Supply Chain Management Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent.

Supply Chain Management

Chapter 15

Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

15-2

You should be able to:LO 15.1 Explain the terms supply chain and logisticsLO 15.2 Name the key aspects of supply chain managementLO 15.3 List, and briefly explain, current trends in supply chain managementLO 15.4 Outline the benefits and risks related to outsourcingLO 15.5 Explain what the main supply chain risks are, and what businesses can do to

minimize those risksLO 15.6 Describe some of the complexities related to global supply chainsLO 15.7 Briefly describe the ethical issues in supply chains and the key steps companies can

take to avoid ethical problemsLO 15.8 Describe the three concerns of small businesses related to the supply chain and

suggest ways to manage those concernsLO 15.9 List several strategic, tactical, and operational responsibilities related to managing

the supply chainLO 15.10 Discuss procurement in terms of the purchasing interfaces, the purchasing cycle,

ethics, and centralized versus decentralized decision makingLO 15.11 Briefly describe the key aspects of supplier managementLO 15.12 Discuss the logistics aspects of supply chain management, including RFID

technologyLO 15.13 Discuss the issues involved in managing returnsLO 15.14 Describe some of the challenges in creating an effective supply chain and some of

the trade-offs involved

Chapter 15: Learning Objectives

15-3

Supply Chain:the sequence of organizations - their facilities,

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

Logistics:the part of a supply chain involved with the

forward and reverse flow of goods, services, cash, and information.

Supply Chain

LO 15.1

15-4

The goal of SCM is to match supply to demand as effectively and efficiently as possible

Key issues:1. Determining appropriate levels of outsourcing2. Managing procurement3. Managing suppliers4. Managing customer relationships5. Being able to quickly identify problems and respond to

them

Key Aspects of SCM

LO 15.2

15-5

Trends affecting supply chain design and management:Measuring supply chain ROI“Greening” the supply chainRe-evaluating outsourcingIntegrating ITAdopting lean principlesManaging risks

Trends in SCM

LO 15.3

15-6

Benefits: Lower prices may result from lower labor costs The ability of the organization to focus on its core strengths Permits the conversion of some fixed costs to variable costs It can free up capital to address other needs Some risks can be shifted to the supplier The ability to take advantage of a supplier’s expertise Makes it easier to expand outside of the home country

Risks Inflexibility due to longer lead times Increased transportation costs Language and cultural differences Loss of jobs Loss of control Lower productivity Loss of business knowledge Knowledge transfer and intellectual property concerns Increased effort required to manage the supply chain

Benefits & Risks of Outsourcing

LO 15.4

15-7

Supply Chain RisksSupply chain disruption

Natural disastersSupplier problems

Quality IssuesAnother form of disruption that may disrupt

supplies and lead to product recalls, liability claims, and negative publicity

Loss of control of sensitive informationIf suppliers divulge sensitive information to

competitors, it can weaken a firm’s competitive position

Supply Chain Risks

LO 15.5

15-8

Global supply chains Product design often uses inputs from around the world Some manufacturing and service activities are

outsourced to countries where labor and/or materials costs are lower

Products are sold globally

Complexities Language and cultural differences Currency fluctuations Political instability Increasing transportation costs and lead times Increased need for trust amongst supply chain partners

Global Supply Chains

LO 15.6

15-9

Three small business SCM concerns:1. Inventory management

Carry extra inventory as a way to avoid shortages due to supply chain interruption

Have backups for delivery from suppliers and to customers

2. Reducing risks Use only reliable suppliers Determine which suppliers are critical and get to know them and any

challenges they have Measure supplier performance Recognize warning signs of supplier issues Have plans in place to manage supply chain problems

3. International trade Work with someone who has expertise to help oversee foreign suppliers Set expectations for demand and timing Do not rely on a single supplier Build goodwill to help in negotiations and resolving any problem that arise Consider using domestic suppliers if the risks of working with foreign

suppliers are prohibitive

Small Business Concerns

LO 15.8

15-10

Management Responsibility:StrategicCertain strategic responsibilities have a

major impact on the success of both supply chain management and the business itself:Supply chain strategy alignmentNetwork configurationInformation technologyProducts and servicesCapacity planningStrategic partnershipsDistribution strategyUncertainty and risk reduction

LO 15.9

15-11

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 procurementDevelop and implement purchasing plans for

products and services that support operations strategies

Procurement

LO 15.10

15-12

Supplier ManagementChoosing suppliersSupplier auditsSupplier certificationSupplier relationship managementSupplier partnerships

CPFR (collaborative planning, forecasting, and replenishment)

Strategic partnering

LO 15.11

15-13

LogisticsLogistics

Refers to the movement of materials, services, cash, and information in a supply chainMovements within a facilityIncoming shipmentsOutgoing shipments

LO 15.12

15-14

Reverse Logistics The process of transporting returned items

Products are returned to companies or third party handlers for a variety of reasons and in a variety of conditions Elements of return management

GatekeepingScreening returned goods to prevent incorrect

acceptance of goodsAvoidance

Finding ways to minimize the number of items that are returned

Managing Returns

LO 15.13

15-15

It 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

Creating an Effective Supply Chain

LO 15.14