SUPPLY CHAIN MANAGEMENT

http://www.youtube.com/watch?v=yZC4neLax5o
 The role of Supply Chain Management (SCM) in
business marketing strategy

 The importance of integrating both firms and

functions throughout the entire supply chain

 The critical role of logistics activities in achieving

supply chain management goals

 The importance of achieving high levels of logistical

service performance while simultaneously controlling
the cost of logistic activities
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Effective supply chain management includes:

1.Integrated
computer systems that provide the production
schedule and demand forecasts to all supply chain members.

2.Collaborative
program management tools that allow
manufacturers and suppliers to synchronize activities to
respond to events (threats and opportunities) in real time.
 Supply Chain Management (SCM) has become a more
important strategic and competitive variable

 It’s pervasive nature affects every aspect of business from:

1. Costs
2. Customer service
3. Asset productivity (inventory turns)
4. Revenue generation

 The best are getting faster as they apply new technologies

and new innovations to SCM
Formal Definition:

Encompasses the planning and management of all

activities involved in sourcing and procurement,
conversion, and logistics.

Central to SCM are the coordination and collaboration

activities performed with channel partners, which may
included suppliers, intermediaries, their party service
providers, and customers.

Inessence, supply chain management integrates

supply and demand across companies.
 Raw material suppliers
 Raw material producers (make products)
 Wholesalers
 Retailers
 Ultimate consumers

 On time and at the right price!

 Also includes other necessary participants to
move product such as warehousing,
transportation, information processing and
materials handling.
1. Customer Relations Management
2. Supplier Relations Management
3. Customer Service Management
4. Demand Management
5. Order Fulfillment
6. Manufacturing Flow Management
7. Product Development and Commercialization
8. Returns Management
 Can improve overall company performance by:
1. Revenue enhancement
2. Cost reduction

 Focuses on integrating the aforementioned critical

processes across all organizational borders for
purposes of:
 Enhancing flow
 Lowering costs
 Increasing profits
 The traditional approach is for each member in the
supply system to operate their business in such as
way as to individually manage their own part.

 However, this is inefficient and costly.

 Material is often moved around too much
resulting in higher transportation costs.
 Communication between sales and other
departments is excessive and time consuming.
 Requires firms to share sensitive and
proprietary information about:

a. Customers
b. Actual demand
c. Point-of-sales transactions
d. Corporate strategy

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 Joint planning and joint communications.

 To accomplish this, many companies set up

teams from their supply chain members
that cut across functional and company
boundaries to manage the movement of
goods through the supply chain.

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SCM: A TOOL FOR COMPETITIVE ADVANTAGE
 Many companies have now integrated SCM
into all phases of their operation to include:
 Design
 Sourcing
 Manufacturing
 Distribution

 This has resulted in enhanced market

position and added value for customers.
 SCM reduces costs through efficiencies

and

 Speedsup the cash cycle, thus increasing

revenues.
 An efficient and effective supply chain can be a powerful
competitive weapon providing:

 Waste reduction – Minimizing duplication of efforts,

harmonizing operations and systems, and enhancing quality

 Time compression – Compressing order-to-delivery cycle

time

 Flexible response – Meeting customer’s unique requirements

in cost-effective manner

 Unit cost reduction – Reducing cost per unit to end users by

determining performance levels that customers desire
 Good SC benefits the ultimate consumer, and

 Benefits all the customers within the supply

chain.

 Note: Each member is a customer of the prior member until the product
reaches the ultimate consumer.
1. The coupling of inventory movement with
financial movement can:
1. Open doors to greater end-to-end cost savings
2. Have better balance sheets
3. Lower total costs
4. Have higher margins
5. Have a more stable supply chain

 And everybody wins!

 Financial:

1. Lower costs
2. Higher profits
3. Enhanced cash flow
4. Revenue growth
5. Higher rates of return on assets
 SCM efficiency & effectiveness is made possible
through:

 Powerful information systems

 Internet technology

 Supply chain software

 Over the last 10 years, we’ve seen a revolution
take place in SCM technology attributed
directly to Internet development.

 It was very difficult to integrate all the various

facets of the SC without real time application
provided by the Internet.
1. Need to clearly define strategic objectives
2. Understand where their objectives diverge, and
3. Work together to resolve any differences

 Once partners agree on establishing an integrated

supply chain, performance metrics can be
established to track its goals.
 The metrics must measure performance, and are
tied to a financial system that rewards each
participant fairly.
 Just In Time systems originally applied to moving
inventory through the production process.

 The objective is to get the right part to the right place at

the right time in perfect condition (zero defects).

 JIT’s purpose is to relate production to purchase.

 Example: If 100 units are expected to be purchased, then

produce 100 units (getting product to match market
needs).

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 One consequence of JIT inventory has
been to reduce suppliers to preferred
supplier status (relationships).

 Preferred suppliers have seen their

business grow tremendously.
 Almost everything is a make or buy situation. Same
goes for various logistical functions.

 Most companies are now outsourcing

transportation, warehousing and information
processing. The trend is continuing.

 This is really a form of specialization and division of

labor.
 The results of specialization are:

1. Lower costs
2. Better service
3. Improved asset utilization
4. Increased flexibility
5. Access to leading technologies