chapter

13

SUPPLY CHAIN
MANAGEMENT

Prepared by
Angela Zigras, Seneca College
Deborah Baker, Texas Christian University

Copyright © 2002 by Nelson, a division of Thomson Canada Limited.

 You Will Learn To ...
1. Discuss logistics and supply chain
management.

2. Discuss the concept of balancing logistics

service and cost.

3. Describe the integrated functions of the supply

chain.

4. Discuss new technology and emerging trends

in logistics
Copyright © 2002 by Nelson, a division of Thomson Canada Limited.
 Logistics Decisions and Supply
Chain Management

The process of strategically managing

the efficient flow and storage of raw
Logistics materials, in process inventory, and
finished goods from point of origin to
point of consumption.

The connected chain of all the business

Supply entities, both internal and external to the
Chain company, that perform or support the
logistics function.

Copyright © 2002 by Nelson, a division of Thomson Canada Limited.

Supply Chain Management

A management system that

coordinates and integrates all
of the activities performed by
supply chain members into a
seamless process, from the
source to the point of
consumption.

Copyright © 2002 by Nelson, a division of Thomson Canada Limited.

 Supply Chain Management

Focus on Innovative Solutions

Competitive with focus on

Customer Satisfaction

Results Synchronized Flow

of
Supply Chain
Management Customer Value

Copyright © 2002 by Nelson, a division of Thomson Canada Limited.

Role of Supply Chain Management

Communicator of
customer demand from
Role of point of sale to supplier
Supply Chain
Management
Physical flow process
that engineers the
movement of goods

Copyright © 2002 by Nelson, a division of Thomson Canada Limited.

 Supply Chain Management
Activities Manage and Plan
 Movement of information and customer
requirements up and down the supply chain.

 Movement and storage of raw materials and

parts from their source to production.

 Movement of raw materials, semi manufactured

products and finished products within locations

Copyright © 2002 by Nelson, a division of Thomson Canada Limited.

 Supply Chain Management
Activities Manage and Plan

 Production in response to consumer demand.

 Physical distribution of the finished goods to

intermediaries and final buyers.

 Establish strategic partnerships with supply

chain members to meet customer needs and
create customer value.

Copyright © 2002 by Nelson, a division of Thomson Canada Limited.

 Benefits of
Supply Chain Management

Reduced Costs

Improved Service

Common Benefits
of Supply Chain Enhanced Revenues
Management

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 Logistics Service

Interrelated activities
performed by a member
of the supply chain to ensure
that the right product is in the
right
place at the right time.

Copyright © 2002 by Nelson, a division of Thomson Canada Limited.

 Logistical Competencies

 Devise logistics service strategies as a

means of competitive differentiation
 Integrate members of supply chain to
achieve operating excellence
 Respond quickly to changing logistical
requirements
 Constantly monitor all aspects of the
supply chain
Copyright © 2002 by Nelson, a division of Thomson Canada Limited.
Logistic Information System

Information technology that

integrates and links all of the
logistics functions of the
supply chain.

Copyright © 2002 by Nelson, a division of Thomson Canada Limited.

 Integrated Logistical
Components of the Supply Chain
Sourcing & Procurement

Logistics Information System

Production Scheduling

Supply Order Processing & Customer Service

Chain
Team Inventory Control

Warehouse & Materials Handling

Modes of Transportation

Copyright © 2002 by Nelson, a division of Thomson Canada Limited.

 Supply Chain Team

Entire group of individuals

who orchestrate the
movement of goods, services,
and information from the
source to the consumer.

Copyright © 2002 by Nelson, a division of Thomson Canada Limited.

 Sourcing and Procurement
Plan
Purchasing Strategies

Develop
Specifications
Role of
Purchasing Select
Departments Suppliers

Negotiate
Price

Negotiate
Service Levels
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 Production Scheduling

Traditional Focus Customer Focus

Push/Pull
Push Pull
Strategy
Start of Customer-Order
Inventory-Based
Production Based

Manufacturing Mass Production Mass Customization

Copyright © 2002 by Nelson, a division of Thomson Canada Limited.

Just-in-Time Manufacturing

A process that redefines and

simplifies manufacturing by
reducing inventory levels and
delivering raw materials just
when they are needed on the
production line.

Copyright © 2002 by Nelson, a division of Thomson Canada Limited.

 Benefits of JIT

 Reduces raw material inventories

 Shortens lead times
 Creates better supplier relationships
 Reduces production and storeroom costs
 Reduces paperwork

Copyright © 2002 by Nelson, a division of Thomson Canada Limited.

Order Processing System

System whereby orders are

entered into the supply chain
and filled.
The “order” brings the supply
chain in motion.

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Electronic Data Interchange

Information technology that

replaces paper documents
that accompany business
transactions.

Copyright © 2002 by Nelson, a division of Thomson Canada Limited.

 Benefits of EDI

 Replaces paper documents

 Reduces inventory levels
 Improves cash flow
 Streamlines operations
 Increases speed and accuracy of information
transmission
 Creates relationship between buyer and seller
Copyright © 2002 by Nelson, a division of Thomson Canada Limited.
Inventory Control System

A method of developing and

maintaining an adequate
assortment of materials or
products to meet a
manufacturer’s or a
customer’s demand.

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Materials Requirement Planning
MRP

Inventory control system that

manages the replenishment
of raw materials, supplies,
and components from the
supplier to the manufacturer.

Copyright © 2002 by Nelson, a division of Thomson Canada Limited.

 Managing Inventory From the
Supplier to the Manufacturer

Sourcing and Procurement

Managing Operations
Inventory
Supplier to
Manufacturer
Signals purchasing when
materials need to be
replenished

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 Warehouse and
Materials-Handling
Receive goods into
warehouse

Identify, sort, and

Functions label goods
of
Materials
Dispatch the goods to
Handling temporary storage

Recall, select, or pick the

goods for shipment
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 Transportation

Cost

Transit Time

Reliability

Criteria Capability
for
Transportation Accessibility
Mode
Choice Traceability

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 Criteria for Ranking
Modes of Transportation
Highest Lowest

Relative Truck Rail Pipe Water

Air
Cost
Transit
Water Rail Pipe Truck Air
Time

Reliability Pipe Truck Rail Air Water

Capability Water Rail Truck Air Pipe

Accessibility Truck Rail Air Water Pipe

Traceability Air Truck Rail Water Pipe

Copyright © 2002 by Nelson, a division of Thomson Canada Limited.

 Trends in
Supply Chain Management
Advanced
Trends Computer Technology
Affecting the
Logistics Outsourcing of
Logistics Functions
Industry
Electronic
Distribution

Copyright © 2002 by Nelson, a division of Thomson Canada Limited.