Lamb, Hair, McDaniel
2010-2011
CHAPTER 14
Supply Chain Management
1
Learning Outcomes
LO 1 Define the terms supply chain, supply chain management,
and supply chain orientation, 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 for excellent supply chain
management and discuss how each of these processes
impacts the end customer
2
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.
3
Supply Chains and
Supply Chain Management
Define the terms supply chain,
supply chain management,
and supply chain orientation,
and discuss the benefits
of supply chain management
LO1
4
Supply Chains
Supply Chain
LO1
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
LO1
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
6
Supply Chain Management
Communicator of customer demand
from point of sale to supplier
Physical flow process that engineers the
movement of goods
LO1
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Supply Chains
LO1
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Supply Chain Managers
Supply chain managers are
responsible for :
 Making strategic decisions
 Management of information
through supply chain
 Coordinating relationships
between company and external
partners
LO1
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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
LO1
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10
Supply Chain Integration
Discuss the concept of
supply chain integration
and explain why each
of the six types of
integration is important
LO2
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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
LO2
Customer
Integration
Customer Integration
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Supply Chain Integration
Relationship
Integration
The ability of two or more
companies to develop social
connections that serve to guide
their interactions when working
together.
Role
Specificity
When each firm in a supply chain
has clarity in terms of knowing
which firm is the leader, which
firms are the followers, and which
responsibilities are assigned to
each firm.
LO2
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Measurement Integration
Measurement
Integration
Technology
and planning
integration
LO2
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
The creation and maintenance of
information technology systems
that connect managers across
and through the firms in the
supply chain
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Internal Operations
Integration
Internal
Operations
Integration
Customer
Integration
LO2
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,
value-added offerings to those
customers who represent the
greatest value to the firm or
supply chain
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Key Processes of
Supply Chain Management
Identify eight key processes of
excellent supply chain
management, and discuss
how each of these processes
impacts the end customer
LO3
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Key Processes
LO3
17
Customer Relationship
Management
Customer
Relationship
Management
Process
LO3
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.
18
Customer
Service Management
Customer
Service
Management
Process
LO3
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
LO3
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.
20
Order Fulfillment
A supply chain
Order Fulfillment management process that
Process
involves generating,
filling, delivering, and
providing on-the-spot
service for customer
orders.
LO3
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Manufacturing Flow
Management
Manufacturing
Flow
Management
Process
LO3
A process that ensures
that firms in the supply
chain have the resources
they need
22
Supplier Relationship
Management
Supplier
Relationship
Management
Process
LO3
A supply chain
management process that
supports manufacturing
flow by identifying and
maintaining relationships
with highly valued
suppliers
23
Product Development and
Commercialization
Product
Development and
Commercialization
Process
LO3
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
LO3
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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Key Processes of
Supply Chain Management
LO3
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Managing Logistical Components
Describe the logistical
components of the
supply chain
LO4
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Supply
Chain
Team
LO4
Logistics Information System
Logistical Components
of the Supply Chain
Sourcing & Procurement
Production Scheduling
Order Processing
Inventory Control
Warehouse & Materials Handling
Transportation
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Sourcing and Procurement
The Role of Purchasing:
 Plan purchasing strategies
 Develop specifications
 Select suppliers
 Negotiate price and service levels
LO4
 Reduce costs
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Production Scheduling
Traditional Focus
Customer Focus
Push / Pull
Strategy
Push
Pull
Start of
Production
InventoryBased
Customer-Order
Based
Manufacturing
Mass Production
Mass Customization
LO4
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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.
LO4
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Benefits of JIT
 Reduces raw material inventories
 Shortens lead times
 Creates better supplier relationships
 Reduces production and storeroom
costs
 Reduces paperwork
LO4
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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
LO4
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Transportation
Airways
Water
Pipelines
Motor Carriers
Railroads
LO4
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JIT Requirements
Receive high-quality parts
Meet supplier delivery commitments
Have a crisis management plan
LO4
35
Order Processing
Electronic
Data
Interchange
Information technology that
replaces paper documents that
accompany business
transactions with electronic
transmission of the information.
http://www.walmartstores.com
Online
LO4
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Order Processing
Inventory
Control
System
LO4
A method of developing
and maintaining an
adequate assortment of
materials or products to
meet a manufacturer’s or
a customer’s demand.
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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.
LO4
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Materials
Handling Functions
Receive goods into
warehouse
Identify, sort, and label
goods
Dispatch the goods to
temporary storage
LO4
Recall, select, or pick the
goods for shipment
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Transportation
Airways
Water
Pipelines
Motor Carriers
Railroads
LO4
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Transportation Mode Choice






LO4
Cost
Transit time
Reliability
Capability
Accessibility
Traceability
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LO4
Criteria for Ranking
Modes of Transportation
Lowest
Highest
Relative
Cost
Transit
Time
Air
Truck
Rail
Pipe
Water
Water
Rail
Pipe
Truck
Air
Reliability
Pipe
Truck
Rail
Air
Water
Capability
Water
Rail
Truck
Air
Pipe
Accessibility Truck
Rail
Air
Water
Pipe
Traceability
Truck
Rail
Water
Pipe
Air
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42
Trends in Supply Chain
Management
Discuss new technology
and emerging trends in
supply chain management
LO5
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Trends in Supply Chain
Management
Globalization of supply chain management
Advanced computer technology
Outsourcing of logistics functions
Electronic distribution
Outsourcing of logistics functions
LO5
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44
Trends in Supply Chain
Management
Advanced computer technology
Outsourcing of logistics functions
Electronic distribution
LO5
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Advanced Computer
Technology
 Automatic identification systems
- Bar coding
- Radio frequency technology
 Communications technology
 Supply chain software systems
LO5
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Outsourcing Logistics
Functions
Outsourcing Benefits
 Reduce inventories
 Locate stock at fewer plants and distribution
centers
 Provide same or better levels of service
LO5
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Green Supply Chain
Management
• Requires integrating green thinking into all
aspects of the supply chain
– Green materials sourcing
– Environmental impact of packaging,
shipment, use
– Incorporate end of life management
• Recycling
• Clean disposal
LO5
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AMR Research Healthcare Top 25
Ranked based on building supply chain excellence and innovation to
drive business results in demand-driven supply chains
1.
Johnson & Johnson
10. Wyeth
18. Genentech
2.
Sisters of Mercy
11. GlaxoSmithKline
19. Alcon Laboratories
3.
Cardinal Health
12. AstraZeneca
20. Medtronic
4.
Owens & Minor
13. AmerisourceBergen
21. Boston Scientific
5.
McKesson
14. Walgreens
22. BJC HealthCare
6.
CVS Caremark
15. Covidien
23. Roche
7.
Abbott
16. Cleveland Clinic
24. Amgen
8.
Novartis
17. Merck
25. Mayo Clinic
9.
BD (Becton, Dickinson)
LO5
Source: http://www.amrresearch.com/Content/View.aspx?compURI=tcm:7-49119
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