Supply Chain
Management
McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Supply Chain:
the sequence of organizations - their facilities,
functions, and activities - that are involved in
producing and delivering a product or service
Sometimes referred to as value chains
Instructor Slides 15-2
The sequence of the supply chain begins with basic
suppliers and extends all the way to the final customer.
Raw Warehouse Processing Distributio Retail
Factories Offices End User
Material s Centers n Centers Outlets
Supply chain functions and activities
Forecasting
Purchasing
Inventory management
Information management
Quality assurance
Scheduling
Production and delivery
Customer service
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A typical
manufacturing
supply chain
A typical
service supply
chain
Goods and services flow
clockwise in this diagram,
and cash flows
counterclockwise.
Information flows in
both directions.
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Supply Chain Management (SCM)
The strategic coordination of business functions within
a business organization and throughout its supply
chain for the purpose of integrating supply and
demand management
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SCM Managers
People at various levels of the organization who are responsible for
managing supply and demand both within and across business
organizations.
Involved with planning and coordinating activities
Sourcing and procurement of materials and services
Transformation activities
Logistics
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Tactical Operational
Forecasting Scheduling
Sourcing Receiving
Operations Planning Transforming
Managing inventory Order fulfilling
Transportation planning Managing inventory
Collaborating Shipping
Information sharing
Controlling
Instructor Slides 15-8
Trends affecting supply chain design and
management:
Measuring supply chain ROI
“Greening” the supply chain
Re-evaluating outsourcing
Integrating IT
Managing risks
Adopting lean principles
Instructor Slides 15-9
The goal of SCM is to match supply to demand as
effectively and efficiently as possible
Key issues:
Determining appropriate levels of outsourcing
Managing procurement
Managing suppliers
Managing customer relationships
Being able to quickly identify problems and respond to them
Managing risk
Instructor Slides 15-10
Outsourcing -
“the strategic use of outside resources to perform
activities traditionally handled by internal staff and
resources” Dave Griffiths
Why Outsource?
Provide services that are scalable, secure, and
efficient, while improving overall service and
reducing costs
Offshoring is NOT the same as outsourcing
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Goldsmith, 2003
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© Christos Braziotis, 2012-2013 – Nottingham University Business School
• Increased transportation costs
• Loss of control
• Creating future competition
• Other longer-term impacts (risks, ethical and
sociopolitical considerations)
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© Christos Braziotis, 2012-2013 – Nottingham University Business School
Reasons for Making Reasons for Buying
1. Maintain core competence 1. Frees management to deal with its
2. Lower production cost primary business
3. Unsuitable suppliers 2. Lower acquisition cost
4. Assure adequate supply (quantity or 3. Preserve supplier commitment
delivery) 4. Obtain technical or management ability
5. Utilize surplus labor or facilities (protect 5. Inadequate capacity
personnel from a layoff) 6. Reduce inventory costs
6. Obtain desired quality 7. Ensure alternative sources
7. Obtain unique item that would entail a 8. Item is protected by a patent or trade
prohibitive commitment for a supplier secret
8. Protect proprietary design
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© Christos Braziotis, 2012-2013 – Nottingham University Business School
Slack & Lewis 2011 15
© Christos Braziotis, 2012-2013 – Nottingham University Business School
A UAE business sets up its own call-center in India to serve UAE customers.
In-house or outsource?
A toy manufacturer uses overseas suppliers to produce components which it
imports to the UAE.
In-house or outsourcing?
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Outsourced elements of the value chain are in white
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Analysis will look at the expected sales levels and cost of internal
operations vs. cost of purchasing the product or service
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© Christos Braziotis, 2012-2013 – Nottingham University Business School
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© Christos Braziotis, 2012-2013 – Nottingham University Business School
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© Christos Braziotis, 2012-2013 – Nottingham University Business School
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© Christos Braziotis, 2012-2013 – Nottingham University Business School
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© Christos Braziotis, 2012-2013 – Nottingham University Business School
It begins with strategic sourcing
Analyzing the procurement process to lower costs by reducing
waste and non-value-added activities, increase profits, reduce
risks, and improve supplier performance
There must be
Trust
Effective communication
Information velocity
Supply chain visibility
Event management capability
Performance metrics
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The movement of goods, services, cash, and information in a supply chain.
Movements within a facility
Incoming shipments
Outgoing shipments
Logistics management includes management of:
1. inbound and outbound transportation,
2. material handling,
3. warehousing,
4. inventory,
5. order fulfillment and distribution,
6. third-party logistics,
7. reverse logistics (the return of goods from customers).
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Traffic management
Overseeing the shipment of incoming and outgoing
goods
Handles schedules and decisions on shipping method and
times, taking into account:
Costs of shipping alternatives
Government regulations
Needs of the organization
Shipping delays or disruptions
Instructor Slides 15-26
Radio frequency identification (RFID)
A technology that uses radio waves to identify objects, such as
goods in supply chains
Similar to barcodes but
Are able to convey much more information
Do not require line-of-sight for reading
Do not need to be read one at a time
Has the ability to:
Increase supply chain visibility
Improve inventory management
Improve quality control
Enhance relationships with suppliers and customers
Instructor Slides 15-27
Third-party logistics (3-PL)
The outsourcing of logistics management
Includes
Warehousing and distribution
Potential benefits include taking advantage of:
The specialists’ knowledge
Their well-developed information system
Their ability to obtain more favorable shipping rates
Instructor Slides 15-28
Effective supply chains are necessary for
organizational success
Requires integration of all aspects of the chain
Supplier relationships are a critical component of
supply chain strategy
Lean operations and six sigma are being employed to
improve supply chain success
Instructor Slides 15-29
