1DSCI 3123

Supply Chain Management

• Def: Supply Chain• What is Supply Chain Management?• Strategic Importance of SCM

– Purchasing

– Operations/Materials Management

– Marketing and Customer Service

• Uncertainty In Supply Chain & Some Solutions• Supply Chain Design

Accounting and Finance

2DSCI 3123

Supply Chain

• Facilities, functions, activities for producing & delivering product or service from supplier to customer

• Planning, managing, acquiring, producing, warehousing, distribution, delivery

3DSCI 3123

Customer

Manufacturer or Service Provider

Supplier

Supplier

Supplier

Customer

Customer

Scheduling Information

Cash FlowOrder Flow

Credit Flow

Material Flow

Inv.

Inv.

Inv.

Inv.

Purchasing-Vendors

What is Supply Chain Management?

Operations/Materials Man.

Marketing/ Sales/

Cust. Serv.

Accounting and Finance

4DSCI 3123

Strategic Importance of SCM

• Deals w/the complete cycle of materials flows

• SCM plays key role in – Product customization– Quality control– Cost reductions– Speed-to-market

• Effective SCM is to balance the production stream with uncertainty (customer, supplier, economic, etc.)

5DSCI 3123

Purchasing

• Why Important?– Substantial % of sales, both goods and services

– e.g., Industry % of Sales

All 54%

Lumber 60%

Food 63%

Petroleum 83%

– Quality of goods and services produced are directly related to those purchased/received

6DSCI 3123

Purchasing

• Selecting suppliers• Ordering materials• Shipping & delivery of raw materials• Information management• Quality management - w/regard to suppliers

• Customer service - w/regard to suppliers and fellow workers

7DSCI 3123

Operations/Materials Management

• Ordering materials - in conjunction w/purchasing

• Inventory control• Scheduling production & capacity• Shipping & delivery - in conjunction w/warehouse

• Information management - linked to 3 major business areas

• Quality management - garbage in/garbage out principal

• Customer service - vendors and final customer

8DSCI 3123

Marketing and Customer Service

• Forecasting demand• Selecting suppliers - in conjunction w/purchasing

• Shipping & delivery - contract requirements

• Information management• Quality management - first place customer complaints

and/or compliments

• Customer service - make the sale next time?

9DSCI 3123

Uncertainty In Supply Chain

• Wrong forecasts

• Late deliveries

• Poor quality

• Machine breakdowns

• Canceled orders

• Erroneous information

10DSCI 3123

Some Solutions

• Vertical integration

• Single sourcing

• JIT - moving suppliers closer

• Keiretsu - Japanese concept of partnering a small # of suppliers and vertical integration

• Information technology improvements- MRP, ERP

• Improved inventory control - goods as well as services

11DSCI 3123

Supply Chain Design

• Strategic issue

• Apply quality management principles

• Control inventory

• Work with suppliers & customers to achieve goals

• Major goal of distribution is speed

• Locate close to major markets

• Use IT to speed information flow - e.g., EDI, Internet, etc.

• Outsource international distribution

12DSCI 3123

Summary

• Def: Supply Chain• What is Supply Chain Management?• Strategic Importance of SCM

– Purchasing

– Operations/Materials Management

– Marketing and Customer Service

• Uncertainty In Supply Chain & Some Solutions• Supply Chain Design

Accounting and Finance