1. Supply Chain Management
Chapter 13 Supply Chain Management
Chapter 13
Supply Chain Management
MKTG9
Lamb, Hair, and McDaniel
© 2016 Cengage Learning. All Rights Reserved.

2. © 2016 Cengage Learning. All Rights Reserved.
Chapter 13 Supply Chain Management
LEARNING OUTCOMES
13-1 Define the terms supply chain and supply chain management, and discuss the benefits of supply chain management
13-2 Discuss the concepts of internal and external supply chain integration and explain why each of these types of integration is important
13-3 Identify the eight key processes of excellent supply chain management and discuss how each of these processes affects the end customer
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3. © 2016 Cengage Learning. All Rights Reserved.
Chapter 13 Supply Chain Management
LEARNING OUTCOMES
13-4 Understand which supply chain functions affect business success, and how
13-5 Understand the importance of sustainable supply chain management to modern business operations
13-6 Discuss new technology and emerging trends in supply chain management
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4. Supply Chains and Supply Chain Management
Chapter 13 Supply Chain Management
Supply Chains and Supply
Chain Management
13-1
Define the terms supply chain
and supply chain management,
and discuss the benefits
of supply chain management
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5. © 2016 Cengage Learning. All Rights Reserved.
Chapter 13 Supply Chain Management
Supply Chain
The connected chain of all of the business entities, both internal and external to the company, that perform or support the logistics function.
Notes:
Many companies are turning to supply chain management for competitive advantage.
A company’s supply chain includes all of the companies involved in all of the upstream and downstream flows of products, services, finances, and information, from initial suppliers (the point of origin) to the ultimate customer (the point of consumption).
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6. Supply Chain Management
Chapter 13 Supply Chain Management
Supply Chain Management
A management system that coordinates and integrates all of the activities performed by supply chain members into a seamless process, from the source to the point of consumption, resulting in enhanced customer and economic value.
Notes:
Visualizing the entire supply chain allows managers to maximize strengths and efficiencies at each level of the process to create a highly competitive, customer-driven supply system.
Understanding and integrating supply and demand information at every level will allow supply chain managers to optimize their decisions, reduce waste, and respond quickly to sudden changes in the supply chain.
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7. Benefits of Supply Chain Management
Chapter 13 Supply Chain Management
Benefits of Supply Chain Management
Supply chain oriented companies commonly report:
Lower inventory, transportation, warehousing, and packaging costs
Greater supply chain flexibility
Improved customer service
Higher revenues
Increased performance and profitability
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8. Supply Chain Integration 13-2 Discuss the concepts of internal
Chapter 13 Supply Chain Management
Supply Chain
Integration
13-2
Discuss the concepts of internal
and external supply chain
integration and explain why each
of these types of
integration is important
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9. Supply Chain Integration
Chapter 13 Supply Chain Management
Supply Chain Integration
A systems approach where the overall performance of the chain is greater than the sum of its parts.
Occurs when multiple functional areas coordinate business processes to seamlessly link to one another.
Notes:
In a world-class supply chain, the customer may not know where the business activities of one firm or business unit end and where those of another begin—all the participating firms and business units appear to be reading from the same script.
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10. Internal Supply Chain Integration
Chapter 13 Supply Chain Management
Internal Supply Chain Integration
Management practices that reflect a highly coordinated effort between supply chain firms or across business functions within the same or different firms are said to be “integrated.”
From an internal perspective, the very best companies develop a managerial orientation toward demand-supply integration (DSI).
Notes:
Under the DSI philosophy, those functional areas in the company charged with creating customer demand communicate frequently and are synchronized with the parts of the business charged with fulfilling the created demand.
In short, companies operating under a DSI philosophy are better at their business because all of the different divisions within the company “play from the same sheet of music.”
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11. External Supply Chain Integration
Chapter 13 Supply Chain Management
External Supply Chain Integration
Material and Service Supplier Integration
Customer Integration
Relationship Integration
Measurement Integration
Technology and Planning Integration
Firm-to-Firm Social Interactions
Operational Planning and Control
Notes:
Firms’ success in achieving each of these types of integration is very important.
Highly integrated supply chains (those that are successful in achieving many or all of these types of integration) have been shown to be better at satisfying customers, managing costs, delivering high-quality products, enhancing productivity, and utilizing company or business unit assets, all of which translate into greater profitability for the firms and their partners working together in the supply chain.
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12. Supply Chain Integration
Chapter 13 Supply Chain Management
Supply Chain Integration
Relationship
Integration
The ability of two or more companies to develop social connections that serve to guide their interactions when working together.
The performance assessment of the supply chain as a whole that also holds each individual firm or business unit accountable for meeting its own goals.
Measurement
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13. Supply Chain Integration
Chapter 13 Supply Chain Management
Technology and planning integration
The creation and maintenance of information technology systems that connect managers across and through the firms in the supply chain.
Material and service supplier integration
Requires firms to link seamlessly to those outsiders that provide goods and services to them so that they can streamline processes and provide quality customer experiences.
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14. Supply Chain Integration
Chapter 13 Supply Chain Management
A competency that enables firms to offer long-lasting, distinctive, value-added offerings to those customers who represent the greatest value to the firm or supply chain.
Customer Integration
Notes:
Organizational success in achieving both the internal and external types of integration is very important.
Integration involves a balance between barriers and enablers. Companies that work closely with their suppliers encounter problems such as corporate culture, information hoarding, and trust issues.
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15. Key Processes of Supply Chain Management
Chapter 13 Supply Chain Management
Key Processes of Supply
Chain Management
13-3
Identify the eight key processes
of excellent supply chain
management and discuss
how each of these processes
impacts the end customer
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16. Key Business Processes
Chapter 13 Supply Chain Management
Customer relationship management
Customer service management
Demand management
Order fulfillment
Manufacturing flow management
Supplier relationship management
Product development and commercialization
Returns management
Notes:
Business processes are composed of bundles of interconnected activities that stretch across firms in the supply chain.
There are eight critical business processes on which supply chain managers must focus. They are listed on this slide.
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17. Customer Relationship Management
Chapter 13 Supply Chain Management
Customer Relationship Management
CRM allows companies to prioritize their marketing focus on different customer groups according to each group’s long-term value to the company or supply chain.
Notes:
The customer relationship management process provides a set of comprehensive principles for the initiation and maintenance of customer relationships and is often carried out with the assistance of specialized CRM computer software.
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18. Customer Service Management
Chapter 13 Supply Chain Management
Customer Service Management
The customer service management process presents a multi-company, unified response system to the customer whenever complaints, concerns, questions, or comments are voiced.
Notes:
Whereas the customer relationship management process is designed to identify and build relationships with good customers, the customer service management process is designed to ensure that those customer relationships remain strong.
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19. © 2016 Cengage Learning. All Rights Reserved.
Chapter 13 Supply Chain Management
Demand Management
The demand management process seeks to align supply and demand throughout the supply chain by anticipating customer requirements at each level and create demand-related plans of action prior to actual customer purchasing behavior.
Notes:
Demand management seeks to minimize the costs of serving multiple types of customers who have variable wants and needs.
It is very difficult to predict exactly what items and quantities customers will buy prior to purchase; however, much of the uncertainty in demand planning can be mitigated by conducting collaborative planning, forecasting, and replenishment (CPFR) activities with the company’s customers and suppliers.
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Chapter 13 Supply Chain Management
Order Fulfillment
The order fulfillment process is a highly integrated process, often requiring persons from multiple companies and multiple functions to come together and coordinate to create customer satisfaction at a given place and time.
Notes:
One of the most fundamental processes in supply chain management is the order fulfillment process, which involves generating, filling, delivering, and providing on-the-spot service for customer orders.
When the order fulfillment process is managed diligently, the amount of time between order placement and receipt of the customer’s payment following order shipment (known as the order-to-cash cycle) is minimized as much as possible.
Since many firms do not view order fulfillment as a core competency, they often outsource this function to a third party logistics firm that specializes in the order fulfillment process.
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21. Manufacturing Flow Management
Chapter 13 Supply Chain Management
Manufacturing Flow Management
The manufacturing flow management process is concerned with ensuring that firms in the supply chain have the needed resources to manufacture with flexibility and to move products through a multi-stage production process.
Notes:
The goals of the manufacturing flow management process are centered on leveraging the capabilities held by multiple members of the supply chain to improve overall manufacturing output in terms of quality, delivery speed, and flexibility, all of which tie to profitability.
Depending on the product, supply chain managers may choose between a lean or agile supply chain strategy.
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22. Supplier Relationship Management
Chapter 13 Supply Chain Management
Supplier Relationship Management
The supplier relationship management process supports manufacturing flow by identifying and maintaining relationships with highly valued suppliers.
Notes:
Supplier relationship management provides structural support for developing and maintaining relationships with suppliers.
The management of supplier relationships is a key step toward ensuring that firms’ manufacturing resources are available, and thereby the supplier relationship management process has a direct impact on each supply chain member’s bottom-line financial performance.
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23. Product Development and Commercialization
Chapter 13 Supply Chain Management
Product Development and Commercialization
The product development and commercialization processes include the group activities that facilitates the joint development and marketing of new offerings among a group of supply chain partner firms.
Notes:
New products and services are not the sole responsibility of a single firm who serves as inventor, engineer, builder, marketer, and sales agent; rather, they are often the product of a multi-company collaboration with multiple firms and business units playing unique roles in new product development, testing, and launch activities, among others.
Designing a new product with the help of suppliers and customers can allow a company to introduce features and cost cutting measures into final products.
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24. © 2016 Cengage Learning. All Rights Reserved.
Chapter 13 Supply Chain Management
Returns Management
The returns management process enables firms to manage volumes of returned product efficiently, while minimizing returns-related costs and maximizing the value of the returned assets to the firms in the supply chain.
Notes:
In addition to the value of managing returns from a pure asset-recovery perspective, many firms are discovering that returns management also creates additional marketing and customer service touch points that can be leveraged for added customer value above and beyond normal sales and promotion-driven encounters.
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25. How Supply Chain Functions Impact Company Success
Chapter 13 Supply Chain Management
How Supply Chain Functions
Impact Company Success
13-4
Understand which supply
chain functions affect
business success, and how
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26. Supply Chain Functions
Chapter 13 Supply Chain Management
Supply Chain Functions
Critical to the success of any supply chain is orchestrating the means by which products move physically through it.
This is accomplished via the execution of three interdependent groups of supply chain functions that exist within a business organization.
Notes:
Orchestrating the physical means through which products move it is critical to any supply chain.
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27. Logistical Components of the Supply Chain
Chapter 13 Supply Chain Management
Logistical Components of the Supply Chain
Supply Chain Team
Supply Management
Inventory Control
Order Processing
Production
Warehousing and Materials Handling
Transportation
Logistics Information System
Notes:
The supply chain team, in concert with the supply chain information system, orchestrates the movement of goods, services, and information from the source to the consumer.
Supply chain teams typically cut across organizational boundaries, embracing all parties who participate in moving the product to market.
The supply chain consists of several interrelated and integrated components, as shown on this slide.
The best supply chain teams move beyond the organization to include external participants, such as suppliers, transportation carriers, and third-party logistics suppliers.
Members of the supply chain communicate, coordinate, and cooperate extensively.
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Chapter 13 Supply Chain Management
Supply Management
Supply managers plan strategies, develop specifications, select suppliers, and negotiate price and service levels.
The goal of most supply management activities is to reduce the costs of raw materials and supplies.
Notes:
Supply management professionals are on the front lines of the organization, facing the supply base.
The supply management function’s ability to foster supply chain relationships, share knowledge across different functions, and contribute to strategic plans not only increases the company’s ability to innovate and flexibility in responding to customer requests, but can also directly affect the company’s bottom line through cost reduction and quality improvement.
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Chapter 13 Supply Chain Management
Inventory Control
A method of developing and maintaining an adequate assortment of materials or products to meet a manufacturer’s or a customer’s demand.
Notes:
The organization’s inventory control system develops and maintains an adequate assortment of materials or products to meet a manufacturer’s or a customer’s demands.
Inventory decisions, for both raw materials and finished goods, have a big impact on supply chain costs and the level of service provided.
The goal of inventory management is to keep inventory levels as low as possible while maintaining an adequate supply of goods to meet customer demand.
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30. © 2016 Cengage Learning. All Rights Reserved.
Chapter 13 Supply Chain Management
Inventory Control
Most companies carry inventory as a sort of insurance policy against customer stockouts:
Cycle stocks
Safety stocks
In-transit inventory
Work-in-process inventory
Seasonal inventory
Notes:
Cycle stocks of inventory include those items that are expected to be sold as finished goods (or the materials that go into making finished goods) in a given demand period.
Safety stocks, also called buffer stocks, are extra allotments of inventory that companies sometimes choose to hold.
At any given time, companies may also have in-transit inventory moving into the business from a suppliers or out on the way to a customer.
Work-in-process inventory reflects inventory that is being assembled or manufactured from its raw state into finished goods for sale.
During certain times of the year when sales are traditionally higher, the company may hold some seasonal inventory to augment the demand in excess of cycle stock that is expected to occur.
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31. © 2016 Cengage Learning. All Rights Reserved.
Chapter 13 Supply Chain Management
Inventory Control
Tools for managing inventory include:
Materials requirement planning (MRP) or materials management
Supplier to manufacturer
Distribution resource planning (DRP)
Manufacturer to end user
Automatic replenishment programs
Minimal forecasting
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32. © 2016 Cengage Learning. All Rights Reserved.
Chapter 13 Supply Chain Management
Order Processing
A system whereby orders are entered into the supply chain and filled. Order processing is becoming more automated through the use of computer technology known as electronic data interchange (EDI).
Notes:
As an order enters the system, management must monitor two flows: the flow of goods and the flow of information.
Smart RFID (radio-frequency identification), an inventory handling and tracking system that employs radio-frequency electromagnetic fields to transfer and read product data via an electronic tag, is another type of advanced computer technology that is helping companies manage their supply chains.
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33. Production Scheduling
Chapter 13 Supply Chain Management
Push / Pull
Strategy
Traditional Focus
Push
Start of Production
Manufacturing
Inventory- Based
Mass Production
Customer Focus
Pull
Customer-Order Based
Mass Customization
Notes:
In a traditional mass-marketing manufacturing, production begins when forecasts call for additional products to be made or inventory is low, called build-to-stock.
In a customer-focused “pull” manufacturing environment, production of goods is not started until an order is placed by the customer specifying the desired configuration, also known as mass customization or build-to-order.
In this environment of customer demand and mass customization, supply chains need to be flexible and be able to shift production based on demand.
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Chapter 13 Supply Chain Management
Postponement
A hybrid strategy that takes advantages from build-to-stock and build-to-order strategies.
Product based on generic forecasts
Shipped to locations near major customers
Customer places order and manufacturing is completed to customer’s specifications.
Notes:
Customer can receive individualized products based on his needs and the manufacturer is still able to have the cost savings of building to stock.
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35. Warehousing and Materials Handling
Chapter 13 Supply Chain Management
Warehousing and Materials Handling
Materials-Handling System
a method of moving inventory into, within, and out of the warehouse.
Most manufacturers today have moved to automated materials-handling systems to minimize the amount of handling.
Notes:
Most manufacturers keep some safety stock on hand in the event of an emergency. Additionally, inventory may be stored for seasonally-demand products.
Storage helps manufacturers manage supply and demand.
A materials-handling system moves inventory into, within, and out of the warehouse, performing the functions shown on this slide.
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Chapter 13 Supply Chain Management
Transportation
Air
Water
Pipe
Truck
Rail
Notes:
Supply chain logisticians must decide which mode of transportation to use to move products from supplier to producer and from producer to buyer. These decisions are related to other logistics decisions. The five major modes of transportation are listed on this slide.
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37. Transportation Mode Choice
Chapter 13 Supply Chain Management
Transportation Mode Choice
Supply chain managers choose a mode of transportation on the basis of several criteria:
Cost
Transit time
Reliability
Capability
Accessibility
Traceability
Notes:
Supply chain managers choose a mode of transportation on the basis of the criteria shown on this slide.
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38. 13.1 Criteria for Ranking Modes of Transportation Highest Lowest
Chapter 13 Supply Chain Management
Relative Cost
Air
Truck
Rail
Pipe
Water
Transit Time
Reliability
Capability
Accessibility
Traceability
Highest
Lowest
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39. Supply Chain Technologies
Chapter 13 Supply Chain Management
Supply Chain Technologies
The logistics information system serves as the link connecting all of the operational components of the supply chain.
Notes:
The components of the system include, for example, software for materials acquisition and handling, warehouse-management and enterprise-wide solutions, data storage and integration in data warehouses, mobile communications, electronic data interchange, radio-frequency identification (RFID) chips, and the Internet.
Working together, the components of the logistics information system are the fundamental enablers of successful supply chain management.

40. Sustainable Supply Chain Management 13-5 Understand the importance of
Chapter 13 Supply Chain Management
Sustainable Supply
Chain Management
13-5
Understand the importance of
sustainable supply chain management
to modern business operations
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41. © 2016 Cengage Learning. All Rights Reserved.
Chapter 13 Supply Chain Management
Sustainable Supply
Chain Management
Sustainable supply chain management involves the integration and balancing of environmental, social, and economic thinking into all phases of the supply chain management process.
Notes:
In response to the need for firms to both reduce costs and act as leaders in protecting the natural environment, many are adopting sustainable supply chain management principles as a key part of their supply chain strategy.
By enacting sustainable supply chain management principles, companies can simultaneously generate cost savings, protect the Earth’s natural resources, and ensure that socially responsible business practices are enacted.
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42. Discuss new technology and emerging trends in supply chain management
Chapter 13 Supply Chain Management
Trends in Supply
Chain Management
13-6
Discuss new technology and emerging trends in supply chain management
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43. Trends in Supply Chain Management
Chapter 13 Supply Chain Management
Trends in Supply Chain Management
Electronic distribution
Supply Chain Risk, Security,
and Resilience
Outsourcing Logistics Functions
Notes:
Several technological trends are affecting the job of the supply chain manager:
Outsourcing of logistics functions is a rapidly growing segment in which a manufacturer or supplier turns over the entire or partial function of supply chain management to an independent third party.
With global unrest increasing, businesses have begun paying closer attention to the security of their supply chain from both human events and natural events.
Electronic distribution includes any kind of product or service that can be distributed electronically. For instance, computer software can be purchased and downloaded electronically.
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44. Outsourcing Logistics Functions
Chapter 13 Supply Chain Management
Outsourcing Logistics Functions
Outsourcing Benefits
Reduces inventories
Locates stock at fewer plants and distribution centers
Provides same or better levels of service
Notes:
Outsourcing, or contract logistics, is a rapidly growing initiative in which a manufacturer or supplier turns over an entire logistical function (often buying and managing transportation, warehousing, and/or light postponed manufacturing) to an independent third-party logistics company (3PL).
fourth-party logistics companies (4PLs) or logistics integrators, create and manage entire solutions for getting products where they need to be, when they need to be there.
American companies have been offshoring, or outsourcing logistics to service providers located in countries with lower labor costs, such as China or India.
Nearshoring to locations such as Mexico or the Caribbean nations ensures low costs while reducing supply chain risk.
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45. Supply Chain Risk, Security, and Resiliency
Chapter 13 Supply Chain Management
Supply Chain Risk, Security, and Resiliency
The management of supply chain risk is a critical business focus.
Proactive supply chain security measures seek to protect key inventory and assets while reactive supply chain resiliency measures ensure that the supply chain is back up and running as soon as possible in the event that a disruption occurs.
Notes:
Modern companies undertake contingency and crisis planning to mitigate the effects of disruptions such as terrorist attacks, disastrous weather events or other acts of God, systems failures such power grid failure or widespread computer viruses, and volatile changes in supply or demand.
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46. Electronic Distribution
Chapter 13 Supply Chain Management
Electronic Distribution
A distribution technique that includes any kind of product or service that can be distributed electronically, whether over traditional forms such as fiber-optic cable or through satellite transmission of electronic signals.
Three-dimensional printing is the newest method for distributing products. Special printers create products based on a digital file using liquefied raw materials shipped to the printer’s location.
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47. Global Logistics and Supply Chain Management
Chapter 13 Supply Chain Management
Global Logistics and Supply Chain Management
Strategically, there are many reasons why a company might wish to globalize its supply chain.
At the same time, globalization has brought about great uncertainty for modern companies, and specifically, their supply chains.
Notes:
The allure of foreign markets is strong, due to increasing demand for imported products worldwide. Cheap labor advantages and trade barriers/tariffs have encouraged firms to expand their global manufacturing operations.
Moving operations offshore exposes companies to risks associated with geopolitical conflict, foreign nationalization of assets and knowledge diffusion, and highly variable quality standards. Foreign suppliers are often less reliable, and due to the lengthening of the supply chain, variability in transportation service can lead to service failures.
Companies moving offshore must carefully consider the pros and cons, and build supply management systems that can manage very diverse tasks. Logistically, it is critical for importers of any size to understand and cope with the legalities of trade in other countries.
As the world continues to globalize, supply chain management will undoubtedly continue to take on a globalized flavor.
Efforts to achieve world-class global supply chain management mean that the balancing of supply and demand—and the satisfaction of more and more customers worldwide—are becoming a reality for many companies.
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Chapter 13 Supply Chain Management
Chapter 13 Video
Geoffrey B. Small
Geoffrey B. Small, a super-luxury fashion designer, discusses how he sources the materials needed to develop his clothing lines. He also discusses how he makes distribution decisions based on his micro production process and global distribution channels.
CLICK TO PLAY VIDEO
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