1. SUPPLY CHAINMANAGEMENTas taught in MGTC44 and MRK200.last updated 2005 July 11INTRODUCTION The purpose of this section is to introduce the student to the important of the Supply Chain in Business and International Business. Upon completion of this section, students will be able to • understand the various components of the Supply Chain and how they are interdependent o including understanding the relationship between materials, information and funding • identify who is involved in the Supply Chain • identify the different levels and involvement of suppliers o first tier o second tier o third tier WTGR.ad cKEY The Key point to understanding the importance of the Supply Chain is to considerPOINTS how the Supply Chain is effected by the • Political / Legal / Regulatory Environment o ie. tariffs, import restrictions • Geographic Environment o ie. topographical barriers, waterways, air travel • Economic Environment o ie. currency exchange rate considerations • Technological Environment o ie. shipping technology, packaging, document processing .. • Competitive Environment • and to some extent the o Social / Cultural Environment.4 Ps It is also important for students to understand that the things which effect the Supply Chain also have a consequence for the 4Ps • Product
2. o the features, colours, shape and texture of the product will depend on your source of supply for the materials • Price o your price will depend on the competitive cost of the materials • Promotion o promotion is developed in part based on the product and price so various promotion "things" are reflected by where the parts are supplied from eg. quality leather from Italy eg. fine wine from the ...... region • Place o the place at which a company assembles their product, or vends a product is often dependent on the distance from the source of supply since decreasing the distance will decrease the cost and allow the price to be more competitive o this also has to be done in co-operation with the "place" considerations for the customers location. What is the Supply Chain? www.supply-chain.org/Resources/faq.htm "The supply chain -- a term now commonly used internationally -- encompasses every effort involved in producing and delivering a final product or service, from the suppliers supplier to the customers customer. Supply Chain Management includes managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer." Why is the supply chain important? "In years past, manufacturers were the drivers of the supply chain -- managing the pace at which products were manufactured and distributed. Today, customers are calling the shots, and manufacturers are scrambling to meet customer demands for options / styles / features, quick order fulfillment, and fast delivery."..Supply Supply-Chain Management as explained in the FAQ of theChain Center for Electronic CommerceManagementanindustry
3. http://cism.bus.utexas.edu/resources/ecfaq/ecfaqc2.htmlterm ! Q. What is supply chain management? "A supply chain is a collection of inter-dependent steps that, when followed, accomplish a certain objective such as meeting customer requirements. Supply-chain management is a generic term that encompasses the coordination of order generation, order taking, and offer fulfillment/distribution of products, services, or information. Numerous, independent firms and customers are involved in a supply chain (e.g., manufacturers and parts suppliers; parcel shippers, senders and receivers; wholesalers and retailers). The WWW and extranets (connected intranets) have shown a great potential in linking and managing these entities into a virtual organization." key points, as translated by witigerSupplyChainManagement • coordination of order generation • order takingan • offer fulfillmentindustry • distribution of products, services, or informationterm ! who is involved • suppliers (at three different levels) • parcel shippers (documents) • wholesalers - on the pull side • retailers - on the pull side What might be missing from the definition above • order taking and offer fulfillment can sometimes be considered "information" • you also have to have some words noting the money required to make it all happen..Definitionof Global Manufacturing &terms Supply Chain Mgmnt "a companys supply chain
4. encompasses the • coordination of materials • information • and funds from the initial raw material supplier to the ultimate customer" Daniels p. 628 this definition is OK, on a general level, but it is not complete enough for a full understanding.Definitionof Supply Chain Mgmntterms - expanded definition (our MGTC44 / MRK 200 expanded version)Expanded "a companys supply chain encompasses the • coordination of materials o time of the materials arrival o location related to the production process warehousing storage o packaging of the materials inbound • information o information about materials quality o price fluctuations o currency exchange rate considerations • and funds o borrowing money from the bank to pay for materials before they are assembled then sold labour to assemble the product from the initial raw material supplier to the ultimate customer".Definitionof Supply Chain Mgmntterms - expanded definition when we say "... from the initial raw material supplier to the ultimate customer"Expanded - the suppliers are broken down into 3 categories. These terms are used in all types of manufacturing industries but are particularly common in the automotive and electronic consumer products industries. • third tier supplier - raw materials o (eg. the polyethylene [plastic] pellets which get heated, then blowmoulded into the shape of the fan blades) o (eg. the company that takes the raw copper ingots and extrudes
5. them into copper wire, which is used to make the motor) • second tier supplier - subcomponents o (eg. motor in the fan assembly) • first tier supplier - complete components o (eg. cooling fan assembly in a computer)..Supply Supply Chain ManagementChain as explained in the Schneider and Perry book, Chapter 9Component - the component partsParts • Purchasing Activities • Logistics Activities • Support Activities, Purchasing Activities include, • identifying people who will sell parts and materials to you • evaluating those potential suppliers o quality o cost competitiveness o delivery costs and time of delivery • selecting particular parts and materials • placing the order • resolving issues that arise (ie. late shipment, parts missing, wrong colour etc.).Supply Logistics Activities include,ChainComponent • managing the inbound movements of parts and materialsParts • outbound completed products • warehousing • inventory control • vehicle scheduling.Supply Support Activities include,ChainComponent • HR resources o ie. employee travel policiesParts • document storage • finance o payroll processing • technology development larger firms are building some of these functions into their Intranet systems, like information to track customers who have not paid
6. .Supply Supply Chain ManagementChain Logistics Activities include, [added by witiger]ComponentParts • managing the inbound movements of parts and materials • outbound completed productsLOGISTICS • warehousing • inventory control • vehicle scheduling.Supply Supply Chain ManagementChainComponent logistics = materials managementParts Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services and related information from the point ofLOGISTICS origin to the point of consumption in order to meet customers requirements" exploded to see more clearly what this long statement means "Logistics is that part of the supply chain process that • plans, • implements, and • controls o the efficient, effective flow and storage of goods, services and related information from the • point of origin to the • point of consumption in order to meet customers requirements" this quote comes from the Council of Logistics Management The Council of Logistics Management IN 2005 CLM is now the Council of Supply Chain
7. Management Professionals (CSCMP). at www.cscmp.org.Supply Supply Chain ManagementChainComponent An interesting rant about why logistics has not been respected as an important part of marketing.formerly posted at http://www.esg.uqam.ca/esg/crg/papers/04-99/04-99.htmPartsLOGISTICS LOGISTICS: "Mainstream marketing management, also referred to as sales and THE OTHER promotion-based marketing, with its penchant for demand HALF OF stimulation is almost entirely concerned with demand stimulation, MARKETING that is creating and obtaining sales. One need only look at any current marketing management textbook to note that the vast majority of topics discussed deal mainly with what firms need to do in order to get sales. The tools used to obtain sales are promotion- based, i.e., advertising, sales promotion, personnel selling, and so forth. These are all mixed with heavy doses of consumer behavior analysis using the tools of marketing research for market and segmentation analysis as well as understanding what makes the consumer buy. What is missing in demand stimulation is servicing demand, that is the supply side of marketing, or what Converse (1954) called the other half of marketing. Servicing demand, the other half of selling, assures that customers will get what they bought, is almost never discussed in mainstream marketing thought.".Elementsof Chapter 18Supply-Chain page 634 Supply ChainManagement Management A comprehensive supply chain should include text says } 1. customer service requirements } 2. plant & distribution network } 3. inventory management } 4. outsourcing and 3rd party logistics } relationships } this all sounds very much like a list 5. key customer and supplier relationships of 6. business processes } the entire functions of a company 7. IT systems } 8. organizational design and training } requirements } 9. performance metrics } 10. performance goals ..Elements another way of looking at the supply chain
8. ofSupply-Chain •Management This is a book written by Kalakota and Whinston which was widely used in e-commerce courses in 1999 and 2000. You are not required to buy this book. We refer just to one part of one chapter. Planning Systems o means having the right product at the right place at the right time o requires being able to obtain good "order information" from the customer o POS - Point of Sale data gathered at the retail terminal is part of this o Demand Forecasting (cause you cant have some products ready instantly) allows you to be more competitive in supplying things faster customer demand triggers order movement up the supply chain to the raw material supplier o the trend has been away from Push based systems to Pull based systems • Execution Systems o facilitate the physical movement of goods and services through the supply chain o focus on operational efficiency entails finding new ways to streamline day2day operations reduce costs improve productivity o need for cross functional integration o execution systems are basically the way you do things to make sure everything done the right way ! • Performance Measurement Systems o keeps track of how things are going well, or poorly o necessary to evaluate good and bad results in a specific way so you can make changes o most often this means talking about some specific accounting or financial software package that gives performance numbers • Integrating Functions in a Supply Chain o the key thing about integrating is getting all the key functions to work together o the key functions are Managing Information about demand Managing the flow of physical goods Managing the manufacturing process Managing the money.