This document discusses supply chain management. It introduces supply chains and how they have evolved over time. It describes alternative supply chain strategies linked to product types and production processes. It also discusses how demand fluctuations can occur in a supply chain due to the bullwhip effect. Current trends and the impact of technology on supply chains are presented. Requirements for successful supply chain management are defined, including trust, long-term relationships, and information sharing between partners.

1. Supply Chain Management

2. CHAPTER OBJECTIVES
‡ Introduce the concept of a firm¶s supply chain and show
how it has evolved over time to its present status.
‡ Present alternative supply chain strategies that are linked
to the types of products being sold and the processes
used to make them.
‡ Describe how the bullwhip effect can cause significant
demand fluctuations in a supply chain.
‡ Identify current trends that are affecting the
characteristics of a supply chain.
‡ Present the requirements necessary for a successful
supply chain.
‡ Discuss the impact of technology on a firm¶s supply chain.
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3. Managerial Issues
‡ Concentration of resources on the firm¶s core
competencies such as supply chain
management.
‡ Increasing proportion of purchased goods and
services as inputs into products.
‡ Increased pressure to reduce inventories.
‡ Applying advances in information technology to
strategically manage supplier relationships and
the supply chain itself.
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4. Definition of Supply Chain Management
‡ Supply Chain Management
The long-term relationship between a firm and its
suppliers to ensure the timely delivery of goods and
services that are competitively priced.
‡ Supply Chain
The steps and the firms that perform these steps in the
transformation of raw inputs into finished products
bought by customers.
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5. Logistics
‡ Inbound Logistics
The delivery of goods and services that are purchased
from suppliers and/or their distributors.
‡ Outbound Logistics
The delivery of goods and services that are sold to a
firm s customers and/or distributors.
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6. A Company¶s Supply Chain
Exhibit 4.1
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7. The Evolution of Supply Chain Management
Exhibit 4.2A,B
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8. The Evolution of Supply Chain Management
(cont¶d)
Exhibit 4.2C,D
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9. Choosing a Successful Supply Chain
Strategy
‡ Key Consideration
Avoiding demand-side uncertainty that results in a
mismatch of supply and demand.
‡ Functional Product
A commodity-type product that exhibits stable
demand and low profit margins.
‡ Innovative Product
A new product that has a high degree of innovation
and exhibits unstable demand and high profit
margins.
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10. Comparison of Demand Characteristics for
Functional and Innovative Products
Exhibit 4.3A
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11. Choosing a Successful Supply Chain
Strategy (cont¶d)
‡ Key Consideration
Avoiding supply-side uncertainty that results in a
mismatch of supply and demand.
‡ Stable Supply Process
A product that can be produced in a predictable way.
‡ Evolving Supply Process
A product that lacks stability in the way in which it is
produced.
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12. Integration of supply chain
Factors driving integration
1. Increased cost competitiveness
having substantially improved the efficiency of
internal ops, seeking further cost reduction by
improving the efficiency and synergy of supply
chains. Levi¶s
2. Shorter PLC
Mobiles, cars state of art for less than one year,
every new gene with half the PLC.

13. Factors driving integration
‡ 3. Faster Prod. Deve.
Every introduction is rewarded by larger mkt shares and
unit volumes to drive costs down rapidly.
4. Customization: customers can afford and
demanding greater variety of products that
address their specific needs. Mass
customization is the new marketing mantra
‡ 5. Higher qlty: increasing customer affluence
and greater competition to supply their needs,
have led to demands for higher qlty.

14. Dell¶s virtual integration: characteristics
‡ Use of rapid seamless communication to build
direct rela between custo and suppliers.
‡ Clear definition of core compe: what it does best
i.e. branding, marketing mass custo and selling
direct, with partnerships for the rest capital
intensive and labour intensive processes. Focus
on activities that create most value for
customers and shareholders.
‡ Selection of partners, best in their respective
fields: Intel, MS, IBM..

15. Dell¶s virtual integration: characteristics
‡ Use minimum number of suppliers to whom Dell
is loyal as long as they maintain their leadership
in tech, cost, qlty and delivery.
‡ Use of Internet: B2B, B2C, Intranet, Extranet,
Internet, integral part of strategy to eliminate
boundaries between companies and integrate.
‡ Less emphasis on gaurding intellectual assets
and more on using them rapidly before they¶re
obsolete.

16. The Bullwhip Effect
‡ Bullwhip Effect
The phenomenon that occurs in a supply chain when
order size variability is amplified as orders move
upstream in the supply chain from the retailer up to
the manufacturer.
‡ Causes of the Bullwhip Effect
Demand forecast updating
Order batching
Price fluctuations
Rationing and shortage gaming
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17. The Bullwhip Effect (cont¶d)
‡ Counteracting the Bullwhip Effect
Improve forecasting accuracy by sharing information
across the supply chain.
Encourage smaller order batches by reducing the time
and cost of placing an order.
Allow vendors to manage their own inventories.
Stabilize prices by instituting an everyday-low-price
strategy to eliminate forward buying behavior.
Keep customers updated about the supply situation.
Institute ordering policies when shortages occur to
reduce phantom orders and order gaming.
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18. Current Trends in Supply Chain Management
Reduced Supplier-
Number of Managed
Suppliers Inventories
Increased Supply Contingent
Competition Chain Inventories
Shorter Shared or
Product Reduced Advances In
Life Cycles Risk Technology
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19. How Technology Is Changing the Supply Chain
‡ EDI (electronic data exchange)
Direct link between a manufacturer s database and that
of the vendor.
‡ Quick Response (QR) Programs
Just-in-time replenishment system using bar-code
scanning and EDI.
‡ Efficient Customer Response (ECR)
Strategy for bringing distributors,
suppliers, and grocers together
using bar-code scanning and EDI.
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20. Major Supply Chain Management (SCM)
Software Packages
Source: Kayte VanScoy, ³Recession-Proof Your Business,´ Smart Business, December 2001/January 2002, pp. 84±88. Exhibit 4.5
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21. Requirements for Successful Supply Chain
Long-
Long-Term
Trust
Relationships
Successful
Supply Chain
Management
Information
Individual Strengths
Sharing
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22. The Role of Logistics in The Supply Chain
‡ Partnering
Establishing a strategic alliance or partnership with a
firm that specializes in transportation or logistics.
Using a logistics partner to store finished goods at the
logistics partner s hub or distribution center.
‡ In-Transit Inventory Costs
Combination of transportation and carrying costs
associated with delivery of raw materials and
components that are inbound to the plant.
Are reduced by locating distribution centers closer to
customer markets.
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23. Disintermediation
‡ Disintermediation
The trend to reduce many of the steps in the supply
chain by reducing the number of intermediaries in the
chain.
‡ Cross-docking
‡ Direct-to-store shipments
JIT II®: vendor and customer work closely together,
eliminating many of the intermediate steps that now
exist.
‡ Vendor representative located at facility
‡ Direct database linkage with vendor¶s manufacturing
facility.
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