Chapter 11 Supply Chain Management

Supply Chain All activities associated with the flow and transformation of goods and services from raw materials to the end user, the customer All activities associated with the flow and transformation of goods and services from raw materials to the end user, the customer A sequence of business activities from suppliers through customers that provide the products, services, and information to achieve customer satisfaction A sequence of business activities from suppliers through customers that provide the products, services, and information to achieve customer satisfaction

The Supply Chain Products and Services Customers Total satisfaction with quality, price, delivery, and service Distributors Package and delivery Inventory Producers Finished goods, end products and services Inventory Suppliers Materials, parts, sub- assemblies, and services

The Supply Chain Information Products and Services Customers Total satisfaction with quality, price, delivery, and service Distributors Package and delivery Inventory Producers Finished goods, end products and services Inventory Suppliers Materials, parts, sub- assemblies, and services

The Supply Chain Information Cash Products and Services Customers Total satisfaction with quality, price, delivery, and service Distributors Package and delivery Inventory Producers Finished goods, end products and services Inventory Suppliers Materials, parts, sub- assemblies, and services

Supply Chain Management Synchronization of activities required to achieve maximum competitive benefits Synchronization of activities required to achieve maximum competitive benefits Coordination, cooperation, and communication Coordination, cooperation, and communication Rapid flow of information Rapid flow of information Vertical integration Vertical integration

Supply Chain Uncertainty Forecasting, lead times, batch ordering, price fluctuations, and inflated orders contribute to variability Forecasting, lead times, batch ordering, price fluctuations, and inflated orders contribute to variability Inventory is a form of insurance Inventory is a form of insurance Distorted information is one of the main causes of uncertainty Distorted information is one of the main causes of uncertainty

The Bullwhip Effect Suppliers Tier II Suppliers Tier I Producers Distributor Inventory

Sourcing: Vertical Integration Supplies Component Manuf. Assembly Transport/.Warehousing Retailing Owning as much as possible of this chain is called Vertical Integration. Owning the entire chain is called Vertical Monopoly (not in the text).

Information in the Supply Chain Consolidation of purchasing from all suppliers Consolidation of purchasing from all suppliers Intercompany and intracompany information access Intercompany and intracompany information access Data interchange Data interchange Data acquisition at the point of origin and point of sale Data acquisition at the point of origin and point of sale Instantaneous updating of inventory levels Instantaneous updating of inventory levels

Electronic Data Interchange Computer-to-computer exchange of business documents in a standard format Computer-to-computer exchange of business documents in a standard format Quick access, better customer service, less paperwork, better communication, increased productivity, improved tracing and expediting, improves billing and cost efficiency Quick access, better customer service, less paperwork, better communication, increased productivity, improved tracing and expediting, improves billing and cost efficiency

Sourcing Relationship between customers and suppliers focuses on collaboration and cooperation Relationship between customers and suppliers focuses on collaboration and cooperation Outsourcing has become a long-term strategic decision Outsourcing has become a long-term strategic decision Organizations focus on core competencies Organizations focus on core competencies Single-sourcing is increasingly a part of supplier relations Single-sourcing is increasingly a part of supplier relations

Single Sourcing In the past, it was common for a company to limit the percentage of supplies to come from a single supplierIn the past, it was common for a company to limit the percentage of supplies to come from a single supplier Fluctuation, low quality, or failure was protected againstFluctuation, low quality, or failure was protected against In single-sourcing, however, company and supplier are in a partnership, influencing each other’s performance, with greater sharing of informationIn single-sourcing, however, company and supplier are in a partnership, influencing each other’s performance, with greater sharing of information The entire supply chain becomes more efficient as a resultThe entire supply chain becomes more efficient as a result

E-Procurement Business-to-business commerce conducted on the Internet Business-to-business commerce conducted on the Internet Benefits include lower transaction costs, lower prices, reduce clerical labor costs, and faster ordering and delivery times Benefits include lower transaction costs, lower prices, reduce clerical labor costs, and faster ordering and delivery times Currently used more for indirect goods Currently used more for indirect goods E-Marketplaces service industry-specific companies and suppliers E-Marketplaces service industry-specific companies and suppliers

B2B Procurement Auctions One buyer many sellersOne buyer many sellers Run by CombineNet, IBM, Logistics.com, Net Exchange, and EmptorisRun by CombineNet, IBM, Logistics.com, Net Exchange, and Emptoris Users include Sears, Walmart, Compaq, Staples, The Limited, Home Depot, and KmartUsers include Sears, Walmart, Compaq, Staples, The Limited, Home Depot, and Kmart Sears reports $25 M (13%) savings in one shipping lane auctionSears reports $25 M (13%) savings in one shipping lane auction Shipping providers were able to eliminate uncertainty and exposure to winning incompatible or incomplete sets of lanesShipping providers were able to eliminate uncertainty and exposure to winning incompatible or incomplete sets of lanes