Supply Chain Management Chapter 15 Supply Chain Management Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 15: Learning Objectives You should be able to: LO 15.1 Explain the terms supply chain and logistics LO 15.2 Name the key aspects of supply chain management LO 15.3 List, and briefly explain, current trends in supply chain management LO 15.4 Outline the benefits and risks related to outsourcing LO 15.5 Explain what the main supply chain risks are, and what businesses can do to minimize those risks LO 15.6 Describe some of the complexities related to global supply chains LO 15.7 Briefly describe the ethical issues in supply chains and the key steps companies can take to avoid ethical problems LO 15.8 Describe the three concerns of small businesses related to the supply chain and suggest ways to manage those concerns LO 15.9 List several strategic, tactical, and operational responsibilities related to managing the supply chain LO 15.10 Discuss procurement in terms of the purchasing interfaces, the purchasing cycle, ethics, and centralized versus decentralized decision making LO 15.11 Briefly describe the key aspects of supplier management LO 15.12 Discuss the logistics aspects of supply chain management, including RFID technology LO 15.13 Discuss the issues involved in managing returns LO 15.14 Describe some of the challenges in creating an effective supply chain and some of the trade-offs involved

Supply Chain Supply Chain: Logistics: the sequence of organizations - their facilities, functions, and activities - that are involved in producing and delivering a product or service Logistics: the part of a supply chain involved with the forward and reverse flow of goods, services, cash, and information. LO 15.1

Key Aspects of SCM The goal of SCM is to match supply to demand as effectively and efficiently as possible Key issues: Determining appropriate levels of outsourcing Managing procurement Managing suppliers Managing customer relationships Being able to quickly identify problems and respond to them LO 15.2

Trends in SCM Trends affecting supply chain design and management: Measuring supply chain ROI “Greening” the supply chain Re-evaluating outsourcing Integrating IT Adopting lean principles Managing risks LO 15.3

Benefits & Risks of Outsourcing Lower prices may result from lower labor costs The ability of the organization to focus on its core strengths Permits the conversion of some fixed costs to variable costs It can free up capital to address other needs Some risks can be shifted to the supplier The ability to take advantage of a supplier’s expertise Makes it easier to expand outside of the home country Risks Inflexibility due to longer lead times Increased transportation costs Language and cultural differences Loss of jobs Loss of control Lower productivity Loss of business knowledge Knowledge transfer and intellectual property concerns Increased effort required to manage the supply chain LO 15.4

Supply Chain Risks Supply Chain Risks Supply chain disruption Natural disasters Supplier problems Quality Issues Another form of disruption that may disrupt supplies and lead to product recalls, liability claims, and negative publicity Loss of control of sensitive information If suppliers divulge sensitive information to competitors, it can weaken a firm’s competitive position LO 15.5

Global Supply Chains Global supply chains Complexities Product design often uses inputs from around the world Some manufacturing and service activities are outsourced to countries where labor and/or materials costs are lower Products are sold globally Complexities Language and cultural differences Currency fluctuations Political instability Increasing transportation costs and lead times Increased need for trust amongst supply chain partners LO 15.6

Small Business Concerns Three small business SCM concerns: Inventory management Carry extra inventory as a way to avoid shortages due to supply chain interruption Have backups for delivery from suppliers and to customers Reducing risks Use only reliable suppliers Determine which suppliers are critical and get to know them and any challenges they have Measure supplier performance Recognize warning signs of supplier issues Have plans in place to manage supply chain problems International trade Work with someone who has expertise to help oversee foreign suppliers Set expectations for demand and timing Do not rely on a single supplier Build goodwill to help in negotiations and resolving any problem that arise Consider using domestic suppliers if the risks of working with foreign suppliers are prohibitive LO 15.8

Management Responsibility: Strategic Certain strategic responsibilities have a major impact on the success of both supply chain management and the business itself: Supply chain strategy alignment Network configuration Information technology Products and services Capacity planning Strategic partnerships Distribution strategy Uncertainty and risk reduction LO 15.9

Procurement The purchasing department is responsible for obtaining the materials, parts, and supplies and services needed to produce a product or provide a service. The goal of procurement Develop and implement purchasing plans for products and services that support operations strategies LO 15.10

Supplier Management Choosing suppliers Supplier audits Supplier certification Supplier relationship management Supplier partnerships CPFR (collaborative planning, forecasting, and replenishment) Strategic partnering LO 15.11

Logistics Logistics Refers to the movement of materials, services, cash, and information in a supply chain Movements within a facility Incoming shipments Outgoing shipments LO 15.12

Managing Returns Reverse Logistics The process of transporting returned items Products are returned to companies or third party handlers for a variety of reasons and in a variety of conditions Elements of return management Gatekeeping Screening returned goods to prevent incorrect acceptance of goods Avoidance Finding ways to minimize the number of items that are returned LO 15.13

Creating an Effective Supply Chain It begins with strategic sourcing Analyzing the procurement process to lower costs by reducing waste and non-value-added activities, increase profits, reduce risks, and improve supplier performance There must be Trust Effective communication Information velocity Supply chain visibility Event management capability Performance metrics LO 15.14