Chapter 10 : Extending the Organization – Supply Chain Management

Basics of Supply Chain

Plan - A company must have a plan for

managing all the resources that go toward

meeting customer demand for products or

services.

Source - Companies must carefully choose

reliable suppliers that will deliver goods

and services required for making products. 

Make - This is the step where companies

manufacture their products or services. This

can include scheduling the activities

necessary for production, testing,

packaging,and preparing for delivery.

Deliver (Logistic) - Companies must be able

to receive orders from customers, fulfill the

orders via a network of warehouses, pick

transportation companies to deliver the

products, and implement a billing and

invoicing system to facilitate payments.

Return - This is typically the most 

problematic step in the supply chain.

Companies must create a network for receiving

defective and excess products and support

customers who have problems with delivered

products.

Factors Driving SCM

Visibility – more visible models of different

ways to do things in the supply chain have

emerged.  High visibility in the supply chain

is changing industries, as Wal-Mart

demonstrated

Visibility

Supply chain visibility allows organizations

to eliminate the bullwhip effect :

   - To explain the bullwhip effect to your

students discuss a product that demand

does not change, such as diapers.  The

need for diapers is constant, it does not

increase at Christmas or in the summer,

diapers are in demand all year long.  The

number of newborn babies determines diaper

demand, and that number is constant.

-Retailers order diapers from distributors

when their inventory level falls below 

certain level, they might order a few

extra just to be safe.

-Distributors order diapers from

manufacturers when their inventory level

falls below a certain level, they might

order a few extra just to be safe.

-Manufacturers order diapers from

suppliers when their inventory level falls

below a certain level, they might order a

few extra just to be safe.

-Eventually the one or two extra boxes

ordered from a few retailers becomes

several thousand boxes for the

manufacturer.  This is the bullwhip

effect, a small ripple at one end makes 

large wave at the other end of the whip.

Consumer Behaviour

Companies can respond faster and more

effectively to consumer demands through supply chain enhances.

Once an organization understands customer

demand and its effect on the supply chain it

can begin to estimate the impact that its

supply chain will have on its customers and

ultimately the organizations performance.

Demand planning software – generates demand

forecasts using statistical tools and

forecasting techniques

Competition

Supply chain planning (SCP) software– uses

advanced mathematical algorithms to improve

the flow and efficiency of the supply chain.

Supply chain execution (SCE) software –

automates the different steps and stages of

the supply chain.

SCP and SCE both increase a company’s ability

to compete.

SCP depends entirely on information for its

accuracy.

SCE can be as simple as electronically

routing orders from a manufacturer to a

supplier.

.

SCM Success Stories

Numerous decision support systems (DSSs) are

being built to assist decision makers in the

design and operation of integrated supply 

chains

DSSs allow managers to examine performance

and relationships over the supply chain and

among:

- Suppliers

- Manufacturers

- Distributors

- Other factors that optimize supply chain

  performance

SCM Success Stories