CHAPTER SUPPLY CHAIN AND CHANNEL MANAGEMENT 15 McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

15-2 LEARNING OBJECTIVES Supply Chain and Channel Management LO1Define supply chain management LO2Recognize the value added by the supply chain. LO3Describe the flow of merchandise and the flow of information in the supply chain. LO4Describe how supply chains are managed.

15-3 Zara Customers Zara Website Royalty-Free/CORBIS

15-4 Supply Chain Management

15-5 Supply Chain, Marketing Channels, and Logistics are Related Marketing channel Logistics management Similar but different Chad Baker/Getty Images Ryan McVay/Getty Images

15-6 Behind the Scenes at Costco

15-7 Supply Chains Add Value

15-8 Supply Chains Streamline Distribution Reduce number of transactions Increase value for consumers More efficient and effective FedEx Commercial ©Brand X Pictures/PunchStock

15-9 Supply Chain Management Affects Marketing Fulfilling delivery promisesMeeting customer expectationsReliant on an efficient supply chain Courtesy Zara International, Inc.

How does supply chain management add value? Check Yourself

15-11 Making Information Flow

15-12 Data Warehouse

15-13 Electronic Data Interchange Cycle time Quality of communications Easily analyzed and used Photo by Cabela’s

15-14 Vendor-Managed Inventory DH Kong/Plush Studios/Getty Images

15-15 Collaborative Planning, Forecasting, and Replenishment Digital Vision/Getty Images

15-16 Pull and Push Supply Chain Pull Orders based on sales data More accurate inventory Better when demand is uncertain Push Merchandise allocated based on forecast Does not need sophisticated IS system Good for steady demand items

What are the various supply chain links associated with each information flow? 2. What is the difference between push and pull supply chains? Check Yourself

15-18 Making Merchandise Flow

15-19 Bakery with Conscience

15-20 How does Dell’s Merchandise Flow Courtesy Dell, Inc.

15-21 Distribution Center versus Direct Store Delivery What are the advantages of a distribution center? Mario Tama/Getty Images

15-22 The Distribution CenterDistribution Center Shipping to store Preparing to ship Getting Merchandise Floor Ready Storing and Cross-Docking Receiving and checking using UPC and RFID Management of inbound transportation ABC News Segment on a Walgreens Warehouse

15-23 Inbound Transportation Dispatcher coordinates deliveries Manufacturer may pay transportation expenses or retailers may negotiate directly with trucking companies and pay expenses Steve Cole/Photodisc/Getty Images

15-24 Receiving and Checking Receiving Arrival receipt Checking Undamaged Ordered = received Radio Frequency Distribution (RFID) Tags Container computer chips David Buffinton/Getty Images Photo by Scott Olson/Getty Images

15-25 Storing and Cross-DockingCross-Docking TraditionalCross-dockingCombinations Walter Hodges/Digital Vision/Getty Images

15-26 Getting Merchandise Floor-Ready Ticketing and marking Increasingly firms are forcing suppliers to ship floor ready merchandise

15-27 Shipping Merchandise to Stores Shipping merchandise to stores is complex for multi-store chains Distribution centers use sophisticated routing and scheduling systems Ryan McVay/Getty Images

15-28 Inventory Management Through Just-In-Time SystemsJust-In-Time Systems Just-in-time (JIT) Quick response (QR) Zappos Website Courtesy Tubular Steel, Inc.

15-29 Benefits of JIT Systems Reduced lead time Increased product availability and lower inventory investment James Leynse/Corbis

How does merchandise flow through a typical supply chain? 2. Why have just-in-time supply chain systems become so popular? Check Yourself

15-31 Managing the Marketing Channel and Supply Chain Supply chain or channel conflict Courtesy The Stanley Works

15-32 Managing the Marketing Channel and Supply Chain through Vertical Marketing Systems Independent or conventional supply chain

15-33 Types of Vertical Marketing Systems Independent or conventional supply chain Administered vertical marketing system Contractual vertical marketing system Corporate vertical marketing system

15-34 Managing Marketing Channels and Supply Chains Through Strategic RelationshipsStrategic Relationships Mutual Trust Open Communications Common GoalsInterdependence Credible Commitments

15-35 Relationship of supply chain members Used by Permission of Deutsch Inc as Agent for National Fluid Milk Processor Promotion Board

What are the differences between the three types of vertical marketing systems? 2. How do firms develop strong strategic partnerships with their supply chain partners? Check Yourself

15-37 Return to slide Merchandise cartons that are cross-docked are prepackaged by the vendor for a specific store. Glossary

15-38 Return to slide Manufacturers can ship merchandise either directly to a store or to a distribution center, where it is then shipped to the store. Glossary

15-39 Return to slide Electronic data interchange (EDI) is the computer-to-computer exchange of business documents from a retailer to a vendor and back. Glossary

15-40 Return to slide Just-in-time inventory systems are inventory management systems designed to deliver less merchandise on a more frequent basis than traditional inventory systems. Glossary

15-41 Return to slide Radio frequency identification (RFID) tags are tiny computer chips that automatically transmit to a special scanner all the information about a container’s contents or individual products. Glossary

15-42 Return to slide A strategic relationship or partnering relationship involves the supply chain members being committed to maintaining the relationship over the long term and investing in opportunities that are mutually beneficial. Glossary

15-43 Return to slide Supply chain management is a set of approaches and techniques firms employ to integrate their suppliers, manufacturers, warehouses, stores, and transportation intermediaries into a seamless operation in which merchandise is produced and distributed in the right quantities, to the right locations, and at the right time, as well as to minimize system wide costs while satisfying the service levels that their customers require. Glossary

15-44 Return to slide Vendor-managed inventory (VMI) is an approach for improving supply chain efficiency in which the manufacturer is responsible for maintaining the retailer’s inventory levels in each of its stores. Glossary