2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*LEARNING OBJECTIVESYou should be able to: Describe a supply chain and define supply chain management. Describe the objectives and elements of supply chain management. Describe local, regional, and global supply chain management activities among services and manufacturing companies. Describe a brief history and some of the trends of supply chain management. Understand how the bullwhip effect impacts supply chain members.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*CHAPTER OUTLINEIntroduction Supply Chain Management DefinedThe Importance of Supply Chain ManagementThe Origins of Supply Chain Management in the U.S.The Foundations of Supply Chain ManagementSome Current Trends in Supply Chain Management

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*What is a Supply Chain?A supply chain consists of the flow of products and services from:Raw materials manufacturersComponent and intermediate manufacturersFinal product manufacturersWholesalers and distributors andRetailers

Connected by transportation and storage activities, andIntegrated through information, planning, and integration activities Many large firms are moving away from in-house Vertically Integrated structures to Supply Chain Management

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*What is a Supply Chain? (continued)Reverse logistic activities: Intermediate and end customers may need to return products, obtain warranty repair or may just throw products away or recycle them.

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What is a Supply Chain? (continued)Supply chain definition: The series of companies eventually making products and services available to consumers including all of functions enabling the production, delivery and recycling of materials, components, end products and services.2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*What is Supply Chain Management (SCM)?The design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer.Institute for Supply ManagementThe coordinated set of techniques to plan and execute all steps in the global network used to acquire raw materials from vendors, transform them into finished goods, and deliver both goods and services to customers.

Logistics and Supply Chain Management SocietyThe planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities also includes coordination with channel partners, which can be suppliers, intermediaries, third party service providers, and customers.

Council of Supply Chain Management Professionals

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*What is Supply Chain Management? (continued)Old paradigm - Firm gained synergy as a vertically integrated firm encompassing the ownership and coordination of several supply chain activities. More traditional organizational cultures emphasize short-term, company focused performance. (conflict with the objectives of SCM)

New paradigm - Firm in a supply chain focuses activities in its area of specialization and enters into voluntary and trust-based relationships with supplier and customer firms. All participants in the supply chain benefit. Boundaries are dynamic and extend from the firms suppliers suppliers to its customers customers (i.e., second tier suppliers and customers).Supply chains now deal with reverse logistics to handle returned products, warranty repairs, and recycling.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*Importance of Supply Chain ManagementFirms have discovered value-enhancing and long term benefits

Who benefits most? Firms with: Large system inventoriesLarge number of suppliersComplex products assembeliesCustomers with large purchasing budgets

How do they benefit?Lower purchasing and inventory costsImproved qualityHigher levels of customer service

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*Importance of Supply Chain Management (continued)Firms using Supply Chain Management:

Start with key suppliersMove on to other suppliers, customers, and shippersIntegrate second tier suppliers and customers (second tier refers to the customers customers and the suppliers suppliers)

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*Importance of Supply Chain Management (continued)Cost savings and better coordination of resources are reasons to employ Supply Chain Management.

Reduced Bullwhip Effect - the magnified reduction of safety stock costs based on coordinated planning and sharing of information- Collaborative planning, forecasting, and replenishment activities reduce the Bullwhip Effect and lead to better customer service, lower inventory costs, improved quality, reduced cycle time, better production methods, and other benefits.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*Origins of Supply Chain Management1950s & 1960sU.S. manufacturers focused on mass production techniques as their principal cost reduction and productivity improvement strategies1960s-1970sIntroduction of new computer technology lead to development of Materials Requirements Planning (MRP) and Manufacturing Resource Planning (MRPII) to coordinate inventory management and improve internal communication

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*Origins of Supply Chain Management (continued)1980s & 1990sIntense global competition led U.S. manufacturers to adopt the following techniques to offer lower-cost, higher-quality products along with higher levels of customer service.

Supply Chain Management (SCM) Just-In-Time (JIT)Total Quality Management (TQM) Business Process Reengineering (BPR) Manufacturers utilized:- JIT & TQM to improve quality, manufacturing efficiency and delivery times.- BPR or radical rethinking and redesigning of business processes to reduce waste and increase performance.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*Origins of Supply Chain Management (continued)2000s and BeyondCompanies will focus on relationships, sustainability, and social responsibility

Companies will focus on improving supply chain capabilities with initiatives such as:Third-party service providers (3PLs) (to ensure a continuous, uninterrupted supply of goods)Integrating logistics Using transportation to facilitate rapid response

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*Origins of Supply Chain Management (continued)

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*The Foundations of Supply Chain Management

Supply (Ch. 2&3&4)Supply base rationalization, supplier alliances, SRM, global sourcing, ethics and sustainabilityOperations (Ch. 5&6&7&8)Demand management, CPFR, MRP, ERP, inventory visibility, lean systems, Six Sigma quality systemsLogistics (Ch. 9&10&11&12)Logistics management, customer relationship management, network design, RFID, global supply chains, sustainability, service response logisticsIntegration(Ch. 13&14)Risk and security management, performance measurement, green supply chains

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

*The Foundations of Supply Chain Management (continued)Supply Elements:Supplier management - improve performance through Supplier evaluation (determining supplier capabilities)Supplier certification (third party or internal certification to assure product quality and service requirements)

Strategic partnerships - successful and trusting relationships with top-performing suppliers

Ethics and sustainability - recognizing suppliers impact on reputation and carbon footprint.2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*Important Elements of Supply Chain Management (continued)Operations Elements:Demand management - match demand to available capacityLinking buyers & suppliers via MRP and ERP systemsUse lean systems to improve the flow of materials to reduce inventory levelsEmploy Six Sigma to improve quality compliance among suppliers

One of the important aspects of using lean systems and Six Sigma is use of a continuous stream of small ideas from front-line employees.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*Important Elements of Supply Chain Management (continued)Logistics Elements:Transportation management - trade-off decisions between cost & timing of delivery (i.e. customer service via trucks, rail, water & air)Customer relationship management (CRM) - strategies to ensure deliveries, resolve complaints, improve communications, & determine service requirementsNetwork design - creating distribution networks based on trade-off decisions between cost & sophistication of distribution system

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*Important Elements of Supply Chain Management (continued)Integration Elements:Supply Chain Process Integration - when supply chain participants work for common goals. Requires intra-firm functional integration. Based on efforts to change attitudes & adversarial relationships, reduce conflicts, etc.Supply Chain Performance Measurement - Crucial for firms to know if procedures and certain strategies are working as expected.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*Current Trends in Supply Chain ManagementExpanding the Supply ChainU.S. firms are expanding partnerships and building facilities in foreign marketsRight shoring for maximum flexibility and minimum cost

The expansion involves: Breadth - foreign manufacturing, office & retail sites, foreign suppliers & customersDepth - second and third tier suppliers & customers

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*Current Trends in Supply Chain Management (continued)Increasing Supply Chain ResponsivenessFirms will increasingly need to be more flexible and responsive to customer needs Supply chains will need to benchmark industry performance and meet and improve on a continuous basisBenchmarking is the measure a rival's product according to specified standards in order to compare it with and improve one's own product.Responsiveness improvement will come from more effective and faster product & service delivery systems

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*Current Trends in Supply Chain Management (continued)The GREENING of Supply Chains (sustainable supply chain)Purchasing, producing, packaging, moving, storing, repackaging, delivering and other supply chain activities can be harmful to the environment.Supply chains will work harder to reduce environmental degradation

Large majority (75%) of U.S. consumers influenced by a firms environmental friendliness reputation

Recycling and conservation are a growing alternative in response to high cost of natural resources

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

*Current Trends in Supply Chain Management (continued)Reducing Supply Chain Costs

Cost reduction achieved through:Reducing purchasing and product distribution costs, waste, excess inventory, and non-value added activities2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Current Trends in Supply Chain Management (continued)Reducing Supply Chain Costs (continued)

Continuous improvement through

Benchmarking - improve over competitors performanceTrial & errorIncreased knowledge of supply chain processes Software to streamline (simplify and organize) the supply chain and hiring third-party spend management consultantsLogistics functions through better design of distribution networks, use of software and third-party logistics service providers.

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

AssignmentQ1. What is the role of service providers in a supply chain? Q2. What are the impacts of IT (Information Technology) on SCM?

Note: Please answer the questions in only one page.2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.*

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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