Supply Chain Management

Chapter 10

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 Outline
Definitions and Terminology
System Interactions
Coordination in Supply Chain
Measuring Supply Chain Performance
Structural Improvement
Improvement in Infrastructure
The Internet and Supply Chains
Virtual Supply Chains
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 Definitions and Terminology
Supply Chain
Supply Chain Management
Distribution Channel
Demand management
Logistics management

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 Supply Chain
The sequence of business processes and
information that provides a product or
service from suppliers through
manufacturing and distribution to the
ultimate consumer.

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 Supply Chain Management
Planning, design, and control of the flow of
information and materials along the supply
chain in order to meet customer
requirements in an efficient manner, now
and in the future.

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 Distribution Channel
The route from the producer forward through
the distributors to the customer

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 Demand Management
Managing the demand for goods or
services along the supply chain.
Demand can be managed through such
mechanisms as products, pricing,
promotion, and distribution.

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 Logistics Management
If broadly defined, it is the same as supply
chain management.
Narrowly defined, logistics management is
concerned with inbound transportation and
outbound distribution.

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 A Typical Supply Chain (Figure
10.1)

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 System Interactions
(System Dynamics in Supply Chains)

Supply chain is a highly interactive system

There is an accelerator effect
The best way to improve a supply chain is
to reduce the total replenishment time and
to feedback actual demand information to
all levels.

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 Widget Example (Figure 10.2): Retail Level

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 Widget Example (Figure 10.2): Wholesale Level

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 Widget Example (Figure 10.2): Factory Level

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 Coordination in the Supply Chain
Example of need realization in grocery
industry (efficient consumer response,
ECR, program)
Need for coordination both across firms
and within firms
Use of cross-functional teams
Parallel between supply chain and quality
improvement
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 Measuring Supply Chain
Performance
Delivery
Quality
Time
Cost

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 Structural Improvement
Basic Ways to Improve Supply Chain
Structure:
– Change structure
Capacity, Facilities, Process technology, vertical
integration
– Change infrastructure
People, Information systems, Organization,
Production and inventory control, Quality control
systems

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 Forms of Structural Change
Forward and Backward Integration
Major process simplification
Changing the configuration of factories,
warehouses, or retail locations
Major product redesign
Outsourcing logistics to a third party.

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 Improvement in Infrastructure
Cross-functional teams
Partnerships
Set-up time reduction
Information systems
Cross-docking

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 The Internet and Supply Chains
Fundamental processes in supply chains:
– Order placement
– Order fulfillment
e-Procurement and its types
Potential problems with e-Procurement

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 Processes for e-Procurement (Figure 10.3)

REQUEST

Requirement Selection Requisition Approval

BUY
Requisition Source Negotiate Contract

SUPPLY
Process
Confirm Ship Invoice
Order

PAYMENT
Receive Deliver Match Pay

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 Virtual Supply Chains
“Virtual Companies”:
– Highly flexible
– Successful in highly dynamic environment
– Computer and the Internet are the main
catalysts
– May lead to “hollow corporations”
Virtual Supply Chain consists of at least
one virtual company that coordinates all
activities of the supply chain
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