Supply Chain

Management

2014
2014
Pearson
Pearson
Education,
Education,
Inc.Inc.

11
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Learning Objectives
When you complete this chapter you
should be able to:
1. Explain the strategic importance of the supply
chain
2. Identify six sourcing strategies
3. Explain issues and opportunities in the supply
chain
4. Describe the steps in supplier selection
5. Explain major issues in logistics
management
6. Compute percent of assets committed to
inventory and inventory turnover
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Supply-Chain Management
The objective of supply chain
management is to coordinate
activities within the supply chain
to __________ the supply chains
____________________and
benefits to the ultimate _________

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The Supply Chains Strategic

Importance
The coordination of all supply chain
activities, starting with raw materials
and ending with a satisfied customer
Includes suppliers, manufacturers
and/or service providers, distributors,
wholesalers, retailers, and final
customer

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The Supply Chains Strategic

Importance
Large portion of sales dollars spent on
purchases
Supplier relationships increasingly
______________and long term
Improve innovation, speed design, reduce
costs

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A Basic Supply Chain

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See also Figure 11.1 for Beer example

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Sourcing Issues
___________ vs. _____________
Choosing between obtaining products and
services externally as opposed to producing
them internally

Outsourcing
Transfer traditional ________ activities and
resources to ____________ vendors
Efficiency in specialization
Focus on ______________________
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Six Sourcing Strategies

Many suppliers
Few suppliers
Vertical integration
Joint ventures
Keiretsu networks
Virtual companies

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Many Suppliers
Commonly used for
______________products
Purchasing is typically based on _____
Suppliers compete with one another
Supplier is ___________ for
technology, expertise, forecasting,
cost, quality, and delivery

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Few Suppliers
Buyer forms _____________relationships
with fewer suppliers
Create ______through economies of scale
and learning curve improvements
Suppliers more willing to participate in JIT
programs and contribute design and
technological expertise
Cost of changing suppliers is ________
Trade secrets and other alliances
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Vertical Integration
Developing the ability to produce goods or
service _____________________
Integration may be forward, towards the
customer, or backward, towards suppliers
______________cost, quality, and inventory
but requires capital, managerial skills, and
demand
__________ in industries with rapid
technological change

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Joint Ventures
___________ collaboration
Enhance skills
Secure supply
Reduce costs

Cooperation without __________

brand or conceding competitive
advantage

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Keiretsu Networks
A middle ground between few suppliers and
vertical integration
Supplier becomes part of the company _______
Often provide financial support for suppliers
through ownership or loans
Members expect ____________________and
provide technical expertise and stable deliveries
May extend through several levels of the supply
chain
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Virtual Companies
Rely on a variety of supplier relationships
to provide services ______________
Fluid organizational boundaries that allow
the creation of unique enterprises to meet
changing market demands
Relationships may be short- or long-term
Exceptionally ____________, low capital
investment, flexibility, and speed
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Supply Chain Risk

More reliance on supply chains means
________________
Fewer suppliers _______________
Compounded by globalization and
logistical complexity
Vendor reliability and quality risks
Political and currency risks

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Risk and Mitigation Tactics

Research and assess possible risks
Innovative ________________
Reduce potential disruptions
Prepare responses for _____________
events
Flexible, secure supply chains
Diversified supplier base
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Security and JIT

Shipments get misrouted, stolen,
damaged, or excessively delayed
Technological innovations are
__________ security and inventory
management
Location, motion sensors, broken seals,
temperature

_______________ can help expedite

shipments
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Managing the Integrated

Supply Chain
Issues
______________________can magnify
fluctuations
_______________ push merchandise into
the supply chain for sales that have not
occurred
______________ reduce shipping costs
but increase inventory holding and do not
reflect actual sales
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Managing the Integrated

Supply Chain
Opportunities
Accurate _____ data, shared
information
Lot size __________, shipping, discounts,
reduced ordering costs
Single stage control of replenishment
Single supply chain member responsible for
ordering

Vendor managed inventory (______)

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Managing the Integrated

Supply Chain
Opportunities
Collaborative planning, forecasting, and
replenishment (________) through the
supply chain
___________ orders against which actual
orders are released
_______________________

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Managing the Integrated

Supply Chain
Opportunities
____________withholds modification as
long as possible
_______________ ordering and funds
transfer speed transactions and reduce
paperwork
Drop shipping and special packaging
bypasses the seller and reduces costs

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Building the Supply Base

Supplier evaluation
Finding potential suppliers
Determine likelihood of their becoming good
suppliers
______________________________
1. Qualification
2. Education
3. Certification

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Building the Supply Base

Supplier development

Integrate the supplier into the system

Quality requirements
Product specifications
Schedules and delivery
______________________________
Training
Engineering and production help
Information transfer procedures

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Building the Supply Base

Negotiation
A significant element in purchasing
Highly valued skills
________________ price model
Supplier opens books

______________________price model
Based on published, auction, or indexed prices

_________________________________
Common policy for many purchases
Does not generally foster long-term relationships
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Building the Supply Base

__________________

Share risks, benefits, create incentives

__________________ purchasing

Leverage volume
Develop specialized staff
Develop supplier relationships
Maintain professional control
Devote resources to selection and negotiation
Reduce duplication of tasks
Promote standardization

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Building the Supply Base

___-Procurement
Speeds purchasing, reduces costs, integrates
supply chain

____________ catalogs and exchanges

Standard items or industry-specific web sites

Online auctions
Low barriers to entry
Reverse auctions for buyers
Price not always the most important factor
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Internet Trading Exchanges

Health care products ghx.com
Retail goods compare.com
Defense and aerospace products
exostar.com
Food, beverage, consumer products
transora.com
Steel and metal products
metalsite.com
Hotels avendra.com
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2011 Pearson Education, Inc. publishing as

Prentice Hall

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Logistics Management
Objective is to obtain efficient operations
through the _______________ of all
material acquisition, movement, and
storage activities
Is a ______________ candidate for
outsourcing
Allows competitive advantage to be gained
through reduced costs and improved
customer service
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Shipping Systems
__________________
Moves the vast majority of manufactured
goods
Chief advantage is flexibility

__________________
Capable of carrying large loads
Little flexibility though containers and
piggybacking have helped with this
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Shipping Systems
___________________
Fast and flexible for light loads
May be expensive

____________________
Typically used for bulky, low-value cargo
Used when shipping cost is more important
than speed

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Shipping Systems
_____________
Used for transporting oil, gas, and other
chemical products

______________
Combines shipping methods
Common, especially in international
shipments
Aided by standardized containers
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Warehousing
May be expensive, but alternatives may
be more so
Fundamental purpose is to __________
May provide other functions
Consolidation
Break-bulk
_________________
Channel assembly
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Third-Party Logistics (3PL)

________________________can reduce
inventory, costs, and improve delivery
reliability and speed
Coordinate supplier inventory with delivery
services
May provide
warehousing,
assembly, testing,
shipping, customs

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Ethics and Sustainable

Supply Chain Management
________________ ethics
Critical to long term success of an
organization
Supply chains particularly susceptible

Ethics ___________ the supply chain

Ethical behavior regarding the
environment
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Principles and Standards for

Ethical Supply Management
Conduct
LOYALTY TO YOUR ORGANIZATION
JUSTICE TO THOSE WITH WHOM YOU
DEAL
FAITH IN YOUR PROFESSION

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ISM Ethical Standards

1. PERCEIVED IMPROPRIETY. Prevent the intent
and appearance of unethical or compromising
conduct in relationships, actions and
communications
2. CONFLICTS OF INTEREST. Ensure that any
personal, business or other activity do not
conflict with the lawful interests of your
employer
3. ISSUES OF INFLUENCE. Avoid behaviors or
actions that may negatively influence, or appear
to influence, supply management decisions
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ISM Ethical Standards

4. RESPONSIBILITIES TO YOUR EMPLOYER.
Uphold fiduciary and other responsibilities using
reasonable care and granted authority to deliver
value to your employer
5. SUPPLIER AND CUSTOMER
RELATIONSHIPS. Promote positive supplier
and customer relationships
6. SUSTAINABILITY AND SOCIAL
RESPONSIBILITY. Champion social
responsibility and sustainability practices in
supply management
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ISM Ethical Standards

7. CONFIDENTIAL AND PROPRIETARY
INFORMATION. Protect confidential and
proprietary information
8. RECIPROCITY. Avoid improper reciprocal
agreements
9. APPLICABLE LAWS, REGULATIONS AND
TRADE AGREEMENTS. Know and obey the
letter and spirit of laws, regulations and trade
agreements applicable to supply management

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ISM Ethical Standards

10. PROFESSIONAL COMPETENCE. Develop
skills, expand knowledge and conduct
business that demonstrates competence and
promotes the supply management profession

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