Supply Chain Management


Supply chain management (SCM) focuses on managing its resources to complete the following tasks:

·         Meet customer requirements

·         Provide competitive advantages

·         Meet business objectives


Support activities of the firm:

·         Firm’s infrastructure

·         Human resource management

·         Technology development

·         Procurement



Supply Chain Management (SCM):  integration of flow of all activities through improved supply chain relationships to achieve a sustainable competitive advantage

·         Management of information systems

·         Sourcing and procurement

·         Production scheduling

·         Order processing

·         Cash flow

·         Inventory management

·         Warehousing

·         Customer service

·         Aftermarket disposition of packaging and materials


SCM Concepts

·         Market/Industry characteristics:  the best suppliers…

o   Defect free

o   Just in time

o   Use internal engineering resources

o   Provide best total cost for the company

o   Provided inspected material

o   Have best new technology and innovation cycles

o   Generally first in the marketplace with new improvements


Opportunities for change come from seeking three goals:

1.       Best/fastest cycle time

2.       Bes-usage practices versus best-industry or best-technology practices

3.       Best/lowest total cost, including process, transportation, and handling costs


Total cost of ownership:  sum total of all costs associated with every activity of the supply stream


Function of SCM:

·         Focus suppliers on improvements in quality, consistency, and usage

·         Use supplier resources to create new product or service features for a business’s customers with faster cycle time to market

·         Manage all materials and reduce cost

Internal functions of SCM:

·         Different processes used in transforming inputs provided by supplier network

·         Production scheduling, which translates orders into actual production tasks

External functions of SCM: (purchasing managers)

·         Selecting right suppliers

·         Making sure suppliers meet performance expectations

·         Employing appropriate contractual mechanisms

·         Maintaining good relationship with suppliers

·         Liason between suppliers and other internal alliance members


Logistics:  the art and science of obtaining, producing, and distributing material and product in the proper place and in proper quantities.


Time-Based Competition

·         It’s better to be 50% over budget and ON TIME than on budget and 6 months late

·         Impossible to recover lost sales and their associate losses in revenues over the 6 months

·         Reduces need for inventories

o   As lead time increases, uncertainty in demand patterns over those lead times increases, then more inventory is needed to protect against that uncertinaty

o   Direct correlation between lead time and inventory

o   Most effective way to manage and reduce system-wide inventories is reduce lead time/cycle time between customer demand and fulfillment

·         Cycle time reduction is not just about completing a process quickly; it is concerned with completing the process effectively

·         External benefits

o   Higher quality

o   Quicker customer response

o   Technologically advance products

o   Better cash flow

·         Internal benefits

o   Simplified organizations

o   Shorter planning loops

o   Increased responsiveness

o   Better communication, coordination, and cooperation between functions

·         Steps to Reducing cycle times

1.       Estalish a cycle-time reduction team

2.       Develop an understanding of the given supply chain processs and current cycle-time performance

3.       Identify opportunities for cycle-time reduction

4.       Develop and implement recommendations for cycle-time reduction

5.       Measure process cycle-time performance

6.       Conduct continuous improvement efforts for process cycle-time reduction efforts


Trust Factor

·         Reliability

·         Competence

·         Affability

·         Vulnerability

·         Loyalty


Innovative customer/supplier relationships and agreements

·         Vendor-managed inventory (NWI)

·         Quick Response program (QRP)

·         Virtual Corporation

·         On-site vendor/customer representative


Supply Chain Operations Reference (SCOR) Model

·         Four level framework that provides a guide to supply chain alliance member for process improvement

1.       Analyze basis of competition

2.       Configure supply chain

3.       Alighn performance levels, practices, and systems

4.       Implement supply chain processes and systems


Strategic Objectives of SCM

·         Costs

·         Market share

·         Sales volume

·         Growth rates

·         Customer satisfaction

·         Product quality

·         Time to market

·         Profits

·         Costs

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