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Key Concepts

of
Supply Chain Management

Objectives
Appreciate what a supply chain is and what it does
Understand where your company fits in the supply
chain it participates in and the role it plays in
those supply chains
Discuss ways to align your supply chain with your
business strategy
Start an intelligent conversation about the supply
chain management issues in your company
Definitions
A supply chain is the alignment of firms that bring
products or services to market Lambert, Stock, and
Ellram.
Definitions
A supply chain consists of all stages involved, directly
or indirectly, in fulfilling a customer request. The
supply chain not only includes the manufacturer and
suppliers, but also transporters, warehouses, retailers,
and customers themselves Chopra and Meindl
Definitions
A supply chain is a network of facilities and
distribution options that performs the functions of
procurement of materials, transformation of these
materials into intermediate and finished products, and
the distribution of these finished products to
customers Ganeshan and Harrison.
Supply Chain Management
The systematic, strategic coordination of the
traditional business functions and the tactics
across theses business functions within a
particular company and across businesses within
the supply chain, for the purposes of improving
the long-term performance of individual
companies and the supply chain as a whole
Mentzer, Dewitt, et al.
Supply Chain Management
Supply chain management is the coordination of
production, inventory, location, and transportation
among the participants in a supply chain to achieve
the best mix of responsiveness and efficiency for the
market being served.
Logistics vs SCM (supply chain
mgmt.)
Logistics refers to activities that occur within the
boundaries of a single organization and supply
chains refer to networks of companies that work
together and coordinate their actions to deliver a
product to market.
SCM acknowledges all of traditional logistics and
also includes activities such as marketing, new
product development, finance, and customer
service.
Company Actions in SC
Companies in any SC must take decisions individually
and collectively regarding their actions in five areas:
Production
Inventory
Location
Transportation
Information
Goal of SCM
The goal or mission of supply chain management
can be defined as increasing throughput while
simultaneously reducing both inventory and
operating expense. (here throughput means sales
to the end customer).

In some markets customers value and will pay for
high levels of service while in others customers
simply seek the lowest prices.
Production
The fundamental managerial decision is how to
resolve trade-off between responsiveness and
efficiency.
Factories can be built to accommodate one of two
approaches to manufacturing; product focus or
functional focus.
Warehousing can also be done using any of three
approaches; stock keeping unit, job lot storage, or
cross-docking.
Inventory
Inventory is spread throughout the supply chain
and includes everything from raw material to work
in progress to finished goods.
There are three basic decisions to make regarding
the creation and holding of inventory; cycle
inventory, safety inventory, and seasonal inventory.
Location
Location refers to the geographical sitting of supply chain
facilities.
It also includes the decision related to which activities
should be performed in each facility.
The responsiveness versus efficiency trade-off here is the
decision whether to centralize activities in fewer locations
to gain economies of scale and efficiency, or to decentralize
activities in many locations close to customers and
suppliers.
Location decisions have strong impacts on the cost and
performance of supply chain.
Transportation
Transportation refers to the movement of everything
from raw material to finished goods between different
facilities in a supply chain.
Different modes of transportation are: ship, rail,
pipelines, trucks, airplanes, and electronic
transportation.
Information
All decisions are based on timely availability of
information regarding other four supply chain drivers.
Information is used for two purposes in supply chain;
coordinating daily activities and forecasting and
planning to anticipate and meet future demands.
Evolving Structure of Supply Chains
- 21
Vertical Integration: slow moving mass markets
of the industrial age, it was common for successful
companies to own much of their supply chain.
Virtual Integration: companies now focus on
their core competencies, and partner with other
companies to create supply chains for fast moving
markets.
Participants of Supply Chain
Producers
Distributors
Retailers
Customers
Service Providers
Aligning Supply Chain with
Business Strategy
Understand the market your company serves
Define core competencies of your company
Develop needed supply chain capabilities
Understand Markets Your Company
Serves
The quantity of the product needed in each lot
The response time that customers are willing
to tolerate
The variety of products needed
The service level required
The price of the product
The desired rate of innovation in the product.