Supply Chain Management Managing the flows of information between all of the parties directly and indirectly involved in the procurement of a product or raw material. Chapter 10 pages Business Plug-In B8 pages Business Plug-In B21 pages (RFID)

Focus of Organizational Supply Chain Strategies Efficiency: focus on performance – Getting the most from each resource (optimize resources) – Looks at throughput, speed, availability Throughput: the volume that can be sent through the system Effectiveness: focus on doing what is right – Setting the right goals and objectives and making sure they get accomplished. Looks at customer satisfaction, conversion rates, sell-through increases Do things right and/or Do the right things – How much of each do you do? – Sometimes, you have to trade one for the other.

SUPPLY CHAIN DRIVERS Organizations use these four drivers to support either a supply chain strategy focusing on efficiency or a supply chain strategy focusing on effectiveness

Facilities Efficiency (saves money at expense of other things) – Economies of scale when facilities centralized. Saves money but further from customers and longer to deliver – Save money by building a facility that is only big enough to handle production requirements – A single product focus lets me do a really good job producing just one thing. Effectiveness (tends to increase costs) – Goods can get to customers faster with more facilities – Building in lots of extra capacity provides flexibility – A multi-product focus may allow me to perform the same operation on many different things.

Inventory Efficiency (saves money at expense of other things) – Saves money by not holding much inventory or using as much space. Incoming shipments must be received more frequently. – A company can save money by not maintaining as much safety stock, but runs the risk of disappointing customers if inventory runs out during a busy season (such as Christmas) – Single storage location Effectiveness (tends to increase costs) – Spend money to hold larger amounts of inventory so as to immediately be able to respond to customer needs. – A company spends money by maintaining higher amounts of safety stock so as to not run out during busy times (Christmas), but not enough demand may lead to price cuts and losses. – Multiple storage locations (close to customers) Decide whether to risk the expense of carrying too much inventory (effective) or run the risk of losing sales (efficient)

Transportation Primary transportation methods – Truck, rail, ship, air, pipeline, electronic Speed of delivery and price of delivery are difference drivers Efficiency (saves money at expense of other things) – A company can save money by shipping goods inexpensively, but this takes longer for the customer to receive the goods. – Inexpensive shipping = Efficiency Effectiveness (tends to increase costs) – To ensure speedy delivery, a more expensive delivery method is selected. – More expensive shipping = Effective – A company that uses Federal Express to ship goods is focusing on safe and timely delivery and not on the cost of delivery. Regardless of which transportation method is selected, having a global inventory management system is vital (ability to track and locate all components and materials in both the upstream and downstream portions of the supply chain)

Information An organization must decide how and what information it wants to share with its supply chain partners Efficiency (saves money at expense of other things) – Freely sharing lots of information increases the speed and decreases the cost of supply chain processing. – Pull strategy: partners are responsible for retrieving/pulling information when they need/want it (and they bear the cost of getting info) – Must trust partners when letting them access your systems. Partners control when info is pulled Effectiveness (tends to increase costs) – Share only selected information with certain individuals, which will decrease the speed and increase the costs of supply chain processing – Push strategy: you send info to partners when YOU want to (partners may have to wait to get what they need and you bear the cost of sending/pushing info to them – Using a push strategy, your organization controls what is shared and when it is shared.

Wal-Mart’s strong information flows allow it to operate its business in a just-in-time fashion (JIT inventory)