1. CHAPTER 15- LOOKING TO THE FUTURE OF SUPPLY CHAIN MANAGEMENT Principles of Supply Chain Management: A Balanced Approach Prepared by Daniel A. Glaser-Segura, PhD

2. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 2 Learning Objectives You should be able to: –Discuss the current state & future challenges of SCM. –Explain why Supply Chains are becoming more global. –Describe how firms are expanding their SCM efforts to second- & third-tier members of their supply chains. –Discuss why & how supply chains are making greater efforts to become more environmental responsible. –Explain how supply chains are becoming faster. –Explain why firms are outsourcing some or all SCM processes. –Describe some of the ways supply chains are reducing total costs.

3. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 3 Chapter Fifteen Outline Expanding the Supply Chain Extending Progress Integration throughout the SC The Global Expansion of Supply Chains The Greening of Supply Chains Increasing SC Responsiveness Reducing SC Costs Reducing Purchasing Costs Outsourcing SCM Functions Managing Inventories Along the SC

4. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 4 Introduction Changes that have acted to bring about SCM. –Transportation deregulation in the 1970s & 1980s allowed companies to think more about distribution strategies & logistics –Computing Systems such as MRP, DRP, MRP-II, ERP software systems. –Electronic data interchange (EDI) in the 1980s & now Internet –Communication & information transfer- companies & their supply chains are finding new & better ways to satisfy customers, reduce costs, improve quality, & enhance competitive position.

5. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 5 Expanding the Supply Chain Extending Process Integration Throughout the SC –With second-& third-tier SC members was facilitated by rapid advances in communication software –Web services present one of the newest opportunities for SC partners to connect over the Web. flexible, quick & efficient integration –Reverse logistics- firms must deal with faulty, unwanted, worn out, damaged return products.

6. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 6 Expanding the Supply Chain- Cont. The Global Expansion of Supply Chains –Companies see global expansion of markets & foreign suppliers as profitability & competitiveness strategies –Risks abound, however, in the form of: Higher insurance costs, Shipping costs, Tightly monitored & time-consuming customs procedures, shortages & delays Political upheavals Foreign social problems Le Stop, Monsieur Package

7. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 7 The Greening of Supply Chains Global supply chains face environmental regulations Customers demand to know where products come from & how they are made Green supply chain involves: –Collecting & analyzing environmental regulations & customer surveys –Discussing environmental issues with procurement, engineering, & quality –Developing, communicating, & managing green SC programs

8. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 8 Reducing Supply Chain Costs Cost reduction is often only option for improving profits with the caveat that customers must be satisfied with the products & services. Reducing Purchasing Costs –Firms must be careful not to jeopardize existing long-term supplier partnerships when trying to reduce costs, or to jeopardize long-term SC strategies. –Downward price adjustments can have a lasting detrimental impact on supplier relationships & performance.

9. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 9 Reducing Supply Chain Costs- Cont. Outsourcing Supply Chain Management Functions Commonly outsourced SCM functions include: –inbound & outbound transportation –warehousing, –purchasing & inventory management Systems management companies tend to outsource functions that are not seen as core competencies.

10. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 10 Reducing Supply Chain Costs- Cont. Managing Inventories Along the Supply Chain –Improving merchandising & inventory management –Working with suppliers to improve stocking –Redesigning logistics, international distribution centers, transit facilities, & transportation routes. Methods to reduce inventory: Periodic inventory reviews ABC inventory method Managing the entire SC. SC systems (i.e., warehouse & logistics management software)