Supply Chain Management
Definition of a Supply Chain
All activities associated with the flow and transformation of goods from the raw materials stage, through to the end user, as well as the associated information flows. Material and information flow both up and down the supply chain. – Handfield and Nicholes, 1999
Major Contributors to the Development of SCM
1. Need for productivity improvement in operations
2. Increased use of outsourcing
3. Complexity and uncertainties of supply chains
4. Need to better manage inventories
5. Increased transportation costs
6. Globalization in purchasing, manufacturing, distribution, etc.
7. Increased market competition in cost, quality, delivery, service, speed.
8. Advancement in information technology and e-commerce
9. The emergence of new forms of inter-organizational relationships
Key Elements of SCM
Strategic Issues
® Design of supply chain
® Strategic alliance (partnership)
Tactical Issues
® Policies on inventories, purchasing, transportation, quality, etc.
® Design of information systems
Operating Issues
® Process improvement and Integrated logistics
® Operations planning and control, quality assurance, purchasing, etc.
Strategic Alliance
Alliance conceptualization – determine the need and type of alliance
Alliance pursuance – identify the strategic and operational characteristics of a potential alliance partner
Alliance confirmation – select and confirm the relationship with a partner
Alliance implementation – monitor and assess alliance performance
Information Technology
Inter-organizational information system – integrated data processing and communication system utilized by two or more organizations, e.g., Internet, extranet, electronic commerce, electronic data interchange, satellite communication systems, logistics software systems.
Intra-organizational information system– Intranet, bar coding and scanners, radio-frequency identification systems (RFID), cable and wireless telecommunication systems, database and data warehouse systems, decision support systems, enterprise resources planning systems, distribution requirements planning system
Process Improvement and Integrated Logistics
External supply chain mapping and improvement – understand and improve business processes across organizations (scoping, organizing, redesigning, implementing.)
Use of business process reengineering and benchmarking – techniques to achieve breakthrough improvement and to apply best practices.
Integrated logistics – implement efficient and effective flow and storage of goods and related information from the point of origin to the point of consumption (e.g., third-party logistics, cross-docking, disintermediation, and reverse logistics.)
Performance Measures for SCM (Supply Chain Operations Reference Model) – Supply-Chain Council (www.supply-chain.org)
Reliability
Flexibility
Costs
Assets and utilization
Requirements for a Successful Supply Chain
1. Shared goals and interests
2. Trust
3. Information sharing
4. Long-term relationships
5. Strong individual organizations
Optimization of Supply Chain
Lot size – inventory trade-off
Inventory – transportation cost trade-off
Lead time – transportation cost trade-off
Product variety – inventory trade-off
Cost – customer service trade-off
Information – technology cost trade-off
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