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Chapter 2 Powerpoint

  1. 1. CHAPTER 2 The Supply Chain Management Concept
  2. 2. Learning Objectives <ul><li>To learn about supply chains and their management </li></ul><ul><li>To understand differences between transactional and relational exchanges </li></ul><ul><li>To realize the importance of leveraging technology </li></ul><ul><li>To appreciate barriers to supply chain management </li></ul>© 2008 Prentice Hall 2-
  3. 3. The Supply Chain Concept <ul><li>Key Terms </li></ul><ul><ul><li>Agile supply chain </li></ul></ul><ul><ul><li>Bullwhip effect </li></ul></ul><ul><ul><li>Contract logistics </li></ul></ul><ul><ul><li>Data mining </li></ul></ul><ul><ul><li>Fast supply chain </li></ul></ul><ul><ul><li>Fourth-party logistics (4PL) </li></ul></ul><ul><ul><li>GSCF model </li></ul></ul><ul><li>Key Terms </li></ul><ul><ul><li>Partnerships </li></ul></ul><ul><ul><li>Perfect order </li></ul></ul><ul><ul><li>SCOR model </li></ul></ul><ul><ul><li>Supply chain </li></ul></ul><ul><ul><li>Supply chain collaboration </li></ul></ul><ul><ul><li>Supply chain management </li></ul></ul><ul><ul><li>Third-party logistics (logistics oursourcing) </li></ul></ul>© 2008 Prentice Hall 2-
  4. 4. About Supply Chains… <ul><li>A supply chain “encompasses all activities associated with the flow and transformation of goods from the raw material stage (extraction), through to the end user, as well as the associated information flows .” </li></ul>2- Source: Robert B. Handfield and Ernest L. Nichols, Jr., Introduction to Supply Chain Management
  5. 5. Different Supply Chain Configurations: Direct Supply Chain 2- Supplier Organization Customer
  6. 6. Different Supply Chain Configurations: Extended Supply Chain 2- Supplier Organization Customer Supplier’s suppliers Customer’s customers
  7. 7. Different Supply Chain Configurations: Ultimate Supply Chain 2- Supplier Organization Customer Ultimate supplier Ultimate customer Financial Provider Market Research 3 rd Party Logistic Supplier
  8. 8. Supply Chain Management <ul><ul><li>Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion , and all Logistics Management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies. </li></ul></ul>CSCMP
  9. 9. Logistics: What It Is? <ul><li>CSCMP (Council of Supply Chain Management Professionals) definition: </li></ul><ul><ul><li>“ Logistics is that part of the Supply Chain Management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements .” </li></ul></ul>© 2008 Prentice Hall 1- Source:
  10. 10. Successful Supply Chains have… <ul><li>Enterprise-to-enterprise point of view </li></ul><ul><li>Systems approach across all organizations in the supply chain </li></ul><ul><ul><li>Companies recognize interdependencies </li></ul></ul><ul><ul><li>Goals and objectives are compatible </li></ul></ul>© 2008 Prentice Hall 2-
  11. 11. <ul><li>Process reference models integrate the well-known concepts of business process reengineering, benchmarking, and process measurement into a cross-functional framework. </li></ul><ul><li>A Process Reference Model Contains: </li></ul><ul><ul><li>Standard descriptions of management processes </li></ul></ul><ul><ul><li>A framework of relationships among the standard processes </li></ul></ul><ul><ul><li>Standard metrics to measure process performance </li></ul></ul><ul><ul><li>Management practices that produce best-in-class performance </li></ul></ul><ul><ul><li>Standard alignment to features and functionality </li></ul></ul>The Supply-Chain Operations Reference (SCOR) Model
  12. 12. The Supply-Chain Operations Reference (SCOR) Model © 2008 Prentice Hall 2-
  13. 13. <ul><li>Customer Relationship Management (CRM) </li></ul><ul><li>Customer Service Management </li></ul><ul><li>Demand Management </li></ul><ul><li>Order Fulfillment </li></ul><ul><li>Manufacturing Flow Management </li></ul><ul><li>Supplier Relationship Management </li></ul><ul><li>Product Development and Commercialization </li></ul><ul><li>Return Management </li></ul>The Global Supply Chain Forum (GSCF) Model
  14. 14. Globalization of Supply Chains <ul><li>Increasing globalization </li></ul><ul><ul><li>Lower priced materials and labor </li></ul></ul><ul><ul><li>Global perspective of companies </li></ul></ul><ul><ul><li>Development of global competition </li></ul></ul><ul><li>Extremely difficult to execute due to differences </li></ul><ul><ul><li>Cultural, economic, and technological </li></ul></ul><ul><ul><li>Political, spatial, and logistical </li></ul></ul>© 2008 Prentice Hall 2-
  15. 15. Key Attributes of Supply Chain Management <ul><li>Customer power </li></ul><ul><ul><li>Fast and agile supply chain </li></ul></ul><ul><li>Long-term orientation </li></ul><ul><ul><li>Relational exchanges </li></ul></ul><ul><ul><li>Transactional exchanges </li></ul></ul><ul><li>Leveraging technology </li></ul><ul><ul><li>Computer and Internet </li></ul></ul><ul><li>Enhanced communication across organizations </li></ul>© 2008 Prentice Hall 2-
  16. 16. Key Attributes of Supply Chain Management <ul><li>Inventory control </li></ul><ul><ul><li>Bullwhip effect </li></ul></ul><ul><ul><li>JAZ </li></ul></ul><ul><li>Interorganizational Collaboration </li></ul><ul><ul><li>Supply chain councils </li></ul></ul>© 2008 Prentice Hall 2-
  17. 17. Barriers to Supply Chain Management <ul><li>Regulatory and political considerations </li></ul><ul><li>Lack of top management commitment </li></ul><ul><li>Reluctance to share, or use, relevant data </li></ul><ul><li>Incompatible information systems </li></ul><ul><li>Incompatible corporate cultures </li></ul>© 2008 Prentice Hall 2-
  18. 18. Supply Chain Management and Integration <ul><li>Long-term, mutually beneficial agreements </li></ul><ul><ul><li>Partnerships </li></ul></ul><ul><ul><li>Strategic alliances </li></ul></ul><ul><ul><li>Third-party arrangements </li></ul></ul><ul><ul><li>Contract logistics </li></ul></ul><ul><li>Methods used to integrate </li></ul><ul><ul><li>Vertical integration </li></ul></ul><ul><ul><li>Formal contracts </li></ul></ul><ul><ul><li>Informal agreements </li></ul></ul>© 2008 Prentice Hall 2-
  19. 19. Supply Chain Management and Integration <ul><li>Third-Party Logistics (3PL) </li></ul><ul><ul><li>Logistics outsourcing </li></ul></ul><ul><ul><li>Contract logistics </li></ul></ul><ul><li>Fourth-party logistics (4PL) primarily used in global companies </li></ul><ul><ul><li>Lead logistics provider (LLP) </li></ul></ul><ul><li>Supply chain software </li></ul>© 2008 Prentice Hall 2-
  20. 20. Case 2-1 Johnson Toy Company <ul><li>Located Biloxi, Mississippi </li></ul><ul><li>Basic Design Toys: Low profit margin </li></ul><ul><li>Unconventional Toys: Risky, High profits if popular </li></ul><ul><ul><li>Jungle Jim the Jogger </li></ul></ul><ul><li>Seasonal </li></ul>1- Company Facts: Product Facts: Market Facts:
  21. 21. <ul><li>Popular toy turns into unpopular </li></ul><ul><li>Production was cancelled </li></ul><ul><li>Returns without a clear policy </li></ul><ul><li>#1: From the standpoint of an individual concerned with accounting controls, discuss and evaluate Johnson Toy Company’s present policies for handling returned items. </li></ul><ul><li>#2: Answer question 1, but from the standpoint of an individual interested in marketing. </li></ul>1- Problems at Hand: Discussions: Case 2-1 Johnson Toy Company
  22. 22. <ul><li>#3: Propose a policy for handling returns that should be adopted by the Johnson Toy Company. Be certain to list circumstances under which exceptions would be allowed. Should it apply to the Jungle Jim dolls? </li></ul>1- Discussions: Case 2-1 Johnson Toy Company
  23. 23. <ul><li>I. HIGH VOLUME CUSTOMERS (defined as purchasing $75,000 of merchandise from Johnson’s per year) </li></ul><ul><li>A. Functionally damaged goods may be returned to Johnson’s plant at Johnson’s expense with a full refund. </li></ul><ul><li>B. High volume customers will receive a straight 2% deduction off of the wholesale selling price to cover defectives—whether defectives are classified as cosmetically damaged or slow moving items, except when unable to sell due to special circumstances (see Section III). </li></ul>1- Case 2-1 Johnson Toy Company
  24. 24. <ul><li>II. LOW VOLUME CUSTOMERS </li></ul><ul><li>  Functionally damaged goods may be returned to Johnson’s plant via Johnson’s salesperson with a full refund. </li></ul><ul><li>Low volume customers will NOT receive an automatic deduction for defectives. Instead, the damage or defect must be defined: </li></ul><ul><ul><li>  Cosmetically damaged goods (classified as functionable and sellable): a 25% discount granted upon inspection by Johnson’s salesperson. </li></ul></ul><ul><ul><li>Slow moving items: NO RETURNS  </li></ul></ul><ul><ul><li>Non-moving items (for reasons other than physical damage) </li></ul></ul>1- Case 2-1 Johnson Toy Company
  25. 25. <ul><li>SPECIAL CIRCUMSTANCES When product is not resellable for reasons other than being functionally damaged or just a slow mover in the off season, such as when the product receives bad press (as in the case of Jungle Jim and Jogger Dolls), Johnson will allow return of all such non-resellable items under the following conditions: </li></ul><ul><ul><li>Retailer must pay for the returned merchandise to reach Johnson’s plant. </li></ul></ul><ul><ul><li>Retailer’s account will be credited for the full amount of said purchase. </li></ul></ul><ul><ul><li>C. Credit is to be used within 30 days of receipt of returned goods at Johnson’s plant; credit will be void after 30 days. </li></ul></ul>1- Case 2-1 Johnson Toy Company
  26. 26. <ul><li>#4: Should this policy, if adopted, be printed and distributed to all of the retailers who handle Johnson Toy Company products? Why or why not? If it should not be distributed to them, who should receive copies? </li></ul><ul><li>#5: Assume that it is decided to prepare a statement on returns to be distributed to all retailers and that it should be less than a single double-spaced page. Prepare such a statement. </li></ul><ul><li>#6: On the basis of the policy in your answer to question 3, develop instructions for the Johnson Toy Company distribution and accounting departments with respect to their roles and procedures in the handling of returns. </li></ul>1- Discussions: Case 2-1 Johnson Toy Company
  27. 27. <ul><li>#7: Assume that you are Cheryl Guridi, the firm’s logistics manager. Do you think that the returns policy favored by the logistics manager would differ from what would be best for the firm? Why or why not? </li></ul><ul><li>#8: Until the policy you recommend in your answer to question 3 takes effect, how would you handle the immediate problem of retailers wanting to return unsold Jungle Jim the Jogger dolls? </li></ul>1- Discussions: Case 2-1 Johnson Toy Company
  28. 28. Case 2-2 Wyomo Grocery Buyers’ Cooperative <ul><li>Located Biloxi, Mississippi </li></ul><ul><li>Basic Design Toys: Low profit margin </li></ul><ul><li>Unconventional Toys: Risky, High profits if popular </li></ul><ul><ul><li>Jungle Jim the Jogger </li></ul></ul><ul><li>Seasonal </li></ul>1- Company Facts: Product Facts: Market Facts:
  29. 29. Case 2-2 Wyomo Grocery Buyers’ Cooperative <ul><li>Located Billings, Montana </li></ul><ul><li>Owned by member grocery stores </li></ul><ul><li>Board of Directors (elected) hired the General manager </li></ul><ul><li>Serving 150 food stores (longest ~450 miles) </li></ul><ul><li>All dry groceries were shipped from warehouse in Billings, once or twice a week </li></ul><ul><li>Produce shipped from Billing, Cheyenne, Great Falls two or three times a week </li></ul><ul><li>Owns 15 tractors, 19 trailers, 6 trucks/refrigerated </li></ul>1- Company Facts: Logistics Facts:
  30. 30. Case 2-2 Wyomo Grocery Buyers’ Cooperative <ul><li>Charges members cost + 23% </li></ul><ul><li>Profit sharing: 20% to members (proportional to orders) </li></ul><ul><li>Warehouse carries 8,000 SKUs, small grocery stores carry 1,000~2,000 SKUs, Large members carry 6,000~8,000 SKUs </li></ul><ul><li>Growing competition from chain stores </li></ul><ul><li>Warehouse reaching capacity </li></ul><ul><li>Proposal to build a larger warehouse (10,500 SKUs) </li></ul>1- Co-op Facts: Issues at hand: Motion: to limit SKUs to 8,000
  31. 31. <ul><li>#1: Co-op members presently pay for goods “on the basis of cost to the co-op plus 23% to cover warehousing and transportation from the warehouses to the members’ retail stores.” Is this a fair way to cover warehousing costs? Can you think of a better way? If so, describe it. </li></ul><ul><li>#2: Answer the problem posed in question 1 with respect to transportation costs. </li></ul><ul><li>#3: Toward the end of the case, Bright described how some manufacturers pay bribes to get shelf space in retail stores. Should retailers accept such bribes? Why or why not? </li></ul>Case 2-2 Wyomo Grocery Buyers’ Cooperative 1- Discussions:
  32. 32. <ul><li>#4: The case says, “Stores were responsible for placing orders with the co-op, although a co-op representative would call on a weekly basis, and one of her/his functions was to help some store operators complete their order forms.” Is this a function that the co-op should be performing? Why or why not? </li></ul><ul><li>#5: The case mentions that some of the larger stores that belonged to the co-op sometimes threatened to form their own co-op. Assume that you are hired by some of them to study the feasibility of such a move. List the various topics that you would include in your study. </li></ul>Case 2-2 Wyomo Grocery Buyers’ Cooperative 1- Discussions:
  33. 33. <ul><li>#6: How would you vote on Hardy’s motion? Why? </li></ul><ul><li>#7: Would it make a difference whether you represented a large or small store? Why? </li></ul><ul><li>#8: Are there other strategies that the co-op might pursue to overcome this problem? If so, describe. </li></ul>Case 2-2 Wyomo Grocery Buyers’ Cooperative 1- Discussions: