SUPPLY CHAIN

MANAGEMENT

SUPPLY CHAIN
INTEGRATION

2023 | 2
 OBJECTIVES
LEARNING UNIT 1: INTRODUCTION TO SUPPLY CHAINS AND THIER
MANAGEMENT

RESULTADOS DE APRENDIZAJE:

1. Classify the roles and stages of supply chains and how these may improve supply chain
network performance.

2. Identify and describe different Supply Chain strategies to ensure optimum Supply Chain
performance.

.
2
 OUTLINES
• Describe supply chain integration, the bullwhip effect, and
their impact on supply chain performance
• Describe the Supply Chain Integration Model and actions
that facilitate integration in the supply chain
• Identify causes of the bullwhip effect and obstacles to
integration in the supply chain
 Supply Chain Integration
• The primary goal of Supply Chain Management is to create value for
the end customers as well as the firms in the supply chain network.
• Firms in the supply chain network must integrate process activities
internally & with other firms in the network.
• Process integration means coordinating & sharing information &
resources to jointly manage a process.
• Process integration is often a difficult task & requires:
– Training
– Willing & competent partners
– Trust
– Organizational culture change
4
Supply Chain Integration Model

5
 Supply Chain Integration Model:
Align Strategies
• The company should be using strategies consistent with delivering high-
quality products at competitive price and service levels by developing
policies aligned with supporting the overall strategy of the supply chain.
• Elements include:
– Parts purchased & suppliers
– Shop layout & manufacturing processes
– Design of the products manufactured
– Mode of transportation
– Warranty & return services
– Employee training methods
– Types of information technologies used
 Supply Chain Integration Model:
Key Business Processes
Process Description
Customer Relationship Identifying key customer segments, tailoring product and service agreements
Management to meet their needs, measuring customer profitability and firm’s impact on
customers.
Customer Service Providing information to customers such as product availability, shipping
Management dates, and order status; administering product and service agreements.
Demand Management Balancing customer demand with the firm’s output capacity; forecasting
demand and coordinating with production, purchasing, and distribution.
Order Fulfillment Meeting customer requirements by synchronizing the firm’s marketing,
production, and distribution plans.
Manufacturing Flow Determining manufacturing process requirements to enable the right mix of
Management flexibility and speed to satisfy demand.
Supplier Relationship Managing product and service agreements with suppliers; developing close
Management working relationships with key suppliers.
Product Development Developing new products frequently and getting them to market effectively;
and Commercialization integrating suppliers and customers into the process to reduce time to
market.
Returns Management Managing used product disposition, product recalls, packaging requirements;
and minimizing future returns.

7
Obstacles To Process Integration Along the
Supply Chain
Obstacle Description
Silo Mentality Failing to see the big picture and acting only from the
perspective of a single department within a firm or a single
firm within a supply chain.
Lack of Supply The inability to easily share or retrieve trading partner
Chain Visibility information in real time, as desired by supply chain
participants.
Lack of Trust Unwillingness to work together or share information
because of the fear that the other party will take advantage
of them or use the information unethically.
Lack of Lack of process and information system skills and lack of
Knowledge knowledge regarding the benefits of SCM among
management and other employees, within the firm and
among partners.

8
 Supply Chain Integration Model:
Overcome barriers
• To overcome integration and supply chain performance issues firms need to work
better with suppliers and customers.
• They also need to develop SC Performance Measures for Key Processes, by:
– Monitoring the links with trading partners in the key SCM processes.
– Trading partners should monitor a number of cost-oriented measures averaged
across the member firms for each of the key supply chain processes, and
• Assess & Improve External Process Integration & Performance, by:
– Building maintaining & strengthening relationships
– Share information about Sales, forecast information, new products, expansion
plans, new processes, & new marketing campaigns.
• Process integration will enable firms to collaborate & share this information.
 Bullwhip Effect
• Order fluctuations increase as they move up the supply chain
from retailers to wholesalers to manufacturers to suppliers
• Distorted demand information within the supply chain,
produces very different estimates of what demand looks like
• For example, a 10% change in retail, becomes a 16% increase in
distribution orders, which becomes a 28% increase in
warehouse orders and a 40% increase in factory production,
and
• Results in a loss of supply chain coordination
Bullwhip Effect
 Bullwhip Causes and Responses
Bullwhip cause Description
Demand forecast Using varying customer orders to
updating create and update forecasts,
production schedules, and
purchase requirements.
Order batching Making large orders for goods
from suppliers on an infrequent
basis to reduce order and
transportation costs.
Price fluctuations Offering price discounts to
customers, causing erratic buying
patterns.
Rationing and shortage Allocating short product supplies
gaming to customers, causing them to
increase future orders beyond
what they really need.
Response to reduce
Base forecasts and orders on
point of sale data
More frequent ordering to
maintain target stock levels
Use everyday-low pricing to
level demand
Allocate production to stores
based on past sales
performances, sharing sales
performance data ensures
more accurate production
 The Effect of Poor Coordination on
Performance
Increases Decreases
Manufacturing cost Level of product availability
Inventory cost Relationship quality in SC
Replenishment lead time Profitability
Transportation cost
Labor cost for shipping and
receiving

• The bullwhip effect reduces supply chain profitability by

making it more expensive to provide a given level of product
availability
 Session 1 Activity #1:
Group work
From UEVirtual open the Short Case that describes the supply chain of nappies:
• STUDENT COPY - SCM SHORT CASE - BULLWHIP & COORDINATION
• In your breakout group read and discuss the case and answer the following
questions:
1. What is happening in the nappy supply chain?
2. What are its causes and which obstacles to supply chain coordination can you
find?
3. How is the Supply Chain’s financial performance affected?
4. What do you think could be a solution for the problem revealed in the case?
Choose a person to report back your group’s answers
 Session 1 Activity #1:
Group work
Question Discussion

What is happening

Causes and Obstacles

Affect on Financial
Performance

Possible solutions
 Session 1 Activity #1:
Group work
Question Discussion
What is happening Bullwhip affect different members, XYZ has a promotion, other members have
problems, backorders, overproduction, delivery problems
Causes and Obstacles Price fluctuations, order more when have promotion or discounts – incentive
increased sales in XYZ, negative for other supply chain stages
Distributor orders more batch orders or based on historical data
Factory orders more to increase production but has supply problems- gaming /
batching
Forecasting maybe based on historical data – forecasting
Affect on Financial Additional costs workers, transport costs, production costs, storage costs, inventory
Performance costs, supermarket wins all others bear costs
Possible solutions Strategy planning, clear vision of mkt and avoid generation of these extra costs,
lower costs by improving communication – when will have promotion, XYZ ordering
in advance – more frequent replenishment
Maintain lowers prices all the time to have constant demand stable supply chain

16
 THE OBJECTIVE OF A
SUPPLY CHAIN:
1. Maximize overall value created.
2. Supply chain value: difference between what the final
product is worth to the customer and the effort the supply
chain expends in filling the customer’s request.
3. Value is correlated to supply chain profitability (Difference
between revenue generated from the customer and the
overall cost across the supply chain).
 BIBLIOGRAPHY
• Wisner/Tan/Leong. Principles of Supply Chain Management: A
Balanced Approach 5th ed. Ch 13 Págs. 501-531
• Additional Material From:
• Clips:
• Supply Chain Integration:
https://www.youtube.com/watch?v=S_yMW2b0kNk
• Collaboration across the Supply Chain:
https://www.youtube.com/watch?v=b7EBvjRtW1Y