1 Key Concepts of SCM

8/11/2019 1 Key Concepts of SCM

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Key Concepts

of

Supply Chain Management


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ObjectivesAppreciate 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


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DefinitionsA supply chain is the alignment of firms that bring

products or services to market Lambert, Stock, andEllram.


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DefinitionsA supply chain is a network of facilities and

distribution options that performs the functions ofprocurement of materials, transformation of thesematerials into intermediate and finished products, andthe distribution of these finished products tocustomers Ganeshan and Harrison.


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Supply Chain Management The systematic, strategic coordination of the

traditional business functions and the tactics

across theses business functions within aparticular company and across businesses withinthe supply chain, for the purposes of improvingthe long-term performance of individual

companies and the supply chain as a whole

Mentzer, Dewitt, et al.


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Supply Chain Management Supply chain management is the coordination of

production, inventory, location, and transportationamong the participants in a supply chain to achievethe best mix of responsiveness and efficiency for themarket being served.


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Logistics vs SCM (supply chain

mgmt.) Logistics refers to activities that occur within the

boundaries of a single organization and supplychains refer to networks of companies that work

together and coordinate their actions to deliver aproduct to market.

SCM acknowledges all of traditional logistics andalso includes activities such as marketing, newproduct development, finance, and customerservice.


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Company Actions in SCCompanies in any SC must take decisions individuallyand collectively regarding their actions in five areas:

Production

Inventory

Location

Transportation

Information


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Goal of SCM The goal or mission of supply chain management

can be defined as increasing throughput whilesimultaneously reducingboth inventory andoperating expense. (here throughput means salesto the end customer).

In some markets customers value and will pay forhigh levels of service while in others customerssimply seek the lowest prices.


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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 orfunctional focus.

Warehousing can also be done using any of threeapproaches; stock keeping unit, job lot storage, orcross-docking.


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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; cycleinventory, safety inventory, and seasonal inventory.


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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 locationsto gain economies of scale and efficiency, or to decentralizeactivities in many locations close to customers and

suppliers. Location decisions have strong impacts on the cost and

performance of supply chain.


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Transportation Transportation refers to the movement of everything

from raw material to finished goods between differentfacilities in a supply chain.

Different modes of transportation are: ship, rail,pipelines, trucks, airplanes, and electronictransportation.


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Evolving Structure of Supply Chains

- 21Vertical 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 othercompanies to create supply chains for fast moving

markets.


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Participants of Supply Chain Producers

Distributors

Retailers Customers

Service Providers


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Aligning Supply Chain with

Business Strategy Understand the market your company serves

Define core competencies of your company

Develop needed supply chain capabilities


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Understand Markets Your Company

Serves The quantity of the product needed in each lot

The response time that customers arewillingto tolerate

Thevariety of products needed

The service level required

The price of the product

The desired rate of innovation in the product.

1 Key Concepts of SCM

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