Chapter 1:

Supply Chain Management

Chapter 1Management of Business Logistics,

7th Ed. 2

Learning Objectives - After reading this chapter, you should be able to do the following:

Understand the development of supply chain management in leading corporations.

Appreciate the importance and role of supply chain management among private and public organizations.

Understand the contributions of a supply chain approach to organizational efficiency and effectiveness.

Chapter 1Management of Business Logistics,

7th Ed. 3

Learning Objectives

Analyze the benefits that can accrue from implementing effective supply chain practices.

Understand the major challenges and issues facing organizations developing and implementing supply chain strategies.

Discuss the major change drivers in our economy and in the global marketplace.

Chapter 1Management of Business Logistics,

7th Ed. 4

Logistics Profile: SAB Distribution

SAB, a central Pennsylvania food wholesaling company, had grown to $180 million over the years.

Current management were dealing with flat sales and profit profiles and had cut costs to the point where further cuts were counterproductive.

The market had changed and SAB was unable to respond…management had questions but no answers. What happened? Where does SAB fit in the supply chain? What should SAB do?

Chapter 1Management of Business Logistics,

7th Ed. 5

Supply Chain Management: Introduction

Supply chain management now part of the business vocabulary.

Impact of global marketplace drastically changed the landscape of business.

Change was rapid and continuous in the 1990s.

Doing business in the comfort zone was no longer synonymous with success.

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7th Ed. 6

The Changing Business Landscape: Five Driving Forces

The Empowered Consumer Power Shift in the Supply

Chain Deregulation Globalization Technology

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7th Ed. 7

The Changing Business Landscape: Five Driving Forces

The Empowered Consumer Impact on logistics is more direct. Informed consumers have low tolerance

for poor quality in products and services. Changing demographics commands 24/7

service. Increased customer service increases the

importance of logistics and supply chains.

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The Changing Business Landscape: Five Driving Forces

Power Shift in the Supply Chain Large retailers more demanding and

commanding. Focus upon distribution costs and their

impact on “everyday low prices”. Changing logistics and supply chain

strategies resulted from shifts in the balance of economic power.

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7th Ed. 9

The Changing Business Landscape: Five Driving Forces

Deregulation Changing economic controls empowered

creativity and competition. Changes in transportation – fewer or no

economic controls over rates and services. Change in financial institutions blurred

traditional differences and increased competition.

Change in the communications industry also resulted in more competition.

Changes in the utility industry allows more competition.

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7th Ed. 10

The Changing Business Landscape: Five Driving Forces

Globalization Global marketplace concept Global network sourcing, manufacturing,

marketing and distribution Global alternatives have blossomed No geography --- access available to the world Supply chain challenges Wal-Mart’s challenges New supply sources

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The Changing Business Landscape: Five Driving Forces

Technology Information Age provides new and

unrestricted access to the place aspect of business.

My time, my place Warehouse technology has changed

dramatically with computer devices in use from the office space to the forklifts.

Chapter 1Management of Business Logistics,

7th Ed. 12

On the Line: Extreme Enterprise

Integrating new enterprise and supply chain management solutions allowed Columbia Sportswear to keep up with sales that increased from $3 million in 1984 to $470 million in 1999.

With one store and a handful of outlets, distribution to its customers is where the rubber meets the road.

Columbia’s president was determined not to let distribution restrain growth, and backed it with money.

A 1 million square foot distribution center receives more than 2 million units/month and set a record by shipping 172,000 items in one day, and more than 2 million items in a month.

Chapter 1Management of Business Logistics,

7th Ed. 13

The Changing Business Landscape: The Supply Chain Concept

Development of the Concept Business Case for Supply Chain

Management Characteristics of Supply Chain

Management

Chapter 1Management of Business Logistics,

7th Ed. 14

The Changing Business Landscape: The Supply Chain Concept

Development of the Concept Total systems cost - remains an important

element of logistics analysis. Outbound logistics - was the initial focus

with higher value finished goods. Inbound logistics – deregulation allowed

new focus on coordination of inbound and outbound movements.

Value chain analysis integrated logistics activities.

Terminology growing as supply chain concept matures.

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Figure 1-1 A View of Business Logistics in a Firm

Chapter 1Management of Business Logistics,

7th Ed. 16

Figure 1-2 Integrated Logistics Management

Chapter 1Management of Business Logistics,

7th Ed. 17

Figure 1-3Generic Value Chain

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Figure 1-4 Logistics Supply Chain

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The Changing Business Landscape: The Supply Chain Concept Business Case for Supply Chain Management: Why

so much attention on supply chain management? ECR and Best-in-class studies (see next two

slides) Complexity of the supply chain Extended enterprise concept Two-way flow of:

Products Information Cash

Inventory visibility

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7th Ed. 20

Figure 1-5: Comparison of Average Throughput Time of Dry Grocery Chain before and after ECR Implementation

Chapter 1Management of Business Logistics,

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Figure 1-6: Total Supply Chain Management Cost --- All Sectors

0

2

4

6

8

10

12

14

1996 1997

Best-in-classMedian

Reven

ue %

Chapter 1Management of Business Logistics,

7th Ed. 22

Figure 1-7: Integrated Supply Chain

Chapter 1Management of Business Logistics,

7th Ed. 23

Figure 1-8: Running Lean

05

101520253035404550

1996 Qtr 4

1997 Qtr 1

1997 Qtr 2

1997 Qtr 3

1997 Qtr 4

CompaqDell

Number of times Dell and Compaq turn inventory over in each quarter, calculated at an annual rate.

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The Changing Business Landscape: The Supply Chain Concept

Characteristics of Supply Chain Management Inventory

Visibility Pull systems

Landed Cost Companies must realize that their

strategies may affect the landed cost. Coordination of supply chain activities

may lower the landed cost.

Chapter 1Management of Business Logistics,

7th Ed. 25

The Changing Business Landscape: The Supply Chain Concept

Characteristics of Supply Chain Management Real-time two way information flows Customer service

levels must be tailored to each customer not all customers require the same

service Supply chain relationships

Collaborative planning Share risks and rewards

Chapter 1Management of Business Logistics,

7th Ed. 26

Figure 1-9: Traditional Supply Chain/Pipeline Inventory Flow 1970s and 1980s

Chapter 1: Summary and Review Questions

Students should review their knowledge of the chapter by checking out the Summary and

Study Questions for Chapter 1.

This is the last slide for Chapter 1

End of Chapter 1 Slides

Supply Chain Management