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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.
Chapter 1 Management of Business Logistics, 7th Ed. 3
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.
Chapter 1 Management of Business Logistics, 7th Ed. 4
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?
Chapter 1 Management of Business Logistics, 7th Ed. 5
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.
Chapter 1 Management of Business Logistics, 7th Ed. 6
The Changing Business Landscape: Five Driving Forces
� The Empowered Consumer
� Power Shift in the Supply Chain
� Deregulation
� Globalization
� Technology
Chapter 1 Management of Business Logistics, 7th Ed. 7
The Changing Business Landscape: Five Driving Forces
� 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.
Chapter 1 Management of Business Logistics, 7th Ed. 8
The Changing Business Landscape: Five Driving Forces
� 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.
Chapter 1 Management of Business Logistics, 7th Ed. 9
The Changing Business Landscape: Five Driving Forces
� 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.
Chapter 1 Management of Business Logistics, 7th Ed. 10
The Changing Business Landscape: Five Driving Forces
� 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
Chapter 1 Management of Business Logistics, 7th Ed. 11
The Changing Business Landscape: Five Driving Forces
� 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.
Chapter 1 Management of Business Logistics, 7th Ed. 12
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.
Chapter 1 Management of Business Logistics, 7th Ed. 13
The Changing Business Landscape: The Supply Chain Concept
� Development of the Concept
� Business Case for Supply Chain Management
� Characteristics of Supply Chain Management
Chapter 1 Management of Business Logistics, 7th Ed. 14
The Changing Business Landscape: The Supply Chain Concept
� 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.
Chapter 1 Management of Business Logistics, 7th Ed. 15
Figure 1-1 A View of Business Logistics in a Firm
Chapter 1 Management of Business Logistics, 7th Ed. 16
Figure 1-2 Integrated Logistics Management
Chapter 1 Management of Business Logistics, 7th Ed. 17
Figure 1-3Generic Value Chain
Chapter 1 Management of Business Logistics, 7th Ed. 18
Figure 1-4 Logistics Supply Chain
Chapter 1 Management of Business Logistics, 7th Ed. 19
The Changing Business Landscape: The Supply Chain Concept
� 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
Chapter 1 Management of Business Logistics, 7th Ed. 20
Figure 1-5: Comparison of Average Throughput Time of Dry Grocery Chain before and after ECR Implementation
Chapter 1 Management of Business Logistics, 7th Ed. 21
Figure 1-6: Total Supply Chain Management Cost --- All Sectors
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2
4
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14
1996 1997
Best-in-class
Median
Revenue %
Chapter 1 Management of Business Logistics, 7th Ed. 22
Figure 1-7: Integrated Supply Chain
Chapter 1 Management of Business Logistics, 7th Ed. 23
Figure 1-8: Running Lean
0
5
10
15
20
25
30
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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.
Chapter 1 Management of Business Logistics, 7th Ed. 24
The Changing Business Landscape: The Supply Chain Concept
� Characteristics of Supply Chain Management
� 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.
Chapter 1 Management of Business Logistics, 7th Ed. 25
The Changing Business Landscape: The Supply Chain Concept
� Characteristics of Supply Chain Management
� 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
Chapter 1 Management of Business Logistics, 7th Ed. 26
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