1. Supply Chain Management
Dr Steve Childe

2. What is a supply chain?

3. What is a supply chain? What is a supply chain?
“Network of manufacturing & distribution sites that interact to procure & transform raw materials for producing finished goods to customers.” (Ballou 1999)

4. What is a supply chain?
A Supply Chain Operations Reference (SCOR) model by the Supply-Chain Council:
Return
Return
Enable
(SCOR 2000)

5. What is a supply chain? A Network View (Ballou 1998) Procurement
Raw
Material
Manufacturers
Assemblers
Warehouses
Customers
Procurement
Production
Distribution
Stages
(Ballou 1998)

6. What is a supply chain? A Cycle View Customer Retailer Distributor
Customer Order Cycle
Retailer
Replenishment Cycle
Distributor
Manufacturing Cycle
Manufacturer
Procurement Cycle
Supplier
(Chopra & Meindl 2001)

7. What is a supply chain?
Flows in a Supply Chain
Supplier
Customer

8. What is a supply chain? Materials Flow in a Supply Chain Producers
Distributors
Suppliers
Consumers
Recyclers
Collectors
Reverse Channel

9. What is a supply chain? Dynamic nature of the supply chain
Customer demand and supplier capabilities change over time
Relations in the chain evolve over time
Competitors interact over time
Customer and supplier interact over time

10. Porter’s Value Chain

11. Strategic Issues
Fit with Strategy
Responsiveness
Efficiency

12. Changes during Life Cycle (Chopra & Meindl)

14. Performance Metrics
How does your supply chain perform to suit your (or your customers’)
Quantity / lot size?
Variety (from same source)?
Service level (=response time)?
Price?
Innovation?
Other performance measures??

15. Relationships
Adversarial - instant negotiation on price and delivery – Win-Lose
Partnership – long term, sharing information and expertise – The Win-Win

17. Effects of Interdependence (Kumar 1996)
Our
Organisation’s
(Buyer’s)
Dependence
High
HOSTAGE
Supply Partner relatively
powerful
EFFECTIVE
RELATIONSHIP
High level of
Interdependence
Low
APATHY
Low level of
interdependence
DRUNK WITH POWER
Buyer Organisation
relatively powerful
Low
High
Partner’s (Supplier’s /Seller’s) Dependence

19. Who determines the style of relationship?
Sako: companies decide whether to become partners and to trust one another;
Contractual Trust
keeping promises e.g. pay, keep confidential
Competence Trust
to do the job properly e.g. quality
Goodwill Trust
trusted not to exploit the other – impossible to put in contract

21. Outsourcing Buying things you previously would make
Womack: Toyota makes 27% of its cars (by value add) while GM makes 70% (Womack et al 1990).
Which is the best car?
Current average 70-80% outsourced
Outsourcing is about buying services as well as materials

22. The decision logic of outsourcing (Slack)
Does company have specialized knowledge?
Is significant operations performance improvement likely?
Is company’s operations performance superior?
Is activity of strategic importance?
Explore outsourcing this activity No No No No
Yes
Yes
Yes
Yes
Explore keeping this activity in-house

23. Forrester effect (Bullwhip effect)
Fairly consistent demand leads unconnected suppliers to carry small safety stocks.
An increase in customer demand might lead a supplier to increase the safety stock.
This results in an amplified demand to the next supplier.

24. Forrester effect
The effect is such that a 10% increase can rise to 40% over three stages.
This is extremely difficult to forecast!

25. Lee H L, Padmanabhan V, Seungjin Whang
Wholesaler
Lee H L, Padmanabhan V, Seungjin Whang

26. SCM Issues Win-win relationships Integration and strategy match
Power and pressure
Outsourcing (or not)
Co-ordination of activities by information flow
Long-term collaboration
Who controls the whole chain?

27. References
Chopra S and Meindl P, 2002, Supply Chain Management: Strategy, Planning and Operation, Prentice Hall, Upper Saddle River NJ USA
Kumar N, 1996, The power of trust in manufacturer-retailer relationships, Harvard Business Review, Nov-Dec pp92-106
Lee H L, Padmanabhan V and Seungjin Whang, 1997, The bullwhip effect in supply chains, Sloan Management Review, Spring,
Porter M E, 1985, Competitive Advantage, The Free Press, New York
Sako M, 1992, Prices, Quality and Trust, Cambridge University Press