Supply Chain Management

Supply Chain
Management
 Supply chain management : describes the coordination of all supply chain
activities, starting with raw materials and ending with a satisfied customer.
So, a supply chain includes suppliers; manufacturers ,service providers,
distributors, wholesalers, and retailers who deliver the product and service to
the final customer
Supply Chain Strategies
 Low cost strategy
 Supply chain inventory
 Distribution network
Make-or-buy decisions and outsourcing
 There are two types of firms : A wholesaler or retailer buy everything they
sell. Manufacturers purchase supplies to assemble them and make a final
product
 Outsourcing means transferring traditional internal activities and resources to
outside suppliers and vendors.
Six sourcing strategies
 Many suppliers : With the many-suppliers strategy, a supplier responds to the

demands and specifications of a “request for quotation,” with the order
usually going to the low bidder. This strategy plays one supplier against
another and places the burden of meeting the buyer’s demands on the
supplier. Suppliers aggressively compete with one another. This approach
holds the supplier responsible for maintaining the necessary technology,
expertise, and forecasting abilities, as well as cost, quality, and delivery
competencies.
 Few suppliers : A strategy of few suppliers implies that rather than looking for
short-term attributes, such as low cost, a buyer is better off forming a long-
term relationship with a few dedicated suppliers. Long-term suppliers are
more likely to understand the broad objectives of the procuring firm and the
end customer
 Vertical integration : It means acquiring the supply of raw materials and the
distribution venues for the finished products.
 For example, Standard Oil started out as a refinery operation. Through
vertical integration they acquired oil fields, rail and shipping, and retail
distribution centers. From the ground to your gas tank, it was one single
operation veritcally integrated
 This strategy can be risky considering the lack of experience in a certain field
 Joint venture : In joint ventures, individuals or businesses cooperate to create
a single product or service package. A joint venture is a partnership
agreement in which two or more individual- or group-run businesses join
together to carry out a single business project. For example, U.S.-based
General Motors Corporation and Toyota Motor Corporation, based in Japan,
have a joint venture called New United Motor Manufacturing, Inc., created for
the purpose of producing cars in California.
 Keiretsu networks : is a set of companies with interlocking business
relationships and shareholdings. It is a type of informal business group. The
keiretsu maintained dominance over the Japanese economy for the second
half of the 20th century.
 Virtual companies : rely on a variety of good, stable supplier relationships to
provide services on demand. Suppliers may provide a variety of services that
include doing the payroll, hiring personnel, designing products, providing
consulting services, manufacturing components, conducting tests, or
distributing products. The relationships may be short- or long-term and may
include true partners, collaborators, or simply able suppliers and
subcontractors
Supply Chain risks
 Supplier failure to deliver

 Supplier quality failure
 Logistics delays or damage
 Distribution
 Information loss
 Political
 Economic
 Natural catastrophes
Issues in managing the integrated supply
chain
 Local optimization
 Large lots
 Incentives
Opportunities in managing the supply
chain
 Accurate pull data : are generated by sharing point-of-sales (POS) information
so that each member of the chain can schedule effectively. This implies using
POS systems that collect sales data and then adjusting that data for market
factors, inventory on hand, and outstanding orders. Then a net order is sent
directly to the supplier who is responsible for maintaining the finished-goods
inventory.
 Lot size reduction :
 developing economical shipments of less than truckload lots
- providing discounts based on total annual volume rather than size of individual
shipments
- reducing the cost of ordering through techniques such as standing orders and
various forms of electronic purchasing
Building the supply base
 The supplier selection is a four-stage process :
Supplier evaluation
Supplier development
Negotiations
Logistics management
 An approach that seeks efficiency of operations through the integration of all

material acquisition, movement, and storage activities.
 Shipping systems : Trucking, Railroads, Airfreights, Waterways, Pipelines,
Multimodal
 Warhousing : A warehouse is a commercial building for storage of goods.
Warehouses are used by manufacturers, importers, exporters, wholesalers,
transport businesses, customs, etc. They are usually large plain buildings in
industrial areas of cities, towns and villages. They usually have loading docks
to load and unload goods from trucks. Sometimes warehouses are designed for
the loading and unloading of goods directly from railways, airports, or
seaports
Measuring supply chain performance
 Percentage invested in inventory

 Inventory turnover
 Weeks of supply
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Supply Chain Management

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Supply Chain Management

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Supply Chain

 Low cost strategy

 Supply chain inventory

 Many suppliers : With the many-suppliers strategy, a supplier responds to the

 Supplier failure to deliver

 The supplier selection is a four-stage process :

 An approach that seeks efficiency of operations through the integration of all

 Percentage invested in inventory

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