Supply Chain Management

1
Chapter 1

• Supply Chain Management

2
Learning Objectives

• Understand the development of supply chain
  management in leading corporations.
• Appreciate the importance and role of supply
  chain management among private and public
  organizations.
• Understand the contributions of a supply chain
  approach to organizational efficiency and
  effectiveness.

3
Learning Objectives

• Analyze the benefits that can accrue from
  implementing effective supply chain practices.
• Understand the major challenges and issues facing
  organizations developing and implementing supply
  chain strategies.
• Discuss the major change drivers in our economy
  and in the global marketplace.

4
Logistics Profile SAB Distribution

• SAB, a central Pennsylvania food wholesaling
  company, had grown to 180 million over the
  years.
• Current management were dealing with flat sales
  and profit profiles and had cut costs to the
  point where further cuts were counterproductive.
• The market had changed and SAB was unable to
  respondmanagement had questions but no answers.
• What happened?
• Where does SAB fit in the supply chain?
• What should SAB do?

5
Supply Chain Management Introduction

• Supply chain management now part of the business
  vocabulary.
• Impact of global marketplace drastically changed
  the landscape of business.
• Change was rapid and continuous in the 1990s.
• Doing business in the comfort zone was no longer
  synonymous with success.

6
The Changing Business Landscape Five Driving
Forces

• The Empowered Consumer
• Power Shift in the Supply Chain
• Deregulation
• Globalization
• Technology

7
The Changing Business Landscape Five Driving
Forces

• The Empowered Consumer
• Impact of consumer on logistics is more direct.
• Informed consumers have low tolerance level for
  poor quality in products and services.
• Changing demographics commands 24/7 service. let
  the seller beware
• Increased customer service increases the
  importance of logistics and supply chains.

8
The Changing Business Landscape Five Driving
Forces

• Power Shift in the Supply Chain
• Large retailers emerge, are more demanding and
  commanding.
• Focus upon distribution costs and their impact on
  everyday low prices.
• Changing logistics and supply chain strategies
  resulted from shifts in the balance of economic
  power.

9
The Changing Business Landscape Five Driving
Forces

• Deregulation
• Changing economic controls empowered creativity
  and competition.
• Changes in transportation fewer or no economic
  controls over rates and services.
• Change in financial institutions blurred
  traditional differences and increased
  competition.
• Change in the communications industry also
  resulted in more competition.
• Changes in the utility industry allows more
  competition.

10
The Changing Business Landscape Five Driving
Forces

• Globalization
• Global marketplace concept
• Global network sourcing, manufacturing, marketing
  and distribution
• Global alternatives have blossomed
• No geography - access available to the world
• Supply chain challenges - distance
• Wal-Marts challenges in Brazil
• New supply sources

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The Changing Business Landscape Five Driving
Forces

• Technology
• Information Age provides new and unrestricted
  access to the place aspect of business.
• My time, my place consumer revolution
• Warehouse technology has changed dramatically
  with hi-tech devices in use from the office space
  to the forklifts.

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On the Line Extreme Enterprise

• Integrating new enterprise and supply chain
  management solutions allowed Columbia Sportswear
  to keep up with sales that increased from 3
  million in 1984 to 470 million in 1999.
• With one store and a handful of outlets,
  distribution to its customers is where the rubber
  meets the road.
• Columbias president was determined not to let
  distribution restrain growth, and backed it with
  money.
• A 1 million square foot distribution center
  receives more than 2 million units/month and set
  a record by shipping 172,000 items in one day,
  and more than 2 million items in a month.

13
The Changing Business Landscape The Supply Chain
Concept

• Development of the Concept
• Business Case for Supply Chain Management
• Characteristics of Supply Chain Management

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The Changing Business Landscape Development of
the Concept

• Physical Distribution Management (outbound) in
  60-70s
• System concept total cost analysis, cost center.
• NCPDM
• Logistics Management (integrated inbound and
  outbound) in 80s
• Value chain analysis based on total cost.
• Supply Chain Management in 90s
• Extended enterprise perspective.

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Figure 1-1 A View of Business Logistics in a Firm
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Figure 1-2 Integrated Logistics Management
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Figure 1-3Generic Value Chain
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Figure 1-4 Logistics Supply Chain
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Figure 1-5Comparison of Average Throughput Time
of Dry Grocery Chain before and after ECR
Implementation
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Figure 1-6 Total Supply Chain Management Cost -
All Sectors
13.1
11.6
Revenue
7
6.3
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The Changing Business Landscape Business Case
for Supply Chain Management

• ECR study by GMA and best-in-class study by SCC
• Complexity of the supply chain
• Extended enterprise concept
• Coordinated, two-way flows of
• Products (reverse logistics)
• Information (Information sharing)
• Cash
• Inventory visibility

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Figure 1-7 Integrated Supply Chain
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Figure 1-8 Running Lean
Number of times Dell and Compaq turn inventory
over in each quarter, calculated at an annual
rate.
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The Changing Business Landscape Characteristics
of Supply Chain Management

• Inventory manage flow and level, balance supply
  and demand,
• Visibility reduce duplication
• Pull systems vs. push system
• Cost
• Efficiency lowing cost.
• System theory total cost analysis global
  optimization.

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Figure 1-9 Traditional Supply Chain/Pipeline
Inventory Flow 1970s and 1980s
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The Changing Business Landscape Characteristics
of Supply Chain Management

• Information - two way flows, real-time
• Customer service
• 3 levels
• Levels must be tailored to each customer
• Supply chain collaboration
• Collaborative/cooperative planning
• Share risks and rewards
• Focus on core competencies and outsource other
  activities to partners