1. Extending the Organization – Supply Chain Management CHAPTER 10 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

2. LEARNING OUTCOMES 1.List and describe the components of a typical supply chain. 2.Describe the four changes resulting from advances in IT that are driving supply chains. 3.Summarize the best practices for implementing a successful supply chain management system. 10-2

3. SUPPLY CHAIN MANAGEMENT The average company spends nearly half of every dollar that it earns on production In the past, companies focused primarily on manufacturing and quality improvements to influence their supply chains 10-3

4. SUPPLY CHAIN MANAGEMENT A 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 10-4

5. BASICS OF SUPPLY CHAIN The supply chain has three main links: 1.Materials flow from suppliers and their “upstream” suppliers at all levels. 2.Transformation of materials into semi-finished and finished products through the organization’s own production process. 3.Distribution of products to customers and their “downstream” customers at all levels. 10-5

6. BASICS OF SUPPLY CHAIN 10-6

7. INFORMATION TECHNOLOGY’S ROLE IN THE SUPPLY CHAIN Information Technology’s primary role is to create integrations or tight process and information linkages between functions within a firm Information Technology integrates planning, decision-making processes, business operating processes, and information sharing for business performance management 10-7

8. INFORMATION TECHNOLOGY’S ROLE IN THE SUPPLY CHAIN 10-8

9. VISIBILITY Supply Chain Visibility—The ability to view all areas up and down the supply chain Bullwhip Effect—Occurs when distorted product demand information passes from one entity to the next throughout the supply chain To make a supply chain work most effectively, organizations must create visibility in real time 10-9

10. CONSUMER BEHAVIOR Companies can respond faster and more effectively to consumer demands through supply chain enhancements Demand Planning Software—Generates demand forecasts using statistical tools and forecasting techniques One study found that companies managing demand in supply chains can average 50% reduction in inventory and a 40% increase in timely deliveries 10-10

11. COMPETITION Supply Chain Planning (SCP) Software— Uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain Supply Chain Execution (SCE) Software— Automates the different steps and stages of the supply chain 10-11

12. COMPETITION 10-12

13. SPEED Three factors fostering speed 10-13

14. SUPPLY CHAIN SUCCESS FACTORS SCM industry best practices include: 1.Make the sale to suppliers. 2.Wean employees off traditional business practices. 3.Ensure the SCM system supports the organizational goals. 4.Deploy in incremental phases and measure and communicate success. 5.Be future oriented. 10-14