SCM 2230 A02: Introduction to
Supply Chain Management
Robert V. Parsons, PhD, MBA
Sessional Instructor
Email contacts:
robert.parsons@umanitoba.ca
robertvparsons@gmail.com
Sept 11 - 13, 2023 - Week 2 Lectures
Slide Set 1: Subject Introduction Wisner et al 2022 Chapter 1 Review
Wisner et al. 2022 - Chapter 1
• Chapter provides a brief overview
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Describing what is SCM and de nitions
Outlining objectives and elements of SCM
Describing basic SCM activities
Outlining past history and current trends
Will talk too about “bull-whip” e ect
[Materials and images from Cengage
(textbook rm) employed in lecture notes]
• First describing top SCM rms in 2016:
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– Outlined by Gartner ... something wrong?
Top SCM Firms for 2016
• Wisner et al. report these as
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Apple (consumer electronics)
Proctor & Gamble (personal care)
Unilever (primarily soaps)
McDonald’s (convenient fast-foods)
Amazon (order/delivery logistics plus)
• But on-line 2016 Apple and P&G missing
– News release: Gartner announces rankings
of the 2016 supply chain top 25
https://www.gartner.com/en/newsroom/press-releases/2016-05-19gartner-announces-rankings-of-the-2016-supply-chain-top-25
Top SCM Firms for 2016
• Wisner et al. neglect to note that Gartner
actually has two categories!
• They rst has a “Master Category”
recognizing sustained SCM leadership
– This covered Apple and Proctor & Gamble
• Gartner then has a second “Top 25
Category” covering the next best group
– In 2016, the next top ve were then Unilever,
McDonald’s, Amazon, Intel and H&M
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https://www.gartner.com/en/newsroom/press-releases/2016-05-19gartner-announces-rankings-of-the-2016-supply-chain-top-25
What is Supply Chain Management?
• Wisner et al. provide lots of interesting
initial descriptions, usefully:
– Consistent themes involve organizing, coordinating and integrating across a number
of interrelated companies and entities to
ensure delivery of goods and services to
customers in ways that are cost e cient,
ensure required quality, and with customer
services and followup as needed
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• Focal Firm identi es centre of analysis
but not sole important component
What is Supply Chain Management?
• Wisner et al. best explains complex
nature of SCM by delving back through
a bit of history - see later
• Provides formal de nitions from three
SCM-related organizations:
– Council of Supply Chain Professional
– Institute for Supply Chain Management
– Association for Operations Management
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• We will focus on de nition used by I.H.
Asper School of Business - next pages
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Asper De nition of SCM (1)
Asper De nition of SCM (2)
• Supply Chain Management (SCM) is
the process of strategically managing
the ow of goods, services and
information, and the relationships within
and among organizations, in order to
deliver greater economic value and
enhanced customer service
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https://umanitoba.ca/faculties/management/
academic_depts_centres/dept/supplychain/what-issupply-chain-management.html
Asper De nition of SCM (3)
• [SCM] ... includes the interaction of
logistics and transport, operations,
purchasing, and some elements of
marketing and information technology.
It focuses on serving relevant
stakeholders, including customers,
suppliers, shareholders, employees,
communities, and policy makers
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https://umanitoba.ca/faculties/management/
academic_depts_centres/dept/supplychain/what-issupply-chain-management.html
Asper De nition of SCM (4)
• Several major forces have driven the
development of supply chain
management, including:
– Increased complexity of organizations
– Globalization of commerce
– Evolution of information technology
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https://umanitoba.ca/faculties/management/
academic_depts_centres/dept/supplychain/what-issupply-chain-management.html
Wisner et al. SCM Model (1)
– Refer to Figure 1.1 in Textbook
Wisner et al. SCM Model (2)
• Key features of this model to note:
– Products and services ow from initial raw
materials and sources (left) through to
ultimate end-use customers (right)
• Focal Firm is at centre
– It is the focus of analysis in particular case
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• Raw and intermediate materials ow in
via various routes (channels) from the
left, representing their Supply side
Wisner et al. 2022 SCM Model (3)
• Finished or semi- nished products and
services ow out via various routes too
(channels) to the right, representing
their Distribution side
• Are “tiers” of suppliers and customers
– Direct ones are termed “Tier 1”, with
further entities feeding into or out of them
in turn are termed “Tier 2” etc.
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• The lines between entities represent
transportation or transmission activities
Wisner et al. 2022 SCM Model (3a)
• Bit of further depth regarding “tiers”
– Use of “tiers” is particularly prevalent in
automobile, aerospace and computers
– Frequent use of sub-assembly systems
• Key terms to de ne:
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– Original Equipment Manufacturer (OEM) is
the nal product manufacturer/assembler
– “Tier 1” mostly sub-assemblies to OEMs
– “Tier 2” parts and services to Tier 1
– “Tier 3” parts and services to Tier 2
Wisner et al. 2022 SCM Model (4)
• We know can change perspective by
altering Focal Firm
– Changing the Focal Firm shifts who are
suppliers and who are customers
– Indeed any individual entity can be so
reviewed as the Focal Firm
• One aspect of model is critical (across
bottom), namely sharing of information,
planning and activity integration
– Key but initially unforeseen development
Wisner et al. 2022 SCM Model (5)
• Additional observations:
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– Each Focal Firm can have multiple distinct
supply chains with di erent partners
– Overall supply chain involves a very
complex and dynamic interaction of
independent component input/output rms
– Variety of delivery and logistics rms are
important as transport service providers
– Final end-use customers (at the far right)
represent the ultimate and only real source
of income for the entire supply chain!
Historical Background on SCM (1)
– Refer to Figure 1.2 in textbook
General progression
over time
Historical Background on SCM (2)
• SCM can be traced through a
“progression of business paradigms”
• Dominant in 1950s and 1960s was clearly:
– Mass production, vertical integration
– Objective was to be “The New GM”
• But ... there were lots of issues with this
– Notable was high costs of inventories
– “Make more and store” led to costly wastes
– Indeed 1970s recession exacerbated by
write-downs of inventory values
Historical Background on SCM (3)
• Genesis of SCM was in production
management, but SCM has eclipsed latter
• Initial focuses on:
– Inventory management and cost control
– Material requirements planning (MRP) and
manufacturing resource planning (MRPII),
both facilitated by computer technologies
• Mention of SCM rst seen in 1982:
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– Keith, O. and M. Webber, “Supply-Chain
Management: Logistics Catches Up with Strategy”
Historical Background on SCM (4)
• Next steps were still production oriented
– Just-in-Time (JIT) to reduce inventories
– Total Quality Management (TQM) and other
quality initiatives to reduce wastage and loss
– Realization vertical integration not so good,
and better to focus on core competencies
(i.e., stick to knitting know and do best), also
leading to supplier/customer alliances
– Business Process Reengineering (BPR),
again to streamline and reduce extraneous
Historical Background on SCM (5)
• Now SCM seen as more complete whole
• More recent trends involving:
– Supply chain relationship formation
– Environmental sustainability
– Corporate Social Responsibility (CSR)
• Initially focus was more upstream to
suppliers, but also need to consider
customers too, more marketing oriented
– Customer relationship management (CRM)
Historical Background on SCM (6)
• Can now recognize SCM has been
e ectively evolving from two directions:
– Purchasing and supply management
emphasis (buyers at Focal Firm); and
– Distribution, logistics and customer service
emphasis (logistics/marketing at Focal Firm)
• Reliance on third-party logistics (3LPs)
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– In-/out-bound shipping, warehousing, and
logistics services for moving, storing,
documenting, customs clearing services
Historical Background on SCM (7)
• For wholesale and retail rms SCM focus
on quickness of response and service:
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Facilitated by advancing information tech
Electronic data interchange (EDI) systems
Bar Coding
Internet-based systems
Logistics software applications
Radio frequency identi cation (RFID)
technologies for tracking and monitoring
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• Have led to more integration of SCM
SCM Main Component Elements (1)
• Four main components elements of
SCM are identi ed - these correspond
to the way textbook organized:
• Supply (Ch 2, 3, 4)
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– Covers in-bound materials and processes
– Important current issues include: supply
management; supply-base reduction;
Supplier Relationship Management (SRM)
systems; ethical and sustainable sourcing
of materials and inputs
SCM Main Component Elements (2)
• Operations (Ch 5, 6, 7, 8)
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– Covers activities to ensure the right amount
of product is produced, and nished goods
and services meet quality, cost, and
customer service requirements
– Important current issues include: demand
management; material requirements planning
(MRP); collaborative planning, forecasting
and replenishment (CPFR); inventory
management; enterprise resource planning
(ERP); lean systems; and quality (e.g., “6σ” )
SCM Main Component Elements (3)
• Logistics (Ch 9, 10, 11, 12)
– Covers activities primarily for outbound (i.e.,
downstream) movement and distribution of
products and services to customers. Deals
with trade-o of cost versus timeliness:
• Truck vs rail vs air vs water vs pipeline modes
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– Important current issues include: third-party
logistics service providers (3LP); customer
relationship management (CRM) systems;
distribution network design; global-oriented
supply chains; service response logistics
SCM Main Component Elements (4)
• Integration (Ch 13, 14)
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– Covers activities to co-ordinate and
integrate processes among a focal rm and
key supply chain trading partners, termed
“supply chain process integration”
– Important current issues include: barriers to
integration; risk and security management;
overall system performance measurement;
“green” supply chains, including monitoring
and measuring sustainability and corporate
social responsibility (CSR) performance
Current Trends in SCM (1)
• Several broader current trends in SCM
can be identi ed - will focus on three:
• Supply Chain Analytics
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– SCM encompasses more traditional
Management Science, e.g., optimization,
linear programming, networks design,
queuing, forecasting models, inventory, etc.
– New aspects involve “big data” and new
sophisticated analytical tools given
enormous rise in computer technologies
Current Trends in SCM (2)
• Improving Sustainability
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– While some talk about apparent linkages
between pro t and improved environmental
and social governance, likely overstated
– I know this directly from my own work in
Sustainability Economics
– What ends up being legitimate and very
important is reducing liabilities (and losses)
from environmental or social problems, and
maintaining positive image and reputation
Current Trends in SCM (3)
• Supply Chain Visibility
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– SCM frequently tends to be more in the
background, considered a bit “specialized,”
and too often taken for granted
– That is ... until major disruption occurs and
everyone then acutely aware (e.g., chips!)
– Visibility implies making ongoing aspects of
SCM more visible for rms and customers:
e.g., Where are products right now?, What
are inventories?, and Are we prepared for
possible disruptive events?
Importance of SCM: More attention!
• Canadian Manufacturers and
Exporters (CME)
– Just looking at Assignment #1 tells a big
story about the sudden recognition of how
important SCM is the operation of business
– Prior to the pandemic, SCM really was not a
topic much discussed by CME or its
member companies
– Now SCM is viewed as very important
Importance of SCM: More attention!
• Pandemic exposed vulnerabilities too
Monbiot, G. 2022.
Regenesis: Feeding
the World without
Devouring the
Planet.
Penguin Random
House.
Importance of SCM: More attention!
• Pandemic exposed vulnerabilities too
– George Monbiot takes more of an
environmentalist’s perspective but makes
variety of highly valid observations
– A bit akin to Karl Marx, who was not a very
good economist, but was a stellar
investigative journalist in book Das Kapital
– Exposing the deeply disturbing underbelly of
the industrial society of 1800s England
– Child labour, unsafe conditions, etc., etc.
Importance of SCM: More attention!
• Monbiot (2022) … quoting pages 36-37
– [When COVID struck the UK], it exposed an
unforeseen consequence of privatizing the supply
of masks, gowns, gloves and protective
equipment. Instead of stockpiling, the companies
cut costs by minimizing storage. When demand
was steady and predictable, their JIT systems
looked rational. But when the emergency struck,
their minimized systems could not be scaled up
fast enough to meet demand. The failure was
lethal: hundreds of health and care workers died
as a result of inadequate protection.
Consequences of SCM Systems
• In the UM Learn introduction, note made:
– Indigenous peoples here had dramatic
in uence on supply chains in the past, with
their signi cance often overlooked, but at
the same time those same supply chains
had direct impacts on Indigenous peoples,
frequently NOT very good!
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• What was that important supply chain?
• Important for us all to think about the
consequences of our supply chains!
• Synopsis:
– Cyber Logic Systems is a successful U.S.
rm specializing in cyber security
– Want to consider aggressive expansion into
South America and Europe … BUT
– Supply chains identi ed as big limitation
– Manager is tasked to develop plan on how to
ensure supply chain structure robust enough
to move forward with the expansion
– Needs to consider all four major elements
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Chapter 1 Case: The Big Picture (1)
Chapter 1 Case: The Big Picture (2)
• Four questions were asked!
• In this case I will call for volunteers to
answer one of the questions - you do not
need to be perfect but have given some
thought to this, using Chapter content:
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1.Considering SCM element of Supply, what
are speci c issues for Cyber Logic Systems?
Chapter 1 Case: The Big Picture (3)
• My opinions for Question 1 on Supply:
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– Obvious issue stated is “supplier
certi cation”
– Other issues: “suppliers having di erent
capabilities to supply varying markets”
– This is separate from quality
– Other issues: “supplier sourcing closer to
individual markets”
Chapter 1 Case: The Big Picture (4)
• Remaining questions:
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2. Considering SCM element of Operations,
what are speci c issues for Cyber Logic
Systems?
Chapter 1 Case: The Big Picture (5)
• My opinions for Question 2 on
Operations:
– Primarily software oriented but hardware
frequently required, which suggests issue of
“customization” and associated requirements
– Other issues: “design cycle time”
Chapter 1 Case: The Big Picture (6)
• Remaining questions:
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3.Considering SCM element of Logistics, what
are speci c issues for Cyber Logic Systems?
Chapter 1 Case: The Big Picture (7)
• My opinions for Question 3 on Logistics:
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– Allude to “need for a more self-sustaining
network” sort of jargon - will talk about what
this means in later lectures
– Other issues: “needs for redesign” identi ed
– Other issues: “di ering market regulations,
and technical speci cations”
– Other issues: “highly time sensitive, so
response time is important”
Chapter 1 Case: The Big Picture (8)
• Remaining questions:
4.Finally, in working on Integration, what type
of issues must the company overcome?
Chapter 1 Case: The Big Picture (9)
• My opinions for Question 4 on
Integration:
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– Issues “need cohesive interaction of all parts
across diverse regions to meet somewhat
di erent and changing customer needs”
– Issues “realization that SCM is more than just
supply or operations or logistics in isolation”
Summary of SCM Overview (1)
• Brie y summarizing Chapter 1
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– SCM involves compendium of key business
processes from initial raw material extraction
to the nal end-use customer(s), including all
intermediate processing and/or
manufacturing, transportation, storage
activities, along with the nal sale to the
end-product customer and any eventual
product returns or recycling e orts
Summary of SCM Overview (2)
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– SCM involves independent component
entities in supply chains working together to
provide bene ts to all stakeholders.
– Practice of SCM is increasingly recognized
as important to reducing costs and
improving quality and customer service
– End objective is improving business
competitiveness
Summary of SCM Overview (3)
• We will brie y go through all elements:
Supply; Operations; Logistics; Integration
• But ... we will focus on selected topics
and will not go through everything
• Textbook is useful detailed reference that
goes into a lot more depth on topics
• Appendix 1.1 outlines “The Beer Game”
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– Interesting and very useful simulation
– We will to do this exercise in later lecture!
More Concluding Comments
• Supply chain disruption became a fact of
life under COVID-19
• Excellent short article in paper on issues
and responses for construction industry
– Bellamy, B. “Perfect storm of construction
disruption.” Winnipeg Free Press, print
edition Monday December 27, 2021 page A7
https://www.winnipegfreepress.com/opinion/analysis/
perfect-storm-of-construction-disruption-575975862.html
• Suggest you read this useful brief article
Oh ... One More Thing
• “Bull Whip E ect” (Wisner et al. page ~10)
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– Dynamic e ect caused by cycles of
uncertain demand and inventory availability
leading to excessive safety stock
– In turn overly magni es supplier forecasts
and haunts production planning by giving
falsely optimistic forecasts
– Estimated to cause increased costs of 12%
to 25% for each rm through supply chain
– Seeing this e ect in action is one of the
signi cant points of The Beer Game