1. INTRODUCTION TO SUPPLY CHAIN MANAGEMENT

2. What is a Supply Chain? A supply chain consists of the flow of products and services from: Raw materials manufacturers Component and intermediate manufacturers Final product manufacturers Wholesalers and distributors and Retailers Connected by transportation and storage activities, and Integrated through information, planning, and integration activities Many large firms are moving away from in-house Vertically Integrated structures to Supply Chain Management

3. What is a Supply Chain? 3 A supply chain consists of the flow of products and services from: Raw materials manufacturers Component and intermediate manufacturers Final product manufacturers Wholesalers and distributors and Retailers Connected by transportation and storage activities, and Integrated through information, planning, and integration activities Many large firms are moving away from in-house Vertically Integrated structures to Supply Chain Management

4. What is a Supply Chain? (Cont.) 4

5. What is Supply Chain Management? 5 The design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer Institute for Supply Management Managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer The Supply Chain Council The planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities … also includes coordination with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. Council of Supply Chain Management Professionals

6. What is Supply Chain Management? (Cont.) 6 Old paradigm - Firm gained synergy as a vertically integrated firm encompassing the ownership and coordination of several supply chain activities. Organizational cultures emphasized short-term, company focused performance. New paradigm - Firm in a supply chain focuses activities in its area of specialization and enters into voluntary and trust-based relationships with supplier and customer firms. All participants in the supply chain benefit. Boundaries are dynamic and extend from “the firm’s suppliers’ suppliers to its customers’ customers (i.e., second tier suppliers and customers).” Supply chains now deal with reverse logistics to handle returned products, warranty repairs, and recycling.

7. Importance of Supply Chain Management 7 Firms have discovered value-enhancing and long term benefits Who benefits most? Firms with: Large inventories Large number of suppliers Complex products Customers with large purchasing budgets

8. Importance of Supply Chain Management (Cont.) 8 Firms using Supply Chain Management: 1. Start with key suppliers 2. Move on to other suppliers, customers, and shippers 3. Integrate second tier suppliers and customers (second tier refers to the customer’s customers and the supplier’s suppliers)

9. Importance of Supply Chain Management (Cont.) 9 Cost savings and better coordination of resources are reasons to employ Supply Chain Management Reduced Bullwhip Effect- the magnified reduction of safety stock costs based on coordinated planning and sharing of information Collaborative planning, forecasting, and replenishment activities reduce the Bullwhip Effect and lead to better customer service, lower inventory costs, improved quality, reduced cycle time, better production methods, and other benefits.

10. The Foundations of Supply Chain Management 10 Supply Management Supplier management, supplier evaluation, supplier certification, strategic partnerships Operations Demand management, MRP, ERP, inventory visibility, JIT (AKA lean production & Toyota Production System), TQM (AKA Six Sigma) Distribution Transportation management, customer relationship management, distribution network, perfect order fulfillment, global supply chains, service response logistics Integration Process integration, performance measurement

11. The Foundations of Supply Chain Management (Cont.) 11 Purchasing Trends: Long term relationships Supplier management- improve performance through Supplier evaluation (determining supplier capabilities) Supplier certification (third party or internal certification to assure product quality and service requirements) Strategic partnerships- successful and trusting relationships with top-performing suppliers

12. Important Elements of Supply Chain Management (Cont.) 12 Operations Trends: Demand management- match demand to available capacity Linking buyers & suppliers via MRP and ERP systems Use JIT to improve the “pull” of materials to reduce inventory levels Employ TQM to improve quality compliance among suppliers

13. Important Elements of Supply Chain Management (Cont.) 13 Distribution Trends: Transportation management- tradeoff decisions between cost & timing of delivery/customer service via trucks, rail, water & air Customer relationship management- strategies to ensure deliveries, resolve complaints, improve communications, & determine service requirements Network design- creating distribution networks based on tradeoff decisions between cost & sophistication of distribution system

14. Important Elements of Supply Chain Management (Cont.) 14 Integration Trends: Supply Chain Process Integration- when supply chain participants work for common goals. Requires intrafirm functional integration. Based on efforts to change attitudes & adversarial relationships Supply Chain Performance Measurement- Crucial for firms to know if procedures are working

15. Current Trends in Supply Chain Management 15 Expanding the Supply Chain U.S. firms are expanding partnerships and building facilities in foreign markets The expansion involves: breadth- foreign manufacturing, office & retail sites, foreign suppliers & customers depth- second and third tier suppliers & customers

16. Current Trends in Supply Chain Management (Cont.) 16 Increasing Supply Chain Responsiveness Firms will increasingly need to be more flexible and responsive to customer needs Supply chains will need to benchmark industry performance and meet and improve on a continuous basis Responsiveness improvement will come from more effective and faster product & service delivery systems

17. Current Trends in Supply Chain Management- Cont. 17 Reducing Supply Chain Costs Cost reduction achieved through: Reduced purchasing costs Reducing waste Reducing excess inventory, and Reducing non-value added activities Continuous Improvement through Benchmarking- improve over competitors’ performance Trial & error Increased knowledge of supply chain processes