This document discusses key concepts in supply chain management including the importance of mutual goals, trust, and compatible cultures between organizations in the supply chain. It also discusses challenges like local optimization, incentives that prioritize short-term gains over efficiency, and the bullwhip effect. Opportunities in integrated supply chains are larger including accurate demand information, reduced lot sizes, and collaborative planning. E-procurement, vendor selection, logistics management, distribution systems, third-party logistics, and the tradeoffs of shipping costs and inventory holding costs are also summarized.

1. 11Supply-Chain
Management

2. 11 - 2
Managing the Supply Chain
Mutual agreement on
goals
Trust
Compatible
organizational cultures

3. 11 - 3
Issues in an Integrated Supply Chain
 Local optimizationLocal optimization - focusing on local
profit or cost minimization based on
limited knowledge
 Incentives (sales incentives, quantityIncentives (sales incentives, quantity
discounts, quotas, and promotions)discounts, quotas, and promotions) -
push merchandise prior to sale
 Large lotsLarge lots - low unit cost but do not
reflect sales

4. 11 - 4
Bullwhip effect - the
increasing fluctuation
in orders that occurs
as orders move
through the supply
chain
Issues that complicate
development of an Integrated
Supply Chain

5. 11 - 5
Opportunities in an Integrated Supply Chain
 Accurate “pull” data
 Lot size reduction
 Single stage control of
replenishment
 Vendor managed inventory (VMI)
 Collaborative planning, forecasting,
and replenishment (CPFR)
 Blanket orders

6. 11 - 6
Opportunities in an Integrated Supply Chain
 Standardization
 Postponement
 Drop shipping and special
packaging
 Pass-through facility
 Channel assembly

7. 11 - 7
E-Procurement
 Uses the internet to facilitate
purchasing
 Electronic ordering and funds
transfer
 Electronic data interchange (EDI)
 Advanced shipping notice

8. 11 - 8
 Online catalogs
1. Catalogs provided by vendors
2. Catalogs published by
intermediaries
3. Exchanges provided by buyers
E-Procurement

9. 11 - 9
E-Procurement
 Auctions
 Maintained by buyers, sellers, or
intermediaries
 Low barriers to entry
 Increase in the potential number of
buyers
 RFQs
 Can make requests for quotes (RFQs)
less costly
 Improves supplier selection
 Real-time inventory tracking

10. 11 - 10
Vendor Selection
 Vendor evaluation
 Critical decision
 Find potential vendors
 Determine the likelihood of them
becoming good suppliers
 Vendor Development
(supply chain as competitive unit)
 Training
 Engineering and production help
 Establish policies and procedures

11. 11 - 11
Vendor Selection
 Negotiations
 Cost-Based Price ModelCost-Based Price Model - supplier
opens books to purchaser
 Market-Based Price ModelMarket-Based Price Model - price
based on published, auction, or
indexed price
 Competitive BiddingCompetitive Bidding - used for
infrequent purchases but may make
establishing long-term relationships
difficult

12. 11 - 12
Logistics Management
 Objective is to obtain efficient
operations through the integration
of all material acquisition,
movement, and storage activities
 Is a frequent candidate for
outsourcing
 Allows competitive advantage to
be gained through reduced costs
and improved customer service

13. 11 - 13
Distribution Systems
 TruckingTrucking
 Moves the vast majority ofMoves the vast majority of
manufactured goodsmanufactured goods
 Chief advantage is flexibilityChief advantage is flexibility
 RailroadsRailroads
 Capable of carrying large loadsCapable of carrying large loads
 Little flexibility thoughLittle flexibility though
containers and piggybackingcontainers and piggybacking
have helped with thishave helped with this

14. 11 - 14
Distribution Systems
 Airfreight
 Fast and flexible for light loads
 May be expensive
 Waterways
 Typically used for bulky, low-value cargo
 Used when shipping cost is more
important than speed
 Pipelines
 Used for transporting oil, gas, and other
chemical products

15. 11 - 15
Third-Party Logistics
Outsourcing logistics can reduce costs and improve
delivery reliability and speed
Coordinate supplier inventory with delivery services
May provide
warehousing,
assembly, testing,
shipping, customs

16. 11 - 16
Cost of Shipping Alternatives
 Product in transit is a form of
inventory and has a carrying cost
 Faster shipping is generally more
expensive than slower shipping
 We can evaluate the two costs to
better understand the trade-off

17. 11 - 17
Cost of Shipping Alternatives
Value of connectors = $1,750.00
Holding cost = 40% per year
Second carrier is 1 day faster and $20 more
expensive
Daily cost of
holding product
= x /365
Annual
holding
cost
Product
value
= (.40 x $1,750)/ 365 = $1.92
Since it costs less to hold the product one day
longer than it does for the faster shipping ($1.92 <
$20), we should use the cheaper, slower shipper

18. 11 - 18
Security and JIT
 Monitoring and controlling stock moving
through supply chains is more important
than ever
 New technologies are
being developed to
allow close monitoring
of location, storage
conditions, and
movement

19. 11 - 19
THANK
YOU!
JOY AMOR M. MANO
MBA-1
PHILIPPINE WOMENS UNIVERSITY
S.Y 2014