CHAPTER 10
Supply Chain Management
a coordinated system of entities, activities,
information and resources involved in moving
a product or service from supplier to customer
a network of organizations and facilities
that transforms raw materials into
products delivered to customers
The supply chain also includes
transportation companies, warehouses,
and inventories and some means for
transmitting messages and information
among the organizations involved
Dell’s own channel for
manufacturing and selling
eliminated
• distributors and
• retailers
Michael Dell decides to
• Sell PCs Directly to Consumers and
• Built-to-Order
Dell’s own channel for manufacturing and
selling PCs eliminated
• the reseller markups and
• large inventory expenses
Learning Outcomes
 List and describe the components of a
typical supply chain
 Define the relationship between decision
making and supply chain management
 Identify three of the factors driving supply
chain management’s explosive growth
 Summarize the best practices for
implementing a successful supply chain
management system
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Overview
 The average company spends nearly half of
every dollar that it earns on production
 In the past, companies focused primarily on
manufacturing and quality improvements to
influence their supply chains
 Today, companies are focusing on all of the
following to influence their supply chains:

Suppliers, assemblers, shipping/logistic firms,
sales/marketing channels, third-party
customers support firms, other business
partners
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Overview
The supply chain has three main links:
1. Materials flow from suppliers and their
“upstream” suppliers at all levels
2. Transformation of materials into semifinished
and finished products through the
organization’s own production process
3. Distribution of products to customers and
their “downstream” customers at all levels
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Traditional SCM thinking involved
“I buy from my suppliers,
I sell to my customers.”
Today, organizations are realizing the
tremendous value they can gain from
having visibility throughout
their supply chain
Best Buy checks inventory levels at each
of its 750 stores across North America
as often as every half-hour
The bullwhip effect is a phenomenon in which the variability
In the size and timing of orders increase at each stage up
the supply chain, from customer to supplier
The Bullwhip Effect (continued)
 One way to eliminate the bullwhip effect is to give all
participants in the supply chain access to consumerdemand information from the retailer.
 Each organization can thus plan its inventory or
manufacturing based on true demand and not on the
observed demand from the next organization up in
the supply chain.

An interorganizational information system is
necessary to share such data.
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SCM’s Growth
Five Factors Driving SCM’s Explosive Growth
Using SCM to
Enhancing Decision Making
 Numerous decision support systems (DSSs) are
being built to assist decision makers in the design
and operation of integrated supply chains
 DSSs allow managers to examine performance and
relationships over the supply chain and among:




Suppliers
Manufacturers
Distributors
Other factors that optimize supply chain performance
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The SCM industry best practices
1. Make the sale to suppliers
2. Wean employees off traditional business
practices
3. Ensure the SCM system supports the
organizational goals
4. Deploy in incremental phases and measure
and communicate success
5. Be future oriented
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BudNet
 Anheuser-Busch’s top-secret nationwide data
network, BudNet, knows every time a sixpack moves off of a store shelf.
 Information is entered into BudNet nightly
from several thousand Anheuser-Busch
distributors and sales representatives
 Anheuser-Busch has made a deadly accurate
science out of determining what beer lovers
are buying, as well as when, where, and why
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Case Questions
1. Describe how an SCM system can help a
distributor such as Anheuser-Busch make its
supply chain more effective and efficient
2. SCM is experiencing explosive growth.
Explain why this statement is true using
BudNet as an example
3. Evaluate BudNet’s effect on each of the five
factors that are driving SCM success
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