Chain Management by Douglas Long Slides made by Ta-Hui Yang
1 Outline
{ The supply chain concept
{ Efficiency in the supply chain { Channel relationship { Managing the supply chain { Market channels
2 1. The Supply Chain Concept
{ Henry Ford z Created one of the best examples of a supply chain z Started with a car assembly factory z Car-parts factory, steel foundry, rubber plantation, iron ore, retailers z A very inefficient empire z More practical to specialize in what they do best, and buy from others what they do best.
3 1. The Supply Chain Concept
{ Supply chain management definition
z The integration of key business processes from end user through original supplier that provides products, services, and information that add value for customers and other stakeholders.
4 1. The Supply Chain Concept
{ What is the difference between SCM and
logistics? z Logistics is getting things to where they need to be z SCM takes this process further by organizing the overall business operations and the way it interfaces with other companies and organized ongoing logistical operations
5 2. Efficiency in The Supply Chain { If a company can create a highly efficient supply chain where their competitors failed, it has a major competitive advantage. { How does supply chain integration benefit its members? z Cooperation between the chain members reduces risk and improves the efficiency of the overall logistics process z Waste and redundancy is eliminated from the supply chain
6 2. Efficiency in The Supply Chain { What kind of waste and redundancy are we talking about? z Inventory ore steel engine blocks engines cars 1200 1150 1100 1050 1000 200 extra 150 extra 100 extra 50 extra z Time { Dry grocery product took 104 days from supplier to supermarket { Apparel industry took 66 weeks from raw material to retailer
7 2. Efficiency in The Supply Chain { Value chain z A supply chain is not the same as a value chain z A value chain is a management concept z each link in the chain must create some value to the product z If a link does not provide any value, it must be eliminated { Supply chain z A type of value chain z Many value chains doe not involve the movement of any goods
8 2. Efficiency in The Supply Chain
{ Myth z Rarely does supply chain operate between more than two firms z Rarely see well coordinated logistics between three or more unrelated companies
9 3. Channel Relationships { Relationships with outside companies z change in companies managing their relationships with other companies over the past few decades z A shift from competition and confrontation toward cooperation { What do channel members compete? z over price, quality of service, liability for problems, inventory z Also compete for the best price and terms from their suppliers and customers
10 3. Channel Relationships { Supply chain: “glass pipeline” { Primary channels z Those companies that are willing to devote resources and take on risk to manage the supply chain { Basic issues in SCM z Risk z Power z Leadership
11 3. Channel Relationships { Push and pull systems z Push: an enterprise makes something and then attempts to sell it z Pull: an enterprise looks at what customers want and then seeks to satisfy their demand { Channel relationships with increasing dependence z Single transaction z Conventional channel arrangement z Administrated systems z Contractual system z Partnership/alliance
12 4. Managing The Supply Chain { Establishing the supply chain is only the first step. { Managing the supply chain is an ongoing and never ending process. { Goals in managing the supply chain z Principle of minimum total transactions z Velocity z Minimize bullwhip effect z Just-in-time (JIT) management systems
13 4. Managing The Supply Chain { Bullwhip effect z Changes in demand cause increasingly greater changes as on goes up the supply chain z Example: car maker z Eliminating it entirely may be impossible { Some ways to control bullwhip effect z Demand forecasts z Information sharing z Shorter lead times z Order batching: reduce size and more frequent orders z Price fluctuations: keep prices steady
14 4. Managing The Supply Chain { JIT systems z Outgrowth of the Kanban system from Toyota Production System z The essence of JIT is to have supplies delivered only when needed z Eliminates the need to keep inventory z Most appropriate for repetitive manufacturing, not solution for every company z Solves some problems, creates others: production scheduling becomes much more complex
15 5. Marketing Channels
{ Consider logistics demand from the
perspective of marketing { Definition of marketing channels z Systems of relationships among businesses that participate in the process of buying and selling products and services z 4 Ps: product, place, promotion, and price z Example: Coca-cola
16 5. Marketing Channels
{ Economic utilities z Form z Possession z Time z Place { Last mile problem z The challenge in accomplishing the final leg of delivery to the customer
17 5. Marketing Channels
{ Product life cycle
z Describes how a products position in the market changes z Growth state -> maturing phase -> decline stage z Logistical support required will vary as the product moves through this life cycle
18 5. Marketing Channels
{ Increasing demands of customers for a
variety of choices z Retailers must make decisions about what to offer and what to decline z A company can no longer offer its product through only one channel. The different markets use different channels
19 5. Marketing Channels
{ Power of leadership of the supply chain
z Legitimate z Economic z Expert z Reward { Loyalty has shifted from manufacturers to retailers
