Supply Chain Management Chapter 15 Supply Chain Management McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 15: Learning Objectives You should be able to: Discuss the key issues of supply chain management (SCM) Name the recent trends in SCM Summarize the motivations and risks of outsourcing as a strategy State some of the complexities that are involved with global supply chains List some of the strategic, tactical and operational responsibilities of SCM Give examples of some advantages of e-business Explain the importance of supplier partnerships Discuss the issues involved in managing returns List the requirements of an effective supply chain Name some of the challenges in creating an effective supply chain Student Slides 15-2

Supply Chain Supply Chain: the sequence of organizations - their facilities, functions, and activities - that are involved in producing and delivering a product or service Sometimes referred to as value chains Student Slides 15-3

Facilities The sequence of the supply chain begins with basic suppliers and extends all the way to the final customer Warehouses Factories Processing centers Distribution centers Retail outlets Offices Student Slides 15-4

Functions and Activities Supply chain functions and activities Forecasting Purchasing Inventory management Information management Quality assurance Scheduling Production and delivery Customer service Student Slides 15-5

Supply Chain Management Supply Chain Management (SCM) The strategic coordination of business functions within a business organization and throughout its supply chain for the purpose of integrating supply and demand management Student Slides 15-6

Key SCM Issues 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 Managing risk Student Slides 15-7

Trends in SCM Trends affecting supply chain design and management: Measuring supply chain ROI “Greening” the supply chain Re-evaluating outsourcing Integrating IT Managing risks Adopting lean principles Student Slides 15-8

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 Student Slides 15-9

E-Business E-business The use of electronic technology to facilitate business transactions Applications include Internet buying and selling E-mail Order and shipment tracking Electronic data interchange Product and service promotion Provide information about products and services Student Slides 15-10

Supplier Management Choosing suppliers Supplier audits Supplier certification Supplier relationship management Supplier partnerships CPFR (collaborative planning, forecasting, and replenishment) Strategic partnering Student Slides 15-11

The Bullwhip Effect Variations in demand cause inventory fluctuations to fluctuate and get out of control Inventory fluctuation can be magnified by Periodic ordering Reactions to shortages Forecast inaccuracies Order batching Sales incentives and promotions Liberal product return policies Results in Higher costs Lower customer satisfaction Student Slides 15-12

Logistics Logistics Refers to the movement of materials, services, cash, and information in a supply chain Movements within a facility Incoming shipments Outgoing shipments Student Slides 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 Student Slides 15-14

Operations Strategy Effective supply chains are necessary for organizational success Requires integration of all aspects of the chain Supplier relationships are a critical component of supply chain strategy Lean operations and six sigma are being employed to improve supply chain success Student Slides 15-15