Supply Chain Management
Chapter 15
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15-2
You should be able to:LO 15.1 Explain the terms supply chain and logisticsLO 15.2 Name the key aspects of supply chain managementLO 15.3 List, and briefly explain, current trends in supply chain managementLO 15.4 Outline the benefits and risks related to outsourcingLO 15.5 Explain what the main supply chain risks are, and what businesses can do to
minimize those risksLO 15.6 Describe some of the complexities related to global supply chainsLO 15.7 Briefly describe the ethical issues in supply chains and the key steps companies can
take to avoid ethical problemsLO 15.8 Describe the three concerns of small businesses related to the supply chain and
suggest ways to manage those concernsLO 15.9 List several strategic, tactical, and operational responsibilities related to managing
the supply chainLO 15.10 Discuss procurement in terms of the purchasing interfaces, the purchasing cycle,
ethics, and centralized versus decentralized decision makingLO 15.11 Briefly describe the key aspects of supplier managementLO 15.12 Discuss the logistics aspects of supply chain management, including RFID
technologyLO 15.13 Discuss the issues involved in managing returnsLO 15.14 Describe some of the challenges in creating an effective supply chain and some of
the trade-offs involved
Chapter 15: Learning Objectives
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Supply Chain:the sequence of organizations - their facilities,
functions, and activities - that are involved in producing and delivering a product or service
Logistics:the part of a supply chain involved with the
forward and reverse flow of goods, services, cash, and information.
Supply Chain
LO 15.1
15-4
The goal of SCM is to match supply to demand as effectively and efficiently as possible
Key issues:1. Determining appropriate levels of outsourcing2. Managing procurement3. Managing suppliers4. Managing customer relationships5. Being able to quickly identify problems and respond to
them
Key Aspects of SCM
LO 15.2
15-5
Trends affecting supply chain design and management:Measuring supply chain ROI“Greening” the supply chainRe-evaluating outsourcingIntegrating ITAdopting lean principlesManaging risks
Trends in SCM
LO 15.3
15-6
Benefits: Lower prices may result from lower labor costs The ability of the organization to focus on its core strengths Permits the conversion of some fixed costs to variable costs It can free up capital to address other needs Some risks can be shifted to the supplier The ability to take advantage of a supplier’s expertise Makes it easier to expand outside of the home country
Risks Inflexibility due to longer lead times Increased transportation costs Language and cultural differences Loss of jobs Loss of control Lower productivity Loss of business knowledge Knowledge transfer and intellectual property concerns Increased effort required to manage the supply chain
Benefits & Risks of Outsourcing
LO 15.4
15-7
Supply Chain RisksSupply chain disruption
Natural disastersSupplier problems
Quality IssuesAnother form of disruption that may disrupt
supplies and lead to product recalls, liability claims, and negative publicity
Loss of control of sensitive informationIf suppliers divulge sensitive information to
competitors, it can weaken a firm’s competitive position
Supply Chain Risks
LO 15.5
15-8
Global supply chains Product design often uses inputs from around the world Some manufacturing and service activities are
outsourced to countries where labor and/or materials costs are lower
Products are sold globally
Complexities Language and cultural differences Currency fluctuations Political instability Increasing transportation costs and lead times Increased need for trust amongst supply chain partners
Global Supply Chains
LO 15.6
15-9
Three small business SCM concerns:1. Inventory management
Carry extra inventory as a way to avoid shortages due to supply chain interruption
Have backups for delivery from suppliers and to customers
2. Reducing risks Use only reliable suppliers Determine which suppliers are critical and get to know them and any
challenges they have Measure supplier performance Recognize warning signs of supplier issues Have plans in place to manage supply chain problems
3. International trade Work with someone who has expertise to help oversee foreign suppliers Set expectations for demand and timing Do not rely on a single supplier Build goodwill to help in negotiations and resolving any problem that arise Consider using domestic suppliers if the risks of working with foreign
suppliers are prohibitive
Small Business Concerns
LO 15.8
15-10
Management Responsibility:StrategicCertain strategic responsibilities have a
major impact on the success of both supply chain management and the business itself:Supply chain strategy alignmentNetwork configurationInformation technologyProducts and servicesCapacity planningStrategic partnershipsDistribution strategyUncertainty and risk reduction
LO 15.9
15-11
The purchasing department is responsible for obtaining the materials, parts, and supplies and services needed to produce a product or provide a service.
The goal of procurementDevelop and implement purchasing plans for
products and services that support operations strategies
Procurement
LO 15.10
15-12
Supplier ManagementChoosing suppliersSupplier auditsSupplier certificationSupplier relationship managementSupplier partnerships
CPFR (collaborative planning, forecasting, and replenishment)
Strategic partnering
LO 15.11
15-13
LogisticsLogistics
Refers to the movement of materials, services, cash, and information in a supply chainMovements within a facilityIncoming shipmentsOutgoing shipments
LO 15.12
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Reverse Logistics The process of transporting returned items
Products are returned to companies or third party handlers for a variety of reasons and in a variety of conditions Elements of return management
GatekeepingScreening returned goods to prevent incorrect
acceptance of goodsAvoidance
Finding ways to minimize the number of items that are returned
Managing Returns
LO 15.13
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It begins with strategic sourcing Analyzing the procurement process to lower costs by
reducing waste and non-value-added activities, increase profits, reduce risks, and improve supplier performance
There must beTrustEffective communicationInformation velocitySupply chain visibilityEvent management capabilityPerformance metrics
Creating an Effective Supply Chain
LO 15.14