SUPPLY CHAIN

MANAGEMENT
SYSTEMS
 Learning Objectives
In this lesson, students will:
a) Learn about supply chain management systems
b) Explain how supply chain management systems
coordinate planning, production, and logistics
with suppliers
c) Discuss complexities of global supply chain and
how the Internet is helping manage these
complexities
d) Evaluate the business benefits of supply chain
management system

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 What is a Supply Chain
• The supply chain is a network of organizations and
processes for:
• Procuring raw materials
• Transforming them into products
• Distributing the products
• Upstream supply chain:
• Firm’s suppliers, suppliers’ suppliers, processes for managing
relationships with them
• Downstream supply chain:
• Organizations and processes responsible for delivering products to
customers
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Example: Unilever’s Supply Chain

Unilever

This figure illustrates the major entities in Unilever’s supply chain and the flow of
information upstream and downstream to coordinate the activities involved in buying,
making, and moving a product. Shown here is a simplified supply chain, with the
upstream portion focusing only on the suppliers for various raw materials.
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 Effects of timely/untimely
Information on a Supply Chain
• Inefficiencies caused by untimely information
in the supply chain:
• parts shortages, underutilized plant capacity,
excessive finished goods inventory, or high
transportation costs

• Inefficiencies cut into company’s operating

costs
• studies indicates company’s can waste up to 25%
of operating expenses.
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 Effects of timely/untimely
Information on a Supply Chain
• Perfect information can result in
• Just-in-time strategy:
• Components arrive as they are needed
• Finished goods shipped after leaving assembly line

• Safety stock
• Buffer stock kept by manufacturers for lack of
flexibility/uncertainty in supply chain

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 The Bullwhip Effect
• This happens when
Information about
product demand
gets distorted as it
passes from one
entity to next across
supply chain

Inaccurate information can cause minor fluctuations in demand for a product to be

amplified as one moves further back in the supply chain. Minor fluctuations in retail sales
for a product can create excess inventory for distributors, manufacturers, and suppliers
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 Intranets/Extranets for Supply
Chain Management

Intranets integrate information from isolated business processes within the firm to help
manage its internal supply chain. Access to these private intranets can also be extended
to authorized suppliers, distributors, logistics services, and, sometimes, to retail
customers to improve coordination of external supply chain processes. 8
 Supply Chain Management
Software
1. Supply Chain Planning Systems
− Model existing supply chain
− Enable demand planning
− Optimize sourcing, manufacturing plans
− Establish inventory levels
− Identify transportation modes

2. Supply Chain Execution Systems

− Manage flow of products through distribution
centers and warehouses
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 Complexities of global supply
chain
• Global supply chain issues
– Greater geographical distances
– Greater time differences
– Participants from different countries
• Different performance standards
• Different legal requirements
• Linguistic barriers (French, English, Spanish, Chinese, etc.)
• Internet helps manage global complexities
– Warehouse management
– Transportation management
– Logistics
– Outsourcing
 Business Value of SCM Systems
• Increased sales
• Reduce inventory levels
• Improve delivery service
• Speed product time to market
• Match supply to demand
• Use assets more effectively
Reduced supply chain costs lead to
increased profitability
− Total supply chain costs can be 75% of operating
budget
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