1.0-Ch1-SCM Overview

Chapter 1
SUPPLY CHAIN
MANAGEMENT:
An Overview
Learning Objectives
After reading this chapter, you should be able to do the following:
● Explain the external change drivers in the

global economy and their impact on global
supply chains.
● Discuss the development of supply chain
management in leading organizations and
understand its contributions to their
financial viability.
©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in 2
part.
Learning Objectives, continued
● Appreciate the significance and role of

supply chain management among private
as well as public or nonprofit
organizations.
● Understand the contributions of supply
chain management to organizational
efficiency and effectiveness for competing
successfully in the global marketplace.
● Explain the benefits that can be achieved
from implementing supply chain practices.
part.
Learning Objectives, continued
● Understand the major challenges and

issues facing organizations developing
and implementing supply chain strategies.
part.
Forces Driving the Rate of Change
Five major external forces seem to drive the

rate of change and shape our economic and
political landscape:
1. Globalization
2. Technology
3. Organizational consolidation & power shift
4. The empowered consumer
5. Government policy and regulation
part.
The Supply Chain Concept
● Development of the Supply Chain Concept
• Started in the 1960s with the development of the physical distribution
concept
• Initial focus on physical distribution or outbound logistics was logical
since finished goods
• During the 1980s, the logistics or integrated logistics management
concept developed in a growing number of organizations
• The underlying logic of the systems or total cost concept was also the
rationale for logistics management
• Supply chain management can be viewed as a pipeline or conduit for
the efficient and effective flow of products/materials, services,
information, and financials
©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in
part.
Figure 1-1
A View of Logistics Management
part.
Figure 1-2
Integrated Logistics Management
Source: Center for Supply Chain Research, Penn State University.

part.
Figure 1-3
Generic Value Chain
part.
Figure 1-3
Generic Value Chain
Source: Michael Porfun, Competitive Advantage (New York: The Free Press, 1985): 37
part.
Figure 1-4
Integrated Supply Chain
Source: Center for Supply Chain Research, Penn State University

part.
Figure 1-5
Throughput time comparison
Source: “Efficient Consumer Response: Enhancing Consumer Value in the Grocery Industry”
by Kurt Salmon Associates, Inc. (Jan. 1993)
part.
Figure 1-6
Total Supply Chain Management Cost
Source: Supply Chain Council

part.
SCM Cost as a % of COGS
Source: https://www.mddionline.com/surviving-cost-pressure-cooker (2011)

part.
Major Supply Chain Issues
● Supply Chain Networks

• The network facilities and supporting transportation is important
• Increased complexity for organizations is a problem
• Inventory Deployments
○ Inventory duplication
○ Bullwhip effect
• Collection and storage of vast amounts of data
• Cost/Value
○ Efficiency (cost) and effectiveness (value) prevention of
suboptimization
• Organizational Relationships
○ Tradeoffs and optimization
• Performance Measurement
○ Why and how
part.
Major Supply Chain Issues, continued
● Supply Chain Networks (continued)
• Technology
○ Challenge is to evaluate and successfully implement the technology
• Transportation Management
○ Right product, right time, right quantity, right quality, right cost, right
destination
• Supply Chain Security
○ Concern and potential challenge since 9/11
part.
Summary
● Cash flow has become one of the most important measures of
financial viability in today’s global markets. Supply chains are
an important determinant of improved cash flow since they
impact order cycle time to customers.
● Supply chains are an important determinant of capital

consumption since they impact working capital, inventory
levels, and other assets such as warehouses.
● Efficient and effective supply chains can free up valuable

resources and improve customer fulfillment systems so as to
increase return on investment or assets and improve
shareholder value.
part.
Summary, continued
● The accelerated rate of change in our economy has

accelerated the necessity of continuing changes in
organizations or even transformation to remain competitive.
● The rate of change has been driven by a set of external forces

including but not limited to globalization, technology,
organizational consolidation and shifts in power in supply
chains, an empowered consumer, and government policy and
regulations.
● The conceptual basis of the supply chain is not new. In fact,

organizations have evolved from physical distribution
management to logistics management to supply chain
management.
part.
Summary, continued
● Supply chains are boundary spanning and require managing

three flows—products, information, financials (cash), and
demand.
● Supply chain management is a journey, not a goal, and there

are no “silver bullets” since all supply chains are unique.
● Information is power, and collaborative relationships internally

and externally are a necessary ingredient for success.
● The performance of supply chains must be measured in terms

of overall corporate goals for success.
● Supply chains need to focus on the customers at the end of

the supply chain and be flexible and responsive.
part.
Summary, continued
● Technology is important to facilitate change, but it must follow

a process and educate people to address problems and
issues appropriately.
● Transportation management and security have become

increasingly important in the twenty-first century because of
changes that have occurred.
● Change with the changes, or you will be changed by the

change!
part.

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Chapter 1

● Explain the external change drivers in the

● Appreciate the significance and role of

● Understand the major challenges and

Five major external forces seem to drive the

Source: Center for Supply Chain Research, Penn State University.

Source: Center for Supply Chain Research, Penn State University

Source: Supply Chain Council

Source: https://www.mddionline.com/surviving-cost-pressure-cooker (2011)

● Supply Chain Networks

● Supply Chain Networks (continued)

● Supply chains are an important determinant of capital

● Efficient and effective supply chains can free up valuable

● The accelerated rate of change in our economy has

● The rate of change has been driven by a set of external forces

● The conceptual basis of the supply chain is not new. In fact,

● Supply chains are boundary spanning and require managing

● Supply chain management is a journey, not a goal, and there

● Information is power, and collaborative relationships internally

● The performance of supply chains must be measured in terms

● Supply chains need to focus on the customers at the end of

● Technology is important to facilitate change, but it must follow

● Transportation management and security have become

● Change with the changes, or you will be changed by the

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