Learning objectives• Explain what a supply chain is• Appreciate the role and importance of the supply chain• Define supply chain management• Understand what management of the supply chain entails• Understand the benefits of integrating all the functions in the supply chain• Explain outsourcing, and discuss its advantages and disadvantages
Learning objectives (cont.)• Determine whether products should be made or bought• Discuss materials management• Understand the nature and role of a purchasing or procurement department• Explain the JIT philosophy and its impact on supply chain management• Appreciate new trends in supply chain management, including e-commerce, online catalogues, and e-business.
7.1 Introduction• Supply chain = series of steps between raw material and purchase• Supply chain management: – Planning, design and control – Of all the information and material – Flowing along the supply chain – To ensure customer needs are met
7.1 Introduction (cont.)– Class discussion– Wal-mart– See Figure 7.1.
7.2 Types of chain• Value chain• Customer tiers• Demand chain.
7.3 Various elements of SCM• Class discussion – see Table 7.1 on page 159 of the textbook.
7.4 Why is there a need to manage supply chains?• Improvement of operations• Increasing transport costs• Pressure from competitors• Influence of globalisation• E-commerce• Inventory management.
7.5 Ineffective management of the supply chains• The bullwhip effect• Causes: – Updating of the demand forecast – Playing the shortage and rationing game – Batching of orders – Fluctuating process • Cannot be eliminated entirely.
7.6 Integrated materials management• Class discussion – see Table 7.2 on page 163 of the textbook.• Centralisation vs. decentralisation.
7.7 Performance measurements of the supply chain• Inventory turnover• Weeks of supply• Class discussion – LG Electronics (applied example).
7.8 How to improve the performance of the supply chain• Quick orders, communications, transportation, and re-supply• Receive smaller, more frequent deliveries• Simplify products• Purchase sub-systems or complete modules instead of components• Postpone product configuration• Reduce suppliers of a particular item• Create close relationships with supplier partners.
7.9 How do relationships change with buyer-supplier partnerships?• Class discussion (see Table 7.5 on page 170 of the textbook).
7.10 Decisions to be made regarding make or buy• Retain core technologies• Strategy• Impact on span of process?• Volume of product/service• World trade and globalisation.
7.11 Realities of the make or buy decision• History• Cost and technology.
7.12 Configuration strategies for the supply chain• Backward vertical integration• Forward vertical integration• Benefits of integration• Advantages and disadvantages of outsourcing.
7.13 Procurement• Reasons: – High cost of raw materials – Automated manufacturing – Growth of online procurement – Globalisation
7.13 Procurement (cont.)• Duties of procurement department: – Develop a supplier base – Evaluate suppliers as part of supplier selection – Evaluation of specific capabilities – Selection of the supplier
7.13 Procurement (cont.)• Procurement is cyclical• JIT and procurement.
7.14 The distribution function• The final link in the supply chain• Goods reach the marketplace• Physical distribution management.
Summary• Defined a supply chain and SCM• Types• Why SCM is a priority?• Integrated materials management• Make or buy?• Integration and outsourcing• Procurement• Distribution.