Supply Chain Management Chapter Extension 12 Supply Chain Management © 2008 Pearson Prentice Hall, Experiencing MIS, David Kroenke

Study Question What is a supply chain? What factors affect supply chain performance? How does supply chain profitability differ from organizational profitability? What is the bullwhip effect? What are the functions of supplier relationship management? How do information systems affect supply chain performance?

What Is a Supply Chain? Network of organizations and facilities Transforms raw materials into products delivered to customers Works with companies and consumers up and down the chain Customers order from retailers Retailers order from distributors Distributors order from manufacturers Manufacturers get raw materials from suppliers Transportation companies, warehouses, and inventories also involved

Supply Chain Relationships Figure CE12-1

What Factors Affect Supply Chain Performance? Drivers affecting performance: Facilities Location, size, and operations methodology Inventory All materials in supply chain Managers must availability and cost Transportation Movement of materials along chain Information Requests, responses, and communications between organizations

Information Purpose Availability Means Transactional or informational Access and sharing Means Methods of transmission

Supply Chain Profitability Vs. Organizational Profitability Difference between sum of revenue generated and sum of costs incurred Maximum profit from chain Can not be achieved if organizations maximize profits in isolation Profitability increases when organizations operate at less than maximum profitability

What Is the Bullwhip Effect? Variety in the size and timing of orders increases at each stage up supply chain Natural dynamic of multistage nature of supply chain Unrelated to erratic customer demand Large fluctuations force distributors, manufacturers, and suppliers to carry large inventories Reduces overall profitability Eliminate effect by giving participants access to consumer-demand information Interorganizational information systems share data

The Lawyer’s Full Employment Act Supply chain profitability at REI Thousands of products with dozens of distributors 40-some stores, Web storefront, telephone sales How can they recognize patterns? Ski boot outages negatively impacts ski-package sales Distributor must manage inventory and carry more

The Lawyer’s Full Employment Act, continued REI will pay premium Recoup from binding, ski, and pole distributors Must negotiate agreement Agreement goes to lawyers Project delayed Lawyers expensive Negotiations finished at end of season Start over again next ski season

What Are the Functions of Supplier Relationship Management? SRM Process for managing contacts between an organization and suppliers Supplier is any organization that sells something to an organization that has a SRM application Integrated system Supports inbound logistics primary activity and procurement support activity Three basic processes Source Purchase Settle

Summary of SRM Processes Figure CE12-6

How Do Information Systems Affect Supply Chain Performance? Positive impact on supply chain performance Reduced cost of buying and selling Sourcing, buying, settling faster, easier, more effective Expanded supply chain speed Dollar value of goods exchanged in given period of time Enabled suppliers and customers to reduce inventory size and costs Improve delivery scheduling Enables just-in-time inventory

Active Review What is a supply chain? What factors affect supply chain performance? How does supply chain profitability differ from organizational profitability? What is the bullwhip effect? What are the functions of supplier relationship management? How do information systems affect supply chain performance?