1. 1 Copyright ©2009 by Cengage Learning Inc. All rights reserved Designed by Eric Brengle B-books, Ltd. CHAPTER 14 Prepared by Amit Shah Frostburg State University Marketing Lamb, Hair, McDaniel 10 Supply Chain Management

2. Copyright ©2009 by Cengage Learning Inc. All rights reserved Learning Outcomes 2 LO I LO 2 LO 3 Define the terms supply chain, supply chain management, and supply chain orientation, and discuss the benefits of supply chain management Discuss the concept of supply chain integration and explain why each of the six types of integration is important Identify the eight key processes of excellent supply chain management, and discuss how each of these processes impacts the end customer

3. Copyright ©2009 by Cengage Learning Inc. All rights reserved Learning Outcomes 3 Discuss the key strategic decisions supply chain managers must make when designing their companies’ supply chains Describe the logistical components of the supply chain Explain why supply chain performance measurement is necessary and important Discuss new technology and emerging trends in supply chain management LO 5 LO 6 LO 4 LO 7

4. Copyright ©2009 by Cengage Learning Inc. All rights reserved Supply Chains and Supply Chain Management 4 Define the terms supply chain, supply chain management, and supply chain orientation, and discuss the benefits of supply chain management LO I

5. Copyright ©2009 by Cengage Learning Inc. All rights reserved Supply Chains 5 Supply Chain LO I The connected chain of all of the business entities, both internal and external to the company, that perform or support the logistics function

6. Copyright ©2009 by Cengage Learning Inc. All rights reserved Supply Chains 6 Supply Chain Management Supply Chain Management LO I 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

7. Copyright ©2009 by Cengage Learning Inc. All rights reserved Supply Chains 7 LO I

8. Copyright ©2009 by Cengage Learning Inc. All rights reserved Supply Chain Managers 8 LO I Supply chain managers are responsible for  Making strategic decisions  Management of information through supply chain  Coordinating relationships between company and external partners

9. Copyright ©2009 by Cengage Learning Inc. All rights reserved Benefits of Supply Chain Management 9 LO I Supply chain oriented companies commonly report: Lower inventory, transportation, warehousing, and packaging costs Greater supply chain flexibility Improved customer service Higher revenues Increased profitability

10. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME Supply Chain Management 10 LO I

11. Copyright ©2009 by Cengage Learning Inc. All rights reserved Supply Chain Integration 11 Discuss the concept of supply chain integration and explain why each of the six types of integration is important LO 2

12. Copyright ©2009 by Cengage Learning Inc. All rights reserved Supply Chain Integration 12 LO 2 System Approach System Approach A key principle of supply chain management – that multiple firms work together to perform tasks as a single, unified system, rather than as several individual companies acting in isolation. Supply Chain Integration Supply Chain Integration When multiple firms in a supply chain coordinate their activities and processes so that they are seamlessly linked to one another in an effort to satisfy the customer.

13. Copyright ©2009 by Cengage Learning Inc. All rights reserved Supply Chain Integration 13 LO 2 Material and service supplier Integration Internal Operations Integration Customer Integration Relationship Integration Measurement Integration Technology and planning Integration Firm-to-Firm Social Interactions Operational Planning and Control Customer Integration

14. Copyright ©2009 by Cengage Learning Inc. All rights reserved Supply Chain Integration 14 LO 2 Relationship Integration Relationship Integration The ability of two or more companies to develop social connections that serve to guide their interactions when working together. Role Specificity Role Specificity When each firm in a supply chain has clarity in terms of knowing which firm is the leader, which firms are the followers, and which responsibilities are assigned to each firm.

15. Copyright ©2009 by Cengage Learning Inc. All rights reserved Relationship Integration 15 LO 2 High relationship integration allow entire supply chain to perform at a higher level Tend to be managed by formal or informal social guidelines Tend to be open to information sharing across firm/business unit boundaries Tend to practice equitable risk/reward sharing

16. Copyright ©2009 by Cengage Learning Inc. All rights reserved Measurement Integration 16 LO 2 Measurement Integration Measurement Integration 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 Activity- Based costing (ABC) An accounting method used in measurement integration to assess the costs associated with each supply chain activity

17. Copyright ©2009 by Cengage Learning Inc. All rights reserved Measurement Integration 17 LO 2 Managers in all firms and units must conduct functional assessments Firms in supply chain should agree on and commit to principles of ABC Must be a widely agreed upon set of supply chain metrics that are standards

18. Copyright ©2009 by Cengage Learning Inc. All rights reserved Technology and Planning Integration 18 LO 2 Technology and planning integration The creation and maintenance of information technology systems that connect managers across and through the firms in the supply chain

19. Copyright ©2009 by Cengage Learning Inc. All rights reserved Technology and Planning Integration 19 LO 2 Several firm-level and supply chain-level capabilities must be developed Firms in supply chain must become experts at information management Packets of information must be available in real-time Supply chain managers need strong internal communications capability

20. Copyright ©2009 by Cengage Learning Inc. All rights reserved Internal Operations Integration 20 LO 2 Internal Operations Integration Links internally performed work into a seamless process that stretches across departmental and/or functional boundaries, with the goal of satisfying customer requirements

21. Copyright ©2009 by Cengage Learning Inc. All rights reserved Internal Operations Integration 21 LO 2 Five distinct groups of activities: Firm must become cross-functionally unified Firm should seek to standardize operations/work processes Work processes should be simplified Process standards should be developed for internal benchmarks Overall logistical network of firm should be reconfigured

22. Copyright ©2009 by Cengage Learning Inc. All rights reserved Customer Integration 22 LO 2 Customer Integration Customer Integration 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 ABC Segmentation The supply-chain process whereby customers are placed into groups A, B, and C according to their overall long-term value to the firm and to the extent to which the firm can serve their desires

23. Copyright ©2009 by Cengage Learning Inc. All rights reserved Customer Integration Drivers 23 LO 2 Understand not all customers are alike Should use market segmentation Select customer groups for whom to provide highest levels of service

24. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME Supply Chain Integration 24 LO 2

25. Copyright ©2009 by Cengage Learning Inc. All rights reserved Key Processes of Supply Chain Management 25 Identify eight key processes of excellent supply chain management, and discuss how each of these processes impacts the end customer LO 3

26. Copyright ©2009 by Cengage Learning Inc. All rights reserved Key Processes 26 LO 3

27. Copyright ©2009 by Cengage Learning Inc. All rights reserved Customer Relationship Management 27 LO 3 Customer Relationship Management Process Customer Relationship Management Process The prioritization of a firm’s marketing focus on different customer groups according to each group’s long-term value to the company or supply chain; designed to identify and build relationships with good customers.

28. Copyright ©2009 by Cengage Learning Inc. All rights reserved Customer Service Management 28 LO 3 Customer Service Management Process Customer Service Management Process A multi-company, unified response system to the customer whenever complaints, concerns, questions, or comments are voiced; designed to ensure that customer relationships remain strong.

29. Copyright ©2009 by Cengage Learning Inc. All rights reserved Demand Management 29 LO 3 Demand Management Process Demand Management Process The alignment of supply and demand throughout the supply chain to anticipate customer requirements at each level and create demand-related plans of action prior to actual customer purchasing behavior.

30. Copyright ©2009 by Cengage Learning Inc. All rights reserved Order Fulfillment 30 LO 3 Order Fulfillment Process Order Fulfillment Process A supply chain management process that involves generating, filling, delivering, and providing on-the-spot service for customer orders.

31. Copyright ©2009 by Cengage Learning Inc. All rights reserved Manufacturing Flow Management 31 LO 3 Manufacturing Flow Management Process Manufacturing Flow Management Process A process that ensures that firms in the supply chain have the resources they need

32. Copyright ©2009 by Cengage Learning Inc. All rights reserved Supplier Relationship Management 32 LO 3 Supplier Relationship Management Process Supplier Relationship Management Process A supply chain management process that supports manufacturing flow by identifying and maintaining relationships with highly valued suppliers

33. Copyright ©2009 by Cengage Learning Inc. All rights reserved Product Development and Commercialization 33 LO 3 Product Development and Commercialization Process Product Development and Commercialization Process The group of activities that facilitates the joint development and marketing of new offerings among a group of supply chain partner firms.

34. Copyright ©2009 by Cengage Learning Inc. All rights reserved Returns Management 34 LO 3 Returns Management Process Returns Management Process A process that enables firms to manage volumes of returned product efficiently, while minimizing costs and maximizing the value of the returned assets to the firms in the supply chain.

35. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME Key Processes of Supply Chain Management 35 LO 3

36. Copyright ©2009 by Cengage Learning Inc. All rights reserved Strategic Supply Chain Management Decisions 36 Discuss the key strategic decisions supply chain managers must make when designing their companies’ supply chains LO 4

37. Copyright ©2009 by Cengage Learning Inc. All rights reserved Supply Chain Management 37 LO 4 Lean Supply Chain Management Lean Supply Chain Management Agile Supply Chain Management Agile Supply Chain Management The strategy that focuses primarily on the removal of waste from the supply chain to achieve the lowest total cost to the members of the supply chain system The supply chain strategy that focuses primarily on the ability of the firm to fulfill customer demand, even if this means somewhat higher costs The supply chain strategy that focuses primarily on the ability of the firm to fulfill customer demand, even if this means somewhat higher costs

38. Copyright ©2009 by Cengage Learning Inc. All rights reserved Lean versus Agile Supply Chain Management 38 LO 4

39. Copyright ©2009 by Cengage Learning Inc. All rights reserved Mapping The Supply Chain 39 LO 4

40. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME Logistics Function in the Supply Chain 40 LO 4

41. Copyright ©2009 by Cengage Learning Inc. All rights reserved Managing Logistical Components 41 Describe the logistical components of the supply chain LO 5

42. Copyright ©2009 by Cengage Learning Inc. All rights reserved Logistical Components of the Supply Chain 42 LO 5 Supply Chain Team Sourcing & Procurement Order Processing Inventory Control Warehouse & Materials Handling Transportation Logistics Information System

43. Copyright ©2009 by Cengage Learning Inc. All rights reserved Sourcing and Procurement Plan purchasing strategies Develop specifications Select suppliers Negotiate price and service levels Reduce costs 43 LO 5 The Role of Purchasing:

44. Copyright ©2009 by Cengage Learning Inc. All rights reserved Order Processing 44 Electronic Data Interchange LO 5 Information technology that replaces paper documents that accompany business transactions with electronic transmission of the information. http://www.walmartstores.com Online

45. Copyright ©2009 by Cengage Learning Inc. All rights reserved Inventory Management and Control 45 LO 5 Inventory Control System Inventory Control System A method of developing and maintaining an adequate assortment of materials or products to meet a manufacturer’s or a customer’s demand.

46. Copyright ©2009 by Cengage Learning Inc. All rights reserved Inventory Management and Control 46 LO 5 Materials Requirement Planning (MRP) Materials Requirement Planning (MRP) An inventory control system that manages the replenishment of raw materials, supplies, and components from the supplier to the manufacturer. Distribution Resource Planning (DRP) Distribution Resource Planning (DRP) An inventory control system that manages the replenishment of goods from the manufacturer to the final consumer.

47. Copyright ©2009 by Cengage Learning Inc. All rights reserved Inventory Replenishment Example 47 LO 5 MRP Sleep Right Mattress Retail Store Sleep Right Mattress Retail Store Sleep Right Distribution Center ABC Mattress Wholesaling Company Great Mattress Company Great Mattress Company

48. Copyright ©2009 by Cengage Learning Inc. All rights reserved Materials Handling Functions 48 LO 5 Receive goods into warehouse Dispatch the goods to temporary storage Recall, select, or pick the goods for shipment Identify, sort, and label goods

49. Copyright ©2009 by Cengage Learning Inc. All rights reserved Transportation 49 LO 5 Airways Water Pipelines Motor Carriers Railroads

50. Copyright ©2009 by Cengage Learning Inc. All rights reserved Transportation Mode Choice 50 LO 5  Cost  Transit time  Reliability  Capability  Accessibility  Traceability

51. Copyright ©2009 by Cengage Learning Inc. All rights reserved Criteria for Ranking Modes of Transportation 51 LO 5 Relative Cost Transit Time Reliability Capability Accessibility Traceability HighestLowest Air WaterPipeRailTruck WaterRailPipeTruckAir PipeTruckRailAirWater Truck RailTruckAirPipe RailAirWaterPipe AirTruckRailWaterPipe

52. Copyright ©2009 by Cengage Learning Inc. All rights reserved Supply Chain Performance Measurement 52 Explain why supply chain performance measurement is necessary and important LO 6

53. Copyright ©2009 by Cengage Learning Inc. All rights reserved Supply Chain Performance Measurement 53 LO 6 A good metric is characterized by five qualities: Creates understanding of strategic objectives and tactical plans Promotes behaviors that are consistent with achieving these objectives Allows for recording of actual results/outcomes Allows companies to compare themselves to competitors and customer expectations Motivates continuous improvement

54. Copyright ©2009 by Cengage Learning Inc. All rights reserved The Balanced Scorecard Approach 54 LO 6

55. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME Why is Supply Chain Performance Measurement Important? 55 LO 6

56. Copyright ©2009 by Cengage Learning Inc. All rights reserved Trends in Supply Chain Management 56 Discuss new technology and emerging trends in supply chain management LO 7

57. Copyright ©2009 by Cengage Learning Inc. All rights reserved Trends in Supply Chain Management 57 LO 7 Electronic distribution Outsourcing of logistics functions Advanced computer technology Globalization of supply chain management Outsourcing of logistics functions

58. Copyright ©2009 by Cengage Learning Inc. All rights reserved Advanced Computer Technology Automatic identification systems –Bar coding –Radio frequency technology Communications technology Supply chain software systems 58 LO 7

59. Copyright ©2009 by Cengage Learning Inc. All rights reserved Outsourcing Logistics Functions Reduce inventories Locate stock at fewer plants and distribution centers Provide same or better levels of service 59 Outsourcing Benefits LO 7

60. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME Emerging trends in supply chain management 60 LO 7