SIE 465 / 565
Supply Chain Management
Spring 2021
CHAPTER 1
Supply Chain Management:
An Overview
Mark R Nicol
Department of Systems and Industrial Engineering
mnicol@arizona.edu
Discussion Outline
• Five major external forces
• Development of supply chain management concept
• Integrated supply chain characteristics
• Supply chain flows
• Major supply chain issues
2
Leading Retailers (by Sales Year)
SOURCE: Table 1.1
2010
2014
2020
1. Wal-Mart
1. Wal-Mart
1. Wal-Mart
2. Kroger
2. Kroger
2. Amazon
3. Target
3. Costco
3. Kroger
4. Walgreen
4.The Home Depot
4. Costco
5. The Home Depot
5. Walgreen
5. Walgreens
6. Costco
6. Target
6. The Home Depot
7. CVS Caremark
7. CVS
7. CVS
8. Lowe’s
8. Lowe’s
8. Target
9. Best Buy
9. Amazon
9. Lowe’s
10. Sears Holdings
10. Safeway
10. Albertsons
3
Five Major External Forces
5
Government
Policy &
regulation
Globalization
1
4
Empowered
consumer
3
Technology
Organizational
consolidation
4
2
Five Major External Forces
1. GLOBALIZATION
• Globalization creates:
‒ More economic and political risk
‒ Shorter product life cycle
‒ The blurring of traditional organizational boundaries
• Inventory management challenges:
‒ Faster duplicability of products & services
‒ Faster reduction in demand
‒ Requirement of new pricing policies
‒ Higher risk of obsolescence
• Longer and more complex supply chain
challenges:
‒ Growth and increased scope of outsourcing
5
Five Major External Forces
2. TECHNOLOGY
• A facilitator of internal process and supply chain
transformation
• Also a major force in changing the dynamics of the
marketplace
• The Internet
‒ “Connected” 24/7
• Social networks
‒ Impact on customer demand and the speed of information
transfers
• The world’s “knowledge pool” connection
‒ Opportunities for collaboration in supply chains
6
Five Major External Forces
3. ORGANIZATION CONSOLIDATION AND POWER SHIFTS
• During the 1980s and especially during the 1990s,
economic power and the driving force in supply chains
shift from product manufacturers to the retail end of the
supply chain
• More collaboration among organizations in
supply chain
‒ Win-win, improved services such as:
o Scheduled deliveries
o “Rainbow” pallets
o Advance shipments notices (ASNs) shrink-wrapped pallets
‒ Sharing of point-of-sale data to mitigate “bullwhip effect”
7
Five Major External Forces
4. EMPOWERED CONSUMERS
• Consumers are empowered by:
‒ Exponentially expanded access to product sources and
related information
‒ Increased buying power due to high income levels
• Increased pressures on supply chain due to
increased demands at the retail level in terms of:
‒ Competitive prices
‒ High quality in products and services
‒ Tailored or customized products
‒ Convenience and responsiveness – 24/7 availability
with a minimum wait time
‒ Flexibility – Omni-channel distribution strategies
8
Five Major External Forces
4. EMPOWERED CONSUMERS
9
Five Major External Forces
5. GOVERNMENT POLICY AND REGULATION
• More competitive environment is a result of the
deregulation of several important sectors in the United
States during the 1980s and 1990s
• The transportation industry
‒ Expanded services beyond transportation, with service
providers’ role evolving to outsourcing partners
• The financial sector
‒ More flexible and responsive to customer needs, making
business more cognizant of supply chain management
impact on efficiency and cash flow
• The communication industry
‒ A component of the information revolution, leading to
dramatic improvements and opportunities in logistics and
supply chains
10
Evolution of Supply Chain Management Concept
Activity fragmentation to 1960s
Activity integration 1980s
1990s +
Demand forecasting
Purchasing
Requirements planning
Production planning
Manufacturing inventory
Purchasing/
Materials
Management
Integrated
Logistics
Warehousing
Material handling
Packaging
Finished goods inventory
Distribution planning
Order processing
Physical
Distribution
Transportation
Customer services
Strategic planning
Information services
Marketing/Sales
Finance
11
Supply Chain
Management
Integrated Supply Chain
BASICS
SCM is the art and science of integrating the flows of products,
information, and financials through the entire supply pipeline
from the supplier’s supplier to the customer’s customer
Suppliers
Contracted
Manufacturers
Manufacturers
Wholesalers/
Distributors
Product/Services Flow
Information Flow
Finance /Cash Flow
Demand Flow
12
Retailers/
Customers
Integrated Supply Chain
NETWORK
Raw
Material
Supplier
Manufacturing
Plant
Manufacturing
Warehouse
13
Wholesaler
Warehouse
Retailer
Warehouse
Retail Store
Supply Chain Flows
PRODUCT FLOW
• Physical movement of goods and materials
INFORMATION FLOW
• Enabling physical flow of products
• Decision making
• Supply chain collaborations
CASH FLOW
• Management of working capital
DEMAND FLOW
• Detect and understand demand signals
• Synchronize demand vs. supply
14
Major Supply Chain Issues
Transportation
management
Information
Complexity
4
Supply chain 2
network
1
Performance 9
measurement
Cost and
value
Inventory 5
deployment
3
7
Technology
Supply chain
security
10
Organizational 8
relationships
Talent
management
6
11
15
Major Supply Chain Issues
Images courtesy of (left to right) Elmica, The Mudd Partnership, Qstrock Inventory
Supply Chain
Network
The challenges

Network system (facilities
and supporting
transportation services)
must be capable and
flexible to respond and
change with market
dynamics.
Inventory
Deployment
Complexity
The challenges

Increased requirements
in simplifying and
continually evaluating
areas of complexity in
the various aspects of
supply chains
16
The challenges

Increased requirements
for coordination or
integration to reduce
inventory levels on
horizontal (single-firm)
and vertical (multiplefirms) levels in the
supply chain.
Major Supply Chain Issues
Images courtesy of (left to right) TTGT Media, in-sourcing, The Billing Project
Information
The challenges
 The sharing of
information along the
supply chain
 The discipline to ensure
the integrity of the vast
amount of data collected
and stored
Cost and Value
The challenges
 The prevention of
sub-optimization.
17
Organizational
Relationships
The challenges
 Internal collaboration
(marketing, sales,
operations, finance, etc.)
 External collaboration
(vendors, customers,
transportation
companies, 3PLs)
Major Supply Chain Issues
Images courtesy of (left to right) FWC, Pixabay, The FSL Group
Performance
Measurement
Technology
The challenges
 Connecting lower-level
metrics in an
organization directly to
the high-level
performance measures
of the organization and
the supply chain
The challenges
 Evaluate, strategically
plan, and successfully
implement the
technology to make
the improvements
desired
18
Transportation
Management
The challenges
 Transport “perfect
storm.” Transport
market changes; driver
shortages; fuel costs;
infrastructure
constraints; and
regulatory changes
Major Supply Chain Issues
Images courtesy of (left to right) One Source Technology, MediaTec Publishing
Supply chain security
Talent management
The challenges
 Risk of disruptions, vulnerability,
and exposure to terroristic threats
exacerbated by distance and
complexity in global supply chain
The challenges
 Attract, develop, and maintain
the appropriate pool of talent
from entry level to executive
level
19
Summary
• The rate of change has been driven by a set of external
forces including globalization, technology, organizational
consolidation, and shifts in power in supply chains,
empowered consumers, and government policy and
regulations
• Supply chains are extended enterprises which require
managing four flows—products, information, financials
(cash), and demand on a collaborative basis
• The global supply chains of the best companies must be
adaptive, resilient, and responsive to meet the
challenges of the global economy and develop
mitigating strategies for disruptive forces
20