Chapter 11

Supply Chain Management

McGraw-Hill/Irwin

Copyright 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Chapter 11: Learning Objectives

You should be able to:

Discuss the key issues of supply chain management (SCM)

State the goal of SCM
List the components of SCM
List four recent trends in SCM
State some of the complexities of global SCM
List some of the strategic, tactical and operational responsibilities
of SMC
List some advantages of e-business
Explain the motivations and risks of outsourcing as a strategy

11-2

Chapter 11: Learning Objectives (contd.)

You should be able to:
Explain the importance of supplier partnerships
List some key issues relative to managing supply chain
inventories
Explain the importance of logistics management
Discuss the issues involved in managing returns
List the requirements of an effective supply chain
Explain some of the challenges in creating an effective supply
chain

11-3

Supply Chain
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

11-4

Typical Supply Chains

11-5

Supply Chain Management

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

11-6

Key SCM Issues

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

11-7

Trends in SCM
Trends affecting supply chain design and
management:
Re-evaluation of outsourcing
Risk management
Inventory management
Lean supply chains
Sustainability

11-8

Procurement
The purchasing department is responsible for
obtaining the materials, parts, and supplies and
services needed to produce a product or provide
a service.
The goal of procurement
Develop and implement purchasing plans for products
and services that support operations strategies

11-9

E-Business
E-business
the use of electronic technology to facilitate business
transactions
Applications include
Internet buying and selling
E-mail
Order and shipment tracking
Electronic data interchange
Product and service promotion
Provide information about products and services

11-10

Contrasting Supplier Relationships

11-11

The Bullwhip Effect

11-12

Supply Chain Performance Metrics

Financial

Return on assets
Cost
Cash flow
Profits

Suppliers

Quality
On-time delivery
Cooperation
Flexibility

Operations
Productivity
Quality

Inventory
Average value
Turnover
Weeks of supply

Order fulfillment

Order accuracy
Time to fill orders
% of incomplete orders shipped
% of orders delivered on time

Customers
Customer satisfaction
% of customer complaints

11-13

Challenges
Barriers to integration of organizations
Getting top management on board
Dealing with trade-offs

Small businesses
Variability and uncertainty
Response time

11-14

Operations Strategy
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

11-15