STUDY OUTLINE FOR CHAPTER 15

SUPPLY CHAIN MANAGEMENT

Supply chain: aka value chainthe sequence of organizations,

their facilities, functions & activitiesthat are involved in
producing and delivering a product or service (supply + demand
component)
Logistics: the part of a supply chain involved with forward/reverse
flow of goods, services, cash and information.
Supply Chain Management (SCM): the strategic coordination of
business functions within a business organization & throughout its
supply chain for purpose of integrating supply & demand
management//goal=match supply to demand as effectively +
efficiently as possible

5 key aspectsdetermining appropriate level of

outsourcing, managing procurement + suppliers +
customer relationships, and able to quickly identify &
respond to problems
functions & activities forecasting, purchasing,
inventory management, information management,
quality assurance, scheduling, production and delivery,
and customer service

7 principles of SCM
1) segment customers based on needs
2) customize the logistics network
3) listen to market signals & align demand/plan
accordingly
4) differentiate product closer to the customer
5) manage sources strategically
6) develop supply chain technology strategy
7) adopt channel-spanning measures

Trends in Supply Chain Management

measuring supply chain ROI, greening the supply chain, reevaluating outsourcing, integrating IT, adopting lean principles,
and managing risks
Risk Management: Involves identifying risks, assessing their
likelihood of occurring and their potential impact and then
developing strategies for addressing those risks
identify potential SC risks (1st step):
o Disruptions: e.g. natural disasters/supplier problems
o Quality Issues: e.g. product recalls, liability claims,
and negative publicity
o Loss of controlsensitive information: weakens
competitive advantage
Resiliency: the ability of a business to recover from an event that
negatively impacts the supply chain
Supply chain visibility: a major trading partner can connect to its
supply chain to access data in real time
Event-response capability: the ability to detect and respond to
unplanned events
strategies for addressing riskrisk avoidance, risk
reduction + risk sharing
three key elements RM success know your
providers, provide supply chain visibility, and develop
event-response capability

Global Supply Chains

e.g. product design use from inputs around the world,
manufacturing & service activities outsourced to
countries w/ lower labor and/or material costs; products
sold globally
complexities language & cultural differences,
currency fluctuations, political instability, increasing
transportation + lead times, increased need for trust
amongst supply chain partners

Management Responsibilities: (legal, economic,

and ethical organizational strategy, tactics, and operations)
strategic supply chain strategy alignment, network
configuration, information technology, products and
services, capacity planning, strategic partnerships,
distribution strategy, & uncertainty and risk reduction
tactical forecasting, sourcing, operations planning,
managing inventory, transportation planning, &
collaborating
operational scheduling, receiving, transforming,
order fulfilling, shipping, information sharing, &
controlling

Supplier Management
choosing suppliers
Vendor Analysis: evaluating the sources of supply in
terms of price, quality, reputation, and service
supplier audits
supplier certification
supplier relationship management
supplier partnerships/partnering: two or more
business with complementary products/services join to
realize a strategic benefit

o CPFR (collaborative planning, forecasting, &

replenishment)

Creating an Effective Supply Chain

Strategic sourcing (1st step): analyzing the procurement process
to lower costs by reducing waste and non-value-added activities,
increase profits, reduce risks, and improve supplier performance
requirements trust, effective communication,
information velocity, supply chain visibility, event
management capability, & performance metrics

Managing Returns
Reverse Logistics: the process of transporting returned items
Gatekeeping: screening returned goods to prevent incorrect
acceptance of goods
Avoidance: finding ways to minimize the number of items that are
returned

Trade-Offs
1. Lot size-inventory trade-offlarge lot sizes=quantity discount
& lower annual setup costs, but increase safety stock &
carrying costs by suppliers
2. Inventory-transportation cost trade-offsuppliers preference
of full truckloads > partial to reduce shipping costs; greater
holding costs for customers
Cross-docking
3. Lead time-transportation cost trade-offwaiting time for full
load/production time may increase lead time
4. Product variety-inventory trade-off more product
variety=smaller lot sizes & higher setup costs; higher
transportation & inventory mgmt. costs too
Delay differentiation
5. Cost-customer service trade-off producing & shipping in large
lots reduces costs, but increases lead time

 Disintermediation