CHAPTER 10

Supply Chain Management

a coordinated system of entities, activities,information and resources involved in moving a product or service from supplier to customer

a network of organizations and facilitiesthat transforms raw materials intoproducts delivered to customers

The supply chain also includes transportation companies, warehouses, and inventories and some means for transmitting messages and information among the organizations involved

Dell’s own channel formanufacturing and sellingeliminated• distributors and • retailers

Michael Dell decides to • Sell PCs Directly to Consumers and• Built-to-Order

Dell’s own channel for manufacturing andselling PCs eliminated• the reseller markups and • large inventory expenses

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Learning Outcomes

List and describe the components of a typical supply chain

Define the relationship between decision making and supply chain management

Identify three of the factors driving supply chain management’s explosive growth

Summarize the best practices for implementing a successful supply chain management system

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Overview

The average company spends nearly half of every dollar that it earns on production

In the past, companies focused primarily on manufacturing and quality improvements to influence their supply chains

Today, companies are focusing on all of the following to influence their supply chains: Suppliers, assemblers, shipping/logistic firms,

sales/marketing channels, third-party customers support firms, other business partners

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Overview

The supply chain has three main links:

1. Materials flow from suppliers and their “upstream” suppliers at all levels

2. Transformation of materials into semifinished and finished products through the organization’s own production process

3. Distribution of products to customers and their “downstream” customers at all levels

Traditional SCM thinking involved“I buy from my suppliers, I sell to my customers.”

Today, organizations are realizing the tremendous value they can gain fromhaving visibility throughout their supply chain

Best Buy checks inventory levels at each of its 750 stores across North Americaas often as every half-hour

The bullwhip effect is a phenomenon in which the variabilityIn the size and timing of orders increase at each stage upthe supply chain, from customer to supplier

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The Bullwhip Effect (continued)

One way to eliminate the bullwhip effect is to give all participants in the supply chain access to consumer-demand information from the retailer.

Each organization can thus plan its inventory or manufacturing based on true demand and not on the observed demand from the next organization up in the supply chain.

An interorganizational information system is necessary to share such data.

SCM’s Growth

Five Factors Driving SCM’s Explosive Growth

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Using SCM toEnhancing Decision Making Numerous decision support systems (DSSs) are

being built to assist decision makers in the design and operation of integrated supply chains

DSSs allow managers to examine performance and relationships over the supply chain and among: Suppliers Manufacturers Distributors Other factors that optimize supply chain performance

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The SCM industry best practices

1. Make the sale to suppliers

2. Wean employees off traditional business practices

3. Ensure the SCM system supports the organizational goals

4. Deploy in incremental phases and measure and communicate success

5. Be future oriented

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BudNet

Anheuser-Busch’s top-secret nationwide data network, BudNet, knows every time a six-pack moves off of a store shelf.

Information is entered into BudNet nightly from several thousand Anheuser-Busch distributors and sales representatives

Anheuser-Busch has made a deadly accurate science out of determining what beer lovers are buying, as well as when, where, and why

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Case Questions

1. Describe how an SCM system can help a distributor such as Anheuser-Busch make its supply chain more effective and efficient

2. SCM is experiencing explosive growth. Explain why this statement is true using BudNet as an example

3. Evaluate BudNet’s effect on each of the five factors that are driving SCM success