Supply Chain Management
CHAPTER
14
Marketing
10
Lamb, Hair, McDaniel
Designed by
Eric Brengle
B-books, Ltd.
Copyright ©2009 by Cengage Learning Inc. All rights reserved
Prepared by
Amit Shah
Frostburg State University
1
Learning Outcomes
LOI
Define the terms supply chain, supply chain
management, and supply chain orientation,
and discuss the benefits of supply chain
management
LO2
Discuss the concept of supply chain
integration and explain why each of the six
types of integration is important
LO3
Identify the eight key processes of excellent
supply chain management, and discuss how
each of these processes impacts the end
customer
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2
Learning Outcomes
LO4
Discuss the key strategic decisions supply
chain managers must make when designing
their companies’ supply chains
LO5
Describe the logistical components of the
supply chain
LO6
Explain why supply chain performance
measurement is necessary and important
LO7
Discuss new technology and emerging trends in
supply chain management
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3
LOI 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
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LOI
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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LOI
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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LOI
Supply Chains
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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
LOI
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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
LOI
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LOI
REVIEW LEARNING OUTCOME
Supply Chain Management
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LO2
Supply Chain Integration
Discuss the concept of
supply chain integration
and explain why each
of the six types of
integration is important
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LO2
Supply Chain Integration
System
Approach
A key principle of supply chain
management – that multiple firms
work together to perform tasks as
a single, unified system, rather
than as several individual
companies acting in isolation.
Supply Chain
Integration
When multiple firms in a supply
chain coordinate their activities
and processes so that they are
seamlessly linked to one another
in an effort to satisfy the
customer.
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LO2
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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LO2
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.
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Relationship Integration
•High relationship integration allow entire
supply chain to perform at a higher level
•Tend to be managed by formal or informal
social guidelines
•Tend to be open to information sharing
across firm/business unit boundaries
•Tend to practice equitable risk/reward
sharing
LO2
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LO2
Measurement Integration
Measurement
Integration
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
ActivityBased
costing (ABC)
An accounting method used in
measurement integration to
assess the costs associated with
each supply chain activity
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Measurement Integration
•Managers in all firms and units must
conduct functional assessments
•Firms in supply chain should agree on and
commit to principles of ABC
•Must be a widely agreed upon set of supply
chain metrics that are standards
LO2
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LO2Technology
Technology
and planning
integration
and Planning Integration
The creation and maintenance of
information technology systems
that connect managers across and
through the firms in the supply
chain
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Technology and Planning
Integration
Several firm-level and supply chain-level
capabilities must be developed
•Firms in supply chain must become experts
at information management
•Packets of information must be available in
real-time
•Supply chain managers need strong internal
communications capability
LO2
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LO2
Internal Operations Integration
Internal
Operations
Integration
Links internally performed work
into a seamless process that
stretches across departmental
and/or functional boundaries, with
the goal of satisfying customer
requirements
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Internal Operations Integration
Five distinct groups of activities:
• Firm must become cross-functionally unified
• Firm should seek to standardize
operations/work processes
• Work processes should be simplified
• Process standards should be developed for
internal benchmarks
• Overall logistical network of firm should be
reconfigured
LO2
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LO2
Customer Integration
Customer
Integration
ABC
Segmentation
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
The supply-chain process whereby
customers are placed into groups
A, B, and C according to their
overall long-term value to the firm
and to the extent to which the firm
can serve their desires
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Customer Integration Drivers
•Understand not all customers are alike
•Should use market segmentation
•Select customer groups for whom to
provide highest levels of service
LO2
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LO2
REVIEW LEARNING OUTCOME
Supply Chain Integration
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LO3
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
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LO3
Key Processes
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LO3
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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LO3
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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LO3
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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LO3
Order Fulfillment
Order Fulfillment
Process
A supply chain management
process that involves
generating, filling, delivering,
and providing on-the-spot
service for customer orders.
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LO3
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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LO3
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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LO3
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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LO3
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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LO3
REVIEW LEARNING OUTCOME
Key Processes of Supply Chain Management
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LO4
Strategic Supply Chain Management
Decisions
Discuss the key strategic
decisions supply chain
managers must make
when designing their
companies’ supply chains
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LO4
Supply Chain Management
Lean Supply
Chain
Management
The strategy that focuses primarily
on the removal of waste from the
supply chain to achieve the lowest
total cost to the members of the
supply chain system
The supply chain strategy
that focuses primarily on
Agile Supply
the ability of the firm to fulfill
Chain Management customer demand, even if this
means somewhat higher costs
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LO4 Lean versus Agile Supply Chain
Management
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Mapping The Supply Chain
LO4
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LO4
REVIEW LEARNING OUTCOME
Logistics Function in the Supply Chain
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LO5 Managing Logistical Components
Describe the logistical
components of the
supply chain
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LO5 Logistical Components of the Supply
Chain
Supply
Chain
Team
Logistics Information System
Sourcing & Procurement
Order Processing
Inventory Control
Warehouse & Materials Handling
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Transportation
42
LO5
Sourcing and Procurement
The Role of Purchasing:
• Plan purchasing strategies
• Develop specifications
• Select suppliers
• Negotiate price and service levels
• Reduce costs
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LO5
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
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LO5
Inventory Management and 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.
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LO5
Inventory Management and Control
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.
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LO5
Inventory Replenishment Example
Sleep Right Mattress
Retail Store
Sleep Right
Distribution Center
ABC Mattress
Wholesaling Company
Great Mattress
Company
MRP
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LO5
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
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LO5
Transportation
Airways
Water
Pipelines
Motor Carriers
Railroads
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Transportation Mode Choice






LO5
Cost
Transit time
Reliability
Capability
Accessibility
Traceability
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Criteria for Ranking
Modes of Transportation
LO5
Lowest
Highest
Relative
Cost
Air
Truck
Rail
Pipe
Water
Transit
Time
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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LO6
Supply Chain Performance
Measurement
Explain why supply chain
performance measurement
is necessary and important
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LO6
Supply Chain Performance
Measurement
A good metric is characterized by five qualities:
•Creates understanding of strategic objectives
and tactical plans
•Promotes behaviors that are consistent with
achieving these objectives
•Allows for recording of actual results/outcomes
•Allows companies to compare themselves to
competitors and customer expectations
•Motivates continuous improvement
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The Balanced Scorecard
Approach
LO6
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LO6
REVIEW LEARNING OUTCOME
Why is Supply Chain Performance Measurement
Important?
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LO7
Trends in Supply Chain
Management
Discuss new technology
and emerging trends in
supply chain management
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LO7
Trends in Supply Chain
Management
Globalization of supply chain management
Advanced computer technology
Outsourcing of logistics functions
Electronic distribution
Outsourcing of logistics functions
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Advanced Computer Technology
• Automatic identification systems
– Bar coding
– Radio frequency technology
• Communications technology
• Supply chain software systems
LO7
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LO7
Outsourcing Logistics
Functions
Outsourcing Benefits
• Reduce inventories
• Locate stock at fewer plants and
distribution centers
• Provide same or better levels of service
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LO7
REVIEW LEARNING OUTCOME
Emerging trends in supply chain management
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