SCM CH1
Firms using Supply Chain Management:
1.Start with key suppliers 2.Move on to other suppliers, customers, and logistics services 3.Integrate second tier suppliers and customers (second tier refers to the customer's customers and the supplier's suppliers)
The continuing cycle of erratic demand causing forecasts to include safety stock which in turn magnify supplier forecasts and cause production planning problems is known as:
Bullwhip effect
According to the textbook, conditions which must be present for successful supply chain management include
Cooperation among firms
Which of the following activities would fall under the foundational element of operation?
Demand Management
Today in SCM
Emphasis is being placed on the environmental and social impacts of supply chains •Sustainability - ability to meet the needs of current supply chain members without hindering the ability to meet the needs of future generations •Triple bottom line - taking care of people, planet and profits
2000s and Beyond
Evolution along 2 parallel paths 1.Supply management emphasis from industrial buyer 2.Logistics and customer service emphasis from wholesalers and retailers Focus on improving supply chain capabilities with initiatives such as: •Third-party service providers (3PLs) •Integrating logistics •Client/server SCM software - Enterprise Resource Planning
Which of the following can happen as a result of the bullwhip effect?
Excess costs for each firm in a supply chain
Importance of Supply Chain Management
Firms with large system inventories gain the most from successful SCM •Lower purchasing & carrying costs •Better product quality •Higher customer service levels •Increased sales and profits Cost savings and better coordination of resources are reasons to employ Supply Chain Management Reduced Bullwhip Effect •Defined as: Erratic demand forecasts causing excess safety stocks, which cause production planning problems. •SCM reduces safety stocks and costs due to coordinated planning and better sharing of information
there is no true blueprint for how a supply chain should look and they can all be unique in their own ways. Many definitions but all have one common thread...
firms working together to serve the end customer. In general, supply chain management is the efficient and effective flow of products/materials, services, information, and financials from the supplier's suppliers through the various intermediate entities out to the end user, which is the customer
Supply chains are connected by transportation and storage activities and integrated through...
information, planning, and integration activities Today large firms are moving away Vertically Integrated due to high cost and difficulty managing diverse units
Traditional organizational cultures that emphasized short-term, company focused performance can conflict with the objectives of supply chain management. Successful supply chain management...
requires high levels of trust, cooperation, collaboration, and honest, accurate communications •All participants in the supply chain benefit. •Boundaries are dynamic and extend from "the firm's suppliers' suppliers to its customers' customers (i.e., second tier suppliers and customers)." •Supply chains also include reverse logistics activities to handle returned products, warranty repairs, and recycling.
Operations Elements:
•Demand management - match demand to available capacity •Linking buyers & suppliers via MRP and ERP systems •Extending order communication and inventory visibility farther up the supply chain •Radio frequency identification (RFID) systems scan cartons describing contents of the packages •Use lean systems to improve the flow of materials to reduce inventory levels •Employ Six Sigma to improve quality compliance among suppliers
A supply chain consists of the flow of products and services from:
•Raw materials manufacturers •Component and intermediate manufacturers •Final product manufacturers •Wholesalers and distributors and •Retailers
Supply Elements:
•Supplier management - improve performance through -Supplier evaluation (determining supplier capabilities) -Supplier certification (third party or internal certification to assure product quality and service requirements) •Strategic partnerships - successful and trusting relationships with top-performing suppliers •Ethics and sustainability - recognizing suppliers' impact on reputation and carbon footprint
Integration Elements:
•Supply Chain Process Integration - when supply chain participants work for common goals. Requires intra-firm functional integration, with efforts to change attitudes & adversarial relationships •Supply Chain Performance Measurement - Crucial for firms to know if procedures are working as expected •High level supply chain performance occurs when strategies at each firm fit well with overall supply chain strategies
Logistics Elements:
•Transportation management - tradeoff decisions between cost & timing of delivery / customer service via trucks, rail, water & air •Third party logistics providers (3PLs) - for hire outside agencies providing transportation and services •Creating distribution networks based on tradeoff decisions between cost & sophistication of distribution system
History of SCM
1960s with the development of the idea of physical distribution which focused on the outbound side of a firm's logistics system. The focus of physical distribution was on total systems cost and analyzing tradeoff scenarios to arrive at the best or lowest system cost. The initial focus on physical distribution or outbound logistics was logical since finished goods were usually higher in value, which meant that their inventory, warehousing, materials-handling, and packaging costs were relatively higher than their raw materials inputs. During the 1980s, the logistics or integrated logistics management emerged. In its simplest form, it added inbound logistics to the outbound logistics of physical distribution. This increased coordination between the outbound and inbound logistics systems provided opportunities for increased efficiency and, perhaps, improved customer service. International or global sourcing of materials and supplies for inbound systems was growing, which presented some special challenges for production scheduling. The systems or total cost concept was also a rationale for logistics management. This includes a tool called value chain analysis developed for competitive analysis and strategy purposes.
The term Supply Chain Management and the field of study it represents today seems to have emerged in the:
1980s
Key Supply Chain Flows
Integration across the boundaries of several organizations in essence means that the supply chain needs to function similarly to one organization in satisfying the ultimate customer. Services and products have traditionally been an important focus as customers expect their orders to be delivered in a timely, reliable, and damage-free manner. Transportation is critical to this outcome. Note that product flow is a two-way flow in today's environment because of the reverse logistics systems for returning products to the supplier for a variety of reasons. The information flow has become an extremely important factor for success in supply chain management, noting the two-way flow. In a sense, the supply chain is being compressed or shortened through timely information flows back from the marketplace, which leads to a type of supply chain compression or inventory compression. Sharing sales information leads to less demand distortion which is known as the bullwhip effect. The third flow is financials or, more specifically, cash, and a major impact of supply chain compression and faster order cycle times has been faster cash flow. The faster cash-to-cash cycle or order-to-cash cycle has been a bonanza for companies because of the impact on working capital. The fourth flow is demand flow. Integrated information systems enable demand signals to be identified early and responded to with appropriate production or delivery quantities. Supply chain management provides organizations with an opportunity to reduce cost (improve efficiency) and improve customer service (effectiveness). However, certain issues or challenges must be addressed before SCM will be successful.
1980s-1990s
Intense global competition led U.S. manufacturers to adopt: •Supply Chain Management (SCM) •Just-In-Time (JIT) •Total Quality Management (TQM) •Business Process Reengineering (BPR) •Customer Relationship Management (CRM)
1960s-1970s
Introduction of new computer technologies lead to development of Materials Requirements Planning (MRP) and Manufacturing Resource Planning (MRPII) to coordinate inventory management and improve internal communication
Which of the following activities allows buyers to assume the supplier will meet certain product quality and service requirements?
Supplier Certification
Current Trends in SCM
Supply Chain Analytics - examining raw supply chain data and reaching conclusions or making predictions with the information •Growth being pushed by the rise in computing capabilities and big data •Huge volumes of data generated in business organizations including retail, healthcare, manufacturing, and electronics Most companies are trying to improve their supply chain sustainability performance •Can lead to •enhance processes •reduce costs •increase productivity •uncover product innovation •achieve market differentiation •improve societal outcomes Increasing Supply Chain Visibility •Knowing exactly where products are, at any point in the supply chain •Inventory visibility is made easier by technology •Sophisticated software applications for tracking orders, inventories, deliveries, returned goods, and even employee attendance
Major Issues in SCM
Supply Chain Networks: The network facilities must be capable and flexible to respond and change with the dynamics of the marketplace whether in the short run or the long run. Complexity: Globalization and consolidation in supply chains increase complexity for organizations in terms of SKUs, customer/supplier locations, transportation requirements, trade regulations, taxes, etc. Companies need to take steps to simplify, as much as possible, the various aspects of their supply chains such as rationalizing SKUs, physical locations, and customer service. Inventory Deployment: SCM provides an opportunity to reduce inventory levels with coordination or integration, which can help reduce inventory levels on horizontal (one firm) and/or vertical (multiple firms) levels in the supply chain. Information: Today's technology and communication lead to the collection and storage of vast amounts of data unless data is shared horizontally and vertically in the supply chain and used to make better decisions. Information can be a powerful tool if it is timely, accurate, managed, and shared. Cost/Value: A challenge for supply chains is the prevention of suboptimization. Global supply chains compete against other global supply chains which accentuates the importance of cost and value at the very end of the chain. Organizational Relationships: Supply chain management emphasizes a horizontal process orientation that cuts across traditional functional silos within organizations and necessitates collaboration with external vendors, customers, transportation companies, 3PLs, and others in the supply chain. Communication is critical to explain the opportunities for system tradeoffs that will make the supply chain more competitive. Performance Measurement: Most organizations have measures of performance or metrics in place to analyze and evaluate their efficiency and progress over different time periods. In some instances, metrics are set that appear logical for the subunit of the organization but are suboptimal for the overall organization or supply chain. Technology: Technology can be viewed as a change driver, but it is also important as a facilitator of change that will lead to improved efficiency and effectiveness. The approach necessary is to analyze and adjust or change processes, educate the people involved, and then select and implement the technology to facilitate the changes in the processes. Transportation Management: Transportation can be viewed as the glue that unites the supply chain model. The critical outcomes of the supply chain are to deliver the right product, at the right time, in the right quantity and quality, at the right cost, and to the right destination. Economic changes among transportation providers such as shortages of drivers, higher fuel costs, and changes in driver hours of service regulations have led to what some individuals have called a transportation crisis or the "perfect storm," a much greater challenge for users. Supply Chain Security: Safe reliable delivery of products and services is expected. Disruptions such as 9/11 or natural disasters heightened awareness for the need to be prepared
An internal or external event that causes a disruption or failure of supply chain operations is an example of
Supply Chain risk
Four foundations of SCM
Supply, Operations, Logistics, and Integration
Which of the following can be defined as "The ability to meet the needs of current supply chain members without hindering the ability to meet the needs of future generations".
Sustainability
What is supply chain management (according to the Institute for Supply Management)
The design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer.
What is supply chain management (according to the association for operations management)
The design, planning, execution, control and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.
What is supply chain management (according to the council of supply chain management professionals)
The planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities ... also includes coordination with channel partners, which can be suppliers, intermediaries, third party service providers, and customers.
1950s-1960s
U.S. manufacturers focused on mass production techniques as their principal cost reduction and productivity improvement strategies
