Chapter 14
Supply chain management
Supply Chains
Supply Chain
The connected chain of
all of the business
entities, both internal
and external to the
company, that perform or
support the logistics
function
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Supply Chains
Supply Chain
Management
A management system that
coordinates and integrates
all of the activities
performed by supply chain
members into a seamless
process, from the source to
the point of consumption,
resulting in enhanced
customer and economic
value
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Benefits of Supply
Chain Management
Supply chain oriented companies
commonly report:
• Lower inventory, transportation,
warehousing, and packaging costs
• Greater supply chain flexibility
• Improved customer service
• Higher revenues
• Increased profitability
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Supply Chain Integration
Relationship Integration
Measurement
Integration
Technology and
planning Integration
Firm-to-Firm Social
Interactions
Operational
Planning and
Control
Material and service
supplier Integration
Internal Operations
Integration
Customer
Integration
Customer Integration
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Key Processes of
Supply Chain Management
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Customer Relationship
Management
Customer
Relationship
Management
Process
The prioritization of a firm’s
marketing focus on different
customer groups according to
each group’s long-term value
to the company or supply
chain; designed to identify and
build relationships with good
customers.
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Customer
Service Management
Customer
Service
Management
Process
A multi-company, unified
response system to the
customer whenever
complaints, concerns,
questions, or comments
are voiced; designed to
ensure that customer
relationships remain
strong.
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Demand Management
Demand
Management
Process
The alignment of supply and
demand throughout the supply
chain to anticipate customer
requirements at each level and
create demand-related plans of
action prior to actual customer
purchasing behavior.
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Order Fulfillment
A supply chain
Order Fulfillment management process that
Process
involves generating,
filling, delivering, and
providing on-the-spot
service for customer
orders.
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Manufacturing Flow
Management
Manufacturing
Flow
Management
Process
A process that ensures
that firms in the supply
chain have the resources
they need
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Supplier Relationship
Management
Supplier
Relationship
Management
Process
A supply chain
management process that
supports manufacturing
flow by identifying and
maintaining relationships
with highly valued
suppliers
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Product Development and
Commercialization
Product
Development and
Commercialization
Process
The group of activities
that facilitates the joint
development and
marketing of new
offerings among a group
of supply chain partner
firms.
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Returns Management
Returns
Management
Process
A process that enables firms to
manage volumes of returned
product efficiently, while
minimizing costs and
maximizing the value of the
returned assets to the firms in
the supply chain.
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Supply
Chain
Team
Logistics Information System
Logistical Components
of the Supply Chain
Sourcing & Procurement
Production Scheduling
Order Processing
Inventory Control
Warehouse & Materials Handling
Transportation
Sourcing and Procurement
The Role of Purchasing:
 Plan purchasing strategies
 Develop specifications
 Select suppliers
 Negotiate price and service levels
 Reduce costs
Production Scheduling
Traditional Focus
Customer Focus
Push / Pull
Strategy
Push
Pull
Start of
Production
InventoryBased
Customer-Order
Based
Manufacturing
Mass Production
Mass Customization
Just-in-Time Manufacturing
JIT
A process that redefines and
simplifies manufacturing by
reducing inventory levels and
delivering raw materials just
when they are needed on the
production line.
Benefits of JIT
 Reduces raw material inventories
 Shortens lead times
 Creates better supplier relationships
 Reduces production and storeroom costs
 Reduces paperwork
Order Processing
Electronic
Data
Interchange
Information technology that
replaces paper documents that
accompany business
transactions with electronic
transmission of the information.
Order Processing
Inventory
Control
System
A method of developing
and maintaining an
adequate assortment of
materials or products to
meet a manufacturer’s or
a customer’s demand.
Order Processing
Materials
Requirement
Planning
(MRP)
An inventory control system that manages
the replenishment of raw materials,
supplies, and components from the
supplier to the manufacturer.
Distribution
Resource
Planning
(DRP)
An inventory control system that manages
the replenishment of goods from the
manufacturer to the final consumer.
Materials
Handling Functions
Receive goods into
warehouse
Identify, sort, and label
goods
Dispatch the goods to
temporary storage
Recall, select, or pick the
goods for shipment
Transportation
Airways
Water
Pipelines
Motor Carriers
Railroads
Transportation Mode Choice
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Cost
Transit time
Reliability
Capability
Accessibility
Traceability
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