Chapter 1 SUPPLY CHAIN MANAGEMENT: An Overview

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. After reading this chapter, you should be able to do the following: Learning Objectives ● Explain the external change drivers in the global economy and their impact on global supply chains. ● Discuss the development of supply chain management in leading organizations and understand its contributions to their financial viability. 2

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Appreciate the significance and role of supply chain management among private as well as public or nonprofit organizations. ● Understand the contributions of supply chain management to organizational efficiency and effectiveness for competing successfully in the global marketplace. ● Explain the benefits that can be achieved from implementing supply chain practices. 3 Learning Objectives, continued

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Understand the major challenges and issues facing organizations developing and implementing supply chain strategies. 4 Learning Objectives, continued

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Forces Driving the Rate of Change Five major external forces seem to drive the rate of change and shape our economic and political landscape: 1. Globalization 2. Technology 3. Organizational consolidation & power shift 4. The empowered consumer 5. Government policy and regulation 5

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Development of the Supply Chain Concept Started in the 1960s with the development of the physical distribution concept Initial focus on physical distribution or outbound logistics was logical since finished goods During the 1980s, the logistics or integrated logistics management concept developed in a growing number of organizations The underlying logic of the systems or total cost concept was also the rationale for logistics management Supply chain management can be viewed as a pipeline or conduit for the efficient and effective flow of products/materials, services, information, and financials The Supply Chain Concept

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 1-1 A View of Logistics Management

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 1-2 Integrated Logistics Management 8 Source: Center for Supply Chain Research, Penn State University.

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 1-3 Generic Value Chain

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 1-3 Generic Value Chain Source: Michael Porfun, Competitive Advantage (New York: The Free Press, 1985): 37

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 1-4 Integrated Supply Chain Source: Center for Supply Chain Research, Penn State University

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 1-5 Throughput time comparison Source: “Efficient Consumer Response: Enhancing Consumer Value in the Grocery Industry” by Kurt Salmon Associates, Inc. (Jan. 1993)

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 1-6 Total Supply Chain Management Cost Source: Supply Chain Council

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Supply Chain Networks The network facilities and supporting transportation is important Increased complexity for organizations is a problem Inventory Deployments ○ Inventory duplication ○ Bullwhip effect Collection and storage of vast amounts of data Cost/Value ○ Efficiency (cost) and effectiveness (value) prevention of suboptimization Organizational Relationships ○ Tradeoffs and optimization Performance Measurement ○ Why and how Major Supply Chain Issues

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Major Supply Chain Issues, continued ● Supply Chain Networks (continued) Technology ○ Challenge is to evaluate and successfully implement the technology Transportation Management ○ Right product, right time, right quantity, right quality, right cost, right destination Supply Chain Security ○ Concern and potential challenge since 9/11

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Cash flow has become one of the most important measures of financial viability in today’s global markets. Supply chains are an important determinant of improved cash flow since they impact order cycle time to customers. ● Supply chains are an important determinant of capital consumption since they impact working capital, inventory levels, and other assets such as warehouses. ● Efficient and effective supply chains can free up valuable resources and improve customer fulfillment systems so as to increase return on investment or assets and improve shareholder value. Summary

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● The accelerated rate of change in our economy has accelerated the necessity of continuing changes in organizations or even transformation to remain competitive. ● The rate of change has been driven by a set of external forces including but not limited to globalization, technology, organizational consolidation and shifts in power in supply chains, an empowered consumer, and government policy and regulations. ● The conceptual basis of the supply chain is not new. In fact, organizations have evolved from physical distribution management to logistics management to supply chain management. 17 Summary, continued

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Supply chains are boundary spanning and require managing three flows—products, information, financials (cash), and demand. ● Supply chain management is a journey, not a goal, and there are no “silver bullets” since all supply chains are unique. ● Information is power, and collaborative relationships internally and externally are a necessary ingredient for success. ● The performance of supply chains must be measured in terms of overall corporate goals for success. ● Supply chains need to focus on the customers at the end of the supply chain and be flexible and responsive. 18 Summary, continued

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ● Technology is important to facilitate change, but it must follow a process and educate people to address problems and issues appropriately. ● Transportation management and security have become increasingly important in the twenty-first century because of changes that have occurred. ● Change with the changes, or you will be changed by the change! 19 Summary, continued