Supply Chain Management is primarily concerned with the efficient integration of suppliers, factories, warehouses and stores so that merchandise is produced and distributed in the right quantities, to the right locations and at the right time, and so as to minimize total system cost subject to satisfying customer service requirements.
What is a supply chain? Customer wants detergent and goes to Jewel Jewel Supermarket Jewel or third party DC P&G or other manufacturer Plastic Producer Chemical manufacturer (e.g. Oil Company) Tenneco Packaging Paper Manufacturer Timber Industry Chemical manufacturer (e.g. Oil Company)
Relationships between key SCM Issues and the business environment X X Cust. Value X X IT & DSS X Pr. Design X Outsourcing X X St. partnership X X Dist. Strategies X Sup. Contract X Inv. Control X Dist. Conf. Managing Uncertainty Global Optimization
Compaq computer estimates it lost $500 million to $1 billion in sales in 1995 because its laptops and desktops were not available when and where customers were ready to buy them.
Boeing Aircraft, one of America’s leading capital goods producers, was forced to announce writedowns of $2.6 billion in October 1997. The reason? “Raw material shortages, internal and supplier parts shortages…”. (Wall Street Journal, Oct. 23, 1997)
Procter & Gamble estimates that it saved retail customers $65 million through logistics gains over the past 18 months. “According to P&G, the essence of its approach lies in manufacturers and suppliers working closely together …. jointly creating business plans to eliminate the source of wasteful practices across the entire supply chain”. (Journal of Business Strategy, Oct./Nov. 1997)
The Value Chain: Linking Supply Chain and Business Strategy New Product Development Marketing and Sales Operations Distribution Service Finance, Accounting, Information Technology, Human Resources Business Strategy New Product Strategy Marketing Strategy Supply Chain Strategy
Flows in a Supply Chain Customer Information Product Funds Supply Chain
Sequential Optimization vs. Global Optimization Source: Duncan McFarlane Procurement Planning Manufacturing Planning Distribution Planning Demand Planning Sequential Optimization Supply Contracts/Collaboration/Information Systems and DSS Procurement Planning Manufacturing Planning Distribution Planning Demand Planning Global Optimization
The Dynamics of the Supply Chain Order Size Time Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998 Customer Demand Retailer Orders Distributor Orders Production Plan
The Dynamics of the Supply Chain Order Size Time Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998 Customer Demand Production Plan