1. Supply Chain Management
BUSINESS PLUG-IN B8
Supply Chain Management

2. LEARNING OUTCOMES
List and describe the four drivers of supply chain management
Explain supply chain management strategies focused on efficiency
Explain supply chain management strategies focused on effectiveness
Summarize the future of supply chain management

3. INTRODUCTION
Supply chain – consists of all parties involved, directly or indirectly, in the procurement of a product or raw material
Supply chain management (SCM) – involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

4. SUPPLY CHAIN DRIVERS
The four primary drivers of supply chain management
Facilities
Inventory
Transportation
Information
Organizations use these four drivers to support either a supply chain strategy focusing on efficiency or a supply chain strategy focusing on effectiveness

5. SUPPLY CHAIN DRIVERS

6. FACILITIES DRIVER
Facility – processes or transforms inventory into another product, or it stores the inventory before shipping it to the next facility
Three primary facilities components
Location
Capacity
Operational design

7. FACILITIES 1: Location
Location efficiency – centralize the location to gain economies of scale, which increases efficiency
Location effectiveness – decentralize the locations to be closer to the customers, which increases effectiveness

8. FACILITIES 2: Capacity
Capacity efficiency – minimal excess capacity with the ability to produce only what is required
Capacity effectiveness – large amounts of excess capacity which can handle wide swings in demand

9. FACILITIES 3: Operational Design
Operational design efficiency – product focus design allows the facility to become highly efficient at producing one single product, increasing efficiency
Operational design effectiveness – functional focus design allows the facility to perform a specific function on many different types of products, increasing effectiveness

10. FACILITIES DRIVER

11. INVENTORY DRIVER
Inventory – offsets discrepancies between supply and demand
Inventory management and control software – provides control and visibility to the status of individual items maintained in inventory
Two primary inventory components
Cycle inventory
Safety inventory

12. INVENTORY 1: Cycle Inventory
Cycle inventory – the average amount of inventory held to satisfy customer demands between inventory deliveries
Cycle inventory efficiency – holding small amounts of inventory and receiving orders weekly or even daily
Cycle inventory effectiveness – holding large amounts of inventory and receiving inventory deliveries only once a month

13. INVENTORY 2: Safety Inventory
Safety inventory – extra inventory held in the event demand exceeds supply
Safety inventory efficiency – holding small amounts of safety inventory
Safety inventory effectiveness – holding large amounts of safety inventory

14. INVENTORY DRIVER

15. TRANSPORTATION DRIVER
Transportation – moves inventories between the different stages in the supply chain
Two primary inventory components
Method of transportation
Transportation route

16. TRANSPORTATION 1: Method of Transportation
Global inventory management system – provides the ability to locate, track, and predict the movement of every component or material anywhere upstream or downstream in the supply chain
Method of transportation efficiency
Method of transportation effectiveness

17. TRANSPORTATION 2: Transportation Route
Transportation planning software – tracks and analyzes the movement of materials and products to ensure the delivery of materials and finished goods at the right time, the right place, and the lowest cost
Distribution management software – coordinates the process of transporting materials from a manufacturer to distribution centers to the final customer
Transportation route efficiency
Transportation route effectiveness

18. TRANSPORTATION DRIVER

19. INFORMATION DRIVER
Information – an organization must decide how and what information it wants to share with its supply chain partners
Two primary information components
Information sharing
Push verses pull strategy

20. INFORMATION 1: Information Sharing
Information sharing efficiency – freely share lots of information to increase the speed and decrease the costs of supply chain processing
Information sharing effectiveness – share only selected information with certain individuals, which will decrease the speed and increase the costs of supply chain processing

21. INFORMATION 2: Push vs. Pull Information Strategy
Pull information strategy (efficiency) – supply chain partners are responsible for pulling all relevant information
Pull technology – pulls information
Push information strategy effectiveness – organization takes on the responsibility to push information out to its supply chain partners
Push technology – sends information

22. INFORMATION DRIVER

23. APPLYING A SUPPLY CHAIN DESIGN
Wal-Mart’s supply chain management strategy emphasizes efficiency, but also maintains adequate levels of effectiveness
Facilities focus – Efficiency
Inventory focus – Efficiency
Transportation focus – Effectiveness
Information focus - Efficiency

24. APPLYING A SUPPLY CHAIN DESIGN

25. Future Trends Fastest growing SCM components
Supply chain event management (SCEM)
Selling chain management
Collaborative engineering
Collaborative demand planning

26. Radio Frequency Identification (RFID)
Radio frequency identification (RFID) - use active or passive tags in the form of chips or smart labels that can store unique identifiers and relay this information to electronic readers
RFID tag - contains a microchip and an antenna, and typically work by transmitting a serial number via radio waves to an electronic reader, which confirms the identity of a person or object bearing the tag

27. Radio Frequency Identification (RFID)

28. RFID

29. CLOSING CASE ONE Listerine’s Journey
When you use Listerine antiseptic mouthwash, you are experiencing the last step in a complex supply chain spanning several continents and requiring months of coordination by countless businesses and individuals
As raw material is transformed to finished product, what will be Listerine travels around the globe and through multiple supply chains and information systems

30. CLOSING CASE ONE QUESTIONS
Summarize SCM and describe Warner-Lambert’s supply chain strategy
Detail Warner-Lambert’s facilities strategy
Detail Warner-Lambert’s inventory strategy

31. CLOSING CASE ONE QUESTIONS
Detail Warner-Lambert’s transportation strategy
Detail Warner-Lambert’s information strategy
What would happen to Warner-Lambert’s business if a natural disaster in Saudi Arabia depletes its natural gas resources?

32. CLOSING CASE TWO Katrina Shakes Supply Chains
How do corporations cope with the realities of risk, uncertainty, and crisis?
Many businesses prepared well for Hurricane Katrina, responded quickly, and did so because Katrina was exactly the kind of event for which well-run corporations ready themselves
Corporations donated more than $500 million for relief for the hurricane that hit New Orleans in 2005 and were the first to provide help to Katrina victims

33. CLOSING CASE TWO QUESTIONS
How did Home Depot manage its supply chain to be one of the first stores to reopen after Katrina?
How could Wal-Mart have revamped its transportation driver to handle Katrina more efficiently?
Why is it critical to FedEx’s success to be able to handle all types of global disasters? Highlight FedEx’s use of the information driver

34. CLOSING CASE TWO QUESTIONS
How can the government learn from big business in dealing with disasters such as Katrina?
What can companies do in terms of facilities, inventory, transportation, and information to prepare themselves for disasters such as Katrina?