This document provides an overview of supply chain management concepts including defining the supply chain and key processes involved, different supply chain strategies such as push vs pull, the benefits of supply chain collaboration, and challenges in managing inter-organizational relationships across the supply network. The document uses examples and illustrations to explain core SCM topics and discusses how firms can work to integrate suppliers, customers, and other partners to improve performance.

1. Pia Bosma MSc
SUPPLY CHAIN
MANAGEMENT

2. Content Lecture Collaboration
Basics of Supply Chain Management
The evolving Supply Chain
Analysing Relationships Questions
Inter-organizational Relationships
Assignments

3. What Is the Supply Chain?
 Also referred to as the logistics network
 Suppliers, manufacturers, warehouses,
distribution centers and retail outlets – “facilities”
and the Suppliers Manufacturers Warehouses &
Distribution Centers
Customers
 Raw materials
 Work-in-process (WIP) inventory
 Finished products
that flow between the facilities Transportatio Transportation
n Costs
Material Costs Costs Transportation
Manufacturing Costs Costs
Inventory Costs

4. The Supply Chain – Another
View
Plan
Plan Source
Source Make
Make Deliver
Deliver Buy
Buy
Suppliers Manufacturers Warehouses & Customers
Distribution Centers
Transportation Transportation
Material Costs Costs Costs Transportation
Manufacturing Costs Inventory Costs Costs

5. Illustration of the supply chain network, using Braun
Oral-B as an example

6. What Is Supply Chain
Management (SCM)?
Plan Source Make Deliver Buy
 A set of approaches used to efficiently integrate
– Suppliers
– Manufacturers
– Warehouses
– Distribution centers
 So that the product is produced and distributed
– In the right quantities
– To the right locations
– And at the right time
 System-wide costs are minimized and
 Service level requirements are satisfied

7. Why Is SCM Difficult?
Plan Source Make Deliver Buy
 Uncertainty is inherent to every supply chain
– Travel times
– Breakdowns of machines and vehicles
– Weather, natural catastrophe, war
– Local politics, labor conditions, border issues
 The complexity of the problem to globally
optimize a supply chain is significant
– Minimize internal costs
– Minimize uncertainty
– Deal with remaining uncertainty

8. Today’s Marketplace Requires:
Shared visibility for
trading partners
 Personalized content and services for their
customers
 Collaborative planning with design partners,
distributors, and suppliers
 Real-time commitments for design, production,
inventory, and transportation capacity
 Flexible logistics options to ensure timely
fulfillment
 Order tracking & reporting across multiple
vendors and carriers

9. Content Lecture Collaboration
Basics of Supply Chain Management
The evolving Supply Chain
Analysing Relationships Questions
Inter-organizational Relationships
Assignments

10. Supply Chain Integration –
Push Strategies
 Classical manufacturing supply chain strategy
 Manufacturing forecasts are long-range
– Orders from retailers’ warehouses
 Longer response time to react to marketplace changes
– Unable to meet changing demand patterns
– Supply chain inventory becomes obsolete as demand for
certain products disappears
 Inefficient use of production facilities (factories)
– How is demand determined? Peak? Average?
– How is transportation capacity determined?
 Examples: Auto industry, large appliances, others?

11. Supply Chain Integration –
Pull Strategies
 Production and distribution are demand-driven
– Coordinated with true customer demand
 None or little inventory held
– Only in response to specific orders
 Fast information flow mechanisms
– POS data
 Decreased lead times
 Decreased retailer inventory
 Decreased variability in the supply chain and especially at
manufacturers
 Decreased manufacturer inventory
 More efficient use of resources
 More difficult to take advantage of scale opportunities
 Examples: Dell, Amazon

12. Supply Chain Integration – Push/Pull
Strategies
 Hybrid of “push” and “pull” strategies to overcome
disadvantages of each
 Early stages of product assembly are done in a “push”
manner
 Final product assembly is done based on customer
demand for specific product configurations
 Supply chain timeline determines “push-pull boundary”
Push-
Pull
“Generic” Product Boundary “Customized” Product
Push Strategy Pull Strategy
Raw End
Materials Consumer
Supply Chain Timeline

13. Choosing Between Push/Pull
Strategies
Pull High Where do the
Industries where: Industries where:
following industries fit
• Customization is High • Demand is uncertain in this model:
• Demand is uncertain • Scale economies are High
• Scale economies are Low • Low economies of scale
 Automobile?
Demand Uncertainty
 Aircraft?
Computer Furniture
equipment
 Fashion?
 Petroleum refining?
 Pharmaceuticals?
Industries where: Industries where:
 Biotechnology?
• Uncertainty is low • Standard processes are the  Medical Devices?
• Low economies of scale norm
• Push-pull supply chain • Demand is stable
• Scale economies are High
Books, CD ’s Grocery,
Beverages
Push Low
Low Economies of Scale High
Pull Push

14. Characteristics of Push, Pull and
Push/Pull Strategies
PUSH PULL
Objective Minimize Cost Maximize Service
Level
Complexity High Low
Focus Resource Allocation Responsiveness
Lead Time Long Short
Processes Supply Chain Order Fulfillment
Planning

15. Supply Chain
Collaboration – What Is
It?
 Many different definitions depending on perspective
 The means by which companies within the supply chain
work together towards mutual goals by sharing
– Ideas
– Information
– Processes
– Knowledge
– Information
– Risks
– Rewards
 Why collaborate?
– Accelerate entry into new markets
– Changes the relationship between cost/value/profit equation

16. Supply Chain Collaboration
 Cornerstone (= something very important that something
else depends on) of effective SCM
 The focus of many of today’s SCM initiatives
Retailers
Suppliers Synchronized Manufacturer
Production
Scheduling Collaborative Distributors/
Demand
Collaborative Wholesalers
Planning
Product
Development
Collaborative Logistics Planning
•Transportation services
•Distribution center services
Logistics Providers
16

17. Benefits of Supply Chain
Collaboration
CUSTOMERS MATERIAL SERVICE
SUPPLIERS SUPPLIERS
 Reduced inventory  Reduced inventory  Lower freight costs
 Increased revenue  Lower warehousing costs Faster and more reliable
 Lower order management  Lower material acquisition delivery
costs costs  Lower capital costs
 Higher Gross Margin  Fewer stockout conditions  Reduced depreciation
 Better forecast accuracy  Lower fixed costs
 Better allocation of
promotional budgets
 Improved customer service
 More efficient use of human resources

18. Supply Chain Collaboration Spectrum
Extensive Not Viable Synchronized  Thegreen arrow
Collaboration describes increasing
complexity and
sophistication of:
– Information systems
Extent of Collaboration
– Systems infrastructure
– Decision support systems
Coordinated – Planning mechanisms
Collaboration – Information sharing
– Process understanding
 Higher levels of
Cooperative collaboration imply the
Collaboration need for both trading
partners to have
equivalent (or close)
levels of supply chain
maturity
 Synchronized
Transactional collaboration demands
Limited Collaboration Low Return joint planning, R&D and
sharing of information
Many Few and processing models
Number of Relationships – Movement to real-time
customer demand
information throughout the
Source: Cohen & Roussel supply chain
18

19. Successful Supply Chain Collaboration
 Try to collaborate internally before you try external
collaboration
 Help your partners to work with you
 Share the savings
 Start small (a limited number of selected partners) and
stay focused on what you want to achieve in the
collaboration
 Advance your IT capabilities only to the level that you
expect your partners to manage
 Put a comprehensive metrics program in place that allows
you to monitor your partners’ performance
 Make sure people are kept part of the equation
– Systems do not replace people
– Make sure your organization is populated with competent
professionals who’ve done this before

20. Content Lecture Collaboration
Basics of Supply Chain Management
The evolving Supply Chain
Analysing Relationships Questions
Inter-organizational Relationships
Assignments

21. 1. Comparison of B2C and B2B
relationships
 B2C
– Product driven
– Maximize the value of transaction
– Large target market
– Single step buying process, shorter sales cycle
– Brand identity created through repetition and
imagery
– Merchandising and point of purchase activities
– Emotional buying decision based on status,
desire or price

22. 1. Comparison of B2C and B2B
relationships
 B2B
– Relationship driven
– Maximize the value of the relationship
– Small, focused target group
– Multi-step buying process, longer sales cycle
– Brand identity created on personal relationship
– Educational and awareness building activities
– Relational buying decision based on business
value

23. Relations hips in the value

24. 2. Advantages and disadvantages of
creating relationships with consumers
for a manufacturer
 Advantages
– Retain consumers is more profitable in general
– Long-term relationships maintain a competitive
advantage
 Disadvantages
– Calculate the effects on a company’s profit costs
(CRM program)
– Miss new opportunities through focusing on
current consumers

25. 3. Motorola and Hewlett-
Packard
 Co-opetition  if both elements of
cooperation and competition are
visible, the relationship between the
competitors is named co-opetition.
– A firm with a strong position, but lacking
resources held by the competitor must
focus on a co-opetitive relationship.
– Within the process, firms develop
mechanisms that attempt to deal with
competitiveness

26. Five types of relationship between a firm and its competitor

27. 4. Properly incorporating
suppliers in their product
development process
 Suppliers can do much more than
deliver reasonably priced items on
request.
 Exploiting some of the potential of a
supplier requires that operations of the
two companies become more closely
integrated in the various facets of the
relationship.

28. 5. A manufacturer how wants to
integrate end-consumers in the
product development process
 Formal way: conjoint analysis
 Informal way: sales representative
comes home to the HQ with some
inspiration for the new product
development

29. 6. How can ‘distance’ be reduced
in cross-cultural buyer-seller
negotiations
 Cultural dimensions that affect the
distance:
– Different understanding of the national
and industry culture
– Different understandings of the
organisational culture
– Different personal behaviour because of
the different mental programming

30. 6. How can ‘distance’ be reduced
in cross-cultural buyer-seller
negotiations
 It is possible to reduce the ‘psychic
distance’ by an intercultural learning
process. In this learning process, the
company transfers knowledge about
reduction of ‘psychic distances’ in
different cultures
– Psychic: Having a special mental ability,
for example so that you are able to know
what will happen in the future or know
what people are thinking

31. 7. Dell entered into a relationship
with IBM’s Global Service Division
 Dell has maybe evaluated is own
competences and realised that service
support is not its core competence. It
is better in PC-manufacturing.
Therefore, it has outsourced the
service support to IBM, which sees
this as one of its existing and future
core competences. That is a
relationship of value for both partners.

32. 8. Describe the interactions
between buyer and seller in the
‘diamond’ model
 In the ‘diamond’ model, the
boundaries between buying and
selling firms become more
transparent. Interactive, cross
functional teams openly exchange
ideas for improving efficiency and
effectiveness. The goal is to create
new value together.

33. Organisation of buyer–seller relationship

34. Content Lecture Collaboration
Basics of Supply Chain Management
Efficient consumer response
Analysing Relationships Questions
Inter-organizational Relationships
Assignments

35. Summary Inter-
organizational relationships
 The network perspective on supply
chains requires a holistic approach.
(dealing with of treating with the whole
of something)
 It recognizes the interdependence not
only of immediate partners but also
among the entire network of
relationships

36. Summary Inter-
organizational relationships
 The movement of organizations
toward network relationships places
new challenges on management
– to define the core and establish the
boundaries of the firm
– to create the most effective governance
mechanism
– to develop the most appropriate
relationships with partners

37. Summary Inter-
organizational relationships
 Trust relationships are a necessary
condition in supply chain
management. Without it, partners
won’t share information or commit to
specific high-risk investments.
– It is time consuming and is based on
building positive experience

38. Summary Inter-
organizational relationships
 The essential characteristics of the
supply chain is its inter-organizational
relationships. The ability to develop
and manage the supply chain
becomes a core competency, along
with product technology, knowledge,
and market access these relationships
govern future actions of the
corporation.

39. Content Lecture Collaboration
Basics of Supply Chain Management
Efficient consumer response
Analysing Relationships Questions
Inter-organizational Relationships
Assignments

40. Assignments: Innovation
and entrepreneurship
 Working assignments 1 and 2  Page 9
 Question: Are large firms better innovators
than small firms  Page 10
 Questions: Skype: innovators and
entrepreneurs  Page 13
 Article: Innovation Management in Supply
Chains  Summary

41. Benetton’s Supply networks’
 Assignment
– Combine several subjects in a
professional report. The size of the report
must not exceed 5 A4, excluding the
cover, contents and appendixes.
 Then there will be at the end a talk of
around 30 minutes about the report