Chapter 1:

Supply Chain Management

Learning Objectives

Understand the development of supply chain management in leading corporations. Appreciate the importance and role of supply chain management among private and public organizations. Understand the contributions of a supply chain approach to organizational efficiency and effectiveness.
Management of Business Logistics, 7th Ed. 2

Chapter 1

Learning Objectives

Analyze the benefits that can accrue from implementing effective supply chain practices. Understand the major challenges and issues facing organizations developing and implementing supply chain strategies. Discuss the major change drivers in our economy and in the global marketplace.

Chapter 1

Management of Business Logistics, 7th Ed.

Logistics Profile:

SAB Distribution

SAB, a central Pennsylvania food wholesaling company, had grown to $180 million over the years. Current management were dealing with flat sales and profit profiles and had cut costs to the point where further cuts were counterproductive. The market had changed and SAB was unable to respondmanagement had questions but no answers. What happened? Where does SAB fit in the supply chain? What should SAB do?
Chapter 1 Management of Business Logistics, 7th Ed. 4

Supply Chain Management:

Introduction

Supply chain management now part of the business vocabulary. Impact of global marketplace drastically changed the landscape of business. Change was rapid and continuous in the 1990s. Doing business in the comfort zone was no longer synonymous with success.
Management of Business Logistics, 7th Ed. 5

Chapter 1

The Changing Business Landscape: Five Driving Forces

The Empowered Consumer Power Shift in the Supply Chain Deregulation Globalization Technology

Chapter 1

Management of Business Logistics, 7th Ed.

The Changing Business Landscape:

Five Driving Forces

The Empowered Consumer Impact on logistics is more direct. Informed consumers have low tolerance for poor quality in products and services. Changing demographics commands 24/7 service. Increased customer service increases the importance of logistics and supply chains.
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Chapter 1

The Changing Business Landscape:

Five Driving Forces

Power Shift in the Supply Chain Large retailers more demanding and commanding. Focus upon distribution costs and their impact on everyday low prices. Changing logistics and supply chain strategies resulted from shifts in the balance of economic power.
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Chapter 1

The Changing Business Landscape:

Five Driving Forces

Deregulation Changing economic controls empowered creativity and competition. Changes in transportation fewer or no economic controls over rates and services. Change in financial institutions blurred traditional differences and increased competition. Change in the communications industry also resulted in more competition. Changes in the utility industry allows more competition.
Chapter 1 Management of Business Logistics, 7th Ed. 9

The Changing Business Landscape:

Five Driving Forces

Globalization Global marketplace concept Global network sourcing, manufacturing, marketing and distribution Global alternatives have blossomed No geography --- access available to the world Supply chain challenges Wal-Marts challenges New supply sources
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Chapter 1

The Changing Business Landscape:

Five Driving Forces

Technology Information Age provides new and unrestricted access to the place aspect of business. My time, my place Warehouse technology has changed dramatically with computer devices in use from the office space to the forklifts.
Management of Business Logistics, 7th Ed. 11

Chapter 1

On the Line:

Extreme Enterprise
Integrating new enterprise and supply chain management solutions allowed Columbia Sportswear to keep up with sales that increased from $3 million in 1984 to $470 million in 1999. With one store and a handful of outlets, distribution to its customers is where the rubber meets the road. Columbias president was determined not to let distribution restrain growth, and backed it with money. A 1 million square foot distribution center receives more than 2 million units/month and set a record by shipping 172,000 items in one day, and more than 2 million items in a month.
Chapter 1 Management of Business Logistics, 7th Ed. 12

The Changing Business Landscape:

The Supply Chain Concept

Development of the Concept Business Case for Supply Chain Management Characteristics of Supply Chain Management

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Management of Business Logistics, 7th Ed.

13

The Changing Business Landscape:

The Supply Chain Concept

Development of the Concept Total systems cost - remains an important element of logistics analysis. Outbound logistics - was the initial focus with higher value finished goods. Inbound logistics deregulation allowed new focus on coordination of inbound and outbound movements. Value chain analysis integrated logistics activities. Terminology growing as supply chain concept matures.
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Chapter 1

Figure 1-1

A View of Business Logistics in a Firm

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Management of Business Logistics, 7th Ed.

15

Figure 1-2

Integrated Logistics Management

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Management of Business Logistics, 7th Ed.

16

Figure 1-3

Generic Value Chain

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Management of Business Logistics, 7th Ed.

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Figure 1-4

Logistics Supply Chain

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Management of Business Logistics, 7th Ed.

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The Changing Business Landscape:

The Supply Chain Concept

Business Case for Supply Chain Management: Why so much attention on supply chain management? ECR and Best-in-class studies (see next two slides) Complexity of the supply chain Extended enterprise concept Two-way flow of: Products Information Cash Inventory visibility
Chapter 1 Management of Business Logistics, 7th Ed. 19

Figure 1-5: Comparison of Average Throughput

Time of Dry Grocery Chain before and after ECR Implementation

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Management of Business Logistics, 7th Ed.

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Figure 1-6: Total Supply Chain Management Cost --- All Sectors
14 12

Revenue %

10 8 6 4 2 0 1996 1997 Best-in-class Median

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Management of Business Logistics, 7th Ed.

21

Figure 1-7:

Integrated Supply Chain

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Management of Business Logistics, 7th Ed.

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Figure 1-8:

Running Lean
50 45 40 35 30 25 20 15 10 5 0

Number of times Dell and Compaq turn inventory over in each quarter, calculated at an annual rate.

Compaq Dell

1996 Qtr 4

1997 Qtr 1

1997 Qtr 2

1997 Qtr 3

1997 Qtr 4
23

Chapter 1

Management of Business Logistics, 7th Ed.

The Changing Business Landscape:

The Supply Chain Concept

Characteristics of Supply Chain Management Inventory Visibility Pull systems Landed Cost Companies must realize that their strategies may affect the landed cost. Coordination of supply chain activities may lower the landed cost.
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Chapter 1

The Changing Business Landscape:

The Supply Chain Concept

Characteristics of Supply Chain Management Real-time two way information flows Customer service levels must be tailored to each customer not all customers require the same service Supply chain relationships Collaborative planning Share risks and rewards
Chapter 1 Management of Business Logistics, 7th Ed. 25

Figure 1-9: Traditional Supply Chain/Pipeline

Inventory Flow 1970s and 1980s

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Management of Business Logistics, 7th Ed.

26

Chapter 1: Summary and Review Questions

Students should review their knowledge of the chapter by checking out the Summary and Study Questions for Chapter 1. This is the last slide for Chapter 1

End of Chapter 1 Slides Supply Chain Management