Supply Chain ManagementChapter 2

Recap: Decisions in SCM

1) Location• Geographic placement of production facilities, stocking points, and sourcing

points

2) Production• What products to produce,

• In which plants to produce

• Allocation of suppliers to plants

3) Inventory

4) Transportation (distribution)• Transportation choice

• Transportation is more than 30 percent of the logistics costs

• Operating efficiently makes good economic sense

Components of Supply Chain Management

Broad Components

Upstream

Internal Supply Chain

Downstream

Conceptual Components

SC Configuration

SC Relationship

SC Coordination

Value Creation by Supply Chain

Five areas in which supply chain management can have a

direct effect on corporate value:

• Profitable growth

• Working-capital reductions

• Fixed-capital efficiency

• Global tax minimisation

• Cost minimisation

Chapter 2: Global Supply Chain ManagementLearning Objective:

• Differentiate global and local perspective of SCM

• Demonstrate key challenges of SCM

• Response of SCM to Globalisation

• Supply Chain Integration: Challenges and good practice

Global vs. Domestic Supply Chain

• Border Crossing

• Technology

• Visibility • Supply chain visibility (SCV) is the ability of parts, components or

products in transit to be tracked from the manufacturer to their final destination.

• Supply chain visibility technology promotes quick response to change by allowing privledged users to take action and reshape demand or redirect supply.

• Flexibility

Global Supply Chain

Key challenges of SCM

• Unable to apply the right metrics to manage supply chains effectively

• Difficulty prioritising supply chain improvement efforts

• Performance is lagging

• Complexity of supply chains

• Finding and holding on to supply chain talent

Dimensions of Challenges

• Market dimension

• Technology dimension

• Resource dimension

• Time dimension

Response of Supply Chain to Globalisation• Collaboration• Working together to achieve a common goal

• Sharing resources

• Achieve synergy:

• Risk sharing

• Innovation:

• Supply chain integration• close internal and external coordination across the supply chain

operations and processes under the shared vision

• Divergent product portfolio• Development of “blue ocean strategy”

Supply Chain Integration: Challenges and Good Practices• Establish a vision of how financial and non-

financial results will improve with supply chain integration.

• Develop people, culture and an organisation that supports the supply chain vision.

• Develop customer-centric metrics.

• Develop multiple supply chains to meet the needs of different customer and market segments.

• Establish the correct positioning of work on a global basis.

• Incorporate supply chain consideration into product and service design decisions.

Supply Chain Integration: Challenges and Good Practices (cont’d)

• Maintain sourcing as a first-level priority.

• Stay focused and consistent in relationships with customers and suppliers.

• Create an effective Sales and Operations process.

• Develop valid and reliable databases, data and information.

• Develop the capabilities and analytic tools required to make effective decisions in an increasingly complex and risky environment.

• Build trust within and across organisations in the supply chain.

• Find ways to share risk equitably among supply chain partners.

• Find ways to share rewards equitably among supply chain partners.