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INTRODUCTION INTRODUCTION TO SUPPLY CHAIN TO SUPPLY CHAIN MANAGEMENTMANAGEMENT
Supply Chain Supply Chain Management DefinedManagement Defined
A supply chain consists of the flow of products and services from:
Raw materials manufacturers Component and intermediate manufacturers Final product manufacturers Wholesalers and distributors and Retailers
Connected by transportation and storage activities, andIntegrated through information, planning, and integration activities Many large firms are moving away from in-house Vertically Integrated structures to Supply Chain Management
Supply Chain Supply Chain Management Defined Management Defined (continued)(continued)
The design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer Institute for Supply ManagementThe coordinated set of techniques to plan and execute all steps in the global network used to acquire raw materials from vendors, transform them into finished goods, and deliver both goods and services to customers
Logistics and Supply Chain Management SocietyThe planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities … also includes coordination with channel partners, which can be suppliers, intermediaries, third party service providers, and customers.
Supply Chain Supply Chain Management Defined Management Defined (continued)(continued)
• Old paradigm - Firm gained synergy as a vertically integrated firm encompassing the ownership and coordination of several supply chain activities. Organizational cultures emphasized short-term, company focused performance.
• New paradigm - Firm in a supply chain focuses activities in its area of specialization and enters into voluntary and trust-based relationships with supplier and customer firms. All participants in the supply chain benefit. Boundaries are dynamic and extend from “the firm’s suppliers’
suppliers to its customers’ customers (i.e., second tier suppliers and customers).”
Supply chains now deal with reverse logistics to handle returned products, warranty repairs, and recycling.
Importance of Supply Importance of Supply Chain Chain Management Management (continued)(continued)Cost savings and better coordination of resources are
reasons to employ Supply Chain Management Reduced Bullwhip Effect - the magnified reduction
of safety stock costs based on coordinated planning and sharing of information
Collaborative planning, forecasting, and replenishment activities reduce the Bullwhip Effect and lead to better customer service, lower inventory costs, improved quality, reduced cycle time, better production methods, and other benefits.
Origins of Supply Chain Origins of Supply Chain ManagementManagement
1950s & 1960sU.S. manufacturers focused on mass production techniques as their principal cost reduction and productivity improvement strategies
1960s-1970sIntroduction of new computer technology lead to development of Materials Requirements Planning (MRP) and Manufacturing Resource Planning (MRPII) to coordinate inventory management and improve internal communication
Origins of Supply Origins of Supply Chain Management Chain Management (continued)(continued)
1980s & 1990sIntense global competition led U.S. manufacturers to adopt: Supply Chain Management (SCM) Just-In-Time (JIT) Total Quality Management (TQM) Business Process Reengineering (BPR)