“Education in Pursuit of
Supply Chain Leadership”
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Chapter 1
Introduction to Supply
Chain Management
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Learning Objectives
• Define logistics management
• Detail the functions of logistics
• Detail logistics performance measurements
• Define supply chain management (SCM)
• Review the six supply chain competencies
• Describe the steps in the evolution of supply chain
management
• Review basic supply chain structures
• Outline the basic supply chain strategies
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Learning Objectives (cont.)
• Understand the SCOR® supply chain model
• Understand the lean supply chain model
• Understand the adaptive, demand-driven supply chain
model
• Understand the supply chain maturity model
• Describe the trends in supply chain management
• List the goals of today’s supply chains
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Chapter 1
Introduction to Supply Chain
Management
Inventory
Defining
Logistics
Management
Basics
and Supply Chain
Management
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Size of Logistics – 2013
Carrying Costs- $2.459Trillion All Business Inventory
$ Billions
Interest………………………………………………...
2
Taxes, Obsolescence, Depreciation, Insurance……….320
Warehousing ………………………………………….
137
Subtotal
469
Transportation Costs
Motor Carriers:
Truck – Intercity………………………………………
Truck – Local………………………………………….
Subtotal
Other Carriers:
Railroads………………………………………………
Water………..(International 27,Domestic7)…………
Oil Pipelines…………………………………………...
Air……………(International 13, Domestic 20)………..
Forwarders…………………………………………….
Subtotal
74
37
13
33
38
195
Shipping Related Costs……………………………………..
10
Logistics Administration…………………………………….
53
Total Logistics Costs
453
204
657
1,385
Source: Rosalyn Wilson. 25th Annual State of Logistics Report: Is This the New Normal? Oakbrook, IL: Council of
Supply Chain Management Professionals, 2014.
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Defining Logistics
“The art and science of obtaining, producing, and
distributing material and product in the proper
place and in proper quantities"
APICS Dictionary, 14th edition
“That part of supply chain management that plans,
implements, and controls the efficient, effective
forward and reverse flow and storage of goods,
services, and related information between the
point of origin and the point of consumption in
order to meet customers' requirements"
Council of Supply Chain Management Professionals (CSCMP)
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Logistics Management Components
Lean/Green
Warehousing
Audit,
Payment, and
Claims
3PLs
FlowThrough
Techniques
Fleet
and 3PL
Management
Transportation
Management
Warehouse
Management
Logistics
Management
Transportation
Integration
WMS
Technologies
Analytical/
modeling
TMS
Technologies
Logistics
Performance
Measurement
Administration
Management
Routing,
Tracking,
Optimization
Regulation,
Security,
Compliance
Visibility
Track and
Trace
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Logistics Performance Objectives
Service
High level of customer service, inventory availability,
and customer order management
Fast flow
response
Agile and flexible logistics functions capable of rapid
response to customer requirements
Variance
reduction
Dedication to the continuous elimination of all forms
of supply chain variance and waste
Minimum
inventories
Maintain right levels of inventory at the lowest cost
which achieving high customer serviceability
Transportation
reduction
Transportation cost reduction through better planning,
use of third-party logistics, and sustainability
Quality
management
Pursuit of total quality management in products and
logistics services
Product lifecycle support
Increased concern for reverse logistics functions for
product return, repair, waste, and disposition
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Defining Supply Chain Management
“The design, planning, execution, control, and monitoring of supply
chain activities with the objective of creating net value, building a
competitive infrastructure, leveraging worldwide logistics,
synchronizing supply with demand, and measuring performance
globally”
APICS Dictionary, 14th edition
“The planning and management of all activities involved in sourcing
and procurement, conversion, and all logistics management activities.
Importantly, it also includes coordination and collaboration with
channel partners, which can be suppliers, intermediaries, third-party
service providers, and customers. In essence, supply chain
management integrates supply and demand management within and
across companies”
Council of Supply Chain Management Professionals (CSCMP)
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Supply Chain Management Competencies
Customer Management
Collaboration
•
•
•
•
•
• Unified Channel
• Coupling of Channel
Capabilities
• Real-Time Connectivity
• Demand Information Sharing
• Common Performance
Metrics
Customer Value Creation
CEM Philosophy
CRM Toolset
Unified Channel Focus
Customer Intelligence
Supplier Management
• Supplier Channel
Value
Creation
• SRM Toolset
• Strategic Sourcing
• Infrastructure and
Operations
• Technology-Driven
Procurement
Supplier
Management
Channel Alignment
•
•
•
•
Customer
Management
Collaboration
Operations Excellence
Supply Chain
Management
Operations
Excellence
Integrative Technologies
Channel
Alignment
Integrative
Technologies
Channel Geography
Ecosystem Concept
Channel Node Congruence
Functional Optimization
Competitive Advantage
• Operations Integration
• Process Standardization
• Integrated Information
Systems
• Asset Utilization
• Team Approaches
Channel Unification
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•
•
•
•
•
•
•
Networked ERP/SCM
S&OP and CPFR tools
Advanced Planning Systems
Networked Channel Planning
Channel Event Management
EDI and Internet
RFID and Data Collection
Information
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CRM – Critical Customer Requirements
Superior
service
Provide the customer with an unbeatable
buying experience that exceeds price,
product availability, delivery, and service
expectations
Convenient
solutions
Provide the customer not just products and
services but solutions to their business
needs
Customization
Provide the customer with the opportunity to
configure solutions that meet their own
individual needs
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SRM – Critical Components
Strategic
sourcing
Technology
tool sets
Integrated
infrastructures
Details the depth of supplier competencies,
availability of value-added services, level of desired
quality, capacity for innovative thinking, and
willingness to collaborate on new product
development.
Details technologies that facilitate the
communication of purchasing requirements;
negotiation of quality, pricing, and delivery
objectives; product sustainability; and financial
settlement
Details organizational infrastructures that link
channel capabilities and performance objectives
directly with the customer
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Supply Chain as a Network Grid
Supply Chain Ecosystem
Supplier
Node
Supplier
Node
Supplier
Node
Customer
Node
Supplier
Node
Wal-Mart
Supplier
Node
Customer
Node
Supplier
Node
Supplier
Node
Customer
Node
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Scope of Supply Chain Integration
Functions of Inventory
Adaptive InterChannel
Strategic Value
Generation
Supply Chain Regions
Inter-Channel
Product and
Service Value
Generation
e-Supply
Chain Value
Interoperability
Inter-Channel
Logistics
Functions
Internal
Channel
Functions
Logistics
Optimization
Supply
Chain
Operations
Integration
Supply
Chain
Strategic
Collaboration
Intranet
Intranet Network
External
Internal
Optimization Integration
Network Integration
Web-enabled
Extranet
Channel
Web-Enabled
Operations
Strategic
Collaboration Collaboration
Level of Supply Chain Integration
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Chapter 1
Introduction to Supply Chain
Management
Inventory
Evolution of Supply
Management Basics
Chain Management
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SCM Evolutionary Stages
SCM Stage
Stage 1 to 1960s
Decentralized
Logistics
Management
Stage 2 to 1980
Total
Cost
Management
Stage 3 to 1990
Integrated
Logistics
Management
Stage 4 to 2000+
Supply
Chain
Management
Management Focus
Organizational Design
•
•
•
•
•
•
Operations performance
Support for sales/marketing
Warehousing
Inventory control
Transportation efficiencies
Physical Distribution
Management concept
• Decentralized logistics
functions
• Weak internal linkages
between logistics functions
• Little logistics management
authority
•
•
•
•
•
Logistics centralization
Total cost management
Optimizing operations
Customer service
Logistics as a competitive
advantage
• Centralized logistics functions
• Growing power of logistics
management authority
• Application of computer
• Logistics concept founded
• Support for JIT, quality and
continuous improvement
• Use of logistics partners for
competency acquisition
• Closer integration of logistics
and other departments
• Closer integration of logistics
with supply partners
• Logistics channel planning
• Logistics as a strategy
• Concept of SCM
• Use of extranet
technologies
• Growth of coevolutionary
channel alliances
• Collaboration to leverage
channel competencies
• Application of the Internet to the
SCM concept
• Low cost networking of channel
databases
• e-Business
• SCM synchronization
•
•
•
•
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•
•
•
•
•
Trading partner networking
Virtual organizations
Market coevolution
Benchmarking and
reengineering
Integration with ERP
.coms, e-tailers, and market
exchanges
Organizational agility and
scalability
Multi-channel delivery
Omni-channel retail delivery
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Chapter 1
Introduction to Supply Chain
Management
Inventory
Supply Chain
Management Basics
Structures
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Supply Chain Definition
The global network used to deliver
products and services from raw
materials to end customers through
an engineered flow of information,
physical distribution, and cash
APICS Dictionary, 14th edition
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Basic Supply Chain Structure
Information flow
Supplier
Producer
Customer
Product/service flow
Cash flow
Reverse product flow
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Integrated Supply Chain Framework
Process Value Chain
Value Delivery Network
Supply Chain
Ecosystem
Supplier
Supplier
Supplier
Enterprise Boundaries
Supplier
Supply
Functions
Technology
Enablers
Customer
Customer
Digital
Data
Supplier
Supplier
Supplier
Intermediary
Intermediary
Functions
Supplier
Supplier
Demand
Customer
Customer
Supplier
Supplier
Internet
Linkages
Supply Chain
Ecosystem
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Intermediary
Customer
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Basic Supply Chain Strategies
Stable
Characterized by a long trading history between
channel entities; a heavy focus on execution,
efficiencies, and cost performance; and the use
of simple connectivity technologies with little
need for real-time information sharing
Reactive
Characterized as a supply chain where
channel entities act to fulfill the on-demand
requirements from customers
Efficient
Reactive
This channel entity is a low-cost provider of
goods and services focused on efficiency and
cost management to keep total delivered costs
low
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Types of Channel Integration
Vertical
Integration
A vertically managed supply chain is
characteristic of businesses that seek to
absorb as many channel entities as
possible inside the organization to create
a monolithic supply chain servicing the
customer.
Horizontal
Integration
In a horizontally managed supply chain,
corporate managers seek to outsource
as many administrative, production, and
distribution functions as possible to
supply network partners while retaining
ownership of core competencies.
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SCOR® Supply Chain Model
Plan
Plan
Plan
Deliver
Return
Suppliers’
Supplier
Source
Deliver
Make
Source
Source
Return
Return
Enable
Supplier
Internal or External
Return
Make
Deliver
Enable
Return
Your Organization
Deliver
Source
Return
Return
Make
Return
Enable
Customer
Internal or External
Customer’s
Customer
Source: Adapted from APICS Supply Chain Council
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SCOR® Supply Chain Processes
Plan processes describe activities associated with
developing plans to operate the supply chain
Source processes describe ordering, scheduling of
deliveries, and receipt of inventories and services
Make processes describe activities associated with
the conversion of materials into finished goods or
creation of the content for services
Deliver processes describe activities associated with
the creation, maintenance, and fulfillment of demand
orders
Return processes describe activities associated with
the reverse flow of goods and wastes
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SCOR® Performance Attributes
Reliability: ability of the supply chain to perform processes as
expected. Key metrics: perfect order fulfillment, percent of orders
delivered in full, delivery performance to customer commit date,
and others
Responsiveness: the velocity at which processes are performed.
Key metrics: order fulfillment, source, make, and deliver cycle
times
Agility: ability of the supply chain to quickly respond to changes in
the external environment. Key metrics: upside and downside
supply chain flexibility, adaptability, and value at risk (VAR)
Cost: cost of operating a supply chain process. Key metrics: total
supply chain management cost; cost of goods sold; and costs to
plan, source, make, deliver, and return products
Assets: ability of supply chain to effectively manage assets. Key
metrics: cash-to-cash cycle time, return on supply chain fixed
assets, and return on working capital
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SCOR® Supply Chain Thread Diagram
Plan (sP), Source
(sS), Deliver (sD)
Plan, Source, Deliver
Plan, Source, Make (sM), Deliver
sP1
sP4
sP2
sP2
sP3
sS2
sD1
sS1
sM2
sD1
Supplier A
Supplier B
Supply Channel
sS1
sD1
sS1
Inventory
Planning
Plant
Enterprise
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sD1
Distribution
Warehouse
Retailer
Distribution Channel
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Lean Supply Chain Attributes
Lean Improvement Tools
•
•
•
•
•
•
Demand Management
Identify the7 Wastes
The 5 “S” System
SMED/Quick Changeover
Cellular Manufacturing
Total Productive Maintenance
Six Sigma and Statistical Tools
Process Standardization
•
•
•
•
Lean
Improvement
Tools
• Elimination of Process
Inefficiencies
• Network Work Load
Allocation
• Production, Logistics
Process
and Operations
Standardization
Standardization
• Industry Standards
Adoption
Lean SCM Technologies
• Deploy Integrative EBS
• Supply Chain Visibility
• Supply Chain Event
Management
• Global Trade Management
Waste Reduction
Identification of Demand Trigger
Integrated Channel Pull-Systems
Demand/Supply Integration
Demand Collaboration
Sustainability
Demand
Management
Lean
Supply
Chain
Lean SCM
Technologies
• Waste Removal at All Levels
• Recycling and Disposal
• Environmental Strategies
Sustainability
CrossEnterprise
Collaboration
• Social Consciousness
• Triple Bottom Line
• Sustainable Business
Processes
Cross-Enterprise
Collaboration
• Definition of Collaborative
Relationship
• Level of Cost/Improvement
• Identification of Technology
Tools
Customer Value Stream Continuous Improvement
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Components of Adaptive SCM
Channel Network Fabric
Events
Sense
Events
Velocity
Technologies
Visibility
Alert
Level of
Variation
Business
Objectives
Plan
Respond
Collaborate
Learn
Communicate
Execute
Network
Capabilities
Adaptability
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Demand-Driven Supply Network
Fulfillment/Replenishment Flexibility
• Change from forecasting to demand-pull
• Use of ATP/CTP for order promising
• Cross-functional teams for fulfillment and
replenishment
• Demand-driven scheduling and reorder calculation
Demand-Driven
•
•
•
•
•
Focus on continuous customer value creation
Demand-pull processes
Real time data on network transactions
Demand signaling systems
Demand-focused products/processes
Fulfillment/
Replenishment
Flexibility
DemandDriven
Demand/Supply Visibility
• Event management tools for
visibility
• Ability to communicate plans
• Linkage of channel
databases
• Demand collaboration
Demand/
Supply
Visibility
DemandDriven
Supply
Network
• Desire to share and interact on
marketplace intelligence
• Joint operations
• Coordinating competencies
and joint visioning
Demand•
Use of technology to
Driven Channel
enhance collaboration
Collaboration
Lean Optimization
Adaptive Channel Management
• Risk management processes
• Demand-sensing supply chains
• Agile/scalable production and
delivery resources
• Agile supply resources
• Agile organizations
Responsive
Demand-Driven Channel Collaboration
Adaptive
Channel
Management
Lean
Optimization
Agility
• Focus on lean principles to create
customer value and reduce waste
• Optimizing the value stream for delivery
• Engineering continuous flow to speed
response times
• Standardization and rationalization of
channel processes to support the
demand-pull
Partnership
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Chapter 1
Introduction to Supply Chain
Management
Inventory
Supply Chain
Management Basics
Maturity Model
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Supply Chain Maturity Attributes
Flexibility
This attribute places agility and nimbleness as
the central operating features of the mature
supply chain
Predictability
This attribute seeks to dampen the effect of
supply chain disruption by using risk
management methods that make the channel
environment more predictable
Resiliency
This attribute describes the ability of a supply
chain to recover from disruptions of any type
Sustainability
This attribute is the ability to sustain high levels
of performance regardless of changes in
supply channel structures, disruptive events,
and the pressure of the competition
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Supply Chain Maturity Model
On-Demand Value
Interoperability
Profitability
Responsiveness
Increasing
levels of:
Cost Reduction
Inter-Channel Value
Generation
Inter-Channel
Logistics Functions
Internal Channel
Functions
Internal logistics
optimization
Supply chain
operations
integration
Supply chain
strategic
collaboration
Increasing
levels of:
Connectivity of
supply network
focused on
customer value
Flexibility
Predictability
Resiliency
Sustainability
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Chapter 1
Introduction to Supply Chain
Management
Inventory
Trends in Supply
Management Basics
Chain Management
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Trends in Supply Chain Management
Multi-channel and omni-channel fulfillment
Service chains will become more important than
product chains
Leveraging social media
Managing “big data”
Managing business analytics
Growth of cloud computing and mobile
networking
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Chapter 1
Introduction to Supply Chain
Management
Inventory
Goals of Today’s
Management Basics
Supply Chains
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Goals of Today’s Supply Chains
ValueGeneration
Effective supply chains add value to their customers
and stakeholders
Improved
customer
service
Delivering value by segmenting and matching
customer needs with supply chain
Information
technologies
Assisting channel value creation by optimizing
supply chain processes
Leveraging
partner
strengths
Using collaboration to increase profitability, reduce
wastes, promote a common strategy, and construct
customer winning channel architectures
Intimate supply
chain
Achieving a high level of intimacy about what
constitutes a successful customer experience when
they interact with channel products and services
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“Education in Pursuit of
Supply Chain Leadership”
dp&c Chapter8
Chapter 1
End of Session
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