Supply Chain Management

Chapter 10

Irwin/McGraw-Hill

The McGraw-Hill Companies,

1
Inc. 2004

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
Irwin/McGraw-Hill

The McGraw-Hill Companies,

Inc. 2004

Definitions and Terminology

Supply Chain
Supply Chain Management
Distribution Channel
Demand management
Logistics management

Irwin/McGraw-Hill

The McGraw-Hill Companies,

Inc. 2004

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.

Irwin/McGraw-Hill

The McGraw-Hill Companies,

Inc. 2004

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.

Irwin/McGraw-Hill

The McGraw-Hill Companies,

Inc. 2004

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

Irwin/McGraw-Hill

The McGraw-Hill Companies,

Inc. 2004

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.

Irwin/McGraw-Hill

The McGraw-Hill Companies,

Inc. 2004

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.

Irwin/McGraw-Hill

The McGraw-Hill Companies,

Inc. 2004

A Typical Supply Chain (Figure

10.1)

Irwin/McGraw-Hill

The McGraw-Hill Companies,

Inc. 2004

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.

Irwin/McGraw-Hill

The McGraw-Hill Companies,

Inc. 2004

10

Widget Example (Figure 10.2): Retail Level

Irwin/McGraw-Hill

The McGraw-Hill Companies,

Inc. 2004

11

Widget Example (Figure 10.2): Wholesale Level

Irwin/McGraw-Hill

The McGraw-Hill Companies,

Inc. 2004

12

Widget Example (Figure 10.2): Factory Level

Irwin/McGraw-Hill

The McGraw-Hill Companies,

Inc. 2004

13

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
Irwin/McGraw-Hill

The McGraw-Hill Companies,

Inc. 2004

14

Measuring Supply Chain

Performance
Delivery
Quality
Time
Cost

Irwin/McGraw-Hill

The McGraw-Hill Companies,

Inc. 2004

15

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
Irwin/McGraw-Hill

The McGraw-Hill Companies,

Inc. 2004

16

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.

Irwin/McGraw-Hill

The McGraw-Hill Companies,

Inc. 2004

17

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

Irwin/McGraw-Hill

The McGraw-Hill Companies,

Inc. 2004

18

The Internet and Supply Chains

Fundamental processes in supply chains:
Order placement
Order fulfillment

e-Procurement and its types

Potential problems with e-Procurement

Irwin/McGraw-Hill

The McGraw-Hill Companies,

Inc. 2004

19

Processes for e-Procurement (Figure 10.3)

REQUEST
Requirement

Selection

Requisition

Approval

BUY
Requisition

Source

Negotiate

Contract

SUPPLY
Confirm

Process
Order

Ship

Invoice

PAYMENT
Receive

Irwin/McGraw-Hill

Deliver

Match

Pay

The McGraw-Hill Companies,

Inc. 2004

20

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
Irwin/McGraw-Hill

The McGraw-Hill Companies,

Inc. 2004

21