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

1