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Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1
Lamb, Hair, McDaniel
CHAPTER 14
Supply Chain Management
2011-2012
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Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 2
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 OutcomesLearning Outcomes
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 3
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
Learning OutcomesLearning Outcomes
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 4
Supply Chains and Supply Chain Management
Define the terms supply chain and supply chain management,
and discuss the benefits of supply chain management
LO1
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 5
Supply Chains
Supply ChainSupply ChainThe connected chain of
all of the business
entities, both internal
and external to the
company, that perform or
support the logistics
function
LO1
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 6
Supply Chains
Supply Chain Management
Supply Chain Management
A management system that coordinates and integrates all of the activities performed by supply chain members into a seamless process, from the source to the point of consumption, resulting in enhanced customer and economic value
LO1
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 7
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.
LO1
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 8
Supply Chain Management
Physical flow process that engineers the movement of goods
Physical flow process that engineers the movement of goods
Communicator of customer demand from point of sale to supplier
Communicator of customer demand from point of sale to supplier
LO1
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 9
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
LO1
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 10
Supply Chain Integration
Discuss the concept of supply chain integration
and explain why each of the six types of
integration is important
LO2
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 11
Supply Chain Integration
Material and Service Supplier Integration
Material and Service Supplier Integration
Internal Operations Integration
Internal Operations Integration
Customer IntegrationCustomer Integration
Relationship IntegrationRelationship Integration
Measurement Integration
Measurement Integration
Technology and Planning Integration
Technology and Planning Integration
Firm-to-Firm Social Interactions
Firm-to-Firm Social Interactions
Operational Planning and
Control
Operational Planning and
Control
Customer IntegrationCustomer Integration
LO2
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 12
Supply Chain Integration
Relationship Integration
Relationship Integration
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.
LO2
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
Measurement Integration
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 13
Supply Chain Integration
Technology and planning integration
The creation and maintenance of information technology systems that connect managers across and through the firms in the supply chain
LO2
Material and service supplier integration
Requires firms to link seamlessly to those outsiders that provide goods and services to them so that they can streamline processes and provide quality customer experiences.
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 14
Internal Operations Integration
Links internally performed work into a seamless process that stretches across departmental and/or functional boundaries, with the goal of satisfying customer requirements
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
Customer Integration
LO2
Supply Chain Integration
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 15
Key Processes of Supply Chain Management
Identify the eight key processesof excellent supply chain management and discuss
how each of these processes impacts the end customer
LO3
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 16
Key Business Processes
LO3
1. Customer relationship management2. Customer service management3. Demand management4. Order fulfillment5. Manufacturing flow management6. Supplier relationship management7. Product development and
commercialization8. Returns management
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 17
Customer Relationship Management
Customer Relationship Management
(CRM) Process
Customer Relationship Management
(CRM) Process
Allows companies to prioritize
their marketing focus on
different customer groups
according to each group’s
long-term value to the
company or supply chain
LO3
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 18
Customer Service Management
Customer Service
Management Process
Customer Service
Management Process
Presents a multi-company, unified response system to the customer whenever complaints, concerns, questions, or comments are voiced
LO3
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 19
Demand Management
DemandManagement
Process
DemandManagement
Process
Seeks to align supply and
demand throughout the supply
chain by anticipating customer
requirements at each level and
create demand-related plans of
action prior to actual customer
purchasing behavior
LO3
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 20
Order Fulfillment
OrderFulfillment
Process
OrderFulfillment
Process
a highly integrated process,
often requiring persons from
multiple companies and
multiple functions to come
together and coordinate to
create customer satisfaction at
a given place and time
LO3
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 21
Manufacturing Flow Management
Manufacturing Flow
Management Process
Manufacturing Flow
Management Process
Concerned with ensuring
that firms in the supply
chain have the needed
resources to manufacture
with flexibility and to
move products through a
multi-stage production
process
LO3
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 22
Supplier Relationship Management
Supplier Relationship Management
Process
Supplier Relationship Management
Process
Closely related to the
manufacturing flow
management process and
contains several
characteristics that
parallel the customer
relationship management
process
LO3
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 23
Product Development and Commercialization
Product Development and Commercialization
Process
Product Development and Commercialization
Process
Includes the group
activities that facilitates
the joint development and
marketing of new
offerings among a group
of supply chain partner
firms
LO3
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 24
Returns Management
Returns Management
Process
Returns Management
Process
Enables firms to manage
volumes of returned product
efficiently, while minimizing
returns-related costs and
maximizing the value of the
returned assets to the firms in
the supply chain
LO3
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 25
Managing the Logistical Components of the Supply Chain
Discuss the key strategicdecisions supply chain
managers must make whendesigning their companies’
supply chains
LO4
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 26
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.
Logistics is…
Logistics
LO4
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 27
Logistical Components of the Supply Chain
SupplySupplyChainChainTeamTeam
Sourcing & ProcurementSourcing & Procurement
Production SchedulingProduction Scheduling
Order ProcessingOrder Processing
Inventory ControlInventory Control
Warehouse & Materials HandlingWarehouse & Materials Handling
TransportationTransportationLo
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Sys
tem
LO4
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 28
Sourcing and Procurement
Plan purchasing strategies
Develop specifications
Select suppliers
Negotiate price and service levels
Reduce costs
The Role of Purchasing:The Role of Purchasing:
LO4
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Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 29
Production Scheduling
Push / Pull Strategy
Traditional Focus
Push
Start of Production
Manufacturing
Inventory-Based
Mass Production
Customer Focus
Pull
Customer-Order Based
Mass Customization
LO4
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 30
Just-in-Time Manufacturing
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.
JITJIT
LO4
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 31
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
LO4
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 32
Order Processing
Order processing is becoming more automated through the use of computer technology known as ELECTRONIC DATA INTERCHANGE (EDI).
a system whereby orders are entered into the supply chain and filled.
An Order Processing System is…
LO4
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 33
Inventory Control
InventoryControlSystem
InventoryControlSystem
A method of developing and
maintaining an adequate
assortment of materials or
products to meet a
manufacturer’s or a
customer’s demand
LO4
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 34
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
LO4
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 35
Warehousing and Materials Handling
LO4
Most manufacturers today have moved to AUTOMATED materials-handling systems to minimize the amount of handling.
a method of moving inventory into, within, and out of the warehouse.
A Materials-Handling System is…
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 36
Transportation
Airways
Water
Pipelines
Motor Carriers
Railroads
LO4
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 37
Transportation Mode Choice
Cost Transit time Reliability Capability Accessibility Traceability
LO4
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 38
Exhibit 14.1Exhibit 14.1Criteria for Ranking Modes Criteria for Ranking Modes of Transportationof Transportation
LO4
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 39
Trends in Supply Chain Management
Discuss new technology and emerging trends in
supply chain management
LO5
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 40
Trends in Supply Chain Management
Electronic distributionElectronic distribution
Outsourcing of logistics functionsOutsourcing of logistics functions
Advanced computer technologyAdvanced computer technology
LO5
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 41
Advanced Computer Technology
Automatic identification systems
- Bar coding
- Radio frequency technology
Communications technology
Supply chain software systems
LO5
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 42
Outsourcing Logistics Functions
Outsourcing BenefitsOutsourcing Benefits
Reduce inventories
Locate stock at fewer plants and distribution centers
Provide same or better levels of service
LO5
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 43
Electronic Distribution
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.
Electronic Distribution is…
LO5
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 44
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
LO5
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 45
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
LO5
Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 46
Beyo
nd
th
e
BookChapter 14 Videos
Sephora – Supply Chain Management
How does Sephora manage its supply chain?
What information goes into deciding which suppliers become incorporated?
http://www.cengage.com/marketing/book_content/1439039429_lamb/company_clips/ch14.html