CHAPTER 1

Supply Chain Management:

An Overview

Supply Chain Management: A Logistics Perspective (10e)

Coyle, Langley, Novack, and Gibson
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in part.
 Discussion Outline
 Five major external forces
 Development of supply chain management
concept
 Integrated supply chain characteristics
 Supply chain flows
 Major supply chain issues

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 Leading Retailers (Sales Year)
2000 2010 2014
1. Wal-Mart 1. Wal-Mart 1. Wal-Mart
2. Kroger 2. Kroger 2. Kroger
3. The Home Depot 3. Target 3. Costco
4. Sears, Roebuck & Company 4. Walgreen 4. The Home Depot
5. Kmart 5. The Home Depot 5. Walgreen
6. Albertson’s 6. Costco 6. Target
7. Target 7. CVS Caremark 7. CVS Caremark
8. JC Penny 8. Lowe’s 8. Lowe’s
9. Costco 9. Best Buy 9. Amazon.com
10. Safeway 10. Sears Holdings 10. Safeway

Source: Table 1.1

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 Five Major External Forces
5
Government Globalization
Policy &
regulation 1
4
Empowered
Technology
consumer

Organizational 2
3 consolidation

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 Five Major External Forces -
Globalization
Globalization creates more economic and political risk,
shorter product life cycle, and the blurring of traditional
organizational boundaries.
Inventory management challenges
 Faster duplicability of products & services
 Faster reduction in demand
 Requirement of new pricing policies
 Higher risk of obsolescence

Longer and more complex supply chain

challenges
Images courtesy of Daily Lending News
 Growth and increased scope of outsourcing

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Five Major External Forces - Technology
Technology is a facilitator of internal process and supply
chain transformation. It is also a major force in changing
the dynamics of the marketplace.

The Internet. “Connected” 24/7

Social networks. Impact on customer

demand and the speed of information
transfers
The world’s “knowledge pool”
connection. Opportunities for collaboration
in supply chains
Images courtesy of National
Conference of State Legislatures

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 Five Major External Forces – Organization
Consolidation and Power Shifts
During the 1980s and especially the 1990s, economic power
and the driving force in supply chains shift from product
manufacturers to the retail end of the supply chain.
More collaboration among
organizations in supply chains
 Win-win, improved services such as:
 Scheduled deliveries
 “Rainbow” pallets
 Advance shipments notices (ASNs)
shrink-wrapped pallets
 Sharing of point-of-sale data to mitigate
“bullwhip effect”
Images courtesy of Community
Services and Health Industry Skills
Council (Australia)

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 Five Major External Forces –
Empowered Consumers
Consumers are empowered by exponentially expanded
access to product sources and related information and
increased buying power due to high income levels.
Increased pressures on supply chain due
to increased demands at the retail level
in terms of:
 Competitive prices
 High quality in products and services
 Tailored or customized products
 Convenience and responsiveness – 24/7
availability with a minimum of wait time
 Flexibility – Omnichannel distribution
strategies
Images courtesy of Forrester
Research

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 Five Major External Forces –
Government Policy and Regulation
More competitive environment is a result of the
deregulation of several important sectors in the United
States occurred in the 1980s and 1990s.
The transportation industry. Expanded services
beyond transportation, with service providers’ role
evolving to outsourcing partners

The financial sector. More flexible and responsive to

customer needs, making businesses more cognizant of
supply chain management impact on efficiency and
cash flow

The communications industry. A component of

the information revolution, leading to dramatic
improvements and opportunities in logistics and
Images courtesy of Liberty supply chains
Unyielding

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 Evolution of Supply Chain Management
Concept
Activity fragmentation to 1960s Activity integration 1980s 1990s +
Activity fragmentation to 1960s Activity integration 1980s 1990s +
Demand forecasting
Purchasing
Purchasing/
Requirements planning
Materials
Production planning
Management
Manufacturing inventory
Warehousing Integrated
Material handling
Logistics
Packaging
Finished goods inventory Supply Chain
Supply Chain
Management
Distribution planning Physical Management
Order processing Distribution
Transportation
Customer services
Strategic planning
Information services
Marketing/Sales
Finance

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 Integrated Supply Chain – Basics
SCM is the art and science of integrating the flows of products,
information and financials through the entire supply pipeline
from the supplier’s supplier to the customer’s customer.

Suppliers Contracted Manufacturers Wholesalers/ Retailers/

Manufacturers Distributors Customers

Product/Services Flow
Information Flow
Finance /Cash Flow
Demand Flow

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 Integrated Supply Chain –
Network

Raw
Manufacturing Manufacturing Wholesaler Retailer Retail Store
Material
Plant Warehouse Warehouse Warehouse
Supplier

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 Supply Chain Flows

PRODUCT FLOW
• Physical movement of goods and materials

INFORMATION FLOW
• Enabling physical flow of products
• Decision making
• Supply chain collaborations

CASH FLOW
• Management of working capital

DEMAND FLOW
• Detect and understand demand signals
• Synchronize demand vs. supply

Source: Figure 1.8

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 Major Supply Chain Issues
Transportation
Information Transportation
Information management
management
Complexity
Complexity
4 Performance
Performance
measurement
9
measurement
Supply chain
Supply chain 2 Cost and
Cost and 7 Supply chain
Supply chain
network value security
network value security
1 Inventory
Inventory 5 Technology 10
deployment Technology
deployment
3 Organizational
Organizational
relationships
8 Talent
Talent
management
relationships management
6 11
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 Major Supply Chain Issues
(continued)
Supply Chain Complexity Inventory
Network Deployment

The challenges The challenges The challenges

 Network system  Increased  Increased requirements
(facilities and supporting requirements in for coordination or
transportation services) simplifying and integration to reduce
must be capable and continually evaluating inventory levels on
flexible to respond and areas of complexity in horizontal (single-firm)
change with market the various aspects of and vertical (multiple-
dynamics. supply chains firms) levels in the
supply chain.
Images courtesy of (left to right) Elemica, The Mudd Partnership, Qstrock Inventory

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 Major Supply Chain Issues
(continued)
Organizational
Information Cost and Value
Relationships

The challenges The challenges The challenges

 The sharing of  The prevention of sub-  Internal collaboration
information along the optimization. (marketing, sales,
supply chain operations, finance, etc.)
 The discipline to ensure  External collaboration
the integrity of the vast (vendors, customers,
amount of data collected transportation
and stored companies, 3PLs)

Images courtesy of (left to right) TTGT Media, in-sourcing, The Billing Project.

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 Major Supply Chain Issues
(continued)
Performance Transportation
Technology
Measurement Management

The challenges The challenges The challenges

 Connecting lower-level  Evaluate, strategically  Transport “perfect
metrics in an plan, and successfully storm.” Transport
organization directly to implement the market changes; driver
the high-level technology to make shortages; fuel costs;
performance measures the improvements infrastructure
of the organization and desired constraints; and
the supply chain regulatory changes

Images courtesy of (left to right) FCW, Pixabay, The FSL Group

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 Major Supply Chain Issues
(continued)

Supply chain security Talent management

The challenges The challenges

 Risk of disruptions, vulnerability,  Attract, develop, and maintain
and exposure to terroristic the appropriate pool of talent
threats exacerbated by distance from entry level to executive
and complexity in global supply level
chain

Images courtesy of (left to right) One Source Technology, MediaTec Publishing

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 Summary
 The rate of change has been driven by a set of external forces
including globalization, technology, organizational
consolidation and shifts in power in supply chains,
empowered consumers, and government policy and
regulations.
 Supply chains are extended enterprises which require
managing four flows—products, information, financials
(cash), and demand on a collaborative basis.
 The global supply chains of the best companies must be
adaptive, resilient, and responsive to meet the challenges of
the global economy and develop mitigating strategies for
disruptive forces.

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