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Lamb, Hair, McDaniel

CHAPTER 14

Supply Chain Management

2010-2011

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LO 1 Define the terms supply chain, supply chain management, and supply chain orientation, and discuss the benefits of supply chain management

LO 2 Discuss the concept of supply chain integration and explain why each of the six types of integration is important

LO 3 Identify the eight key processes for excellent supply chain management and discuss how each of these processes impacts the end customer

Learning OutcomesLearning Outcomes

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LO 4 Discuss the key strategic decisions supply chain managers must make when designing their companies’ supply chains

LO 5 Discuss new technology and emerging trends in supply chain management.

Learning OutcomesLearning Outcomes

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Supply Chains and Supply Chain Management

4

Define the terms supply chain, supply chain management,

and supply chain orientation, and discuss the benefits

of supply chain management

LO1

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Supply Chains

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Supply ChainSupply ChainThe connected chain of

all of the business

entities, both internal

and external to the

company, that perform or

support the logistics

function

LO1

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Supply Chains

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Supply Chain Management

Supply Chain Management

A management system that coordinates and integrates all of the activities performed by supply chain members into a seamless process, from the source to the point of consumption, resulting in enhanced customer and economic value

LO1

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Supply Chain Management

Physical flow process that engineers the movement of goods

Physical flow process that engineers the movement of goods

Communicator of customer demand from point of sale to supplier

Communicator of customer demand from point of sale to supplier

LO1

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Supply Chains

8LO1

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Supply Chain Managers

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Supply chain managers are responsible for :

Making strategic decisions

Management of information through supply chain

Coordinating relationships between company and external partners

LO1

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Benefits of Supply Chain Management

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Supply chain oriented companies commonly report:

• Lower inventory, transportation, warehousing, and packaging costs

• Greater supply chain flexibility

• Improved customer service

• Higher revenues

• Increased profitability

LO1

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Supply Chain Integration

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Discuss the concept of supply chain integration

and explain why each of the six types of

integration is important

LO2

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Supply Chain Integration

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Material and service supplier Integration

Material and service supplier Integration

Internal Operations Integration

Internal Operations Integration

Customer IntegrationCustomer Integration

Relationship IntegrationRelationship Integration

Measurement Integration

Measurement Integration

Technology and planning Integration

Technology and planning Integration

Firm-to-Firm Social Interactions

Firm-to-Firm Social Interactions

Operational Planning and

Control

Operational Planning and

Control

Customer IntegrationCustomer Integration

LO2

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Supply Chain Integration

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Relationship Integration

Relationship Integration

The ability of two or more companies to develop social connections that serve to guide their interactions when working together.

The ability of two or more companies to develop social connections that serve to guide their interactions when working together.

Role Specificity

Role Specificity

When each firm in a supply chain has clarity in terms of knowing which firm is the leader, which

firms are the followers, and which responsibilities are assigned to

each firm.

When each firm in a supply chain has clarity in terms of knowing which firm is the leader, which

firms are the followers, and which responsibilities are assigned to

each firm.

LO2

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Measurement Integration

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The performance assessment of the supply chain as a whole that also holds each individual firm or business unit accountable for meeting its own goals

Measurement Integration

Technology and planning integration

The creation and maintenance of information technology systems that connect managers across and through the firms in the supply chain

LO2

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Internal Operations Integration

Links internally performed work into a seamless process that stretches across departmental and/or functional boundaries, with the goal of satisfying customer requirements

A competency that enables firms to offer long-lasting, distinctive, value-added offerings to those customers who represent the greatest value to the firm or supply chain

Customer Integration

LO2

Internal Operations Integration

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Key Processes of Supply Chain Management

16

Identify eight key processes of excellent supply chain

management, and discuss how each of these processes

impacts the end customer

LO3

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Key Processes

17LO3

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Customer Relationship Management

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Customer Relationship Management

Process

Customer Relationship Management

Process

The prioritization of a firm’s

marketing focus on different

customer groups according to

each group’s long-term value

to the company or supply

chain; designed to identify and

build relationships with good

customers.

LO3

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Customer Service Management

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Customer Service

Management Process

Customer Service

Management Process

A multi-company, unified response system to the customer whenever complaints, concerns, questions, or comments are voiced; designed to ensure that customer relationships remain strong.

LO3

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Demand Management

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DemandManagement

Process

DemandManagement

Process

The alignment of supply and

demand throughout the supply

chain to anticipate customer

requirements at each level and

create demand-related plans of

action prior to actual customer

purchasing behavior.

LO3

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Order Fulfillment

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Order FulfillmentProcess

Order FulfillmentProcess

A supply chain

management process that

involves generating,

filling, delivering, and

providing on-the-spot

service for customer

orders.

LO3

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Manufacturing Flow Management

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Manufacturing Flow

Management Process

Manufacturing Flow

Management Process

A process that ensures

that firms in the supply

chain have the resources

they need

LO3

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Supplier Relationship Management

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Supplier Relationship Management

Process

Supplier Relationship Management

Process

A supply chain

management process that

supports manufacturing

flow by identifying and

maintaining relationships

with highly valued

suppliers

LO3

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Product Development and Commercialization

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Product Development and Commercialization

Process

Product Development and Commercialization

Process

The group of activities

that facilitates the joint

development and

marketing of new

offerings among a group

of supply chain partner

firms.

LO3

25

Returns Management

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Returns Management

Process

Returns Management

Process

A process that enables firms

to manage volumes of

returned product efficiently,

while minimizing costs and

maximizing the value of the

returned assets to the firms in

the supply chain.

LO3

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Key Processes of Supply Chain Management

26LO3

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Managing Logistical Components

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Describe the logistical components of the

supply chain

LO4

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Logistical Components of the Supply Chain

SupplySupplyChainChainTeamTeam

Sourcing & ProcurementSourcing & Procurement

Production SchedulingProduction Scheduling

Order ProcessingOrder Processing

Inventory ControlInventory Control

Warehouse & Materials HandlingWarehouse & Materials Handling

TransportationTransportationLo

gis

tics

Info

rma

tio

n S

yste

mL

og

isti

cs In

form

ati

on

Sys

tem

LO4

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Sourcing and Procurement

Plan purchasing strategies

Develop specifications

Select suppliers

Negotiate price and service levels

Reduce costs

The Role of Purchasing:The Role of Purchasing:

LO4

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Production Scheduling

Push / Pull Strategy

Traditional Focus

Push

Start of Production

Manufacturing

Inventory-Based

Mass Production

Customer Focus

Pull

Customer-Order Based

Mass Customization

LO4

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Just-in-Time Manufacturing

A process that redefines and simplifies

manufacturing by reducing inventory levels

and delivering raw materials just when they

are needed on the production line.

JITJIT

LO4

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Benefits of JIT

Reduces raw material inventoriesShortens lead timesCreates better supplier relationshipsReduces production and storeroom

costsReduces paperwork

LO4

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Materials Handling Functions

Receive goods into warehouse

Dispatch the goods totemporary storage

Recall, select, or pick the goods for shipment

Identify, sort, and label goods

LO4

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Transportation

Airways

Water

Pipelines

Motor Carriers

Railroads

LO4

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JIT Requirements

Receive high-quality parts Receive high-quality parts

Meet supplier delivery commitmentsMeet supplier delivery commitments

Have a crisis management planHave a crisis management plan

LO4

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Order Processing

Information technology that replaces paper

documents that accompany business transactions

with electronic transmission of the information.

ElectronicData

Interchange

ElectronicData

Interchange

http://www.walmartstores.com

Online

LO4

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Order Processing

A method of developing and maintaining

an adequate assortment of materials or

products to meet a manufacturer’s or a

customer’s demand.

InventoryControlSystem

InventoryControlSystem

LO4

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Order Processing

MaterialsRequirement

Planning(MRP)

MaterialsRequirement

Planning(MRP)

An inventory control system that manages the replenishment of raw materials, supplies, and components from the supplier to the manufacturer.

An inventory control system that manages the replenishment of raw materials, supplies, and components from the supplier to the manufacturer.

DistributionResourcePlanning

(DRP)

DistributionResourcePlanning

(DRP)

An inventory control system that manages the replenishment of goods from the manufacturer to the final consumer.

An inventory control system that manages the replenishment of goods from the manufacturer to the final consumer.

LO4

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MaterialsHandling Functions

Receive goods into warehouse

Dispatch the goods totemporary storage

Recall, select, or pick the goods for shipment

Identify, sort, and label goods

LO4

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Transportation

Airways

Water

Pipelines

Motor Carriers

Railroads

LO4

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Transportation Mode Choice

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Cost Transit time Reliability Capability Accessibility Traceability

LO4

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Criteria for RankingModes of Transportation

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Relative CostTransitTime

Reliability

Capability

Accessibility

Traceability

HighestHighest LowestLowest

Air WaterPipeRailTruck

Water Rail Pipe Truck Air

Pipe Truck Rail Air Water

Water

Truck

Rail Truck Air Pipe

Rail Air Water Pipe

Air Truck Rail Water Pipe

LO4

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Trends in Supply Chain Management

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Discuss new technology and emerging trends in

supply chain management

LO5

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Trends in Supply Chain Management

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Electronic distributionElectronic distribution

Outsourcing of logistics functionsOutsourcing of logistics functions

Advanced computer technologyAdvanced computer technology

Globalization of supply chain managementGlobalization of supply chain management

Outsourcing of logistics functionsOutsourcing of logistics functions

LO5

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Trends in Supply Chain Management

Electronic distributionElectronic distribution

Outsourcing of logistics functionsOutsourcing of logistics functions

Advanced computer technologyAdvanced computer technology

LO5

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Advanced Computer Technology

Automatic identification systems

- Bar coding

- Radio frequency technology

Communications technology

Supply chain software systems

LO5

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Outsourcing Logistics Functions

Outsourcing BenefitsOutsourcing Benefits

Reduce inventories

Locate stock at fewer plants and distribution centers

Provide same or better levels of service

LO5

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Green Supply Chain Management

• Requires integrating green thinking into all aspects of the supply chain– Green materials sourcing– Environmental impact of packaging,

shipment, use– Incorporate end of life management

• Recycling• Clean disposal

LO5

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AMR Research Healthcare Top 25

Ranked based on building supply chain excellence and innovation to drive business results in demand-driven supply chains

1. Johnson & Johnson

2. Sisters of Mercy

3. Cardinal Health

4. Owens & Minor

5. McKesson

6. CVS Caremark

7. Abbott

8. Novartis

9. BD (Becton, Dickinson)

10. Wyeth

11. GlaxoSmithKline

12. AstraZeneca

13. AmerisourceBergen

14. Walgreens

15. Covidien

16. Cleveland Clinic

17. Merck

18. Genentech

19. Alcon Laboratories

20. Medtronic

21. Boston Scientific

22. BJC HealthCare

23. Roche

24. Amgen

25. Mayo Clinic

Source: http://www.amrresearch.com/Content/View.aspx?compURI=tcm:7-49119 LO5