Learning Objectives

Slide 2:Learning Objectives

After completing this chapter, you should be able to: Define supply chain management. Explain the consequences of not sharing information, and describe some of the information that can be shared in a supply chain. Define Digital Loyalty Networks and CPFR. Discuss various options in supply chain structure. Compare in sourcing, outsourcing, and vertical integration. Compare responsive supply chains to efficient supply chains. Describe some supply chain strategies. Discuss the impact of e-commerce on supply chain management. Explain how ERP facilitates e-commerce. Describe some supply chain performance measures and use the Strategic Profit Model. Discuss global issues in supply chain management. Explain the four principles of supply chain management

Slide 3:Introduction

Supply chain encompasses all activities associated with the flow and transfer of goods and services, from raw material extraction through use by the final consumer. All of those different companies, as well as you as the consumer, are part of the supply chain. The manufacturer purchased component parts from various tier 1 suppliers, such as companies that make plastic parts. Those Tier 1 suppliers may have also purchased materials from tier 2 suppliers, such as companies that produce the chemicals for making plastic.

Slide 4:Introduction -- Continued

Those tier 2 suppliers could have also purchased the raw materials to make those chemicals from tier 3 suppliers The supply chain includes the companies that move these items, such as trucking companies, railroads, and shipping companies, as well as warehouses or distribution centers. They are called logistics. Reserve Logistics is a activity that helps to return defective products to the manufacturer for repair or replacement

Slide 5:Overview of Supply Chain Management

Several factors have emerged that now require companies to use supply chain management as part of their competitive strategy. 1-Globalization 2-Increased competition 3-Information technology 4-Shorter product life cycles

Slide 6:Overview of Supply Chain Management -- Continued

Globalization has led to new markets, but at the same time it increases the competition. One way of winning market share is introducing new products, leading to shorter product life cycles. One way to be more competitive is through supply chain management.

Slide 7:Information Sharing in the Supply Chain

Traditionally, information has been shared only between adjacent supply chain pairs, and that information has been very limited. This limited approach to information sharing leads to “bullwhip effect.” To reduce the bullwhip effect, supply chains use a hub and spoke approach to sharing information.

Slide 8:Electronic Data Interchange

EDI connects the databases of different companies. Traditionally, EDI allowed companies utilizing material requirements planning (MRP) to inform suppliers of upcoming orders by providing them with access to the database of planned orders. EDI is a means of sharing information among all members of a supply chain. Shared databases can ensure that all supply chain members have access to the same information, providing visibility to everyone.

Slide 9:Forecast Accuracy

One problem with sharing information is that some of that information may not be accurate. By sharing forecast information, risk can be spread across the entire supply chain rather than being borne by the retailer. Information sharing can also lead to improved forecast accuracy. Simply realizing that forecasts will always be inaccurate can lead to improving supply chain management

Slide 10:Forecast Accuracy -- Continued

Wal-Mart is one company that has used EDI to improve forecast accuracy. Vendors can use Wal-Mart’s satellite network system to directly access real-time, point-of-sale (POS) data. This up-to-the-minute information can improve forecasts by spotting trends the moment they occur.

Slide 11:Digital Loyalty Networks

The term “Digital Loyalty Networks” describes links between a company’s supply chain and its customer management operations. The idea is to customize the supply chain to meet the needs of a company’s most important customers or market segments. By sharing information, the supply chain, the customer management operations, and the customer can all benefit through improved service and reduced costs.

Slide 12:Collaborative Planning Forecasting and Replenishment (CPFR)

Members of the supply chain may make assumptions about future actions of other supply chain members. CPFR seeks to minimize this guessing game through collaboration among supply chain partners. CPFR requires that all supply chain parties be committed to the plans developed jointly. Once a plan is developed, suppliers can begin production knowing that their customers in the supply chain have committed to those orders.

Slide 13:Supply Chain Structure

The upstream side of the supply chain also production planning and purchasing, which are part of the internal supply chain. Also it includes logistics, which is responsible for moving materials between supply chain members. The downstream side, supply chain partners are divided into echelons. Echelon 1 includes organizations, such as distributors, importers, or exporters, that receive the product directly from the organization. Echelon 2 might include retailers, dealers, or even final consumers.

Slide 14:Supply Chain Structure

Many Suppliers versus Few Suppliers: By using many suppliers, a company can often take advantage of competition among those suppliers to meet the company’s demands for cost, quality and delivery. If one supplier goes out of business or is unable to provide the good or service , it is a simple matter to use another supplier. Having one supplier ensure the long-term partnership arrangements. It helps them to get greater integration of the supply chain.

Slide 15:Supply Chain Structure

Insourcing versus Outsourcing: If those goods and services are provided by the organization itself, they are “insourced. Goods and services obtained from outside suppliers are “outsourced. One basic reason companies decide to outsource is that the goods or services can be obtained less expensively from outside suppliers.

Slide 16:Supply Chain Structure

Vertical Integration: If a company owns its suppliers, it is called backward vertical integration. If companies own the distribution systems and retail outlets that sell their products, then that is forward vertical integration. Both integration help the companies to get a close coordination with suppliers.

Slide 17:Vertical Supply Chain Structure

Advantages: Disadvantages:

Slide 18:Virtual Organizations

Outsourcing is gaining in popularity because of cost advantages and the opportunities for greater coordination. This system has even led to “virtual corporations,” that exist only as an administrative shell, with all other functions outsourced. One virtual corporation is Mr. Coffee Concepts, which provides in-room coffeemakers for hotel chains, such as Marriott .

Slide 19:Disintermediation

An intermediary is a business entity that exists between two other parts of the supply chain. Disintermediation is a process to achieve efficiencies in the supply chain by eliminating some intermediaries. Travelocity is one company that has succeeded by utilizing the Internet to provide travelers with easily accessible information from airlines, hotels, and car rental companies.

Slide 20:Types of Supply Chains

Responsive Supply Chains: respond quickly as new products are introduced and as demand changes. Efficient Supply Chains: focus on operating efficiently to minimize costs.

Slide 21:Types of Supply Chains -- Continued

Exhibit 5.5: Responsive vs. Efficient Supply Chains

Slide 22:Supply Chain Strategies

Quick Response Programs Vendor Managed Inventory (VMI) Efficient Consumer Response Postponement Revenue Sharing Cross Docking

Slide 24:E-Commerce

The Internet is now an important part of the supply chain management and communication strategy for many companies. That particular aspect of the Internet, transactions between businesses and consumers, is referred to as B2C (business to consumer) B2C transactions over the Internet are dwarfed by the much larger volume of B2B (business to business) transactions.

Slide 25:B2C

It is now possible to buy nearly anything over the Internet. Customers can be given a much wider choice than would be possible in a traditional retail establishment. The customer takes care of the order entry process by entering his or her own credit card number, address, measurements, and so forth.

Slide 26:B2B

B2B (business-to-business) transactions account for more than 80 percent of all transactions on the Internet. Different types of B2B: 1-Exchanges 2-MRO Hubs 3-Yield Managers

Slide 27:Enterprise Resource Planning (ERP)

The idea behind ERP is to allow access to one another’s databases or, ideally, the use of one common database. The advantage of that approach is that anyone anywhere within the organization has access to all information . Microsoft expected to save $18 million annually by using ERP to replace 33 different financial tracking systems.

Slide 28:Performance Measurement

Slide 30:Global Issues in Supply Chain Management

Operating in today’s global economy, companies have increased opportunities and challenges for managing their supply chains. Decisions about supply chains must focus on the type of product and a company’s competitive strategy. Maintaining control over the supply chain can also be an important global issue.

Slide 31:Principles of Supply Chain Management

Build a competitive infrastructure Leverage the worldwide logistics network Synchronize supply to demand Measure performance globally