14
Supply Chain Management
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Learning Outcomes
LO 1 Define the terms supply chain and supply chain
management, and discuss the benefits of supply chain
management
LO 2 Discuss the concept of supply chain integration and explain
why each of the six types of integration is important
LO 3 Identify the eight key processes of excellent supply chain
management and discuss how each of these processes
impacts the end customer
Learning Outcomes
LO 4 Discuss the key strategic decisions supply
chain managers must make when designing
their companies’ supply chains
LO 5 Discuss new technology and emerging
trends in supply chain management
Supply Chains and
Supply Chain Management
Define the terms supply chain
and supply chain management,
and discuss the benefits
of 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
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
Supply Chain Managers
The philosophy behind supply chain
management is that by visualizing the entire
supply chain, supply chain managers can
maximize strengths and efficiencies at each
level of the process to create a highly
competitive, customer-driven supply system
that is able to respond immediately to
changes in supply and demand.
Supply Chain Management
Communicator of customer demand
from point of sale to supplier
Physical flow process that engineers the
movement of goods
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 performance and profitability
Supply Chain Integration
Discuss the concept of
supply chain integration
and explain why each
of the six types of
integration is important
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
Supply Chain Integration
Relationship
Integration
Measurement
Integration
The ability of two or more
companies to develop social
connections that serve to guide
their interactions when working
together.
The performance assessment of
the supply chain as a whole that
also holds each individual firm or
business unit accountable for
meeting its own goals
Supply Chain Integration
Technology
and planning
integration
The creation and maintenance of
information technology systems
that connect managers across
and through the firms in the
supply chain
Material and
service
supplier
integration
Requires firms to link seamlessly
to those outsiders that provide
goods and services to them so
that they can streamline
processes and provide quality
customer experiences.
Supply Chain Integration
Internal
Operations
Integration
Customer
Integration
Links internally performed work
into a seamless process that
stretches across departmental
and/or functional boundaries,
with the goal of satisfying
customer requirements
A competency that enables firms to
offer long-lasting, distinctive, valueadded offerings to those customers
who represent the greatest value to
the firm or supply chain
Key Processes of
Supply Chain Management
Identify the eight key processes
of excellent supply chain
management and discuss
how each of these processes
impacts the end customer
Key Business Processes
1.
2.
3.
4.
5.
6.
7.
8.
Customer relationship management
Customer service management
Demand management
Order fulfillment
Manufacturing flow management
Supplier relationship management
Product development and
commercialization
Returns management
Customer Relationship
Management
Customer
Relationship
Management
(CRM) Process
Allows companies to prioritize
their marketing focus on
different customer groups
according to each group’s
long-term value to the
company or supply chain
Customer
Service Management
Customer
Service
Management
Process
Presents a multi-company,
unified response system to
the customer whenever
complaints, concerns,
questions, or comments
are voiced
Demand Management
Demand
Management
Process
Seeks to align supply and
demand throughout the supply
chain by anticipating customer
requirements at each level and
create demand-related plans of
action prior to actual customer
purchasing behavior
Order Fulfillment
Order
Fulfillment
Process
a highly integrated process,
often requiring persons from
multiple companies and
multiple functions to come
together and coordinate to
create customer satisfaction at
a given place and time
Manufacturing Flow
Management
Manufacturing
Flow
Management
Process
Concerned with ensuring
that firms in the supply
chain have the needed
resources to manufacture
with flexibility and to
move products through a
multi-stage production
process
Supplier Relationship
Management
Supplier
Relationship
Management
Process
Closely related to the
manufacturing flow
management process and
contains several
characteristics that
parallel the customer
relationship management
process
Product Development and
Commercialization
Product
Development and
Commercialization
Process
Includes the group
activities that facilitates
the joint development and
marketing of new
offerings among a group
of supply chain partner
firms
Returns Management
Returns
Management
Process
Enables firms to manage
volumes of returned product
efficiently, while minimizing
returns-related costs and
maximizing the value of the
returned assets to the firms in
the supply chain
Managing the Logistical
Components of the Supply Chain
Discuss the key strategic
decisions supply chain
managers must make when
designing their companies’
supply chains
Logistics
Logistics is…
the process of strategically managing
the efficient flow and storage of raw
materials, in-process inventory, and
finished goods from point of origin to
point of consumption.
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
 Negotiate price and service levels
 Reduce costs
© iStockphoto.com/Maria Toutoudaki
 Select suppliers
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 at the
precise time they are needed
on the production line.
Benefits of JIT
 For manufacturers: reduces raw
material inventories; immediate
shipping of products
 For suppliers: daily or hourly deliveries
rather than weekly
 For customers: lower costs; shorter
lead times; products tailored to
customer needs
Order Processing
An Order Processing
System is…
a system whereby orders are
entered into the supply chain
and filled.
Order processing is becoming more automated
through the use of computer technology known
as ELECTRONIC DATA INTERCHANGE (EDI).
Inventory Control
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
Inventory Control
Tools for managing inventory include:
 materials requirement planning (MRP) or
materials management – supplier to
manufacturer
 distribution resource planning (DRP) –
manufacturer to end user
 automatic replenishment programs –
minimal forecasting
Warehousing and
Materials Handling
A Materials-Handling
System is…
a method of moving inventory into, within,
and out of the warehouse.
Most manufacturers today have moved to
AUTOMATED materials-handling systems to
minimize the amount of handling.
Transportation
Airways
Water
Pipelines
Motor Carriers
Railroads
Transportation Mode Choice






Cost
Transit time
Reliability
Capability
Accessibility
Traceability
Exhibit 14.1
Criteria for Ranking Modes
of Transportation
Trends in Supply Chain
Management
Discuss new technology
and emerging trends in
supply chain management
Trends in Supply Chain
Management
Advanced computer technology
Outsourcing of logistics functions
Electronic distribution
Advanced Computer
Technology
 Automatic identification systems
- Bar coding
- Radio frequency technology
 Communications technology
 Supply chain software systems
Outsourcing Logistics
Functions
Outsourcing Benefits
 Reduce inventories
 Locate stock at fewer plants and distribution
centers
 Provide same or better levels of service
Electronic Distribution
Electronic Distribution is…
a distribution technique that includes
any kind of product or service that
can be distributed electronically,
whether over traditional forms such
as fiber-optic cable or through
satellite transmission of electronic
signals.
Green Supply Chain
Management
• Requires integrating green thinking into all
phases of the supply chain
– Green materials sourcing
– Environmental impact of packaging,
shipment, use
– Incorporate end-of-life management
• Recycling
• Clean disposal
Global Logistics and Supply
Chain Management
Logistical challenges of global markets:
• Understanding and coping with the
legalities of trade in other countries
• Uncertainty regarding shipping
Beyond the Book
Chapter 14 Videos
Sephora – Supply Chain
Management
How does Sephora manage its supply chain?
What information goes into deciding which
suppliers become incorporated?
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