Supply Chain Management
AG BM 460
Introduction
• Hanover Foods – 95% of output is
produced under contract
• Contract w/ store or industrial customer or
food service company including important
variables
• Then plan production
• Then contract w/ farmers to get what you
need – including all important variables
Mission of the Supply Chain:
Enhancing the customer’s experience through
excellence in delivering the right products,
services, resources and information seamlessly
to the right place at the right time!
“Nowadays, it’s supply chains that compete with
supply chains!”
Price Waterhouse Coopers
Supply Chain Management
Introduction
• Some definitions
– Supply Chain – the core business processes in an
organization that create and deliver a product or service,
from concept through development and manufacturing or
conversion, and into a market for consumption
– Supply Chain Management – the methods, systems
and leadership that continuously improve an
organization’s integrated processes for product and
service design, purchasing, inventory management,
logistics, distribution and customer satisfaction
Supply Chain Management
• More definitions
– Upstream – the processes which occur before
manufacturing or production into a deliverable product or
service, typically processes dedicated to getting raw
materials from suppliers
– Downstream – the processes which occur after
manufacturing or production, typically those processes
dedicated to getting goods and services to customers
and consumers
Definitions of Supply Chain
Management
Supply Chain Management involves the
flows between and among stages in a
supply chain to maximize total
profitability.
Chopra and Meindl, 2001
Supply Chain Optimization
• The traditional approach to supply chain
management usually involves a collection of
separate functional activities
• Integrated approach views costs to anybody as
costs to the chain – prevents actions that save
money on trucking but cost more money on
inventory
Traditional versus Integrated SCM
Approaches
• Independent inventory
management policies
• Minimization of firm costs
• Short-term focus
• Information sharing limited to
current transaction
• Corporate philosophies not
relevant
• Each to their own success or
failure
• Independent actions and
information systems
• Joint reduction of channel
inventories
• Channel-wide cost savings
• Long-term perspective
• As required for planning and
monitoring
• Compatible corporate
philosophies
• Sharing of risks and rewards
• Channel leadership and
compatible information
systems
Some examples
• Inventory – independent or system-wide –
supermarket buys 6 months of detergent on sale
and stores it rather than work out a delivery
schedule to get it as needed
• Costs – minimize your costs or system-wide
costs – sale in Denver region so buy detergent
for whole country there and haul it back to where
it is needed or work out a delivery schedule from
plant to local warehouses
Some examples
• Short or long term focus – are you making
optimal decisions for today or for longer
term – hog plant that underpays farmers
today may find them out of business
tomorrow and then no hog plant
• Information sharing – current transaction
or broadly – are you working together to
both succeed or just for short term gain
Some examples
• Corporate philosophies – working together
requires recognition of other’s perspective,
if not compatible philosophies – Hershey &
WalMart
• Each out for himself or sharing risks and
rewards – Hershey managing candy
section for WalMart
Information Systems
• Non compatible systems once were the
standard
• Now, electronic ordering – sharing scanner
data – electronic invoicing – need
compatible systems
SCM Activities: Industry Focus
1.
2.
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4.
5.
6.
7.
Integrated Behaviour
Mutual Sharing of Information
Mutual Sharing of Risks and Rewards
Cooperation
Same Goal and Same Focus on Serving Customers
Integration of Processes
Partners to Build and Maintain Long-term Relationships
Total
costs
Cost
Transport
costs
Inventory
costs
Rail
Truck
Air
Setting the Stage
• A supply chain is a linked set of value
creating activities.
– View chain as an integrated system.
– Consumer driven … emphasis on quality.
– Focus on improving system-wide
performance … then on the distribution of
gains from those improvements.
– Transparency in inter-firm relationships.
– Key role for chain leader.
Setting the Stage
• Key concerns in the design of supply
chains in the food system include:
– system-wide efficiency
– distribution of returns
– food safety and quality
– adaptability and innovation
• Structural change and the need to link into
more highly integrated supply chains pose
new challenges for farm managers.
Mike Villa’s Produce Activities
• Contract with WalMart to supply produce
over next 6 months
• Cost targets
• Quality targets
• Delivery targets
• Inventory targets
Consider a single product - onions
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Different sources
Storable to a degree
Planning ahead
Managing logistics
Dealing with surprises