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Chapter 1:

Supply Chain Management

Chapter 1 Management of Business Logistics, 7th Ed. 2

Learning Objectives - After reading this

chapter, you should be able to do the following:

� Understand the development of supply chain management in leading corporations.

� Appreciate the importance and role of supply chain management among private and public organizations.

� Understand the contributions of a supply chain approach to organizational efficiency and effectiveness.


Learning Objectives

� Analyze the benefits that can accrue from implementing effective supply chain practices.

� Understand the major challenges and issues facing organizations developing and implementing supply chain strategies.

� Discuss the major change drivers in our economy and in the global marketplace.


Logistics Profile: SAB Distribution

� SAB, a central Pennsylvania food wholesaling company, had grown to $180 million over the years.

� Current management were dealing with flat sales and profit profiles and had cut costs to the point where further cuts were counterproductive.

� The market had changed and SAB was unable to respond…management had questions but no answers.

� What happened?

� Where does SAB fit in the supply chain?

� What should SAB do?


Supply Chain Management: Introduction

� Supply chain management now part of the business vocabulary.

� Impact of global marketplace drastically changed the landscape of business.

� Change was rapid and continuous in the 1990s.

� Doing business in the comfort zone was no longer synonymous with success.


The Changing Business Landscape: Five Driving Forces

� The Empowered Consumer

� Power Shift in the Supply Chain

� Deregulation

� Globalization

� Technology



� The Empowered Consumer

� Impact on logistics is more direct.

� Informed consumers have low tolerance for poor quality in products and services.

� Changing demographics commands 24/7 service.

� Increased customer service increases the importance of logistics and supply chains.



� Power Shift in the Supply Chain

� Large retailers more demanding and commanding.

� Focus upon distribution costs and their impact on “everyday low prices”.

� Changing logistics and supply chain strategies resulted from shifts in the balance of economic power.



� Deregulation

� Changing economic controls empowered creativity and competition.

� Changes in transportation – fewer or no economic controls over rates and services.

� Change in financial institutions blurred traditional differences and increased competition.

� Change in the communications industry also resulted in more competition.

� Changes in the utility industry allows more competition.



� Globalization

� Global marketplace concept

� Global network sourcing, manufacturing, marketing and distribution

� Global alternatives have blossomed

� No geography --- access available to the world

� Supply chain challenges

� Wal-Mart’s challenges

� New supply sources



� Technology

� Information Age provides new and unrestricted access to the place aspect of business.

� My time, my place

� Warehouse technology has changed dramatically with computer devices in use from the office space to the forklifts.


On the Line: Extreme Enterprise

� Integrating new enterprise and supply chain management solutions allowed Columbia Sportswear to keep up with sales that increased from $3 million in 1984 to $470 million in 1999.

� With one store and a handful of outlets, distribution to its customers is where the rubber meets the road.

� Columbia’s president was determined not to let distribution restrain growth, and backed it with money.

� A 1 million square foot distribution center receives more than 2 million units/month and set a record by shipping 172,000 items in one day, and more than 2 million items in a month.


The Changing Business Landscape: The Supply Chain Concept

� Development of the Concept

� Business Case for Supply Chain Management

� Characteristics of Supply Chain Management



� Development of the Concept� Total systems cost - remains an important element of logistics analysis.

� Outbound logistics - was the initial focus with higher value finished goods.

� Inbound logistics – deregulation allowed new focus on coordination of inbound and outbound movements.

� Value chain analysis integrated logistics activities.� Terminology growing as supply chain concept matures.


Figure 1-1 A View of Business Logistics in a Firm


Figure 1-2 Integrated Logistics Management


Figure 1-3Generic Value Chain


Figure 1-4 Logistics Supply Chain



� Business Case for Supply Chain Management: Why so much attention on supply chain management?

� ECR and Best-in-class studies (see next two slides)

� Complexity of the supply chain

� Extended enterprise concept

� Two-way flow of:

� Products

� Information

� Cash

� Inventory visibility


Figure 1-5: Comparison of Average Throughput Time of Dry Grocery Chain before and after ECR Implementation


Figure 1-6: Total Supply Chain Management Cost --- All Sectors

0

2

4

6

8

10

12

14

1996 1997

Best-in-class

Median

Revenue %


Figure 1-7: Integrated Supply Chain


Figure 1-8: Running Lean

0

5

10

15

20

25

30

35

40

45

50

1996

Qtr 4

1997

Qtr 1

1997

Qtr 2

1997

Qtr 3

1997

Qtr 4

Compaq

Dell

Number of times Dell and Compaq turn inventory over in each quarter, calculated at an annual rate.




� Inventory

� Visibility

� Pull systems

� Landed Cost

� Companies must realize that their strategies may affect the landed cost.

� Coordination of supply chain activities may lower the landed cost.




� Real-time two way information flows

� Customer service

� levels must be tailored to each customer

� not all customers require the same service

� Supply chain relationships

� Collaborative planning

� Share risks and rewards


Figure 1-9: Traditional Supply Chain/Pipeline Inventory Flow 1970s and 1980s

Chapter 1:Summary and Review Questions

Students should review their knowledge of the chapter by checking out the Summary and Study

Questions for Chapter 1.

This is the last slide for Chapter 1

End of Chapter 1 Slides

Supply Chain Management

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Documents

landscape of business

changing business landscape

supply chain strategies

business vocabulary

supply chain approach

supply chain managementchapter

current management

importance of logistics