SUPPLY CHAIN MANAGEMENT Brian Gillespie May 19, 2010

Value Chain  Series of steps involved in designing, producing, marketing and selling a product  Steps are categorized as primary and secondary activities  Each step can add or remove value  All activities in the value chain take place inside the firm

Primary Value Chain Activities  Inbound logistics  Receiving of materials needed to manufacture its products  Operations  The activities that transform the materials into the final product  Outbound logistics  The activities that get the product to the customers  Marketing and sales  Handle the 4 P’s  Service  The activities that enhance or maintain the value of the product, like installation or repair

Support Value Chain Activities  Firm Infrastructure  Organizational structure, control systems, company culture  Human resources management  Recruiting, hiring and training of employees  Technology development  Technologies to support value-creating activities  Procurement  The purchasing of inputs like materials, supplies and equipment

Value Chain  Margin (or profit) depends on the effectiveness in performing these activities efficiently

Supply Chain  All activities needed to convert raw materials into product/service and get it to the consumer  Unlike the value chain, the supply chain takes place across multiple firms

Supply Chain

Supply Chain Management  Managing and coordinating the flow of goods, and information between partners in the supply chain in an effort to maximize profitability  Transportation of goods from supply chain members to other members  Synchronization of information between supply chain members Procurement information Advertising information Logistics (advanced shipping notices)

Hewlett-Packard’s Supply Chain Hundreds of suppliers Thousands of retail locations Millions Dozens of factories

Insourcing vs. Outsourcing  Insourcing  The contracting of specialist firms to handle all or part of the supply chain operations UPS is responsible for ordering, scheduling and delivering raw pizza materials for Papa John’s to individual Papa John’s stores  Outsourcing  The delegation of non-essential tasks to subcontractors Computer call services in India

SCM Example  In small groups, create a supply chain for the product and describe the specific primary and support activities in the value chain for the following product 

Kitten Mittons!!!