1. Supply Chain Management
BUSINESS B3
Supply Chain Management

2. Learning Outcomes
Describe supply chain planning and supply chain execution
List and describe the four drivers of supply chain management
Explain supply chain management strategies focused on efficiency
Explain supply chain management strategies focused on effectiveness
Summarize the future of supply chain management

3. Introduction
Supply chain – consists of all parties involved, directly or indirectly, in the procurement of a product or raw material
Supply chain management (SCM) – involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

4. Supply Chain Strategies
Supply chain planning (SCP) software – uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain while reducing inventory
Supply chain execution (SCE) software – automates the different steps and stages of the supply chain

5. Supply Chain Drivers

6. Efficiency IT metrics - measure the performance of the IT system including:
Throughput – amount of information that can travel through a system at any point in time
Speed – amount of time to perform a transaction
Availability – number of hours a system is available
Accuracy – extent to which a system generates correct results
Web traffic – includes number of pageviews, number of unique visitors, and time spent on a Web page
Response time – time to respond to user interactions

7. Effectiveness IT metrics – measure the impact IT has on business processes and activities including:
Usability – the ease with which people perform transactions and/or find information
Customer satisfaction – such as the percentage of existing customers retained
Conversion rates – number of customers an organization “touches” for the first time and convinces to purchase products or services
Financial – such as return on investment, cost-benefit analysis, etc.

8. SCM strategies focusing on efficiency are
most concerned with using the supply chain
to drive down costs
SCM strategies focusing on effectiveness are
most concerned with using the supply chain
to increase customer satisfaction

9. Facilities Driver
Facility – processes or transforms inventory into another product, or it stores the inventory before shipping it to the next facility
Three primary facilities components:
Location
Capacity
Operational design

10. Facilities: Location
Location efficiency – centralize the location to gain economies of scale, which increases efficiency
Information will not stop itself from sending spam, viruses, or highly-sensitive information
Information cannot delete or preserve itself

11. Facilities: Capacity
Capacity efficiency – minimal excess capacity with the ability to produce only what is required
Capacity effectiveness – large amounts of excess capacity which can handle wide swings in demand

12. Facilities: Operational Design
Operational design efficiency – product focus design allows the facility to become highly efficient at producing one single product, increasing efficiency
Operational design effectiveness – functional focus design allows the facility to perform a specific function on many different types of products, increasing effectiveness

13. Facility Driver
Inventory – offsets discrepancies between supply and demand
Two primary inventory components:
Cycle inventory
Safety inventory

14. Cycle Inventory
Cycle inventory efficiency – holding small amounts of inventory and receiving orders weekly or even daily
Cycle inventory effectiveness – holding large amounts of inventory and receiving inventory deliveries only once a month
Cycle inventory – the average amount of inventory held to satisfy customer demands between inventory deliveries

15. Safety Inventory
Safety inventory efficiency – holding small amounts of safety inventory
Safety inventory effectiveness – holding large amounts of safety inventory
Safety inventory – extra inventory held in the event demand exceeds supply

16. Transportation Driver
Transportation – moves inventories between the different stages in the supply chain
Two inventory components:
Method of transportation
Transportation route

17. Method of Transportation
Method of transportation efficiency– choosing an inexpensive method of transportation increases efficiency, but also typically increases delivery time
Method of transportation effectiveness – choosing an expensive method of transportation to ensure speedy delivery increases effectiveness

18. Transportation Route
Transportation route efficiency– a company can save money by shipping its products to a distributor that ships the products to its customers
Transportation route effectiveness – a company can ship its products directly to its customers

19. Information Driver
Information – an organization must decide how and what information it wants to share with its supply chain partners
Two information components:
Information sharing
Push vs. pull strategy

20. Information Sharing
Information sharing efficiency – freely share lots of information to increase the speed and decrease the costs of supply chain processing
Information sharing effectiveness – share only selected information with certain individuals, which will decrease the speed and increase the costs of supply chain processing

21. Push vs. Pull Information Strategy
Pull information strategy (efficiency) – supply chain partners are responsible for pulling all relevant information
Push information strategy effectiveness – organization takes on the responsibility to push (send) information out to its supply chain partners

22. Wal-Mart’s supply chain management drivers

23. Future Trends: Fastest growing SCM components
Supply chain event management (SCEM) – enables an organization to react quickly to resolve supply chain issues
Selling chain management – applies technology to the activities in the order life cycle from inquiry to sale
Collaborative engineering – allows an organization to reduce the costs required during the design process of a product
Collaborative demand planning – helps organizations reduce their investment in inventory, while improving customer satisfaction through product availability

24. Closing Case One Questions
Summarize SCM and describe Warner-Lambert’s supply chain strategy
Detail Warner-Lambert’s facilities strategy
Detail Warner-Lambert’s inventory strategy
Detail Warner-Lambert’s transportation strategy
Detail Warner-Lambert’s information strategy
Describe what would happen to Warner-Lambert’s business if a natural disaster in Saudi Arabia depletes its natural gas resources