Supply Chain Management

Chapter 10

McGraw-Hill/Irwin

The McGraw-Hill Companies, Inc. 2007, All Rights Reserved

Chapter 10 Outline
Definitions and Terminology System Interactions Coordination in Supply Chain Measuring Supply Chain Performance Supply Chain Strategies Structural Improvement Improvement in Infrastructure The Internet and Supply Chains Virtual Supply Chains
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Definitions and Terminology

Supply Chain Supply Chain Management Distribution Channel Demand management Logistics management

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Supply Chain
The sequence of business processes and information that provides a product or service from suppliers through manufacturing and distribution to the ultimate consumer.

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Supply Chain Management

Planning, design, and control of the flow of information and materials along the supply chain in order to meet customer requirements in an efficient manner, now and in the future.

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Distribution Channel
The route from the producer forward through the distributors to the customer

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Demand Management
Managing the demand for goods or services along the supply chain. Demand can be managed through such mechanisms as products, pricing, promotion, and distribution.

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Logistics Management
If broadly defined, it is the same as supply chain management. Narrowly defined, logistics management is concerned with inbound transportation and outbound distribution.

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A Typical Supply Chain

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System Interactions
(System Dynamics in Supply Chains)

Supply chain is a highly interactive system. Decisions in each part of the chain affect the other parts. There is an accelerator (bull whip) effect The best way to improve a supply chain is to reduce the total replenishment time and to feed back actual demand information to all levels.

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Widget Example (Figure 10.2): Retail Level

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Widget Example (Figure 10.2): Wholesale Level

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Widget Example (Figure 10.2): Factory Level

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Coordination in the Supply Chain

Need for coordination both within firms and across firms Supply chains must be managed across organizational boundaries. Parallel between supply chain and quality improvement

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Measuring Supply Chain Performance (1)

Deliveryon time delivery of entire orders. Quality
Customer satisfaction Customer loyalty

Time
Total replenishment time Cash to cash cycle
Days in inventory + days in accts receivable-days in accounts payable
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Measuring Supply Chain Performance (2)

Flexibility
Time to change volume or product mix by a certain percentage Maximum percentage of change in volume or product mix in fixed time perion

Cost
Total delivered cost Value added or productivity

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Supply Chain Strategies

Functional productscommodity-like
Efficient, low cost supply chain

Innovative products
Flexible, fast supply chain

Firms should sort their products and apply the appropriate strategies

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Structural Improvement
Basic Ways to Improve Supply Chain Structure:
Change structure
Capacity, Facilities, Process technology, vertical integration

Change infrastructure
People, Information systems, Organization, Production and inventory control, Quality control systems

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Forms of Structural Change in a Supply Chain

Forward and Backward Integration Major process simplification Changing the configuration of factories, warehouses, or retail locations Major product redesign Outsourcing logistics to a third party.
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Improvement in Infrastructure
Cross-functional teams Partnerships with suppliers and customers Set-up time reduction to reduce lot sizes Integrated information systems Cross-dockingkeeps goods out of the warehouses.

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The Internet and Supply Chains

Fundamental processes in supply chains:
Order placement Order fulfillment

e-Procurement and its types Potential problems with e-Procurement

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Processes for e-Procurement (Figure 10.3)

REQUEST

Requirement

Selection

Requisition

Approval

BUY Requisition Source Negotiate SUPPLY Confirm Process Order Ship PAYMENT Receive Deliver Match Pay Invoice Contract

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Types of e-procurement
On-line catalogs listing products, prices, etc. Third-part auctionsreverse auctions Private exchanges to connect suppliers

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Problems with e-procurement

Too much focus on technology; not enough on systems Insufficient concern about value to both partners Fragmented efforts within and across companies Record accuracy and data security issues

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Virtual Supply Chains

Virtual Companies:
Highly flexibleno fixed assets Successful in highly dynamic environment Made feasible by computers and the Internet May lead to hollow corporations or shell companies

Virtual Supply Chain consists of at least one virtual company that coordinates all activities of the supply chain
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Summary
Definitions and Terminology System Interactions Coordination in Supply Chain Measuring Supply Chain Performance Supply Chain Strategies Structural Improvement Improvement in Infrastructure The Internet and Supply Chains Virtual Supply Chains
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End of Chapter Ten

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