Supply Chain Management

Professor Stephen R. Lawrence

Leeds School of Business

University of Colorado

Boulder, CO 80309-0419

Supply Chain Management

Supply Chain Management = SCM SCM used to be called “logistics”

from the verb loger, “to lodge or quarter”

“Multi-echelon Production Control” SCM is an amalgam of traditional

business and operations functions: Inventory, logistics, scheduling, aggregate

planning, transportation, purchasing, …

SCM Definitions

The art of managing the flow of materials and products from source to user

Set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize system-wide costs while satisfying service level requirements

SCM Diagram

adapted from Porter, Competitive Advantage, Free Press, 1985

Vendors CustomersOur Firm

SCM Information Flows

Why an Interest in SCM?

Productivity (cost reduction)TimelinessFlexibility

Adapted from Professor Joe Geunes

Key SCM Issues

Distribution network design Determine plant and warehouse locations, capacities, and

production/storage levels Inventory Control

The purpose of inventory is to avoid interrupting a supply process, be it production or end customer demand

How can we avoid such disruptions at the minimum total cost?

Since we don’t know the future we must rely on forecasts – how do we use these forecasts to set reorder levels and order quantities?

Adapted from Professor Joe Geunes

Key SCM Issues

Distribution strategy How do we decide where to hold inventory and how to

efficiently transport it to customers? Ship directly from plant to customers in full truckloads? Maintain stocks in regional warehouses and distribute locally? Cross-docking strategies?

Integration and strategic partnerships How involved should a firm be with suppliers of both

materials and services? What level of information sharing is appropriate?

Adapted from Professor Joe Geunes

Key SCM Issues

Product design issues What is the tradeoff between design changes and logistics savings? Can design strategies buffer against demand uncertainties?

Information technology What are the significant data that are critical for sharing with

partners? What is the role of the Internet/e-Commerce in all of this?

Customer value How does supply chain management contribute to customer value? How do new trends in customer value affect supply chain

management?

Adapted from Professor Joe Geunes

Global SCM Opportunities

Trade barriers declining Regional trans-national trading groups

NAFTA European Community Asia

Improved transportation systems Improved information systems

New Developments in SCM

Third party logistics “one-stop shopping” for logistics services

combining warehousing, transportation, order picking, ...

Partnerships non-adversarial cooperation between shippers,

carriers, and warehouses

Cross-docking

SCM and Technology

Containerization Telecommunications & the Internet Bar-coding & RF tracking

expedites automatic product and order tracking

Electronic Data Interchange (EDI) via Internet computer-to-computer order entry communication