1. Supply Chain Management
Business Plug-In B8
Supply Chain Management

2. LEARNING OUTCOMES
List and describe the four drivers of supply chain management.
Explain supply chain management strategies focused on efficiency.
Explain supply chain management strategies focused on effectiveness.
Summarize the future of supply chain management.

3. INTRODUCTION
Supply Chain—Consists of all parties involved, directly or indirectly, in the procurement of a product or raw material
Supply Chain Management (SCM)—Involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability
This plug-in takes a detailed look at how an organization can create a supply chain strategy focusing on efficiency and effectiveness

4. SUPPLY CHAIN DRIVERS
The four primary drivers of supply chain management:
Facilities
Inventory
Transportation
Information
Organizations use these four drivers to support either a supply chain strategy focusing on efficiency or a supply chain strategy focusing on effectiveness

5. FACILITIES DRIVER 1: LOCATION
Facility—Processes or transforms inventory into another product, or it stores the inventory before shipping it to the next facility
Location Efficiency—Centralize the location to gain economies of scale, which increases efficiency
Location Effectiveness—Decentralize the locations to be closer to the customers, which increases effectiveness

6. FACILITIES DRIVER 2: CAPACITY
Capacity Efficiency—Minimal excess capacity with the ability to produce only what is required
Capacity Effectiveness—Large amounts of excess capacity that can handle wide swings in demand

7. FACILITIES DRIVER 3: OPERATIONAL DESIGN
Operational Design Efficiency—Product focus design allows the facility to become highly efficient at producing one single product, increasing efficiency
Operational Design Effectiveness—Functional focus design allows the facility to perform a specific function on many different types of products, increasing effectiveness

8. INVENTORY DRIVER 1: CYCLE INVENTORY
Cycle Inventory—The average amount of inventory held to satisfy customer demands between inventory deliveries
Cycle Inventory Efficiency—Holding small amounts of inventory and receiving orders weekly or even daily
Cycle Inventory Effectiveness—Holding large amounts of inventory and receiving inventory deliveries only once a month

9. INVENTORY DRIVER 2: SAFETY INVENTORY
Safety Inventory—Extra inventory held in the event demand exceeds supply
Safety Inventory Efficiency—Holding small amounts of safety inventory
Safety Inventory Effectiveness—Holding large amounts of safety inventory

10. TRANSPORTATION DRIVER 1: METHOD OF TRANSPORTATION
Transportation—Moves inventories between the different stages in the supply chain
Global Inventory Management System—Provides the ability to locate, track, and predict the movement of every component or material anywhere upstream or downstream in the supply chain
Method of transportation efficiency
Method of transportation effectiveness

11. TRANSPORTATION DRIVER 2: TRANSPORTATION ROUTE
Transportation Planning Software—Tracks and analyzes the movement of materials and products to ensure the delivery of materials and finished goods at the right time, the right place, and the lowest cost
Distribution Management Software—Coordinates the process of transporting materials from a manufacturer to distribution centers to the final customer
Transportation route efficiency
Transportation route effectiveness

12. INFORMATION DRIVER 1: INFORMATION SHARING
Information—An organization must decide how and what information it wants to share with its supply chain partners
Information Sharing Efficiency—Freely share lots of information to increase the speed and decrease the costs of supply chain processing
Information Sharing Effectiveness—Share only selected information with certain individuals, which will decrease the speed and increase the costs of supply chain processing

13. INFORMATION DRIVER 2: PUSH VS. PULL INFORMATON STRATEGY
Pull Information Strategy (Efficiency)—Supply chain partners are responsible for pulling all relevant information
Pull Technology—Pulls information
Push Information Strategy Effectiveness—Organization takes on the responsibility to push information out to its supply chain partners
Push Technology—Sends information

14. APPLYING A SUPPLY CHAIN DESIGN
Wal-Mart’s supply chain management strategy emphasizes efficiency, but also maintains adequate levels of effectiveness
Facilities Focus—Efficiency
Inventory Focus—Efficiency
Transportation Focus—Effectiveness
Information Focus—Efficiency

15. FUTURE TRENDS
Just-in-time supplier—Consumers purchasing products when they want, how they want, and at the price they want
Radio Frequency Identification (RFID)—Use active or passive tags in the form of chips or smart labels that can store unique identifiers and relay this information to electronic readers
Integrating RFID and software
RFID tags are evolving