7/31/2019 SCM Ppt Ch01

1/108

Supply Chain Management

7/31/2019 SCM Ppt Ch01

2/108

Profit 4%

Logistics Cost 21%

Marketing Cost 27%

Manufacturing Cost 48%

Profit

Logistics

Cost

Marketing

Cost

Manufacturing

Cost

7/31/2019 SCM Ppt Ch01

3/108

All stages involved, directly or indirectly, infulfilling a customer request

Includes manufacturers, suppliers, transporters,

warehouses, retailers, and customers Within each company, the supply chain includes

all functions involved in fulfilling a customerrequest (product development, marketing,

operations, distribution, finance, customer service) Examples: Fig. 1.1 Detergent supply chain (Wal-

Mart), Dell

7/31/2019 SCM Ppt Ch01

4/108

Customer wants

detergent and goes

to Jewel

Jewel

Supermarket

Jewel or third

party DC

P&G or other

manufacturer

Plastic

Producer

Chemical

manufacturer

(e.g. Oil Company)

Tenneco

Packaging

Paper

Manufacturer

Timber

Industry

Chemical

manufacturer

(e.g. Oil Company)

7/31/2019 SCM Ppt Ch01

5/108

Maximize overall value created

Supply chain value: difference between whatthe final product is worth to the customer and

the effort the supply chain expends in fillingthe customers request

Value is correlated to supply chain profitability(difference between revenue generated fromthe customer and the overall cost across thesupply chain)

7/31/2019 SCM Ppt Ch01

6/108

Supply chain incurs costs (information, storage,transportation, components, assembly, etc.)

The supply chain profit

Supply chain profitability is total profit to beshared across all stages of the supply chain

Supply chain success should be measured bytotal supply chain profitability, not profits at an

individual stage

7/31/2019 SCM Ppt Ch01

7/108

Sources of supply chain revenue: the customer

Sources of supply chain cost: flows ofinformation, products, or funds between stages

of the supply chain Supply chain management is the management

of flows between and among supply chainstages to maximize total supply chain

profitability

7/31/2019 SCM Ppt Ch01

8/108

SUPPLY CHAIN MANAGEMENT SYSTEMS

Network of organizations and business processesfor procuring raw materials, transforming into

products, and distributing them to customers

Materials, information, and payments flow

through the supply chain in both directions.

The Supply Chain

Supply chain:

7/31/2019 SCM Ppt Ch01

9/108

Coordination of business processes to speed

information, product, and fund flows up and down

a supply chain to reduce time, redundant effort,

and inventory costs

Supply chain management:

7/31/2019 SCM Ppt Ch01

10/108

A Supply Chain

7/31/2019 SCM Ppt Ch01

11/108

Plan: Balancing demand and supply to meet sourcing,

production, and delivery requirements

Source: Procurement of goods and services needed to createa product or service

SCOR (Chain Operations Reference Model)

identifies five major supply chain processes:

7/31/2019 SCM Ppt Ch01

12/108

Make: Processes that transform a product into a

finished state

Deliver: Processes to manage order transportation

and distribution

Return: Processes associated with product returns

and post delivery customer support

Supply Chain Processes (Continued)

7/31/2019 SCM Ppt Ch01

13/108

Key Supply Chain Management Processes

SUPPLY CHAIN MANAGEMENT SYSTEMS

7/31/2019 SCM Ppt Ch01

14/108

Figure 1.1 A Generic Supply Chain

End product manufacturer

Wholesalers,distributors

Intermediate

component mfgs.

Raw material

suppliers

Retailers

End

customers

Product & service flow

Information and planning

7/31/2019 SCM Ppt Ch01

15/108

PurchasingReceiving Storage Operations Storage

Production Distribution

7/31/2019 SCM Ppt Ch01

16/108

Supplier

Supplier

Supplier

Storage

}Mfg. Storage Dist. Retailer Customer

7/31/2019 SCM Ppt Ch01

17/108

Supplier

Supplier}Storage Service Customer

7/31/2019 SCM Ppt Ch01

18/108

Here are two definitions:

The design and management of seamless, value-added processacross organizational boundaries to meet the real needs of the endcustomer

-- Institute for Supply Management

Managing supply and demand, sourcing raw materials and parts,manufacturing and assembly, warehousing and inventorytracking, order entry and order management, distribution acrossall channels, and delivery to the customer

-- The Supply Chain Council

7/31/2019 SCM Ppt Ch01

19/108

Supply chain management is concernedwith the efficient integration of suppliers,

factories, warehouses and stores so thatmerchandise is produced and distributed:In the right quantities

To the right locations

At the right time In order to

Minimize total system cost

Satisfy customer service requirements

7/31/2019 SCM Ppt Ch01

20/108

* Firms have discovered value-enhancing andlong term benefits

* Who benefits most? Firms with:- Large inventories- Large number of suppliers- Complex products

- Customers with large purchasing budgets

* Benefits- Lower purchasing/inventory costs, higher

quality/customer service

7/31/2019 SCM Ppt Ch01

21/108

Firms practicing Supply ChainManagement:

1. Start with key suppliers2. Move on to other suppliers, customers, and

shippers

3. Integrate second tier suppliers and

customers (second tier refers to thecustomers customers and the supplierssuppliers)

7/31/2019 SCM Ppt Ch01

22/108

* Cost savings and better coordination of resourcesare reasons to employ Supply Chain Management

-- Bullwhip Effect- the magnification of safety stocksand costs based on separate forecasts and uncoordinatedplanning and sharing of information along the supply

chain (Ex. 1.1)

* Reducing the bullwhip effect occurs through:

-- Process integration- Interdependent activities can leadto improved quality, reduced cycle time, better

production methods, better forecasts, less safety stock,etc.

7/31/2019 SCM Ppt Ch01

23/108

Purchasing- Supplier alliances, suppliermanagement, strategic sourcing

Operations- Demand management, MRP, ERP, JIT,TQM

Distribution- Transportation management, customerrelationship management, networkdesign, service response logistics

Integration- Coordination/Integration activities,global integration problems,performance measurement

7/31/2019 SCM Ppt Ch01

24/108

Purchasing:

Long term relationships

Supplier management- improvedperformance through-

-- Supplier evaluation (determiningsupplier capabilities and performance)

-- Supplier certification (third party orinternal certification to assure product

quality and service compliance)Strategic partnerships- successful andtrusting, long-term relationships with top-performingsuppliers

7/31/2019 SCM Ppt Ch01

25/108

Operations:

-- Demand management-match demand toavailable capacity

-- Linking buyers & suppliers viaMRPandERPsystems

-- UseJITto improve thepull of materials toreduce inventory levels

-- EmployTQMto improve quality complianceamong buyers and suppliers

7/31/2019 SCM Ppt Ch01

26/108

Distribution:-- Transportation management-tradeoff

decisions between cost & timing ofdelivery/customer service via trucks, rail, water

& air-- Customer relationship management-strategies to ensure deliveries, resolve

complaints, improve communications, &determine service requirements

-- Network design-creatingdistributionnetworksbased on tradeoff decisions between

cost & sophistication of distribution system

7/31/2019 SCM Ppt Ch01

27/108

Integration:

-- Supply Chain Integration-when supply chainparticipants work for common goals. Requiresintra

firmfunctional integration. Based on efforts to changeattitudes & adversarial relationships

-- Global Supply Chains- advantages that accrue fromsourcing from larger global market e.g., lower cost &

higher quality suppliers. May involveoperatingexposure,which is risk found in foreign settings

-- Supply Chain Performance Measurement-Crucial forfirms to know if procedures are working

7/31/2019 SCM Ppt Ch01

28/108

All of the advanced strategies, techniques,and approaches for Supply Chain

Management focus on:

Global Optimization

Managing Uncertainty

7/31/2019 SCM Ppt Ch01

29/108

Decision Support Systems

Inventory Control Network Design Design for Logistics Cross Docking

7/31/2019 SCM Ppt Ch01

30/108

Procurement

Planning

Manufacturing

Planning

Distribution

PlanningDemand

Planning

Sequential Optimization

Supply Contracts/Collaboration/Information Systems and DSS

Procurement

Planning

Manufacturing

Planning

Distribution

PlanningDemand

Planning

Global Optimization

7/31/2019 SCM Ppt Ch01

31/108

The supply chain is complexDifferent facilities have conflictingobjectives

The supply chain is a dynamic system

The power structure changesThe system varies over time

7/31/2019 SCM Ppt Ch01

32/108

What is variation?

What is randomness? What tools and approaches help usto deal with these issues?

7/31/2019 SCM Ppt Ch01

33/108

Forecasting is always wrong

The longer the forecast horizon the worsethe forecast

End item forecasts are even more wrong

7/31/2019 SCM Ppt Ch01

34/108

* Matching supply and demand is difficult.

* Forecasting doesnt solve the problem.

* Inventory and back-order levels typically fluctuate widely acrossthe supply chain.

* Demand is not the only source of uncertainty:Lead times

Yields

Transportation times

Natural Disasters

Component Availability

7/31/2019 SCM Ppt Ch01

35/108

Volumes

Time

Actual

Consumer

DemandRetailer Warehouse

to ShopRetailer Orders

Production Plan

Manufacturer Forecastof Sales

7/31/2019 SCM Ppt Ch01

36/108

Volumes

Time

Consumer

Demand

Production Plan

7/31/2019 SCM Ppt Ch01

37/108

Volumes

Time

Consumer

Demand

Production Plan

7/31/2019 SCM Ppt Ch01

38/108

Pull Systems

Risk Pooling

Centralization

Postponement

Strategic Alliances

Collaborative Forecasting

7/31/2019 SCM Ppt Ch01

39/108

Global competition

Shorter product life cycle

New, low-cost distribution channels

More powerful well-informedcustomers

Internet and E-Business strategies

7/31/2019 SCM Ppt Ch01

40/108

Supply chain strategy or design

Supply chain planning

Supply chain operation

7/31/2019 SCM Ppt Ch01

41/108

Decisions about the structure of the supply chainand what processes each stage will perform

Strategic supply chain decisions Locations and capacities of facilities

Products to be made or stored at various locations

Modes of transportation

Information systems

Supply chain design must support strategic

objectives Supply chain design decisions are long-term and

expensive to reverse must take into accountmarket uncertainty

7/31/2019 SCM Ppt Ch01

42/108

Definition of a set of policies that govern short-term operations

Fixed by the supply configuration from

previous phase Starts with a forecast of demand in the coming

year

7/31/2019 SCM Ppt Ch01

43/108

Planning decisions:

Which markets will be supplied from whichlocations

Planned buildup of inventories Subcontracting, backup locations

Inventory policies

Timing and size of market promotions

Must consider in planning decisions demanduncertainty, exchange rates, competition overthe time horizon

7/31/2019 SCM Ppt Ch01

44/108

7/31/2019 SCM Ppt Ch01

45/108

Customer

Information

Product

Funds

7/31/2019 SCM Ppt Ch01

46/108

Cycle view: processes in a supply chain aredivided into a series of cycles, each performedat the interfaces between two successive supply

chain stages Push/pull view: processes in a supply chain

are divided into two categories depending onwhether they are executed in response to a

customer order (pull) or in anticipation of acustomer order (push)

7/31/2019 SCM Ppt Ch01

47/108

Customer Order Cycle

Replenishment Cycle

Manufacturing Cycle

Procurement Cycle

Customer

Retailer

Distributor

Manufacturer

Supplier

7/31/2019 SCM Ppt Ch01

48/108

Each cycle occurs at the interface between twosuccessive stages

Customer order cycle (customer-retailer)

Replenishment cycle (retailer-distributor)

Manufacturing cycle (distributor-manufacturer)

Procurement cycle (manufacturer-supplier)

Cycle view clearly defines processes involved and

the owners of each process. Specifies the roles andresponsibilities of each member and the desiredoutcome of each process.

7/31/2019 SCM Ppt Ch01

49/108

Procurement,Manufacturing and

Replenishment cycles

Customer Order

Cycle

Customer

Order Arrives

PUSH PROCESSES PULL PROCESSES

7/31/2019 SCM Ppt Ch01

50/108

Supply chain processes fall into one of twocategories depending on the timing of theirexecution relative to customer demand

Pull: execution is initiated in response to acustomer order (reactive)

Push: execution is initiated in anticipation ofcustomer orders (speculative)

Push/pull boundary separates push processesfrom pull processes

7/31/2019 SCM Ppt Ch01

51/108

7/31/2019 SCM Ppt Ch01

52/108

Supply chain processes discussed in the twoviews can be classified into

Customer Relationship Management (CRM)

Internal Supply Chain Management (ISCM) Supplier Relationship Management (SRM)

Integration among the above three macroprocesses is critical for effective and successful

supply chain management

7/31/2019 SCM Ppt Ch01

53/108

Gateway

Zara

McMaster Carr / W.W. Grainger

Toyota

Amazon / Borders / Barnes and Noble

Webvan / Peapod / Jewel

7/31/2019 SCM Ppt Ch01

54/108

7/31/2019 SCM Ppt Ch01

55/108

Managing supply chain flows and assets, tomaximizesupply chain surplus

What is supply chain surplus?

7/31/2019 SCM Ppt Ch01

56/108

Competitive strategy: defines the set of customer needsa firm seeks to satisfy through its products and services

Product development strategy: specifies the portfolioof new products that the company will try to develop

Marketing and sales strategy: specifies how the marketwill be segmented and product positioned, priced, andpromoted

Supply chain strategy: determines the nature of material procurement, transportation

of materials, manufacture of product or creation of service,distribution of product

Consistency and support between supply chain strategy,competitive strategy, and other functional strategies is

important

7/31/2019 SCM Ppt Ch01

57/108

New

Product

Development

Marketing

and

Sales

Operations Distribution Service

Finance, Accounting, Information Technology, Human Resources

7/31/2019 SCM Ppt Ch01

58/108

Introduction

How is strategic fit achieved?

Other issues affecting strategic fit

7/31/2019 SCM Ppt Ch01

59/108

Strategic fit: Consistency between customer priorities of

competitive strategy and supply chain capabilitiesspecified by the supply chain strategy

Competitive and supply chain strategies have thesame goals

A company may fail because of a lack of

strategic fit or because its processes andresources do not provide the capabilities toexecute the desired strategy

Example of strategic fit -- Dell

7/31/2019 SCM Ppt Ch01

60/108

Step 1: Understanding the customer andsupply chain uncertainty

Step 2: Understanding the supply chain

Step 3: Achieving strategic fit

7/31/2019 SCM Ppt Ch01

61/108

Identify the needs of the customer segmentbeing served

Quantity of product needed in each lot

Response time customers will tolerate Variety of products needed

Service level required

Price of the product Desired rate of innovation in the product

7/31/2019 SCM Ppt Ch01

62/108

Overall attribute of customer demand

Demand uncertainty: uncertainty of customerdemand for a product

Implied demand uncertainty: resultinguncertainty for the supply chain given theportion of the demand the supply chain musthandle and attributes the customer desires

7/31/2019 SCM Ppt Ch01

63/108

Implied demand uncertainty also related tocustomer needs and product attributes

First step to strategic fit is to understand

customers by mapping their demand on theimplied uncertainty spectrum

7/31/2019 SCM Ppt Ch01

64/108

Understanding the Customer Lot size

Response time

Service level Product variety

Price

Innovation

Implied

Demand

Uncertainty

7/31/2019 SCM Ppt Ch01

65/108

Customer Need Causes implied demanduncertainty to increase because

Range of quantity increases Wider range of quantity implies

greater variance in demand

Lead time decreases Less time to react to orders

Variety of products required increases Demand per product becomes more

disaggregated

Number of channels increases Total customer demand is now

disaggregated over more channels

Rate of innovation increases New products tend to have more

uncertain demand

Required service level increases Firm now has to handle unusual

surges in demand

7/31/2019 SCM Ppt Ch01

66/108

Predictablesupply and

demand

Salt at a

supermarket

A newcommunication

device

Highly uncertain

supply and demand

Figure 2.2: The Implied Uncertainty (Demand and Supply)

Predictable supply and uncertain

demand or uncertain supply and

predictable demand or somewhat

uncertain supply and demand

An existing

automobile

model

7/31/2019 SCM Ppt Ch01

67/108

Attribute Low Implied

Uncertainty

High Implied

Uncertainty

Product margin Low High

Avg. forecast error 10% 40%-100%

Avg. stockout rate 1%-2% 10%-40%

Avg. forced season-

end markdown

0% 10%-25%

7/31/2019 SCM Ppt Ch01

68/108

How does the firm best meet demand?

Dimension describing the supply chain issupply chain responsiveness

Supply chain responsiveness -- ability to respond to wide ranges of quantities demanded

meet short lead times

handle a large variety of products

build highly innovative products

meet a very high service level

7/31/2019 SCM Ppt Ch01

69/108

There is a cost to achieving responsiveness

Supply chain efficiency: cost of making anddelivering the product to the customer

Increasing responsiveness results in highercosts that lower efficiency

Second step to achieving strategic fit is to mapthe supply chain on the responsivenessspectrum

7/31/2019 SCM Ppt Ch01

70/108

High Low

Low

High

Responsiveness

Cost

7/31/2019 SCM Ppt Ch01

71/108

Step is to ensure that what the supply chaindoes well is consistent with target customersneeds

Examples: Dell,

7/31/2019 SCM Ppt Ch01

72/108

Integrated

steel mill

Dell

Highly

efficient

Highly

responsive

Somewhat

efficient

Somewhat

responsive

Hanes

apparel

Most

automotive

production

7/31/2019 SCM Ppt Ch01

73/108

Implied

uncertainty

spectrum

Responsive

supply chain

Efficient

supply chain

Certain

demand

Uncertain

demand

Responsivenessspectrum

7/31/2019 SCM Ppt Ch01

74/108

All functions in the value chain must supportthe competitive strategy to achieve strategic fit Fig. 2.7

Two extremes: Efficient supply chains (Barilla)and responsive supply chains (Dell) Table 2.3

Two key points there is no right supply chain strategy independent

of competitive strategy there is a right supply chain strategy for a given

competitive strategy

7/31/2019 SCM Ppt Ch01

75/108

Efficient Responsive

Primary goal Lowest cost Quick response

Product design strategy Min product cost Modularity to allow

postponement

Pricing strategy Lower margins Higher margins

Mfg strategy High utilization Capacity flexibility

Inventory strategy Minimize inventory Buffer inventory

Lead time strategy Reduce but not at expense

of greater cost

Aggressively reduce even if

costs are significant

Supplier selection strategy Cost and low quality Speed, flexibility, quality

Transportation strategy Greater reliance on low cost

modes

Greater reliance on

responsive (fast) modes

7/31/2019 SCM Ppt Ch01

76/108

Multiple products and customer segments

Product life cycle

Competitive changes over time

7/31/2019 SCM Ppt Ch01

77/108

Firms sell different products to differentcustomer segments (with different implieddemand uncertainty)

The supply chain has to be able to balanceefficiency and responsiveness given itsportfolio of products and customer segments

Two approaches:

Different supply chains

Tailor supply chain to best meet the needs ofeach products demand

7/31/2019 SCM Ppt Ch01

78/108

The demand characteristics of a product andthe needs of a customer segment change as aproduct goes through its life cycle

Supply chain strategy must evolve throughoutthe life cycle

Early: uncertain demand, high margins (time isimportant), product availability is most

important, cost is secondary Late: predictable demand, lower margins, price

is important

7/31/2019 SCM Ppt Ch01

79/108

Examples: pharmaceutical firms, Intel

As the product goes through the life cycle, thesupply chain changes from one emphasizing

responsiveness to one emphasizing efficiency

7/31/2019 SCM Ppt Ch01

80/108

Competitive pressures can change over time

More competitors may result in an increasedemphasis on variety at a reasonable price

The Internet makes it easier to offer a widevariety of products

The supply chain must change to meet thesechanging competitive conditions

7/31/2019 SCM Ppt Ch01

81/108

Scope of strategic fit The functions and stages within a supply chain that

devise an integrated strategy with a shared objective

One extreme: each function at each stage develops itsown strategy

Other extreme: all functions in all stages devise a strategyjointly

Five categories: Intracompany intraoperation scope

Intracompany intrafunctional scope Intracompany interfunctional scope

Intercompany interfunctional scope

Flexible interfunctional scope

7/31/2019 SCM Ppt Ch01

82/108

Suppliers Manufacturer Distributor Retailer Customer

Competitive

Strategy

ProductDevelopment

Strategy

Supply Chain

Strategy

Marketing

Strategy

Intracompany

Intraoperation

at Distributor

Intracompany

Intrafunctional

at Distributor

Intracompany

Interfunctional

at Distributor

IntercompanyInterfunctional

7/31/2019 SCM Ppt Ch01

83/108

7/31/2019 SCM Ppt Ch01

84/108

Facilities places where inventory is stored, assembled, or fabricated

production sites and storage sites

Inventory

raw materials, WIP, finished goods within a supply chain

inventory policies

Transportation

moving inventory from point to point in a supply chain

combinations of transportation modes and routes

Information

data and analysis regarding inventory, transportation, facilities

throughout the supply chain potentially the biggest driver of supply chain performance

Sourcing

functions a firm performs and functions that are outsourced

Pricing

Price associated with goods and services provided by a firm to thesupply chain

7/31/2019 SCM Ppt Ch01

85/108

Competitive Strategy

Supply Chain

Strategy

Efficiency Responsiveness

Facilities Inventory Transportation

Information

Supply chain structure

Cross Functional Drivers

Sourcing Pricing

Logistical Drivers

7/31/2019 SCM Ppt Ch01

86/108

Role in the supply chain the where of the supply chain

manufacturing or storage (warehouses)

Role in the competitive strategy economies of scale (efficiency priority)

larger number of smaller facilities (responsivenesspriority)

Components of facilities decisions

7/31/2019 SCM Ppt Ch01

87/108

Location centralization (efficiency) vs. decentralization

(responsiveness)

other factors to consider (e.g., proximity to customers)

Capacity (flexibility versus efficiency)

Manufacturing methodology (product focusedversus process focused)

Warehousing methodology (SKU storage, job lotstorage, cross-docking)

Overall trade-off: Responsiveness versus

efficiency

7/31/2019 SCM Ppt Ch01

88/108

Role in the supply chain Role in the competitive strategy

Components of inventory decisions

7/31/2019 SCM Ppt Ch01

89/108

Inventory exists because of a mismatch betweensupply and demand

Source of cost and influence on responsiveness

Impact on

material flow time: time elapsed between whenmaterial enters the supply chain to when it exits thesupply chain

throughput

rate at which sales to end consumers occur

I = RT (Littles Law)

I = inventory; R = throughput; T = flow time

Example

7/31/2019 SCM Ppt Ch01

90/108

If responsiveness is a strategic competitivepriority, a firm can locate larger amounts ofinventory closer to customers

If cost is more important, inventory can bereduced to make the firm more efficient

Trade-off

7/31/2019 SCM Ppt Ch01

91/108

Cycle inventory Average amount of inventory used to satisfy demand between

shipments

Depends on lot size

Safety inventory inventory held in case demand exceeds expectations

costs of carrying too much inventory versus cost of losing sales

Seasonal inventory

inventory built up to counter predictable variability in demand cost of carrying additional inventory versus cost of flexible

production

Overall trade-off: Responsiveness versus efficiency more inventory: greater responsiveness but greater cost

less inventor : lower cost but lower res onsiveness

7/31/2019 SCM Ppt Ch01

92/108

Role in the supply chain Role in the competitive strategy

Components of transportation decisions

7/31/2019 SCM Ppt Ch01

93/108

Moves the product between stages in thesupply chain

Impact on responsiveness and efficiency

Faster transportation allows greaterresponsiveness but lower efficiency

Also affects inventory and facilities

7/31/2019 SCM Ppt Ch01

94/108

If responsiveness is a strategic competitivepriority, then faster transportation modes canprovide greater responsiveness to customerswho are willing to pay for it

Can also use slower transportation modes forcustomers whose priority is price (cost)

Can also consider both inventory and

transportation to find the right balance

7/31/2019 SCM Ppt Ch01

95/108

Mode of transportation: air, truck, rail, ship, pipeline, electronic

transportation

vary in cost, speed, size of shipment, flexibility

Route and network selection

route: path along which a product is shipped

network: collection of locations and routes

In-house or outsource Overall trade-off: Responsiveness versus

efficiency

7/31/2019 SCM Ppt Ch01

96/108

Role in the supply chain Role in the competitive strategy

Components of information decisions

7/31/2019 SCM Ppt Ch01

97/108

The connection between the various stages inthe supply chain allows coordinationbetween stages

Crucial to daily operation of each stage in asupply chain e.g., production scheduling,inventory levels

7/31/2019 SCM Ppt Ch01

98/108

Allows supply chain to become more efficientand more responsive at the same time (reducesthe need for a trade-off)

7/31/2019 SCM Ppt Ch01

99/108

Push (MRP) versus pull (demand informationtransmitted quickly throughout the supplychain)

Coordination and information sharing Forecasting and aggregate planning

Enabling technologies

EDI

Internet

ERP systems

Supply Chain Management software

Overall trade-off: Responsiveness versus

7/31/2019 SCM Ppt Ch01

100/108

Role in the supply chain Role in the competitive strategy

Components of sourcing decisions

7/31/2019 SCM Ppt Ch01

101/108

Set of business processes required to purchasegoods and services in a supply chain

Supplier selection, single vs. multiple

suppliers, contract negotiation

7/31/2019 SCM Ppt Ch01

102/108

Sourcing decisions are crucial because theyaffect the level of efficiency and responsivenessin a supply chain

In-house vs. outsource decisions- improvingefficiency and responsiveness

7/31/2019 SCM Ppt Ch01

103/108

In-house versus outsource decisions Supplier evaluation and selection

Procurement process

Overall trade-off: Increase the supply chainprofits

7/31/2019 SCM Ppt Ch01

104/108

Role in the supply chain Role in the competitive strategy

Components of pricing decisions

7/31/2019 SCM Ppt Ch01

105/108

Pricing determines the amount to chargecustomers in a supply chain

Pricing strategies can be used to match demand

and supply

7/31/2019 SCM Ppt Ch01

106/108

Firms can utilize optimal pricing strategies toimprove efficiency and responsiveness

Low price and low product availability; vary

prices by response times

7/31/2019 SCM Ppt Ch01

107/108

Pricing and economies of scale Everyday low pricing versus high-low pricing

Fixed price versus menu pricing

Overall trade-off: Increase the firm profits

7/31/2019 SCM Ppt Ch01

108/108

Increasing variety of products Decreasing product life cycles

Increasingly demanding customers

Fragmentation of supply chain ownership Globalization

Difficulty executing new strategies