© 2011 Pearson Education, Inc. publishing as Prentice Hall

SCM 352

11 Supply-Chain Management

© 2011 Pearson Education, Inc. publishing as Prentice Hall

Outline

• Global Company Profile: Darden Restaurants

• Strategic Importance of the Supply-Chain– Global Supply-Chain Issues

• Outsourcing• Ethics in the Supply Chain• Emerging Technology: RFID

© 2011 Pearson Education, Inc. publishing as Prentice Hall

• Largest publicly traded casual dining company in the world

• Serves over 400 million meals annually in more than 1,800 restaurants in the US and Canada

• Annual sales of $6.7 billion• Sources food from five continents and thousands of

suppliers• Four distinct supply chains• Over $1.5 billion spent annually in supply chains• Competitive advantage achieved through superior

supply chain

Darden Restaurants

Supply Chain Management

• “The planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers.”

Council of Supply Chain Management Professionals

buy make move sell

© 2011 Pearson Education, Inc. publishing as Prentice HallFigure 11.1

A Supply Chain for Beer

Supply Chain Network

• A supply chain is essentially a network consisting of suppliers, manufacturers, distributors, retailers and customers

• Involves three types of flows requiring close coordination. These flows often referred to as the ‘3Bs’ of SCM (boxes, bytes and bucks):– Boxes – “material flows, which represent physical product

flows from suppliers to customers as well as reverse flows for product returns, servicing and recycling”

– Bytes – “information flows, which represent order transmission and order tracking, and which coordinate the physical flows”

– Bucks – “financial flows, which represent credit terms, payment schedules and consignment arrangements”

(http://knowledge.wharton.upenn.edu/papers/download/BCGSupplyChainReport.pdf)

Strategic Importance of SCM

• Leading organizations today are using the supply chain to enhance differentiation, increase sales, penetrate new markets & channels, and gain a competitive advantage – Wal-Mart and Dell

• Cisco: In 2001, the company announced that it was writing down $2.2 billion in unusable inventory due to supply chain problems. The materials planning system allowed demand for components to be double-and triple-counted across its suppliers. Cisco’s stock was $82 in March 2000, but fell to $13.19 in April 2001.

• Nike: In May 2001, the company announced that sales for the preceding quarter were $100 million below expectation because of supply chain problems. Its stock dropped 20%, an amount so large that the $100 million loss in sales appeared like small change.

(http://www.computerworld.com/softwaretopics/erp/story/0,10801,86908,00.html)

Trends in SCM

• Competition is no longer between companies; it is between supply chains

• "Global sourcing will be the next battle ground for competition. Within five years, businesses that do not make global sourcing an imperative will be struggling not only to compete, but also to survive.“

Aberdeen Group• “The major trends in business right now — low-cost

country sourcing, outsourcing, customization, globalization and more — all create tremendous complexities in a supply chain. In most cases, however, companies have not changed how they manage this critical part of the business.”

Matthesen, VP & global leader for supply chain, BCG(http://knowledge.wharton.upenn.edu/papers/download/BCGSupplyChainReport.pdf)

Economic Importance of SCM

(Principles of Operations Management, Heizer & Render, 8th Edition)

Supply Chain Costs as a Percent of Sales

Industry % PurchasedAll industry 52Automobile 67Food 60Lumber 61Paper 55Petroleum 79Transportation 62

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Outsourcing

• Transfers traditional internal activities and resources of a firm to outside vendors

• Utilizes the efficiency that comes with specialization

• Firms outsource information technology, accounting, legal, logistics, and production

© 2011 Pearson Education, Inc. publishing as Prentice Hall

Outsourcing

• Cost savings• Gaining outside

expertise• Improving operations

and service• Focusing on core

competencies• Gaining outside

technology

• Increased logistics cost• Loss of control• Increased future

competition• Negative impact on

employees• Longer-term impact

Advantages Disadvantages

Ethics in Supply Chain

• Integrity Interactive Corp., a provider of risk reduction and management services, found in their survey that “78% of companies do not include suppliers in their company compliance and ethics programs, and nearly 58% are not sure if their company regularly assesses ethics risks in their supply chain.”

• The Integrity Interactive study was in response to the recent outcry associated with tainted dog food & toothpaste, lead paint in toys, automotive recalls and other supply chain problems.

• Mattel, the maker of Barbie dolls and Hot Wheels cars, recalled nearly one million toys in the US in 2007. Toys were made in China.

(“How Ethical is Your Supply Chain?” January 2008, www.industryweek.com)

(http://www.nytimes.com/2007/08/02/business/02toy.html)

Supplier Ethics Management

• Supplier ethics management (SEM) is an emerging business practice

• SEM “aims to help companies manage their suppliers and supply relationships through strategies, programs and metrics that better align supplier business conduct with purchaser standards.”

• “The goal,” Cellini explains, “is to reduce a purchasing company’s overall risk of corporate integrity failure in the supply chain by aligning supplier conduct with purchaser standards in three major areas of corporate integrity: compliance, ethics and corporate responsibility.”

(“How Ethical is Your Supply Chain?” January 2008, www.industryweek.com)

© 2011 Pearson Education, Inc. publishing as Prentice Hall

Radio Frequency ID (RFID) Tags

Benefits of RFID

• Inventory visibility will increase– Stock can be moved without explicit scanning– Supply chain “speed” will be accelerated– Faster reading (scanning) - faster goods turnover– More detailed data about a product can be read– Improved collaboration with business partners

• More information can be exchanged in “real time” which improves demand and forecasting accuracy– Standardized technology means same information

can be understood by multiple business partners• Potential to authenticate product & combat fake goods

(http://zonecours.hec.ca/documents/198329.GeneralRFID,version25novembre.pdf)

Thank You

Questions? ?