CHAPTER 2 The Supply Chain Management Concept

© 2008 Prentice Hall 2-2 Learning Objectives F To learn about supply chains and their management F To understand differences between transactional and relational exchanges F To realize the importance of leveraging technology F To appreciate barriers to supply chain management

© 2008 Prentice Hall 2-3 The Supply Chain Concept F Key Terms –Bullwhip effect –Contract logistics –Coopetition –Customer power –Fourth-party logistics (4PL) F Key Terms –JIT II –Lead logistics provider (LLP) –Logistics outsourcing –Partnerships –Relational exchanges

© 2008 Prentice Hall 2-4 The Supply Chain Concept F Key Terms –SCOR model –Strategic alliances –Supply chain –Supply chain councils –Supply chain management F Key Terms –Third-party arrangements –Third-party logistics –Transactional exchanges

© 2008 Prentice Hall 2-5 About Supply Chains… F A supply chain “encompasses all activities associated with the flow and transformation of goods from the raw material stage (extraction), through to the end user, as well as the associated information flows.” Source: Robert B. Handfield and Ernest L. Nichols, Jr., Introduction to Supply Chain Management

© 2008 Prentice Hall 2-6 Figure 2-1: Different Supply Chain Configurations

© 2008 Prentice Hall 2-7 Supply Chain Management –Supply chain management is “the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses in the supply chain, for the purposes of improving the long- term performance of the individual companies and the supply chain as a whole.” Source: John T. Mentzer et al., “ Defining Supply Chain Management,” Journal of Business Logistics

© 2008 Prentice Hall 2-8 Successful Supply Chains have… F an enterprise-to-enterprise point of view F a systems approach across all organizations in the supply chain –Companies recognize interdependencies –Goals and objectives are compatible

© 2008 Prentice Hall 2-9 Figure 2-2: The Supply Chain Operations Reference (SCOR) Model

© 2008 Prentice Hall 2-10 JIT II F Developed by Bose Corporation F Supplier integration program –A more realistic competitive perspective –“In-plants”

© 2008 Prentice Hall 2-11 Globalization of Supply Chains F Increasing globalization –Lower priced materials and labor –Global perspective of companies –Development of global competition F Extremely difficult to execute due to differences –Cultural, economic, and technological –Political, spatial, and logistical

© 2008 Prentice Hall 2-12 Key Attributes of Supply Chain Management F Customer power F Long-term orientation –Relational exchanges –Transactional exchanges F Leveraging technology F Enhanced communication across organizations

© 2008 Prentice Hall 2-13 Key Attributes of Supply Chain Management F Inventory control –Bullwhip effect –JAZ F Interactivity, interfunctional, and interorganizational coordination –Supply chain councils –Coopetition

© 2008 Prentice Hall 2-14 Barriers to Supply Chain Management F Regulatory and political considerations F Lack of top management commitment F Reluctance to share, or use, relevant data F Incompatible information systems F Incompatible corporate cultures

© 2008 Prentice Hall 2-15 Supply Chain Management and Integration F Long-term, mutually beneficial agreements –Partnerships –Strategic alliances –Third-party arrangements –Contract logistics F Methods used to integrate –Vertical integration –Formal contracts –Informal agreements

© 2008 Prentice Hall 2-16 Supply Chain Management and Integration F Third-Party Logistics (3PL) –Logistics outsourcing –Contract logistics F Fourth-party logistics (4PL) primarily used in global companies –Lead logistics provider (LLP) F Supply chain software