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Chapter 2Chapter 2

Strategic Supply Chain Strategic Supply Chain Management for DistributionManagement for Distribution

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IntroductionIntroduction

Supply chains can be linear or circular. Most are more complicated.

Supply ChainAll contributors to a final product and its delivery to the consumer or end user.

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IntroductionIntroduction

A Typical Supply Chain ViewA Typical Supply Chain View

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Evolution of Supply Chain Management

1970 and earlier Supply chain not considered as a competitive

unit. Companies seek more profit by outmaneuvering their suppliers and customers.

Vertical integration – early attempts at SCM Scientific methods like EOQ & SPC applied JIT and TQM adopted in Japan but not US.

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Evolution of Supply Chain Management

1970 –1980 Arab Oil Embargo of 1973 makes

holding inventory more profitable. Japan continues research on TQM, JIT

and setup reduction. Distribution not emphasized in the

Japanese research efforts.

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After 1980 Inflation reigns in – inventory profits dry up Competition from Europe and Japan. American manufacturers seriously consider

JIT and TQM. Distributors under pressure to adopt.

JIT pushes inventory upstream as demand for local inventory soar.

JIT fails to fully benefit the end user. Can information sharing help?

Evolution of Supply Chain Management

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Supply Chain Management GoalsSupply Chain Management Goals

Start with the end user and work backwards

Lowest possible cost

Meet user’s needs at the right time & place

Understand end user’s needs

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New Expectations for DistributorsNew Expectations for Distributors

Increase information gathering, handling, and analysis – volume and/or quality.

How?

Surveys Information sharing

E-business systems

Information analysis

Improve SC efficiency

Information automation

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AlliancesAlliances Alliances are key to information exchangeAlliances are key to information exchange Closer relationship with end users and Closer relationship with end users and

supplierssuppliers ExamplesExamples

VMI and I/S – Retail IndustryVMI and I/S – Retail Industry Franchise arrangements with Franchise arrangements with

distributors with detailed expectations distributors with detailed expectations for information exchange and support for information exchange and support for the manufacturer’s productsfor the manufacturer’s products

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Evolving ChannelsEvolving Channels Manufacturer/distributor/3PL/end user

relationships are unclear The SCM principles of alliances and

cooperation in the supply chain would be the path to E-Business.

E-Business was the enabler to SCM and vice versa.