McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc. 2007, All Rights Reserved Supply Chain Management Chapter 10

10-2 Chapter 10 Outline Definitions and Terminology System Interactions Coordination in Supply Chain Measuring Supply Chain Performance Supply Chain Strategies Structural Improvement Improvement in Infrastructure The Internet and Supply Chains Virtual Supply Chains

10-3 Definitions and Terminology Supply Chain Supply Chain Management Distribution Channel Demand management Logistics management

10-4 Supply Chain The sequence of business processes and information that provides a product or service from suppliers through manufacturing and distribution to the ultimate consumer.

10-5 Supply Chain Management Planning, design, and control of the flow of information and materials along the supply chain in order to meet customer requirements in an efficient manner, now and in the future.

10-6 Distribution Channel The route from the producer forward through the distributors to the customer

10-7 Demand Management Managing the demand for goods or services along the supply chain. Demand can be managed through such mechanisms as products, pricing, promotion, and distribution.

10-8 Logistics Management If broadly defined, it is the same as supply chain management. Narrowly defined, logistics management is concerned with inbound transportation and outbound distribution.

10-9 A Typical Supply Chain

10-10 System Interactions (System Dynamics in Supply Chains) Supply chain is a highly interactive system. Decisions in each part of the chain affect the other parts. There is an accelerator (bull whip) effect The best way to improve a supply chain is to reduce the total replenishment time and to feed back actual demand information to all levels.

10-11 Widget Example (Figure 10.2): Retail Level

10-12 Widget Example (Figure 10.2): Wholesale Level

10-13 Widget Example (Figure 10.2): Factory Level

10-14 Coordination in the Supply Chain Need for coordination both within firms and across firms Supply chains must be managed across organizational boundaries. Parallel between supply chain and quality improvement

10-15 Measuring Supply Chain Performance (1) Delivery—on time delivery of entire orders. Quality –Customer satisfaction –Customer loyalty Time –Total replenishment time –Cash to cash cycle Days in inventory + days in accts receivable-days in accounts payable

10-16 Measuring Supply Chain Performance (2) Flexibility –Time to change volume or product mix by a certain percentage –Maximum percentage of change in volume or product mix in fixed time perion Cost –Total delivered cost –Value added or productivity

10-17 Supply Chain Strategies Functional products—commodity-like –Efficient, low cost supply chain Innovative products –Flexible, fast supply chain Firms should sort their products and apply the appropriate strategies

10-18 Structural Improvement Basic Ways to Improve Supply Chain Structure: –Change structure Capacity, Facilities, Process technology, vertical integration –Change infrastructure People, Information systems, Organization, Production and inventory control, Quality control systems

10-19 Forms of Structural Change in a Supply Chain Forward and Backward Integration Major process simplification Changing the configuration of factories, warehouses, or retail locations Major product redesign Outsourcing logistics to a third party.

10-20 Improvement in Infrastructure Cross-functional teams Partnerships with suppliers and customers Set-up time reduction to reduce lot sizes Integrated information systems Cross-docking—keeps goods out of the warehouses.

10-21 The Internet and Supply Chains Fundamental processes in supply chains: –Order placement –Order fulfillment e-Procurement and its types Potential problems with e-Procurement

10-22 Processes for e-Procurement (Figure 10.3) RequirementSelectionRequisitionApproval REQUEST RequisitionSourceNegotiateContract BUY Confirm Process Order ShipInvoice SUPPLY ReceiveDeliverMatchPay PAYMENT

10-23 Types of e-procurement On-line catalogs listing products, prices, etc. Third-part auctions—reverse auctions Private exchanges to connect suppliers

10-24 Problems with e-procurement Too much focus on technology; not enough on systems Insufficient concern about value to both partners Fragmented efforts within and across companies Record accuracy and data security issues

10-25 Virtual Supply Chains “Virtual Companies”: –Highly flexible—no fixed assets –Successful in highly dynamic environment –Made feasible by computers and the Internet –May lead to “hollow corporations” or shell companies Virtual Supply Chain consists of at least one virtual company that coordinates all activities of the supply chain

10-26 Summary Definitions and Terminology System Interactions Coordination in Supply Chain Measuring Supply Chain Performance Supply Chain Strategies Structural Improvement Improvement in Infrastructure The Internet and Supply Chains Virtual Supply Chains

10-27 End of Chapter Ten