1. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel CHAPTER 14 Supply Chain Management 2011-2012 © iStockphoto.com/Robert Byron

2. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 2 LO 1 Define the terms supply chain and supply chain management, and discuss the benefits of supply chain management LO 2 Discuss the concept of supply chain integration and explain why each of the six types of integration is important LO 3 Identify the eight key processes of excellent supply chain management and discuss how each of these processes impacts the end customer Learning Outcomes

3. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 3 LO 4 Discuss the key strategic decisions supply chain managers must make when designing their companies’ supply chains LO 5 Discuss new technology and emerging trends in supply chain management Learning Outcomes

4. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 4 Supply Chains and Supply Chain Management Define the terms supply chain and supply chain management, and discuss the benefits of supply chain management LO 1

5. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 5 Supply Chains Supply Chain The connected chain of all of the business entities, both internal and external to the company, that perform or support the logistics function LO 1

6. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 6 Supply Chains Supply Chain Management Supply Chain Management A 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 value LO 1

7. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 7 Supply Chain Managers The 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. LO 1

8. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 8 Supply Chain Management Physical flow process that engineers the movement of goods Physical flow process that engineers the movement of goods Communicator of customer demand from point of sale to supplier Communicator of customer demand from point of sale to supplier LO 1

9. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 9 Benefits of Supply Chain Management Supply chain oriented companies commonly report: Lower inventory, transportation, warehousing, and packaging costs Greater supply chain flexibility Improved customer service Higher revenues Increased performance and profitability LO 1

10. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 10 Supply Chain Integration Discuss the concept of supply chain integration and explain why each of the six types of integration is important LO 2

11. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 11 Supply Chain Integration Material and Service Supplier Integration Internal Operations Integration Customer Integration Relationship Integration Measurement Integration Technology and Planning Integration Firm-to-Firm Social Interactions Operational Planning and Control Customer Integration LO 2

12. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 12 Supply Chain Integration Relationship Integration Relationship Integration The ability of two or more companies to develop social connections that serve to guide their interactions when working together. LO 2 The performance assessment of the supply chain as a whole that also holds each individual firm or business unit accountable for meeting its own goals Measurement Integration

13. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 13 Supply Chain Integration Technology and planning integration The creation and maintenance of information technology systems that connect managers across and through the firms in the supply chain LO 2 Material and service supplier integration Requires 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.

14. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 14 Internal Operations Integration Links internally performed work into a seamless process that stretches across departmental and/or functional boundaries, with the goal of satisfying customer requirements A 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 chain Customer Integration LO 2 Supply Chain Integration

15. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 15 Key Processes of Supply Chain Management Identify the eight key processes of excellent supply chain management and discuss how each of these processes impacts the end customer LO 3

16. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 16 Key Business Processes LO 3 1.Customer relationship management 2.Customer service management 3.Demand management 4.Order fulfillment 5.Manufacturing flow management 6.Supplier relationship management 7.Product development and commercialization 8.Returns management

17. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 17 Customer Relationship Management Customer Relationship Management (CRM) Process Customer Relationship Management (CRM) Process Allows companies to prioritize their marketing focus on different customer groups according to each group’s long-term value to the company or supply chain LO 3

18. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 18 Customer Service Management Customer Service Management Process Customer Service Management Process Presents a multi-company, unified response system to the customer whenever complaints, concerns, questions, or comments are voiced LO 3

19. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 19 Demand Management Demand Management Process Demand Management Process Seeks 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 behavior LO 3

20. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 20 Order Fulfillment Order Fulfillment Process Order Fulfillment Process a 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 time LO 3

21. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 21 Manufacturing Flow Management Manufacturing Flow Management Process Manufacturing Flow Management Process Concerned 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 process LO 3

22. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 22 Supplier Relationship Management Supplier Relationship Management Process Supplier Relationship Management Process Closely related to the manufacturing flow management process and contains several characteristics that parallel the customer relationship management process LO 3

23. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 23 Product Development and Commercialization Product Development and Commercialization Process Product Development and Commercialization Process Includes the group activities that facilitates the joint development and marketing of new offerings among a group of supply chain partner firms LO 3

24. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 24 Returns Management Returns Management Process Returns Management Process Enables 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 chain LO 3

25. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 25 Managing the Logistical Components of the Supply Chain Discuss the key strategic decisions supply chain managers must make when designing their companies’ supply chains LO 4

26. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 26 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. Logistics is… Logistics LO 4

27. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 27 Logistical Components of the Supply Chain Supply Chain Team Sourcing & Procurement Production Scheduling Order Processing Inventory Control Warehouse & Materials Handling Transportation Logistics Information System LO 4

28. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 28 Sourcing and Procurement  Plan purchasing strategies  Develop specifications  Select suppliers  Negotiate price and service levels  Reduce costs The Role of Purchasing: LO 4 © iStockphoto.com/Maria Toutoudaki

29. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 29 Production Scheduling Push / Pull Strategy Traditional Focus Push Start of Production Manufacturing Inventory- Based Mass Production Customer Focus Pull Customer-Order Based Mass Customization LO 4

30. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 30 Just-in-Time Manufacturing A 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. JIT LO 4

31. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 31 Benefits of JIT  For manufacturers: reduces raw material inventories; immediate shipping of products  For suppliers: daily or hourly deliveries rather than weekly  For customers: lower costs; shorter lead times; products tailored to customer needs LO 4

32. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 32 Order Processing Order processing is becoming more automated through the use of computer technology known as ELECTRONIC DATA INTERCHANGE (EDI). a system whereby orders are entered into the supply chain and filled. An Order Processing System is… LO 4

33. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 33 Inventory Control Inventory Control System Inventory Control System A method of developing and maintaining an adequate assortment of materials or products to meet a manufacturer’s or a customer’s demand LO 4

34. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 34 Inventory Control Tools for managing inventory include:  materials requirement planning (MRP) or materials management – supplier to manufacturer  distribution resource planning (DRP) – manufacturer to end user  automatic replenishment programs – minimal forecasting LO 4

35. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 35 Warehousing and Materials Handling LO 4 Most manufacturers today have moved to AUTOMATED materials-handling systems to minimize the amount of handling. a method of moving inventory into, within, and out of the warehouse. A Materials-Handling System is…

36. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 36 Transportation Airways Water Pipelines Motor Carriers Railroads LO 4

37. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 37 Transportation Mode Choice  Cost  Transit time  Reliability  Capability  Accessibility  Traceability LO 4

38. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 38 Exhibit 14.1 Criteria for Ranking Modes of Transportation LO 4

39. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 39 Trends in Supply Chain Management Discuss new technology and emerging trends in supply chain management LO 5

40. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 40 Trends in Supply Chain Management Electronic distribution Outsourcing of logistics functions Advanced computer technology LO 5

41. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 41 Advanced Computer Technology  Automatic identification systems - Bar coding - Radio frequency technology  Communications technology  Supply chain software systems LO 5

42. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 42 Outsourcing Logistics Functions Outsourcing Benefits  Reduce inventories  Locate stock at fewer plants and distribution centers  Provide same or better levels of service LO 5

43. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 43 Electronic Distribution 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. Electronic Distribution is… LO 5

44. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 44 Green Supply Chain Management Requires integrating green thinking into all phases of the supply chain –Green materials sourcing –Environmental impact of packaging, shipment, use –Incorporate end-of-life management Recycling Clean disposal LO 5

45. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 45 Global Logistics and Supply Chain Management Logistical challenges of global markets: Understanding and coping with the legalities of trade in other countries Uncertainty regarding shipping LO 5

46. Chapter 14 Copyright ©2012 by Cengage Learning Inc. All rights reserved 46 Beyond the Book Chapter 14 Videos Sephora – Supply Chain Management How does Sephora manage its supply chain? What information goes into deciding which suppliers become incorporated? http://www.cengage.com/marketing/boo k_content/1439039429_lamb/company_c lips/ch14.html