1. Supply Chain Management
Chapter 15
Supply Chain Management
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

2. Chapter 15: Learning Objectives
You should be able to:
LO 15.1 Explain the terms supply chain and logistics
LO 15.2 Name the key aspects of supply chain management
LO 15.3 List, and briefly explain, current trends in supply chain management
LO 15.4 Outline the benefits and risks related to outsourcing
LO 15.5 Explain what the main supply chain risks are, and what businesses can do to minimize those risks
LO 15.6 Describe some of the complexities related to global supply chains
LO 15.7 Briefly describe the ethical issues in supply chains and the key steps companies can take to avoid ethical problems
LO 15.8 Describe the three concerns of small businesses related to the supply chain and suggest ways to manage those concerns
LO 15.9 List several strategic, tactical, and operational responsibilities related to managing the supply chain
LO Discuss procurement in terms of the purchasing interfaces, the purchasing cycle, ethics, and centralized versus decentralized decision making
LO Briefly describe the key aspects of supplier management
LO Discuss the logistics aspects of supply chain management, including RFID technology
LO Discuss the issues involved in managing returns
LO Describe some of the challenges in creating an effective supply chain and some of the trade-offs involved

3. Supply Chain Supply Chain: Logistics:
the sequence of organizations - their facilities, functions, and activities - that are involved in producing and delivering a product or service
Logistics:
the part of a supply chain involved with the forward and reverse flow of goods, services, cash, and information.
LO 15.1

4. Key Aspects of SCM
The goal of SCM is to match supply to demand as effectively and efficiently as possible
Key issues:
Determining appropriate levels of outsourcing
Managing procurement
Managing suppliers
Managing customer relationships
Being able to quickly identify problems and respond to them
LO 15.2

5. Trends in SCM Trends affecting supply chain design and management:
Measuring supply chain ROI
“Greening” the supply chain
Re-evaluating outsourcing
Integrating IT
Adopting lean principles
Managing risks
LO 15.3

6. Benefits & Risks of Outsourcing
Lower prices may result from lower labor costs
The ability of the organization to focus on its core strengths
Permits the conversion of some fixed costs to variable costs
It can free up capital to address other needs
Some risks can be shifted to the supplier
The ability to take advantage of a supplier’s expertise
Makes it easier to expand outside of the home country
Risks
Inflexibility due to longer lead times
Increased transportation costs
Language and cultural differences
Loss of jobs
Loss of control
Lower productivity
Loss of business knowledge
Knowledge transfer and intellectual property concerns
Increased effort required to manage the supply chain
LO 15.4

7. Supply Chain Risks Supply Chain Risks Supply chain disruption
Natural disasters
Supplier problems
Quality Issues
Another form of disruption that may disrupt supplies and lead to product recalls, liability claims, and negative publicity
Loss of control of sensitive information
If suppliers divulge sensitive information to competitors, it can weaken a firm’s competitive position
LO 15.5

8. Global Supply Chains Global supply chains Complexities
Product design often uses inputs from around the world
Some manufacturing and service activities are outsourced to countries where labor and/or materials costs are lower
Products are sold globally
Complexities
Language and cultural differences
Currency fluctuations
Political instability
Increasing transportation costs and lead times
Increased need for trust amongst supply chain partners
LO 15.6

9. Small Business Concerns
Three small business SCM concerns:
Inventory management
Carry extra inventory as a way to avoid shortages due to supply chain interruption
Have backups for delivery from suppliers and to customers
Reducing risks
Use only reliable suppliers
Determine which suppliers are critical and get to know them and any challenges they have
Measure supplier performance
Recognize warning signs of supplier issues
Have plans in place to manage supply chain problems
International trade
Work with someone who has expertise to help oversee foreign suppliers
Set expectations for demand and timing
Do not rely on a single supplier
Build goodwill to help in negotiations and resolving any problem that arise
Consider using domestic suppliers if the risks of working with foreign suppliers are prohibitive
LO 15.8

10. Management Responsibility: Strategic
Certain strategic responsibilities have a major impact on the success of both supply chain management and the business itself:
Supply chain strategy alignment
Network configuration
Information technology
Products and services
Capacity planning
Strategic partnerships
Distribution strategy
Uncertainty and risk reduction
LO 15.9

11. Procurement
The purchasing department is responsible for obtaining the materials, parts, and supplies and services needed to produce a product or provide a service.
The goal of procurement
Develop and implement purchasing plans for products and services that support operations strategies
LO 15.10

12. Supplier Management Choosing suppliers Supplier audits
Supplier certification
Supplier relationship management
Supplier partnerships
CPFR (collaborative planning, forecasting, and replenishment)
Strategic partnering
LO 15.11

13. Logistics
Logistics
Refers to the movement of materials, services, cash, and information in a supply chain
Movements within a facility
Incoming shipments
Outgoing shipments
LO 15.12

14. Managing Returns Reverse Logistics
The process of transporting returned items
Products are returned to companies or third party handlers for a variety of reasons and in a variety of conditions
Elements of return management
Gatekeeping
Screening returned goods to prevent incorrect acceptance of goods
Avoidance
Finding ways to minimize the number of items that are returned
LO 15.13

15. Creating an Effective Supply Chain
It begins with strategic sourcing
Analyzing the procurement process to lower costs by reducing waste and non-value-added activities, increase profits, reduce risks, and improve supplier performance
There must be
Trust
Effective communication
Information velocity
Supply chain visibility
Event management capability
Performance metrics
LO 15.14