Supply Chain

Management,
11e
Chapter 1: Supply Chain Management:
An Overview

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 Discussion Outline
• Five major change drivers

• 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 2015 2019
1. Wal-Mart 1. Wal-Mart 1. Wal-Mart 1. Wal-Mart

2. Kroger 2. Kroger 2. Costco 2. Amazon

3. The Home 3. Target 3. Kroger 3. Kroger

Depot
4. Sears, Roebuck 4. Walgreen 4. The Home Depot 4. Costco

https://nrf.com/resources/annual-retailer-lists/top-100-retailers
& Company
5. Kmart 5. Home Depot 5. Target 5. Walgreens Boots Alliance

Source Table 1.1: National Retail Federation (NRF)

6. Albertson’s 6. Costco 6. Walgreen’s 6. The Home Depot

7. Target 7. CVS Caremark 7. CVS Caremark 7. CVS Health Corporation

8. JC Penney 8. Lowe’s 8. Amazon.com 8. Target

9. Costco 9. Best Buy 9. Lowe’s 9. Lowe’s Companies

10. Safeway 10. Sears Holdings 10. Best Buy 10. Albertsons Companies

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 Six Major Change Drivers

Source Figure 1.1: Center for Supply Chain Research, Penn State University.
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 Six Major Change Drivers—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

• Growth and increased scope of outsourcing

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 Six Major Change Drivers—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.

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 Six Major Change Drivers—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”

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 Six Major Change Drivers—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

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 Six Major Change Drivers—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 supply chains
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 Six Major Change Drivers—Sustainability
The pursuit of sustainability is widely recognized as a key element
of successful supply chain management. This is critical to effective
risk management and achieving competitive advantage.

Society. Focus on people is a significant concern in the area of sustainability.

Environment. The objective of being “green” is a key element of making positive
contributions to improving our environment. There are many ways in which
supply chains may help to achieve desired outcomes.
Economy. Continued economic and financial sustainability is essential to making
future positive impacts on society and the environment.

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Evolution of Supply Chain Management
Concept

Source Figure 1.2: Center for Supply Chain Research, Penn State University.
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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.

Source Figure 1.4: Center for Supply Chain Research, Penn State
University.
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Integrated Supply Chain—Network

Source Figure 1.5 : Center for Supply Chain Research, Penn State University.
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 Supply Chain Flows

Center for Supply Chain Research, Penn State University.

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 Major Supply Chain Issues (1 of 5)

1. Supply chain networks 7. Performance measurement

2. Complexity 8. Technology
3. Inventory deployment 9. Transportation management
4. Information 10. Supply chain security
5. Cost and value 11. Talent management
6. Organizational relationships

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 Major Supply Chain Issues (2 of 5)

Supply Chain Network Complexity Inventory Deployment

The challenges The challenges The challenges

• Network system (facilities • Increased requirements in • Increased requirements for
and supporting simplifying and continually coordination or integration
transportation services) evaluating areas of to reduce inventory levels
must be capable and complexity in the various on horizontal (single-firm)
flexible to respond and aspects of supply chains and vertical (multiple-firms)
change with market levels in the supply chain
dynamics

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 Major Supply Chain Issues (3 of 5)

Organizational
Information Cost and Value
Relationships

The challenges The challenges The challenges

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

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 Major Supply Chain Issues (4 of 5)

Performance Transportation
Technology
Measurement Management

The challenges The challenges The challenges

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

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 Major Supply Chain Issues (5 of 5)

Supply Chain Security Talent management

The challenges The challenges

• Risk of disruptions, • Attract, develop, and

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

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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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