Chapter 15 Supply Chain Management McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 15

Supply Chain Management

McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 15: Learning ObjectivesYou should be able to:

1. Discuss the key issues of supply chain management (SCM)2. Name the recent trends in SCM3. Summarize the motivations and risks of outsourcing as a strategy4. State some of the complexities that are involved with global supply

chains5. List some of the strategic, tactical and operational responsibilities of

SCM6. Give examples of some advantages of e-business7. Explain the importance of supplier partnerships8. Discuss the issues involved in managing returns9. List the requirements of an effective supply chain10. Name some of the challenges in creating an effective supply chain

15-2Student Slides

Supply Chain

• Supply Chain:– the sequence of organizations - their facilities,

functions, and activities - that are involved in producing and delivering a product or service

– Sometimes referred to as value chains

15-3Student Slides

Facilities• The sequence of the supply chain begins with basic suppliers

and extends all the way to the final customer– Warehouses– Factories– Processing centers– Distribution centers– Retail outlets– Offices

15-4Student Slides

Functions and Activities• Supply chain functions and activities

– Forecasting– Purchasing– Inventory management– Information management– Quality assurance– Scheduling– Production and delivery– Customer service

15-5Student Slides

Supply Chain Management

• Supply Chain Management (SCM)– The strategic coordination of business functions

within a business organization and throughout its supply chain for the purpose of integrating supply and demand management

15-6Student Slides

Key SCM Issues• The goal of SCM is to match supply to demand as effectively

and efficiently as possible• Key issues:

– Determining appropriate levels of outsourcing– Managing procurement– Managing suppliers– Managing customer relationships– Being able to quickly identify problems and respond to them– Managing risk

15-7Student Slides

Trends in SCM• Trends affecting supply chain design and

management:– Measuring supply chain ROI– “Greening” the supply chain– Re-evaluating outsourcing– Integrating IT– Managing risks– Adopting lean principles

15-8Student Slides

Procurement• The purchasing department is responsible for

obtaining the materials, parts, and supplies and services needed to produce a product or provide a service.

• The goal of procurement– Develop and implement purchasing plans for

products and services that support operations strategies

15-9Student Slides

E-BusinessE-business

The use of electronic technology to facilitate business transactionsApplications include

Internet buying and sellingE-mailOrder and shipment trackingElectronic data interchangeProduct and service promotionProvide information about products and services

15-10Student Slides

Supplier Management

• Choosing suppliers• Supplier audits• Supplier certification• Supplier relationship management• Supplier partnerships– CPFR (collaborative planning, forecasting, and

replenishment)– Strategic partnering

Student Slides15-11

The Bullwhip Effect• Variations in demand cause inventory fluctuations to

fluctuate and get out of control– Inventory fluctuation can be magnified by

• Periodic ordering• Reactions to shortages• Forecast inaccuracies• Order batching• Sales incentives and promotions• Liberal product return policies

– Results in• Higher costs• Lower customer satisfaction

15-12Student Slides

Logistics

• Logistics– Refers to the movement of materials, services,

cash, and information in a supply chain• Movements within a facility• Incoming shipments• Outgoing shipments

Student Slides15-13

Creating an Effective Supply ChainIt begins with strategic sourcing

Analyzing the procurement process to lower costs by reducing waste and non-value-added activities, increase profits, reduce risks, and improve supplier performance

There must beTrustEffective communicationInformation velocitySupply chain visibilityEvent management capabilityPerformance metrics

15-14Student Slides

Operations Strategy

• Effective supply chains are necessary for organizational success– Requires integration of all aspects of the chain– Supplier relationships are a critical component of

supply chain strategy– Lean operations and six sigma are being

employed to improve supply chain success

15-15Student Slides