Chapter 10

EXTENDING THE ORGANIZATION - SUPPLY CHAIN MANAGEMENT

Supply chain 

Consists of all parties involved directly or indirectly. In procurement of a product or raw material

Supply chain management (SCM) 

Involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

The supply chain has 3 main links :

• Materials flow from suppliers and their upstream suppliers at all levels 
• Transformation of materials into semi-finished and finished productsorganization’s own production processes
• Distribution of products to customers and their downstream customers at all levels

The five basic supply chain management activities:

• PLAN      - prepare to manage all resources required to meet demand
• SOURCE  - build relationship with suppliers to procure raw materials
• MAKE      - manufacture products and create production schedule 
• DELIVER  - plans for transportation of goods to customers
• RETURN  - support customers and product returns

Factors driving supply chain management:

• Visibility: supply chain visibility is the ability to view
  all areas up and down the supply chain. Organizations
  can use technology tools that help them integrate upstream
  and downstream with both customers and suppliers.
  The bullwhip effect occurs when distorted product demand
  information passes from one entity to the next throughout
  the supply chain

• Consumer behavior: behavior customers have changed the
  way businesses compete. Customers will leave if a company
  does not continually meet their expectations. Demand
  planning software generates demand forecasts using
  statistical tools and forecasting techniques. Companies can
  respond faster and more effectively to consumer demands
  through supply chain enhancement such as demand planning
  software

• Competition: supply chain planning (SCP) software uses
  advanced mathematical algorithms to improve the flow and
  efficiency of the supply chain while reducing inventory.
  Supply chain execution (SCE) software automates the
  different steps and stages of the supply chain. This could
  be as simple as electronically routing orders from a
  manufacturer to a supplier 

• Speed: competition has focused on speed. New forms of
  servers, telecommunications, wireless applications and
  software are enabling companies to perform activities that
  were once never thought possible. These systems raise the
  accuracy, frequency and speed of communication between
  suppliers and customers as well as between internal users

Factors fostering supply chain speed:

• Pleasing customers has become something of a corporate
  obsession. Serving the customer in the best, most efficient,
  and most effective manner has become critical and
  information about issues such as order status, product
  availability, delivery schedule, and invoices has become
  a necessary part of the total customer service experience.
  
  

• Information is crucial to managers’ abilities to reduce
  inventory and human resource requirements to a
  competitive level.
  
  

• Information flows are essential to strategic planning for
  and development of resources. 

7 principles of supply chain management:

• Segment customers by service need, regardless of industry and then tailor service to those particular segments 

• Customize the logistics network and focus intensively on the service requirements and on the profitability of the preidentified customer segments
  
  

• Listen to signals of market demand and plan accordingly. Planning must span the entire chain to detect signals of changing demand
  
  

• Differentiate products closer to the customer, since companies can no longer afford to hold inventory to compensate for poor demand forecasting
  
  

• Strategically manage source of supply by working with key suppliers to reduce overall costs of owning materials and service
  
  

• Develop and supply chain information technology strategy that supports different levels of decision making and provides a clear view (visibility) of the of products, service and information
  
  

• Adopt performance evaluation measure that apply to every link in the supply chain and measure true profitability at every stage