Chapter 1:
Supply Chain Management
Learning Objectives -
After reading this
chapter, you should be able to do the following:
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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.
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Learning Objectives
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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.
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Logistics Profile:
SAB Distribution
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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?
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Supply Chain Management:
Introduction
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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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The Changing Business
Landscape: Five Driving Forces
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The Empowered Consumer
Power Shift in the Supply
Chain
Deregulation
Globalization
Technology
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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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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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The Changing Business Landscape:
Five Driving Forces
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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.
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On the Line:
Extreme Enterprise
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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.
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The Changing Business Landscape:
The Supply Chain Concept
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Development of the Concept
Business Case for Supply Chain Management
Characteristics of Supply Chain Management
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The Changing Business Landscape:
The Supply Chain Concept
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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
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Figure 1-2
Integrated Logistics Management
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Figure 1-3
Generic Value Chain
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Figure 1-4
Logistics Supply Chain
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The Changing Business Landscape:
The Supply Chain Concept
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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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Figure 1-5: Comparison of Average Throughput
Time of Dry Grocery Chain before and after ECR
Implementation
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Figure 1-6: Total Supply Chain
Management Cost --- All Sectors
14
Revenue %
12
10
8
Best-in-class
Median
6
4
2
0
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1996
1997
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Figure 1-7:
Integrated Supply Chain
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Figure 1-8:
Number of times Dell and
Compaq turn inventory over
in each quarter, calculated
at an annual rate.
Running Lean
50
45
40
35
30
25
20
15
10
5
0
Chapter 1
Compaq
Dell
1996
Qtr 4
1997
Qtr 1
1997
Qtr 2
1997
Qtr 3
1997
Qtr 4
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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.
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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
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Figure 1-9: Traditional Supply Chain/Pipeline
Inventory Flow 1970s and 1980s
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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