2 Chapter 14 Supply Chain Management Learning OutcomesLO 1 Define the terms supply chain and supply chain management, and discuss the benefits of supply chain managementLO 2 Discuss the concept of supply chain integration and explain why each of the six types of integration is importantLO 3 Identify the eight key processes of excellent supply chain management and discuss how each of these processes impacts the end customer
3 Chapter 14 Supply Chain Management Learning OutcomesLO 4 Discuss the key strategic decisions supply chain managers must make when designing their companies’ supply chainsLO 5 Discuss new technology and emerging trends in supply chain management
4 Supply Chains and Supply Chain Management Chapter 14 Supply Chain ManagementSupply Chains and Supply Chain ManagementDefine the terms supply chainand supply chain management,and discuss the benefitsof supply chain management4
5 Chapter 14 Supply Chain Management Supply ChainsSupply ChainThe connected chain of all of the business entities, both internal and external to the company, that perform or support the logistics functionNotes:Many companies are turning to supply chain management for competitive advantage.A company’s supply chain includes all of the companies involved in all of the upstream and downstream flows of products, services, finances, and information, from initial suppliers (the point of origin) to the ultimate customer (the point of consumption).5
6 Supply Chains Supply Chain Management Chapter 14 Supply Chain ManagementSupply ChainsA management system that coordinates and integrates all of the activities performed by supply chain members into a seamless process, from the source to the point of consumption, resulting in enhanced customer and economic valueSupply ChainManagementNotes:Visualizing the entire supply chain allows managers to maximize strengths and efficiencies at each level of the process to create a highly competitive, customer-driven supply system.6
7 Chapter 14 Supply Chain Management Supply Chain ManagersThe philosophy behind supply chain management is that by visualizing the entire supply chain, supply chain managers can maximize strengths and efficiencies at each level of the process to create a highly competitive, customer-driven supply system that is able to respond immediately to changes in supply and demand.77
8 Supply Chain Management Chapter 14 Supply Chain ManagementSupply Chain ManagementCommunicator of customer demandfrom point of sale to supplierPhysical flow process that engineers themovement of goodsNotes:Today, supply chain management plays a dual role.Supply chain management acts as a communicator of customer demand that extends from the point of sale back to the supplier, and second, as a physical flow process that engineers the timely and cost effective movement of goods throughout the entire supply pipeline.
9 Benefits of Supply Chain Management Chapter 14 Supply Chain ManagementBenefits of Supply Chain ManagementSupply chain oriented companies commonly report:Lower inventory, transportation, warehousing, and packaging costsGreater supply chain flexibilityImproved customer serviceHigher revenuesIncreased performance and profitability9
10 Supply Chain Integration Chapter 14 Supply Chain ManagementSupply Chain IntegrationDiscuss the concept ofsupply chain integrationand explain why eachof the six types ofintegration is important10
11 Supply Chain Integration Chapter 14 Supply Chain ManagementSupply Chain IntegrationRelationship IntegrationMeasurement IntegrationTechnology and Planning IntegrationFirm-to-Firm Social InteractionsOperational Planning and ControlMaterial and Service Supplier IntegrationInternal Operations IntegrationCustomer IntegrationNotes:Firms’ success in achieving each of these types of integration is very important.Highly integrated supply chains (those that are successful in achieving many or all of these types of integration) have been shown to be better at satisfying customers, managing costs, delivering high-quality products, enhancing productivity, and utilizing company or business unit assets, all of which translate into greater profitability for the firms and their partners working together in the supply chain.Customer Integration11
12 Supply Chain Integration Chapter 14 Supply Chain ManagementSupply Chain IntegrationRelationshipIntegrationThe ability of two or more companies to develop social connections that serve to guide their interactions when working together.The performance assessment of the supply chain as a whole that also holds each individual firm or business unit accountable for meeting its own goalsMeasurementIntegration12
13 Supply Chain Integration Chapter 14 Supply Chain ManagementThe creation and maintenance of information technology systems that connect managers across and through the firms in the supply chainTechnology and planning integrationRequires firms to link seamlessly to those outsiders that provide goods and services to them so that they can streamline processes and provide quality customer experiences.Material and service supplier integration13
14 Supply Chain Integration Chapter 14 Supply Chain ManagementLinks internally performed work into a seamless process that stretches across departmental and/or functional boundaries, with the goal of satisfying customer requirementsInternal Operations IntegrationA competency that enables firms to offer long-lasting, distinctive, value-added offerings to those customers who represent the greatest value to the firm or supply chainCustomer Integration14
15 Key Processes of Supply Chain Management Chapter 14 Supply Chain ManagementKey Processes of Supply Chain ManagementIdentify the eight key processesof excellent supply chainmanagement and discusshow each of these processesimpacts the end customer15
16 Key Business Processes Chapter 14 Supply Chain ManagementKey Business ProcessesCustomer relationship managementCustomer service managementDemand managementOrder fulfillmentManufacturing flow managementSupplier relationship managementProduct development and commercializationReturns managementNotes:Business processes are composed of bundles of interconnected activities that stretch across firms in the supply chain.There are eight critical business processes on which supply chain managers must focus. They are listed on this slide.16
17 Customer Relationship Management Chapter 14 Supply Chain ManagementCustomer Relationship ManagementCustomerRelationshipManagement(CRM) ProcessAllows companies to prioritize their marketing focus on different customer groups according to each group’s long-term value to the company or supply chainNotes:The customer relationship management process provides a set of comprehensive principles for the initiation and maintenance of customer relationships and is often carried out with the assistance of specialized CRM computer software.17
18 Customer Service Management Chapter 14 Supply Chain ManagementCustomer Service ManagementCustomerServiceManagementProcessPresents a multi-company, unified response system to the customer whenever complaints, concerns, questions, or comments are voicedNotes:Whereas the customer relationship management process is designed to identify and build relationships with good customers, the customer service management process is designed to ensure that those customer relationships remain strong.18
19 Demand Management Demand Management Process Chapter 14 Supply Chain ManagementDemand ManagementDemandManagementProcessSeeks to align supply and demand throughout the supply chain by anticipating customer requirements at each level and create demand-related plans of action prior to actual customer purchasing behaviorNotes:Demand management seeks to minimize the costs of serving multiple types of customers who have variable wants and needs.It is very difficult to predict exactly what items and quantities customers will buy prior to purchase; however, much of the uncertainty in demand planning can be mitigated by conducting collaborative planning, forecasting, and replenishment (CPFR) activities with the company’s customers and suppliers.19
20 Chapter 14 Supply Chain Management Order FulfillmentOrderFulfillmentProcessa highly integrated process, often requiring persons from multiple companies and multiple functions to come together and coordinate to create customer satisfaction at a given place and timeNotes:One of the most fundamental processes in supply chain management is the order fulfillment process, which involves generating, filling, delivering, and providing on-the-spot service for customer orders.When the order fulfillment process is managed diligently, the amount of time between order placement and receipt of the customer’s payment following order shipment (known as the order-to-cash cycle) is minimized as much as possible.Since many firms do not view order fulfillment as a core competency, they often outsource this function to a third party logistics firm that specializes in the order fulfillment process.20
21 Manufacturing Flow Management Chapter 14 Supply Chain ManagementManufacturing Flow ManagementManufacturingFlowManagementProcessConcerned with ensuring that firms in the supply chain have the needed resources to manufacture with flexibility and to move products through a multi-stage production processNotes:The goals of the manufacturing flow management process are centered on leveraging the capabilities held by multiple members of the supply chain to improve overall manufacturing output in terms of quality, delivery speed, and flexibility, all of which tie to profitability.21
22 Supplier Relationship Management Chapter 14 Supply Chain ManagementSupplier Relationship ManagementSupplierRelationshipManagementProcessClosely related to the manufacturing flow management process and contains several characteristics that parallel the customer relationship management processNotes:Supplier relationship management provides structural support for developing and maintaining relationships with suppliers.The management of supplier relationships is a key step toward ensuring that firms’ manufacturing resources are available, and thereby the supplier relationship management process has a direct impact on each supply chain member’s bottom-line financial performance.22
23 Product Development and Commercialization Chapter 14 Supply Chain ManagementProduct Development and CommercializationProductDevelopment andCommercializationProcessIncludes the group activities that facilitates the joint development and marketing of new offerings among a group of supply chain partner firmsNotes:New products and services are not the sole responsibility of a single firm who serves as inventor, engineer, builder, marketer, and sales agent; rather, they are often the product of a multi-company collaboration with multiple firms and business units playing unique roles in new product development, testing, and launch activities, among others.23
24 Returns Management Returns Management Process Chapter 14 Supply Chain ManagementReturns ManagementReturnsManagementProcessEnables firms to manage volumes of returned product efficiently, while minimizing returns-related costs and maximizing the value of the returned assets to the firms in the supply chainNotes:In addition to the value of managing returns from a pure asset-recovery perspective, many firms are discovering that returns management also creates additional marketing and customer service touch points that can be leveraged for added customer value above and beyond normal sales and promotion-driven encounters.24
25 Managing the Logistical Components of the Supply Chain Chapter 14 Supply Chain ManagementManaging the Logistical Components of the Supply ChainDiscuss the key strategicdecisions supply chainmanagers must make whendesigning their companies’supply chains25
26 Logistics Logistics is… Chapter 14 Supply Chain ManagementLogisticsLogistics is…the process of strategically managing the efficient flow and storage of raw materials, in-process inventory, and finished goods from point of origin to point of consumption.Notes:Orchestrating the physical means through which products move it is critical to any supply chain.26
27 Logistical Components of the Supply Chain Chapter 14 Supply Chain ManagementLogistical Components of the Supply ChainSupply Chain TeamSourcing & ProcurementProduction SchedulingOrder ProcessingInventory ControlWarehouse & Materials HandlingTransportationLogistics Information SystemNotes:The supply chain consists of several interrelated and integrated logistical components, as shown on this slide.Integrating and linking all of the components is the logistics information system.The supply chain team orchestrates the movement of goods, services, and information from the source to the consumer.The best supply chain teams move beyond the organization to include external participants, such as suppliers, transportation carriers, and third-party logistics suppliers. Members of the supply chain communicate, coordinate, and cooperate extensively.
29 Production Scheduling Chapter 14 Supply Chain ManagementProduction SchedulingPush / PullStrategyTraditional FocusPushStart of ProductionManufacturingInventory- BasedMass ProductionCustomer FocusPullCustomer-Order BasedMass CustomizationNotes:In a traditional mass-marketing manufacturing, production begins when forecasts call for additional products to be made or inventory is low.In a customer-focused “pull” manufacturing environment, production of goods is not started until an order is placed by the customer specifying the desired configuration, also known as mass customization or build-to-order.In this environment of customer demand and mass customization, supply chains need to be flexible and be able to shift production based on demand.
30 Just-in-Time Manufacturing Chapter 14 Supply Chain ManagementJust-in-Time ManufacturingJITA process that redefines and simplifies manufacturing by reducing inventory levels and delivering raw materials at the precise time they are needed on the production line.Notes:JIT, or lean production, was borrowed from the Japanese. Manufacturers work with suppliers to get necessary items to the assembly line at the precise time they are needed for production.For the manufacturer, JIT means that raw materials arrive at the assembly line “just in time” to be installed.For the supplier, JIT means supplying customers with products in just a few days rather than weeks.For the consumer, JIT means lower costs, shorter lead times, and products that closely meet the consumer’s needs.
31 Chapter 14 Supply Chain Management Benefits of JITFor manufacturers: reduces raw material inventories; immediate shipping of productsFor suppliers: daily or hourly deliveries rather than weeklyFor customers: lower costs; shorter lead times; products tailored to customer needsNotes:The benefits of JIT are shown on this slide.
32 Order Processing An Order Processing System is… Chapter 14 Supply Chain ManagementAn Order Processing System is…a system whereby orders are entered into the supply chain and filled.Notes:As an order enters the system, management must monitor two flows: the flow of goods and the flow of information.Shipping incorrect merchandise or partially filled orders can create just as much dissatisfaction as stockouts or slow deliveries.Order processing is becoming more automated through the use of computer technology known as ELECTRONIC DATA INTERCHANGE (EDI).32
33 Inventory Control Inventory Control System Chapter 14 Supply Chain ManagementInventory ControlInventoryControlSystemA method of developing and maintaining an adequate assortment of materials or products to meet a manufacturer’s or a customer’s demandNotes:The goal of inventory management is to keep inventory levels as low as possible while maintaining an adequate supply of goods to meet customer demand.33
34 Inventory Control Tools for managing inventory include: Chapter 14 Supply Chain ManagementInventory ControlTools for managing inventory include:materials requirement planning (MRP) or materials management – supplier to manufacturerdistribution resource planning (DRP) – manufacturer to end userautomatic replenishment programs – minimal forecasting34
35 Warehousing and Materials Handling Chapter 14 Supply Chain ManagementWarehousing and Materials HandlingA Materials-Handling System is…a method of moving inventory into, within, and out of the warehouse.Notes:Although JIT manufacturing processes may eliminate the need to warehouse many raw materials, manufacturers keep some safety stock on hand in the event of an emergency. Additionally, inventory may be stored for seasonally-demand products.Storage helps manufacturers manage supply and demand.A materials-handling system moves inventory into, within, and out of the warehouse, performing the functions shown on this slide.Most manufacturers today have moved to AUTOMATED materials-handling systems to minimize the amount of handling.35
36 Transportation Airways Water Pipelines Motor Carriers Railroads Chapter 14 Supply Chain ManagementTransportationAirwaysWaterPipelinesMotor CarriersRailroadsNotes:Supply chain logisticians must decide which mode of transportation to use to move products from supplier to producer and from producer to buyer. These decisions are related to other logistics decisions. The five major modes of transportation are listed on this slide.36
37 Transportation Mode Choice Chapter 14 Supply Chain ManagementTransportation Mode ChoiceCostTransit timeReliabilityCapabilityAccessibilityTraceabilityNotes:Supply chain managers choose a mode of transportation on the basis of the criteria shown on this slide.3737
38 Exhibit 14.1 Criteria for Ranking Modes of Transportation Chapter 14 Supply Chain ManagementExhibit 14.1 Criteria for Ranking Modes of Transportation38
39 Trends in Supply Chain Management Chapter 14 Supply Chain ManagementTrends in Supply Chain ManagementDiscuss new technology and emerging trends in supply chain management39
40 Trends in Supply Chain Management Chapter 14 Supply Chain ManagementTrends in Supply Chain ManagementElectronic distributionOutsourcing of logistics functionsAdvanced computer technologyNotes:Several technological trends are affecting the job of the supply chain manager:Advanced computer technology has boosted the efficiency of logistics with tools such as automatic ID systems, radio frequency technology, and supply chain software systems.Outsourcing of logistics functions is a rapidly growing segment in which a manufacturer or supplier turns over the entire or partial function of supply chain management to an independent third party.Electronic distribution includes any kind of product or service that can be distributed electronically. For instance, computer software can be purchased and downloaded electronically.
41 Advanced Computer Technology Chapter 14 Supply Chain ManagementAdvanced Computer TechnologyAutomatic identification systems- Bar coding- Radio frequency technologyCommunications technologySupply chain software systemsDiscussion/Team Activity:Discuss examples of the use of advanced computer technology from the text including Amazon.com, Walmart, and American Apparel.
42 Outsourcing Logistics Functions Chapter 14 Supply Chain ManagementOutsourcing Logistics FunctionsOutsourcing BenefitsReduce inventoriesLocate stock at fewer plants and distribution centersProvide same or better levels of serviceNotes:Turning their logistics functions over to firms with expertise in that area allows companies to focus on their core competencies.
43 Electronic Distribution Chapter 14 Supply Chain ManagementElectronic Distribution is…a distribution technique that includes any kind of product or service that can be distributed electronically, whether over traditional forms such as fiber-optic cable or through satellite transmission of electronic signals.43
44 Green Supply Chain Management Chapter 14 Supply Chain ManagementGreen Supply Chain ManagementRequires integrating green thinking into all phases of the supply chainGreen materials sourcingEnvironmental impact of packaging, shipment, useIncorporate end-of-life managementRecyclingClean disposal
45 Global Logistics and Supply Chain Management Chapter 14 Supply Chain ManagementGlobal Logistics and Supply Chain ManagementLogistical challenges of global markets:Understanding and coping with the legalities of trade in other countriesUncertainty regarding shipping45
46 Sephora – Supply Chain Management Chapter 14 Supply Chain ManagementChapter 14 VideosSephora – Supply Chain ManagementHow does Sephora manage its supply chain?What information goes into deciding which suppliers become incorporated?Beyond the Book46