Supply Chain

Management

McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
 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

Instructor Slides 15-2

 The sequence of the supply chain begins with basic
suppliers and extends all the way to the final customer.
Raw Warehouse Processing Distributio Retail
Factories Offices End User
Material s Centers n Centers Outlets

 Supply chain functions and activities

 Forecasting
 Purchasing
 Inventory management
 Information management
 Quality assurance
 Scheduling
 Production and delivery
 Customer service
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A typical
manufacturing
supply chain

A typical
service supply
chain

Goods and services flow

clockwise in this diagram,
and cash flows
counterclockwise.
Information flows in
both directions.

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 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

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Image: https://www.newyorkecommerceforum.com/2018/12/25/the-economics-of-demand-and-supply/
 SCM Managers
 People at various levels of the organization who are responsible for
managing supply and demand both within and across business
organizations.
 Involved with planning and coordinating activities
 Sourcing and procurement of materials and services
 Transformation activities
 Logistics

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Tactical Operational
 Forecasting  Scheduling
 Sourcing  Receiving
 Operations Planning  Transforming
 Managing inventory  Order fulfilling
 Transportation planning  Managing inventory
 Collaborating  Shipping
 Information sharing
 Controlling

Instructor Slides 15-8

 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

Instructor Slides 15-9

 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

Instructor Slides 15-10

 Outsourcing -
 “the strategic use of outside resources to perform
activities traditionally handled by internal staff and
resources” Dave Griffiths

 Why Outsource?
 Provide services that are scalable, secure, and
efficient, while improving overall service and
reducing costs

Offshoring is NOT the same as outsourcing

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Goldsmith, 2003
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© Christos Braziotis, 2012-2013 – Nottingham University Business School
• Increased transportation costs
• Loss of control
• Creating future competition
• Other longer-term impacts (risks, ethical and
sociopolitical considerations)

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© Christos Braziotis, 2012-2013 – Nottingham University Business School
 Reasons for Making  Reasons for Buying
1. Maintain core competence 1. Frees management to deal with its
2. Lower production cost primary business
3. Unsuitable suppliers 2. Lower acquisition cost
4. Assure adequate supply (quantity or 3. Preserve supplier commitment
delivery) 4. Obtain technical or management ability
5. Utilize surplus labor or facilities (protect 5. Inadequate capacity
personnel from a layoff) 6. Reduce inventory costs
6. Obtain desired quality 7. Ensure alternative sources
7. Obtain unique item that would entail a 8. Item is protected by a patent or trade
prohibitive commitment for a supplier secret
8. Protect proprietary design

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© Christos Braziotis, 2012-2013 – Nottingham University Business School
Slack & Lewis 2011 15
© Christos Braziotis, 2012-2013 – Nottingham University Business School
A UAE business sets up its own call-center in India to serve UAE customers.
In-house or outsource?

A toy manufacturer uses overseas suppliers to produce components which it

imports to the UAE.
In-house or outsourcing?

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Outsourced elements of the value chain are in white

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 Analysis will look at the expected sales levels and cost of internal

operations vs. cost of purchasing the product or service

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© Christos Braziotis, 2012-2013 – Nottingham University Business School
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© Christos Braziotis, 2012-2013 – Nottingham University Business School
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© Christos Braziotis, 2012-2013 – Nottingham University Business School
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© Christos Braziotis, 2012-2013 – Nottingham University Business School
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© Christos Braziotis, 2012-2013 – Nottingham University Business School
 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

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The movement of goods, services, cash, and information in a supply chain.

Movements within a facility

Incoming shipments
Outgoing shipments

Logistics management includes management of:

1. inbound and outbound transportation,
2. material handling,
3. warehousing,
4. inventory,
5. order fulfillment and distribution,
6. third-party logistics,
7. reverse logistics (the return of goods from customers).
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15-25`
 Traffic management
 Overseeing the shipment of incoming and outgoing
goods
 Handles schedules and decisions on shipping method and
times, taking into account:
 Costs of shipping alternatives
 Government regulations
 Needs of the organization
 Shipping delays or disruptions

Instructor Slides 15-26

 Radio frequency identification (RFID)
 A technology that uses radio waves to identify objects, such as
goods in supply chains
 Similar to barcodes but
 Are able to convey much more information
 Do not require line-of-sight for reading
 Do not need to be read one at a time
 Has the ability to:
 Increase supply chain visibility
 Improve inventory management
 Improve quality control
 Enhance relationships with suppliers and customers

Instructor Slides 15-27

 Third-party logistics (3-PL)
 The outsourcing of logistics management
 Includes
 Warehousing and distribution
 Potential benefits include taking advantage of:
 The specialists’ knowledge
 Their well-developed information system
 Their ability to obtain more favorable shipping rates

Instructor Slides 15-28

 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

Instructor Slides 15-29