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Supply-Chain

11 Management

SCM 352

2011 Pearson Education, Inc. publishing as Prentice Hall


Outline

Global Company Profile:


Darden Restaurants
Strategic Importance of the Supply-Chain
Global Supply-Chain Issues
Outsourcing
Ethics in the Supply Chain
Emerging Technology: RFID

2011 Pearson Education, Inc. publishing as Prentice Hall


Darden Restaurants

Largest publicly traded casual dining company in the


world
Serves over 400 million meals annually in more than
1,800 restaurants in the US and Canada
Annual sales of $6.7 billion
Sources food from five continents and thousands of
suppliers
Four distinct supply chains
Over $1.5 billion spent annually in supply chains
Competitive advantage achieved through superior
supply chain

2011 Pearson Education, Inc. publishing as Prentice Hall


Supply Chain Management

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.
Council of Supply Chain Management Professionals

buy make move sell


A Supply Chain for Beer

Figure 11.1
2011 Pearson Education, Inc. publishing as Prentice Hall
Supply Chain Network

A supply chain is essentially a network consisting of


suppliers, manufacturers, distributors, retailers and
customers
Involves three types of flows requiring close
coordination. These flows often referred to as the 3Bs
of SCM (boxes, bytes and bucks):
Boxes material flows, which represent physical product
flows from suppliers to customers as well as reverse flows for
product returns, servicing and recycling
Bytes information flows, which represent order transmission
and order tracking, and which coordinate the physical flows
Bucks financial flows, which represent credit terms, payment
schedules and consignment arrangements

(http://knowledge.wharton.upenn.edu/papers/download/BCGSupplyChainReport.pdf)
Strategic Importance of SCM

Leading organizations today are using the supply


chain to enhance differentiation, increase sales,
penetrate new markets & channels, and gain a
competitive advantage Wal-Mart and Dell
Cisco: In 2001, the company announced that it was
writing down $2.2 billion in unusable inventory due to
supply chain problems. The materials planning
system allowed demand for components to be double-
and triple-counted across its suppliers. Ciscos stock
was $82 in March 2000, but fell to $13.19 in April 2001.
Nike: In May 2001, the company announced that sales
for the preceding quarter were $100 million below
expectation because of supply chain problems. Its
stock dropped 20%, an amount so large that the $100
million loss in sales appeared like small change.
(http://www.computerworld.com/softwaretopics/erp/story/0,10801,86908,00.html)
Trends in SCM

Competition is no longer between companies; it is


between supply chains
"Global sourcing will be the next battle ground for
competition. Within five years, businesses that do not
make global sourcing an imperative will be struggling
not only to compete, but also to survive.
Aberdeen Group
The major trends in business right now low-cost
country sourcing, outsourcing, customization,
globalization and more all create tremendous
complexities in a supply chain. In most cases, however,
companies have not changed how they manage this
critical part of the business.
Matthesen, VP & global leader for supply chain, BCG
(http://knowledge.wharton.upenn.edu/papers/download/BCGSupplyChainReport.pdf)
Economic Importance of SCM

Supply Chain Costs as a Percent of Sales

Industry % Purchased
All industry 52
Automobile 67
Food 60
Lumber 61
Paper 55
Petroleum 79
Transportation 62

(Principles of Operations Management, Heizer & Render, 8th Edition)


Outsourcing

Transfers traditional internal activities


and resources of a firm to outside vendors
Utilizes the efficiency that comes with
specialization
Firms outsource information technology,
accounting, legal, logistics,
and production

2011 Pearson Education, Inc. publishing as Prentice Hall


Outsourcing

Advantages Disadvantages
Cost savings Increased logistics cost
Gaining outside Loss of control
expertise Increased future
Improving operations competition
and service Negative impact on
Focusing on core employees
competencies Longer-term impact
Gaining outside
technology

2011 Pearson Education, Inc. publishing as Prentice Hall


Ethics in Supply Chain

Integrity Interactive Corp., a provider of


risk reduction and management services, found in their
survey that 78% of companies do not include
suppliers in their company compliance and ethics
programs, and nearly 58% are not sure if their company
regularly assesses ethics risks in their supply chain.
The Integrity Interactive study was in response to the
recent outcry associated with tainted dog food &
toothpaste, lead paint in toys, automotive recalls and
other supply chain problems.
Mattel, the maker of Barbie dolls
and Hot Wheels cars, recalled
nearly one million toys in the US
in 2007. Toys were made in China.
(http://www.nytimes.com/2007/08/02/business/02toy.html)
(How Ethical is Your Supply Chain? January 2008, www.industryweek.com)
Supplier Ethics Management

Supplier ethics management (SEM) is an emerging


business practice
SEM aims to help companies manage their suppliers
and supply relationships through strategies, programs
and metrics that better align supplier business conduct
with purchaser standards.
The goal, Cellini explains, is to reduce a purchasing
companys overall risk of corporate integrity failure in
the supply chain by aligning supplier conduct with
purchaser standards in three major
areas of corporate integrity:
compliance, ethics and corporate responsibility.

(How Ethical is Your Supply Chain? January 2008, www.industryweek.com)


Radio Frequency ID (RFID) Tags

2011 Pearson Education, Inc. publishing as Prentice Hall


Benefits of RFID

Inventory visibility will increase


Stock can be moved without explicit scanning
Supply chain speed will be accelerated
Faster reading (scanning) - faster goods turnover
More detailed data about a product can be read
Improved collaboration with business partners
More information can be exchanged in real time
which improves demand and forecasting accuracy
Standardized technology means same information
can be understood by multiple business partners
Potential to authenticate product & combat fake goods

(http://zonecours.hec.ca/documents/198329.GeneralRFID,version25novembre.pdf)
Thank You

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