1. 1 Chapter 14: Supply Chain Management Prepared by Amit Shah, Frostburg State University Designed by Eric Brengle, B-books, Ltd. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

2. Learning Outcomes 2 LO 1 LO 2 LO 3 Define the terms supply chain and supply chain management, 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 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

3. 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 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

4. Supply Chains and Supply Chain Management 4 Define the terms supply chain and supply chain management, and discuss the benefits of supply chain management LO 1 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

5. Supply Chains 5 The connected chain of all the business entities, both internal and external to the company, that perform or support the logistics functions. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

6. Supply Chains 6 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. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

7. Supply Chains 7 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

8. Supply Chain Managers 8 Supply chain managers are responsible for  Making strategic decisions  Management of information through supply chain  Coordinating relationships between company and external partners Copyright 2010 by Cengage Learning Inc. All Rights Reserved

9. Benefits of Supply Chain Management 9 Supply chain oriented companies commonly report: Lower inventory, transportation, warehousing, and packaging costs Greater supply chain flexibility Improved customer service Higher revenues Increased profitability Copyright 2010 by Cengage Learning Inc. All Rights Reserved

10. Review Learning Outcome Supply Chain Management 10 LO 1 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

11. 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 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

12. Supply Chain Integration 12 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. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

13. Relationship Integration 13 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. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

14. Relationship Integration 14 High relationship integration allows the 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 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

15. Measurement Integration 15 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 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

16. Measurement Integration 16 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 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

17. Technology and Planning Integration 17 Technology and planning integration The creation and maintenance of information technology systems that connect managers across and through the firms in the supply chain Copyright 2010 by Cengage Learning Inc. All Rights Reserved

18. Technology and Planning Integration 18 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 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

19. Material and Service Supplier Integration 19 Material and Service Supplier Integration The strategic alignment between a firm and its supply chain materials and services providers that enables the firm to streamline work processes and provide smooth, high-quality customer experiences. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

20. Internal Operations Integration 20 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 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

21. Internal Operations Integration 21 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 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

22. Customer Integration 22 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 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

23. Customer Integration Drivers 23 Understand not all customers are alike Should use market segmentation Select customer groups for whom to provide highest levels of service Copyright 2010 by Cengage Learning Inc. All Rights Reserved

24. Review Learning Outcome Supply Chain Integration 24 LO 2 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

25. 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 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

26. Key Processes 26 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

27. Customer Relationship Management 27 Customer Relationship Management Process - The prioritization of a firm’s marketing focus on different customer group’s long-term value to the company or supply chain; designed to identify and build relationships with good customers. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

28. Customer Service Management 28 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. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

29. Demand Management 29 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. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

30. Order Fulfillment 30 Order Fulfillment Process- A supply chain management process involves generating, filing, delivering, and providing on-the- spot service for customer orders. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

31. Manufacturing Flow Management 31 Manufacturing Flow Management Process - A process that ensures that firms in the supply chain have the resources they need. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

32. Supplier Relationship Management 32 Supplier Relationship Management Process - A supply chain management process that supports manufacturing flow by identifying and maintaining relationships with highly valued suppliers. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

33. Product Development and Commercialization 33 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. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

34. Returns Management 34 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. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

35. Review Learning Outcome Key Processes of Supply Chain Management 35 LO 3 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

36. Strategic Supply Chain Management Decisions 36 Discuss the key strategic decisions supply chain managers must make when designing their companies’ supply chains. LO 4 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

37. Supply Chain Management 37 Lean 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. Agile Supply Chain Management – The supply chain strategy that focuses primarily on the ability of the firm to fulfill customer demand, even if this means somewhat higher costs. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

38. Lean versus Agile Supply Chain Management 38 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

39. Mapping The Supply Chain 39 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

40. Review Learning Outcome Key Strategic Decisions Supply Managers Must Make 40 LO 4 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

41. Managing Logistical Components 41 Describe the logistical components of the supply chain. LO 5 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

42. Logistical Components of the Supply Chain 42 Supply Chain Team Sourcing & Procurement Order Processing Inventory Control Warehouse & Materials Handling Transportation Logistics Information System Copyright 2010 by Cengage Learning Inc. All Rights Reserved

43. Sourcing and Procurement Plan purchasing strategies Develop specifications Select suppliers Negotiate price and service levels Reduce costs 43 The Role of Purchasing: Copyright 2010 by Cengage Learning Inc. All Rights Reserved

44. Order Processing 44 http://www.walmartstores.com Online Electronic Data Interchange- Information technology that Replaces paper documents that accompany business transactions With electronic transmission Of the information. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

45. Inventory Control 45 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. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

46. Inventory Control 46 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) - An inventory control system that manages the replenishment of goods from the manufacturer to the final consumer. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

47. Inventory Replenishment Example 47 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 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

48. Materials Handling Functions 48 Receive goods into warehouse Dispatch the goods to temporary storage Recall, select, or pick the goods for shipment Identify, sort, and label goods Copyright 2010 by Cengage Learning Inc. All Rights Reserved

49. Transportation 49 Airways Water Pipelines Motor Carriers Railroads Copyright 2010 by Cengage Learning Inc. All Rights Reserved

50. Transportation Mode Choice 50  Cost  Transit time  Reliability  Capability  Accessibility  Traceability Copyright 2010 by Cengage Learning Inc. All Rights Reserved

51. Criteria for Ranking Modes of Transportation 51 Relative Cost Transit Time Reliability Capability Accessibility Traceability HighestLowest Air WaterPipeRailTruck WaterRailPipeTruckAir PipeTruckRailAirWater Truck RailTruckAirPipe RailAirWaterPipe AirTruckRailWaterPipe Copyright 2010 by Cengage Learning Inc. All Rights Reserved

52. Supply Chain Performance Measurement 52 Explain why supply chain performance measurement is necessary and important. LO 6 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

53. Supply Chain Performance Measurement 53 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 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

54. The Balanced Scorecard Approach 54 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

55. Review Learning Outcome Why is Supply Chain Performance Measurement Important? 55 LO 6 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

56. Trends in Supply Chain Management 56 Discuss new technology and emerging trends in supply chain management. LO 7 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

57. Trends in Supply Chain Management 57 Electronic distribution Outsourcing of logistics functions Advanced computer technology Globalization of supply chain management Copyright 2010 by Cengage Learning Inc. All Rights Reserved

58. Advanced Computer Technology Automatic identification systems – Bar coding – Radio frequency technology Communications technology Supply chain software systems 58 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

59. Outsourcing Logistics Functions Reduce inventories Locate stock at fewer plants and distribution centers Provide same or better levels of service 59 Outsourcing Benefits Copyright 2010 by Cengage Learning Inc. All Rights Reserved

60. Review Learning Outcome Emerging Trends in Supply Chain Management 60 LO 7 Copyright 2010 by Cengage Learning Inc. All Rights Reserved