13-Feb-22

Chapter 1B: Supply Chain Management

Lecturer: M.A. Nguyen Le Dong Xuan
Faculty of Economics, HCMC University of Economics and Finance

Content
OVERVIEW OF SUPPLY CHAIN MANAGEMENT

SUPPLY CHAIN MANAGEMENT PROCESS FRAMEWORKS

ENABLERS OF SCM IMPLEMENTATION

BARRIERS TO SCM IMPLEMENTATION

SUPPLY CHAIN INTEGRATION

M.A. Nguyen Le Dong Xuan 1

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LEARNING OUTCOMES

1. Understand basic concepts about supply chain and supply chain management
2. Understand supply chain management process frameworks
3. Understand enablers of supply chain management implementation
4. Identify barriers to supply chain management implementation
5. Understand optional approaches for supply chain integration

OVERVIEW OF SUPPLY CHAIN MANAGEMENT

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SUPPLY CHAIN DEFINITION

Definition of supply chain Author

The alignment of firms that bring products or services to

Douglas M. Lambert (1997)
market.

A supply chain can be liberally viewed as a combination of

processes, functions, activities, relationships, and
Murphy, P. R., & Knemeyer,
pathways along which products, services, information, and
A. M. (2018)
financial transactions move in and between enterprises
from original producer to ultimate end-user or consumer.

A supply chain consists of the series of activities and Waters, C. D. J. (2003)

organization that materials move through on their journey
from initial suppliers to final customers.

SUPPLY CHAIN CLASSIFICATION

(Murphy, P. R., & Knemeyer, A. M. (2018). Contemporary logistics.

Pearson Education. ISBN 978-0-13-451925-8. Page 97)

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MEMBERS IN THE SUPPLY CHAIN

- Produce goods/services
- Include (i) raw materials producers and (ii) finished goods
producers.
Producer

- Take the large amount of products from producer and distribute

to customers.
- Storage of inventories
- Focus on promotion and sales
- Find and serve customers
- Implement time and place fuction for customer
Distributor/ - Manage inventory, operate warehouse, deliver products, support
Wholesaler customers and provide after-sales service.

MEMBERS IN THE SUPPLY CHAIN

- Storage of inventories
- Sell a small quantity of products
- Collect demand of customer
- Conduct promotion about price, product, service,
convenience,…
Retailer

- Can be individuals/organizations
- Buy and resale products
- Buy and use products  end users
Customer

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MEMBERS IN THE SUPPLY CHAIN

- An organization that provides services for producer,

distributor, retailer and customer.
- Focus on specialization
- Example: transportation providers, warehouse providers,
Service logistics providers, financial providers, market research
Provider service providers, information technology providers,…

FLOWS IN SUPPLY CHAIN

Information flow

Reverse product flow

Supplier Producer Distributor Retailer Consumer

Product flow Product flow Product flow Product flow

Cash flow

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4 FLOWS IN SUPPLY CHAIN

Information flow Cash flow

 Invoices
 Sales literature  Payments of products
 Specifications  Payments for suppliers
 Receipts
 Orders
 Rules & regulations
Product flow Reverse product flow

 Materials
 Returns for repair
 Components
 Replacements
 Supplies
 Recycling
 Services
 Disposals
 Finished products

STRUCTURE OF SUPPLY CHAIN

(Waters, C. D. J. (2003). Logistics: An introduction to

supply chain management. Palgrave Macmillan. Page 9)

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STRUCTURE OF SUPPLY CHAIN

(Waters, C. D. J. (2003). Logistics: An introduction to

supply chain management. Palgrave Macmillan. Page 9)

SUPPLY CHAIN
• Supply chain emphasizes on the movement of products/services.
• Different product => Different supply chain
• Simple supply chain & Complicate supply chain.

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THE APPLE SUPPLY CHAIN

Upstream activities Downstream activities

Third tier Second tier First tier First tier Final

supplier supplier supplier customer customer

NHÀ KHAI CTY TINH CỬA HÀNG KHÁCH

KHOÁNG NCC ĐÁ TRANG SỨC MUA LẺ
LUYỆN
QUÝ
PHỤ GIA CTY VÀNG CTY TỔ
ĐỂ LUYỆN BẠC CHỨC TIỆC
KHÁCH
PHÔI PHỤ LIỆU ĐÁ QUÝ CƯỚI MUA LẺ
NSX VÀNG
(NHÃN, BAO,
THÙNG, ĐAI) THỎI
KHÁCH
NSX HÀNG LẺ
NHỰA TRỰC TIẾP
NCC
NSX GIẤY,
BAO BÌ
MÀNG BỌC
KHAI THÁC
RỪNG

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EXERCISE 1

Students are required to draw the supply chain of paper and define:
1. Who is the 1st, 2nd, 3rd supplier?
2. Who is the 1st, 2nd, 3rd customer?
3. The upstream activities?
4. The downstream activities?

(Waters, C. D. J. (2003). Logistics: An introduction to

supply chain management. Palgrave Macmillan)

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EXERCISE 2: A BOTTLE OF WATER

1. What materials that a bottle of water

need to be manufactured/made?
2. How many stages to produce a bottle
of water? What are those?
3. How can a bottle of water be
delivered to customers?
Refer: https://www.youtube.com/watch?v=Mi1QBxVjZAw&t=308s

SUPPLY CHAIN MANAGEMENT

• Supply chain management (SCM) is the integration of business process
from end user through original suppliers that provides products, services
and information that add value for customers. Douglas M. Lambert (1997).
• SCM is the management of all key business processes aross members
of supply chain such as:
• Customer relationship management
• Customer service management
• Demand management
• Order fulfillment
• Manufacturing flow management
• Procurement management
• Product development and commercialization

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DIFFERENCE BETWEEN SCM & LOGISTICS MANAGEMENT?
Logistics Management
• “Logistics management is that part of
supply chain management that plans,
implements, and controls the efficient,
effective, forward and reverse flow and
storage of goods, services, and related
information between the point of origin and
point of consumption in order to meet
customers’ requirements” (Council of
Supply Chain Management Professionals).
• Movement of materials in whole supply
chain
• Mention to activities occurred in the scope
of a firm.
• Manage activities such as procurement,
distribution, warehousing and inventory,…
DIFFERENCE BETWEEN SCM & LOGISTICS MANAGEMENT?
Logistics Management
M.A. Nguyen Le Dong Xuan
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Supply Chain Management
• “The 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” (Council of
Supply Chain Management Professionals).
• Transforming a raw materials into products,
and geeting it to customers.
• Refer to network and coordination between
many firms to supply products/services to the
market.
• Manage activities such as logistics,
marketing, new product development, finance
and customer service.
Supply Chain Management
11
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SUCCESSFUL SUPPLY CHAINS

• Adopt an enterprise-to-enterprise point of view.
• Maintain a systems approach across all organizations in the
supply chain
– Companies recognize interdependencies of the decisions
made in major functional areas and business processes
within, across, and between firms.
– Goals and objectives of individual supply chain participants
should be compatible with the goals and objectives of other
participants in the supply chain.

SUPPLY CHAIN MANAGEMENT PROCESS FRAMEWORK

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SCM Process Frameworks

• Two prominent models

– Supply Chain Operations Reference (SCOR) Model
– Global Supply Chain Forum (GSCF) Model
• Difference between SCOR and GSCF model
- SCOR model is focused on the logistics, operations,
and procurement functions.
- GSCF involves all business functions.

Six Processes in the Supply Chain Operations

Reference (SCOR) Model

Plan Source Make Deliver Return Enable

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Eight Processes in the Global Supply Chain Forum (GSCF) Model

Customer Manufacturing Product

relationship flow development and
management management commercialization

Supplier
Order Returns
relationship
fulfillment management
management

Customer
Demand
service
mangement
management

Eight Processes in the Global Supply Chain Forum (GSCF) Model

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EXERCISE 3:

Discuss how the logistics function contributes to the supply chain

management processes established in the SCOR and GSCF models.

ENABLERS OF SCM IMPLEMENTATION

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ENABLERS OF SCM IMPLEMENTATION

Customer power
ENABLERS OF SCM
IMPLEMENTATION
Relationship structure

Leveraging technology

Supply chain facilitators

CUSTOMER POWER

• Information is power
– Customer has tremendous power in buying decisions
– Internet allows the consumer to become highly
knowledgeable about:
• An individual organization and its products
• Competing organizations and their products

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CUSTOMER POWER
Customer needs and wants can change relatively quickly therefore
supply chains are increasingly required to be fast and agile.

Fast supply chain Speed & Time

Ability to respond to changes

Agile supply chain in demand with respect to
volume and variety.

CUSTOMER POWER AND SCM IMPLICATIONS

• Failure to be fast and agile can result in:

– Decreased market share
– Reduced profitability
– Lower stock price
– Dissatisfied customers for supply chain members
• Need for fast and agile supply chains resulted in some
e-commerce firms to begin offering same-day delivery
services in select markets.

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CUSTOMER POWER AND SCM IMPLICATIONS

• Traditional supply chains

– Factory-driven, push oriented
– Focused on internal cost metrics (measures) such as labor
costs and freight costs
• Customer-centric supply chains
– Pull-oriented
– Concerned with metrics that take a more holistic perspective

CUSTOMER POWER AND SCM IMPLICATIONS

• Firms must focus on both effectively and efficiently designing their
supply chains according to market needs/characteristics.

Customer demand is unstable,

Agile supply chain
and their need for variety is high.

Customer demand is stable, and

Lean supply chain
the need for variety is low.

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CUSTOMER POWER AND SCM IMPLICATIONS

• Lean supply chains

– Eliminate all waste, including time and ensuring a level schedule.

– Focus on reducing bullwhip effect, which is characterized by

variability in demand orders among supply chain members.

– Achieve a better-controlled flow of inventory with lower levels of

expensive inventory “lumps”.

Bullwhip effect (Hiệu ứng cái roi da)

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CUSTOMER POWER AND SCM IMPLICATIONS

Lean supply chain

Leagility supply chain

Agile supply chain

• Leagility: focuses part of one’s supply chain on a timely response to fluctuating

customer orders and/or product variety and another part of the supply chain on
leveling out the planning requirements to smooth production output.

CUSTOMER POWER AND SCM IMPLICATIONS

Smaller, more frequent

REDUCE INVENTORY IN THE

orders
Reduced inventory
SUPPLY CHAIN

may increase
Premium transportation vulnerability to
terrorist attacks and
natural disasters
(earthquakes,
Demand-pull hurricanes, health
pandemics).
Elimination or consolidation
of slower-moving product

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RELATIONSHIP STRUCTURES

• Companies should consider employing a long-term as opposed

to a short-term orientation with key supply chain members:
– Suppliers
– Customers
– Intermediaries
– Facilitators

RELATIONSHIP STRUCTURES

• Long-term orientation tends to be predicated on relational exchanges

– “What’s in it for us?” philosophy

• Short-term orientation tends to focus on transactional exchanges

– “What’s in it for me?” philosophy

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RELATIONSHIP STRUCTURES

• Attributes of relational exchange:

– Trust
– Commitment
– Dependence
– Joint Investment
– Shared benefits
– Information sharing

RELATIONSHIP STRUCTURES

Supply chain collaboration:

• Cooperative relationships between members of a supply chain
• To enhance the overall business performance of all parties.
• Include transactional, tactical information sharing, or strategic

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RELATIONSHIP STRUCTURES

LEVERAGING TECHNOLOGY

• Technological advancements in computing and the

internet affect the supply chain.
• Computing power
– Supply chains can be complex entities consisting of
multiple organizations, processes, and requirements.
– Can apply mathematical models that maximize
shareholder wealth or minimize costs.

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LEVERAGING TECHNOLOGY
• Internet
– Allows a supply chain party to have virtually instantaneous
visibility to the same data as other parties in the supply chain.
• Offers the opportunity for supply chains to become more
proactive and less reactive.
• Can translate into lower inventories and improved
profitability throughout the supply chain.

LEVERAGING TECHNOLOGY

• Supply chains depend on huge quantities of real-time information

• Retail point-of-sale information can be transmitted directly to
suppliers and translated into orders for replenishment of product.
• Vendors may allow customers to query vendor inventory records
to determine what products are in stock and where the stocks
are located.

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SUPPLY CHAIN FACILITATORS

• Third-Party Logistics (3PL), also known as logistics outsourcing
or contract logistics
– Any logistics activity not performed in-house is representative
of third-party logistics
– Common 3PL activities involve inbound and outbound
transportation, carrier negotiation and contracting, and freight
consolidation.
– Well-known 3PL providers: DHL Logistics, Kuehne and Nagle,
Schenker Logistics, and UPS Supply Chain Solutions.

SUPPLY CHAIN FACILITATORS

• Logistics outsourcing has the potential to improve both the
effectiveness and efficiency of supply chains but can
easily result in failure due to:
– Unreasonable and unrealistic expectations
– Lack of flexibility in the relationship
• Need to structure 3PL relationships so that unexpected
occurrences can be dealt with in a timely and satisfactory
manner.

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BARRIERS OF SCM IMPLEMENTATION

BARRIERS TO SUPPLY CHAIN MANAGEMENT

• Regulatory and political considerations

• Lack of top management commitment
• Reluctance to share, or use, relevant data
• Incompatible information systems
• Incompatible corporate cultures
• Globalization

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SUPPLY CHAIN INTEGRATION

SUPPLY CHAIN INTEGRATION

• Long-term, mutually beneficial agreements
– Partnerships
– Strategic alliances
– Third-party arrangements
– Contract logistics
• Methods used to integrate
– Vertical integration
– Formal contracts
– Informal agreements

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CHAPTER SUMMARY

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