MGT 314 Chapter 15

Chapter 15
Supply Chain Management

Supply Chain Management
• Supply Chain: The sequence of organizations - their

facilities, functions, and activities - that are involved in
producing and delivering a product or service.
• Management of the flow of goods and services from

point of origin to point of consumption.
• It involves the movement and storage of -

– Raw materials,
– Work-in-process inventory, and
– Finished goods.
Typical Supply Chains
Customer Customer Customer

Initial Final
Supplier Customer
Supplier Supplier Supplier
Flows of Supply Chain Management
1. Product/ Material flow.
2. Information flow and
3. Finance/ Money/ Capital flow.
Flows of Supply Chain Management
Typical Supply Chain of
Goods & Services
Supplier
Supplier
Supplier
} Storage Mfg. Storage Dist. Retailer Customer
}
Supplier
Storage Service Customer
Supplier
Supply Chain Process
Manufacturing Supply Chain
Transportation
Tier-1 Supplier Manufacturer

Supply chain of Goods
(Water Bottle)
Material Flow
Raw WIP Finished

Materials Goods
Water,
Purifier,
Suppliers Bottle, Cap, Bottling Packaging Warehousing Customer
Cleaner
Label
Information Flow
Services Supply Chain
• Anything other than

Farming, Mining and
Manufacturing falls
under Services Supply
chain. For Example:
Supply chain of Services
(E-commerce industry)
Suppliers
1 2 3 4
Receiving
Sorting and Distributing
Shipping
Customers
A B C D
Activities of SCM
 Forecasting.  Scheduling.
 Purchasing.  Production and delivery.
 Inventory management.  Customer service.
 Information management.
 Quality assurance.
Purchasing
• To buy materials of the right quality, in the right quantity,
from the right source, delivered to the right place, at the
right time at the right price.
• In manufacturing, 60% of the cost of finished goods

comes from purchased parts and materials.
• Centralized Purchasing: Purchasing is handled by one

special department.
• Decentralized Purchasing: Individual departments or

separate locations handle their own purchasing
requirements.
Purchasing Cycle
1. Receiving Requisition.
2. Selecting Supplier.
3. Placing orders.
4. Monitoring orders.
5. Receiving orders.
Steps of a Procurement Process
Bullwhip Effect
• The bullwhip effect refers to the phenomenon that
occurs in a supply chain when orders submitted to
suppliers have a greater variability than those
received from customers. This causes a distortion and
amplification of demand variability moving up in the
supply chain .
Bullwhip Effect
• The bullwhip effect happens due to a lack of information
exchange between the components of a supply chain and by
the existence of non-linear interactions, which were difficult to
deal with using managerial intuition.
• The consequence of increased variance is the need for larger

stocks, extra production capacity, and more storage space.
Bullwhip Effect
• The perceived demand seasonality and forecast error

can increase upstream in the supply chain.
• Wholesalers often make larger seasonality for

manufacturers by ordering large quantities during peak
demand seasons in an attempt to get reduced price/unit.
Impacts of Bullwhip Effect
• Excessive inventory throughout the supply chain
(each facility needs to increase its safety stock to
meet a given service level target).
• Insufficient or excessive capacity –periods of intense

utilization are followed by underutilization –supply
chain needs enough capacity for the peaks.
Impacts of Bullwhip Effect
 Loss of revenue.
 Wastage of resources.
 Reduction in efficiency.
 Inaccurate production plans.
 Higher total supply chain cost.

 Dissatisfied customer demand.
 More storage space and investment.
Logistics
• Logistics refers to the movement of materials, services,
cash and information in a supply chain. It includes:
- Movement within a facility,

- Traffic management, and
- Information flow throughout the supply chain.
Movements within a Facility
1. From incoming vehicles to receiving.

2. From receiving to storage.
3. From storage to the point of use (e.g., a work center).

4. From work center to the next or to temporary storage.
5. From the last operation to final storage.
6. From storage to packaging/shipping.

7. From shipping to outgoing vehicles.
Traffic Management
• Overseeing incoming and outgoing (inbound and outbound)
shipments of goods and materials.
• Uses computer tracking of shipments (RFID) to maintain

knowledge about current status of shipments and to provide
up-to-date information on costs and schedules.
• RFID (Radio Frequency Identification): A technology that

uses radio waves to identify objects, such as goods in supply
chains. It is similar to bar codes but coveys much more
information than a bar code. RFID tags can be attached to
Pallets, Cases or Individual items.
Role of Logistics in Supply Chain
Functions of Logistics
1. Transportation.
2. Warehousing.
3. 3PL Logistics.
4. Reverse Logistics.
3PL Logistics
Transportation
 Many modes of transportation play a role in the
movement of goods through supply chains via:
 Air,
 Rail,
 Road,
 Water or
 Pipeline.
Warehousing
 When inventory is not on the move between
locations, it may have to spend some time in a
warehouse.
 Warehousing is the activity related to Receiving,

Sorting and Shipping to and from production and
distribution locations.
3PL Logistics
 The outsourcing of Logistics Management.

 Potential Benefits includes taking advantage of :
- Specialists knowledge;
- Their well-developed information system;
- Their ability to obtain more favorable shipping rates;
- Enabling the company to focus more on its core business.
Reverse Logistics
 The process of transporting returned items.

 Products are returned for the following reasons mostly:
- Waste.
- Recalled Products.
- Items for recycling.
- Defective Products.
- Parts replaced in the field.
- Obsolete/ Outdated products.
- Unsold products returned from retailers.
Benefits of Supply Chain Management
 Higher profits.
 Greater agility.
 Lower inventories.
 Shorter lead times.
 Higher productivity.
 Greater customer loyalty.
Need for SCM
 Improve operations.
 Manage inventories.
 Competitive pressures.
 Increasing globalization.
 Complexity of supply chains.
 Increasing transportation costs.
 Increasing levels of outsourcing.

 Increasing importance of e-commerce.
Effective Supply Chain
 Requires linking the market, distribution channels

processes, and suppliers.
 Supply chain should enable members to:

 Share forecasts.
 Determine the status of orders in real time.
 Access inventory data of partners.
Creating an Effective Supply Chain
1. Develop strategic objectives and tactics.

2. Integrate and coordinate activities in the internal
supply chain.
3. Coordinate activities with suppliers with customers.

4. Coordinate planning and execution across the supply
chain.
5. Form strategic partnerships.

Global Supply Chains
 Increasingly more complex:
– Culture.
– Political.
– Language.
– Environmental.
– Local capabilities.
– Transportation costs.
– Currency fluctuations.
– Finance and economics.
E-Business
• E-Business: The use of electronic technology to

facilitate business transactions.
• Applications include:
– E-mail.
– Internet buying and selling.

– Electronic data interchange.
– Order and shipment tracking.
Advantages of E-Business
• Companies can:
– Have a global presence.

– Analyze customer interests.
– Collect detailed information.
– Realize substantial cost savings.
– Improve competitiveness and quality.
– Shorten supply chain response times.
– Create virtual companies (e.g. Amazon).
– Level the playing field for small companies.
Lecture Takeaways
 Basics of Supply chain management.
 Typical supply chain process of Goods and Services.
 Cross-Docking system.
 Elements and Activities of SCM.
 Basics of Purchasing.
 Purchasing cycle and Procurement process.
 Inventory management- Bullwhip effect.
 Basics of logistics.
 7Rs of Logistics.
 Functions of Logistics.
 Needs and Benefits of SCM.
 E- business and its advantages.

MGT 314 Chapter 15

Uploaded by

Copyright:

Available Formats

MGT 314 Chapter 15

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

MGT 314 Chapter 15

Uploaded by

Copyright:

Available Formats

Chapter 15

Supply Chain Management

• Supply Chain: The sequence of organizations - their

• Management of the flow of goods and services from

• It involves the movement and storage of -

Customer Customer Customer

Storage Service Customer

Tier-1 Supplier Manufacturer

Raw WIP Finished

• Anything other than

Sorting and Distributing

• In manufacturing, 60% of the cost of finished goods

• Centralized Purchasing: Purchasing is handled by one

• Decentralized Purchasing: Individual departments or

• The consequence of increased variance is the need for larger

• The perceived demand seasonality and forecast error

• Wholesalers often make larger seasonality for

• Insufficient or excessive capacity –periods of intense

 Higher total supply chain cost.

- Movement within a facility,

1. From incoming vehicles to receiving.

3. From storage to the point of use (e.g., a work center).

6. From storage to packaging/shipping.

• Uses computer tracking of shipments (RFID) to maintain

• RFID (Radio Frequency Identification): A technology that

 Warehousing is the activity related to Receiving,

 The outsourcing of Logistics Management.

 The process of transporting returned items.

 Increasing levels of outsourcing.

 Requires linking the market, distribution channels

 Supply chain should enable members to:

1. Develop strategic objectives and tactics.

3. Coordinate activities with suppliers with customers.

5. Form strategic partnerships.

• E-Business: The use of electronic technology to

– Internet buying and selling.

– Have a global presence.

You might also like