1. Level Two Supply Chain Management
Supply Chain Management I

2. Learning Objectives
To understand what is meant by the term supply chain management
To understand the traditional supply chain
Be able to apply the traditional supply chain

3. Definitions No one set definition Often seen as an umbrella term
Confusion with the term ‘logistics’.
The term ‘supply chain management’ began to appear in the 1980s.

4. SCM Definitions
Slack et al (2013) define a supply chain as a "strand of linked operations".
Cox et al (1995) define supply chain as the functions within and outside a company that enable the value chain to make products and provide services to the customer.
Heizer and Render (2010) define SCM as the "management of activities that produce materials and services, transform them into intermediate goods and final products, and deliver them through a distribution system."

5. Definition Confusion
Supply Chain Management is not just another term for logistics, purchasing, warehousing, manufacturing et cetera individually.
It is instead about managing all of the activities required to make raw materials into useable goods or services required by the end customer.

6. The Value Chain

7. The Traditional Supply Chain
Flow of Goods
Suppliers
Manufacturers
Distributors
Retailers
End Customers
Flow of Information

8. Supply Chain Objectives
What are we trying to achieve?
Customer requirements
Quality
Speed
Dependability
Flexibility
Cost

9. The Traditional Supply Chain
Flow of Goods
Suppliers
Manufacturers
Distributors
Retailers
End Customers
Flow of Information

10. The Traditional Supply Chain
Consider the supply chains from the earlier lecture:
What path do they take along the traditional supply chain? ? ?

11. Chair Suppliers Raw material - Wood - Forrest Manufacturers Craftsman
Distributors
Large company considerations
Retailers
E.G. IKEA
End Customer

12. Car Much more complex Suppliers Manufacturers Distributors Retailers
End Customer

13. Jaguar Production

14. Looks Simple? What about everything you did not see? Sub assemblies
Deliveries from various suppliers
Back office staff ensuring invoices and wages are paid
Transportation to the customer
Customers specific requirements being taken and used.
And more!

15. Communication Key to supply chain success
Without some form of communication how do you know what the customer wants?
Or, when to produce something
Or, have materials in stock?

16. The Traditional Supply Chain
Flow of Goods
Suppliers
Manufacturers
Distributors
Retailers
End Customers
Flow of Information

17. The Bullwhip Effect Sometimes referred to as the Forrester Effect
Small disturbances downstream
Become larger disturbances, errors, volatility further up the supply chain
Uncertainty caused from distorted information

18. Example Your company has over ordered product x.
In order to reduce the stock levels of x you promote the product and offer 50% off!
Sales (demand) goes up
You sell out but the orders keep coming
You go to your supplier and place a relatively large order to satisfy customer needs
What happens next?

19. Example continued Your suppliers stocks get very low
They become worried and go to their suppliers (the factory) and order more
In order to meet the orders the factory has to increase production (supply).
Lots of back orders
Orders are finally fulfilled. Production levels need to change again.

20. Bullwhip Illustration

21. Bullwhip - Problems Unnecessary capacity adjustments Excess inventory
Quality issues
Increased raw material costs
Overtime expenses
Increased shipping costs
Customer service issues
Longer lead times
Unnecessary capacity adjustments

22. Bullwhip - Causes Un-forecasted sales promotion Sales incentives
Lack of customer confidence
Products being returned
Shipping incentives

23. Bullwhip - Solutions Improve communication
Improve quality of forecast data
Work with the supply chain
Share information

24. To Do Reading Refer to the weekly reading list on moodle
Online activity

25. Today.....
We now know:
What is meant by the term supply chain management.
What the traditional supply chain is and what it looks like.
How the traditional supply chain is applied real world examples.

26. References
Cox, J., Blackstone, J., Spencer, M. (1995) APICS Dictionary. Virginia: American Production and Inventory Control Society
Heizer, J., and Render, B. (2010) Operations Management. 10th edn. Harrow: Pearson
Porter, M. (1985) Competitive Advantage. New York: Free Press
Slack, N., Brandon-Jones, A., and Johnston, R. (2013) Operations Management. 7th edn. Harrow: Pearson