impacts the end customer


Learning Outcomes

3

Discuss the key strategic decisions supply chain managers must make when designing their companies’ supply chains

Describe the logistical components of the supply chain

Explain why supply chain performance measurement is necessary and important

Discuss new technology and emerging trends in supply chain management

LO5

LO6

LO4

LO7


Supply Chains and Supply Chain Management

4

Define the terms supply chain and supply chain management,

and discuss the benefits of supply chain management

LO1


Supply Chains

5

The connected chain of all the business entities, both internal and external to the company,

that perform or support thelogistics functions.


Supply Chains

6

Supply Chain Management- Amanagement system that

coordinates and integrates allof the activities performed bysupply chain members into a seamless process, from the

source to the point ofconsumption, resulting inenhanced customer and

economic value.


Supply Chains

7Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Supply Chain Managers

8

Supply chain managers are responsible for

Making strategic decisions

Management of information through supply chain

Coordinating relationships between company and external partners


Benefits of Supply Chain Management

9

Supply chain oriented companies commonly report:

• Lower inventory, transportation, warehousing, and packaging costs

• Greater supply chain flexibility

• Improved customer service

• Higher revenues

• Increased profitability


Review Learning OutcomeSupply Chain Management

10

LO1


Supply Chain Integration

11

Discuss the concept of supply

chain integration and explain

why each of the six types of

integration is important.

LO2



12

System ApproachSystem

Approach

A key principle of supply chain management – that multiple firms work together to perform tasks as a single, unified system, rather than as several individual companies acting in isolation.

A key principle of supply chain management – that multiple firms work together to perform tasks as a single, unified system, rather than as several individual companies acting in isolation.



When multiple firms in a supply chain coordinate their activities and processes so that they are seamlessly linked to one another in an effort to satisfy the customer.

When multiple firms in a supply chain coordinate their activities and processes so that they are seamlessly linked to one another in an effort to satisfy the customer.


Relationship Integration

13



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

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

Role Specificity

Role Specificity

When each firm in a supply chain has clarity in terms of knowing which firm is the leader, which firms are the followers, and which responsibilities are assigned to each firm.

When each firm in a supply chain has clarity in terms of knowing which firm is the leader, which firms are the followers, and which responsibilities are assigned to each firm.



14

•High relationship integration allows the entire supply chain to perform at a higher level

•Tend to be managed by formal or informal social guidelines

•Tend to be open to information sharing across firm/business unit boundaries

•Tend to practice equitable risk/reward sharing


Measurement Integration

15



The performance assessment of the supply chain as a whole that also holds each individual firm or business unit accountable for meeting its own goals

Activity-Based costing (ABC)

An accounting method used in measurement integration to assess the costs associated with each supply chain activity



16

•Managers in all firms and units must conduct functional assessments

•Firms in supply chain should agree on and commit to principles of ABC

•Must be a widely agreed upon set of supply chain metrics that are standards


Technology and Planning Integration

17

Technology and planning integration

The creation and maintenance of information technology systems that connect managers across and through the firms in the supply chain


Technology and Planning Integration

18

Several firm-level and supply chain-level capabilities must be developed

•Firms in supply chain must become experts at information management

•Packets of information must be available in real-time

•Supply chain managers need strong internal communications capability


Material and Service Supplier Integration

19

Material and Service Supplier Integration

The strategic alignment between a firm and its supply chain materials and services providers that enables the firm to streamline work processes and provide smooth, high-quality customer experiences.


Internal Operations Integration

20


Links internally performed work into a seamless process that stretches across departmental and/or functional boundaries, with the goal of satisfying customer requirements



21

Five distinct groups of activities:

• Firm must become cross-functionally unified

• Firm should seek to standardize operations/work processes

• Work processes should be simplified

• Process standards should be developed for internal benchmarks

• Overall logistical network of firm should be reconfigured


Customer Integration

22

CustomerIntegrationCustomerIntegration

A competency that enables firms to offer long-lasting, distinctive, value-added offerings to those customers who represent the greatest value to the firm or supply chain

ABC Segmentation

The supply-chain process whereby customers are placed into groups A, B, and C according to their overall long-term value to the firm and to the extent to which the firm can serve their desires


Customer Integration Drivers

23

•Understand not all customers are alike

•Should use market segmentation

•Select customer groups for whom to provide highest levels of service


Review Learning OutcomeSupply Chain Integration

24

LO2


Key Processes of Supply Chain Management

25

Identify eight key processes of excellent supply chain

management, and discuss how each of these processes

impacts the end customer.

LO3


Key Processes


Customer Relationship Management

27

Customer Relationship Management Process - The

prioritization of a firm’s marketingfocus on different customer

group’s long-term value to thecompany or supply chain;

designed to identify andbuild relationships with good

customers.


Customer Service Management

28

Customer Service ManagementProcess- A multi-company, unifiedresponse system to the customerwhenever complaints, concerns,

questions, or comments are voiced;designed to ensure that customer

relationships remain strong.


Demand Management

29

Demand Management Process- Thealignment of supply and demandthroughout the supply chain to

anticipate customer requirementsat each level and create demand-

related plans of action prior toactual customer purchasing

behavior.


Order Fulfillment

30

Order Fulfillment Process- Asupply chain management process

involves generating, filing, delivering, and providing on-the-spot service for customer orders.


Manufacturing Flow Management

31

Manufacturing Flow ManagementProcess - A process that ensures

that firms in the supply chain havethe resources they need.


Supplier Relationship Management

32

Supplier Relationship ManagementProcess - A supply chain

management process that supportsmanufacturing flow by identifying

and maintaining relationshipswith highly valued suppliers.


Product Development and Commercialization

33

Product Development and Commercialization Process- Thegroup of activities that facilitates

the joint development and marketing of new offerings among

a group of supply chain partnerfirms.


Returns Management

34

Returns Management Process- AProcess that enables firms to manage volumes of returned

product efficiently, whileminimizing costs and maximizingthe value of the returned assetsto the firms in the supply chain.


Review Learning OutcomeKey Processes of Supply Chain Management

35

LO3


Strategic Supply Chain Management Decisions

36

Discuss the key strategic

decisions supply chain managers

must make when designing

their companies’ supply chains.

LO4


Supply Chain Management

37

Lean Supply Chain Management – The strategy that focuses primarily on

the removal of waste from the supply chain to achieve the lowest total cost to

the members of the supply chain system.

Agile Supply Chain Management – The supply chainstrategy that focuses primarily on

the ability of the firm to fulfill customer demand,even if this means somewhat higher costs.


Lean versus Agile Supply Chain Management


Mapping The Supply Chain


Review Learning OutcomeKey Strategic Decisions Supply Managers Must Make

40

LO4


Managing Logistical Components

41

Describe the logistical components of the

supply chain.

LO5


Logistical Components of the Supply Chain

42

SupplySupplyChainChainTeamTeam

Sourcing & ProcurementSourcing & Procurement

Order ProcessingOrder Processing

Inventory ControlInventory Control

Warehouse & Materials HandlingWarehouse & Materials Handling

TransportationTransportationLo

gis

tics

Info

rma

tio

n S

yste

mL

og

isti

cs In

form

ati

on

Sys

tem


Sourcing and Procurement

• Plan purchasing strategies

• Develop specifications

• Select suppliers

• Negotiate price and service levels

• Reduce costs

43

The Role of Purchasing:The Role of Purchasing:


Order Processing

44

http://www.walmartstores.com

Online

Electronic Data Interchange- Information technology that

Replaces paper documents thataccompany business transactions

With electronic transmissionOf the information.


http://www.walmartstores.com/

http://www.walmartstores.com/

Inventory Control

45

Inventory Control System- A methodof developing and maintaining an

adequate assortment of materials or products to meet amanufacturer’s or a customer’s

demand.


Inventory Control

46

Materials Requirement Planning(MRP) - An inventory control system that manages the replenishment of

raw materials, supplies, and components from the supplier to the manufacturer.

Distribution Resource Planning (DRP) - An inventory control system that manages

the replenishment of goods from the manufacturer to the final consumer.


Inventory Replenishment Example

47

MRP

Sleep Right MattressRetail Store

Sleep Right MattressRetail Store

Sleep Right Distribution Center

Sleep Right Distribution Center

ABC MattressWholesaling Company

ABC MattressWholesaling Company

Great MattressCompany

Great MattressCompany


Materials Handling Functions

48

Receive goods into warehouse

Dispatch the goods totemporary storage

Recall, select, or pick the goods for shipment

Identify, sort, and label goods


Transportation

49

Airways

Water

Pipelines

Motor Carriers

Railroads


Transportation Mode Choice

50

Cost Transit time Reliability Capability Accessibility Traceability


Criteria for RankingModes of Transportation

51

Relative Cost

TransitTime

Reliability

Capability

Accessibility

Traceability

HighestHighest LowestLowest

Air WaterPipeRailTruck

Water Rail Pipe Truck Air

Pipe Truck Rail Air Water

Water

Truck

Rail Truck Air Pipe

Rail Air Water Pipe

Air Truck Rail Water Pipe


Supply Chain Performance Measurement

52

Explain why supply chain performance measurement is necessary and important.

LO6


Supply Chain Performance Measurement

53

A good metric is characterized by five qualities:

•Creates understanding of strategic objectives and tactical plans

•Promotes behaviors that are consistent with achieving these objectives

•Allows for recording of actual results/outcomes

•Allows companies to compare themselves to competitors and customer expectations

•Motivates continuous improvement


The Balanced Scorecard Approach


Review Learning OutcomeWhy is Supply Chain Performance Measurement

Important?

55

LO6


Trends in Supply Chain Management

56

Discuss new technology and emerging trends in

supply chain management.

LO7


Trends in Supply Chain Management

57

Electronic distributionElectronic distribution

Outsourcing of logistics functionsOutsourcing of logistics functions

Advanced computer technologyAdvanced computer technology

Globalization of supply chain managementGlobalization of supply chain management


Advanced Computer Technology

• Automatic identification systems– Bar coding– Radio frequency technology

• Communications technology

• Supply chain software systems


Outsourcing Logistics Functions

• Reduce inventories

• Locate stock at fewer plants and distribution centers

• Provide same or better levels of service

59

Outsourcing BenefitsOutsourcing Benefits


Review Learning OutcomeEmerging Trends in Supply Chain Management

60

LO7


Documents

1 Chapter 14: Supply Chain Management Prepared by Amit Shah, Frostburg State University Designed by Eric Brengle, B-books, Ltd. Copyright 2010 by Cengage