Lecture 15: Supply Chain Management

Introduction

• Supply Chain: Sequence of organizations, facilities, functions, and activities involved in producing and delivering a product or service.
• Logistics: Part of the chain involved in the forward and reverse flow of goods, services, cash, and information.

Typical Supply Chains

• Goods Supply Chain: Suppliers → Storage → Manufacturing → Storage → Distributor → Retailer → Customer.
• Services Supply Chain: Few Suppliers → Storage → Service → Customer.

Flow of Cash, Goods, and Services

• Forward Flow: Goods/Services from suppliers to customers.
• Reverse Logistics: Customers return goods and receive cash back.

Facilities in a Supply Chain

• Includes warehouses, factories, processing centers, distribution centers, retail outlets, and management offices.

Supply Chain Functions and Activities

• Forecasting, purchasing, inventory management, quality assurance, scheduling, production and delivery, customer service.

Supply Chain Management (SCM)

• Definition: Strategic coordination of business functions for integrating supply and demand management.
• Manager Responsibilities: Planning, sourcing, procurement, transformation activity, logistics.

Key Aspects of SCM

• Goals: Match supply to demand efficiently and effectively.
• Key Issues: Outsourcing level, management of procurement, suppliers, customer relationships.

Flow Management

• Product/Service Flow: Movement from suppliers to customers.
• Information Flow: Sharing forecasts, sales data, order tracking.
• Financial Flow: Credit terms, payments, ownership arrangements.

Trends in SCM

• Measuring ROI, greening supply chain, reevaluating outsourcing, integrating IT, adopting lean principles, risk management.

Outsourcing: Benefits and Risks

• Benefits: Lower costs, focus on core strengths, convert fixed to variable costs, free up capital, risk shift.
• Risks: Inflexibility, increased transportation costs, cultural barriers, loss of control, productivity, business knowledge, intellectual property.

Supply Chain Risks

• Disruptions: Natural disasters, supplier problems, quality issues, loss of sensitive information.

Risk Management

• Strategies: Risk avoidance, reduction, sharing.
• Successful Management: Know your suppliers, provide visibility, develop event response capabilities.

Global Supply Chains

• Complexities: Language/culture, currency fluctuations, political instability, transportation costs, trust.

Ethical Issues in SCM

• Examples: Bribery, exporting pollution, minimal green claims, ignoring standards, violating worker rights, mislabeling origin, selling banned products.
• Dealing: Develop ethical codes, monitor activities, choose reputable suppliers, incorporate labor standards.

Small Business Concerns

• Inventory Management: Carry extra to avoid shortages.
• Supplier Reliability: Use reliable suppliers, have backups.
• International Trade: Expertise in overseas suppliers, set demand expectations.

Management Responsibilities

• Legal: Know and obey laws where supply chains exist.
• Economic: Meet demand efficiently.
• Ethical: Consistent with society's moral standards.

Strategic Management Responsibilities

• Align supply chain strategy, configure network, share IT, plan capacity, form strategic partnerships.

Tactical and Operational Responsibilities

• Tactical: Forecasting, sourcing, planning, inventory management, collaboration.
• Operational: Scheduling, order fulfillment, inventory control.

Procurement

• Goal: Implement purchasing plans supporting operational strategies.
• Interfaces: With operations, legal, accounting, suppliers.

Supplier Management

• Choosing and Managing Suppliers: Through audits, certifications, partnerships.

Logistics

• Movement: Within facilities, incoming/outgoing shipments.
• RFID: Enhances inventory, quality, relations.
• 3PL: Outsourcing logistics management.
• Managing Returns: Gatekeeping and avoidance.

Creating an Effective Supply Chain

• Strategic Sourcing: Reducing costs, increasing profits, improving supplier performance.
• Challenges: Integration barriers, trade-offs, response time.

Summary

• Discussed trends, global chains, management responsibilities, procurement, supplier management, logistics, and effective supply chain creation.