10.

CHAPTER 10
Supply Chain Management
 Learning Outcomes

10.1 List anddescribethecomponents of atypical

supplychain
10.2 Definetherelationshipbetweendecision
makingandsupplychainmanagement
10.3 Describethefour changes resultingfromadvances inIT
that aredrivingsupplychains
10.4 Summarizethebest practices for implementinga
successful supplychainmanagement system
Supply Chain Management
 Theaveragecompanyspends nearlyhalf of every
dollarthatitearnsonproduction

 In the past, companies focused primarily on

manufacturing and quality improvements to
influencetheirsupplychains
 Basics of Supply Chain
 Thesupplychainhasthreemainlinks:
1. Materialsflowfromsuppliersandtheir“upstream”
suppliersatalllevels
2. Transformationof materialsintosemi finishedand
finished products through the organization’s own
productionprocess
3. Distribution of products to customers and their
“downstream”customersatalllevels
 Basics of Supply Chain

 Organizations must embracetechnologies that caneffectively

managesupplychains
Basics of Supply Chain
 Explanations..
 Plan
Thisisthestrategicportionof supplychainmanagement. Acompany
must have a plan for managing all the resources that go toward
meeting customer demand for products or services. Abig piece of
planningisdevelopingaset ofmetricstomonitorthesupplychainso
that it is efficient, costs less, and delivers high quality and value to
customers.
 Continue....
 Source
– Companies must carefully choose reliable suppliers that will
deliver goods and services required for making products.
Companies must also develop a set of pricing, delivery, and
payment processes with suppliers and create metrics for
monitoringandimprovingtherelationships.
 Continue....
 Make
–Thisisthestepwherecompaniesmanufacturetheir productsor
services. This caninclude schedulingthe activities necessaryfor
production, testing, packaging, andpreparingfor delivery. Thisis
by far the most metric-intensive portion of the supply chain,
measuring quality levels, production output, and worker
productivity.
 Continue....
 Deliver
–Thisstepiscommonlyreferredtoaslogistics.Logisticsistheset
of processesthat plansfor andcontrolstheefficient andeffective
transportationandstorageofsuppliesfromsupplierstocustomers.
Duringthis step, companies must be able toreceive orders from
customers, fulfill the orders via a network of warehouses, pick
transportationcompaniestodelivertheproducts, andimplement a
billingandinvoicingsystemtofacilitatepayments.
 Continue....
 Return
–Thisistypicallythemost problematicstepinthesupplychain.
Companies must create a network for receiving defective and
excess products andsupport customers whohave problems with
deliveredproducts
 Information Technology’s
Role in the Supply Chain
 IT’s primaryroleis tocreateintegrations or tight process and
informationlinkages betweenfunctions withinafirm
Information Technology’s
Role in the Supply Chain
Factors DrivingSCM
 Visibility

 Supply chain visibility – the ability to viewall

areasupanddownthesupplychain

 Bullwhip effect – occurs when distorted product

demandinformationpasses fromoneentitytothe
nextthroughoutthesupplychain
 Consumer Behavior
 Companiescanrespondfasterandmoreeffectively
to consumer demands through supply chain
enhances

 Demand planning software – generates demand

forecasts using statistical tools and forecasting
techniques
 Competition

 Supply chain planning (SCP) software– uses advanced

mathematical algorithms to improve the flow and
efficiencyofthesupplychain

 Supplychain execution (SCE) software –automates the

differentstepsandstagesofthesupplychain
Competition

 SCPandSCEinthesupplychain
Speed

 Threefactors fosteringspeed
Supply Chain Management
Success Factors

10-19
 Supply Chain Management
Success Factors
 SCMindustrybestpracticesinclude:
1. Makethesaletosuppliers
2. Weanemployeesofftraditionalbusinesspractices
3. Ensure the SCMsystemsupports the organizational
goals
4. Deploy in incremental phases and measure and
communicatesuccess
5. Befutureoriented
 SCM Success Stories
 Topreasons whymoreandmoreexecutives areturningto
SCMtomanagetheir extendedenterprises
GOOD LUCK