1. Supply Chain Management Chapter 14 1

2. Definition of Supply Chain Management Supply Chain Management refers to the effort to coordinate suppliers, manufacturers, warehouses, stores, and transportation so that the merchandise the customer wants is produced in the right quantities and sent to the right locations at the time the customer wants it. 2

3. Discussion A supply chain is the stream of processes of moving goods from the customer order through the raw materials stage, supply, production, and distribution of products to the customer. Managing the chain of events in this process is what is known as supply chain management. The design and management of seamless, value- added processes across organizational boundaries to meet the real needs of the end customer (Institute for Supply Management) 3

4. Supply Chain Management Supply Chain Management falls under one of the 4 P’s, Place. It explains the detailed distribution of products and how they flow between channel members 4

5. Supply Chain - Discussion A supply chain consists of the flow of products and services from: –Raw materials manufacturers –Component and intermediate manufacturers –Final product manufacturers –Wholesalers and distributors and –Retailers Connected by transportation and storage activities, and Integrated through information, planning, and integration activities

6. Supply Chain – Discussion (cont) Effective management must take into account coordinating all the different pieces of this chain as quickly as possible without losing any of the quality or customer satisfaction, while still keeping costs down. In addition, key to the success of a supply chain is the speed in which these activities can be accomplished and the realization that customer needs and customer satisfaction are the very reasons for the network. Reduced inventories, lower operating costs, product availability and customer satisfaction are all benefits which grow out of effective supply chain management. 6

7. General Supply Chain Model

8. Elements of Supply Chain There are six key elements to a supply chain: –Production –Supply –Inventory –Location –Transportation –Information 8

9. Supply Chain, Marketing Channels, and Logistics are Related Logistics management: The integration of two or more activities for the purpose of planning, implementing, and controlling the efficient flow of raw materials, inventory, and finished goods from origin to consumption This is the element of supply chain management that concentrates on the movement and control of physical products Marketing Channel: The movement of goods from the point of production to the point of consumption, consisting of all the institutions and marketing activities in the marketing process Because supply chain management takes a systemwide approach to coordinating the flow of merchandise, it incorporates both of the above 9

10. Supply Chains add Value Each participant in a supply chain adds value to the product Supplier provisions parts and materials The manufacturer assembles the product, and then documents, packages, and ships the order Agents or wholesalers may be used to facilitate the flow of products among channel members Retailer stores the product, educates consumers about product features through advertisements or personal selling, and might even deliver and install the product (if needed) Transportation companies ship the product to and from each channel participant 10

11. Designing the Supply Chain Intensive Distribution –Designed to get products into as many outlets as possible. The more exposure it gets, the more it sells. –Typical for cheap convenience products, such as soda, snack foods, etc. Exclusive Distribution –Distributes products to only a very few select retailers –Assures that customers can find your product at only the most appropriate locations –Adds to the image of the company, and enhances the value of the product –Typical for high class products such as cars, watches, and cosmetics –Exclusive distribution can also help when supply is limited. Retailers have more incentive to push the products because their supply lines are guaranteed, and they have no competition. Selective Distribution –Somewhere between Intensive and Exclusive distributions –Uses a few retailers in each area to help maintain a certain image and to control the flow of product into the area –Typical for long-lasting and relatively high-cost products such as consumer electronics, hardware and tools, and large appliances 11