Chapter 10 Extending the Organization - Supply Chain Management

Basics of Supply Chain

• SCM – the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability
• The supply chain has three main links.

• Materials flows from suppliers and their upstream suppliers at all levels
• Transformation of materials into semi-finished products, or the organization’s own production processes
• Distribution of products to customers and their downstream customers at all levels

Information Technology’s Role in the Supply Chain

Visibility

• 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
• Supply chain visibility – the ability to view all areas up and down the supply chain
• The bullwhip effect occurs when distorted product demand information passes from one entity to the next throughout the supply chain.

Consumer Behavior

• 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 performances
• 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
• SCP and SCE in the supply chain

Speed

• 3 factors fostering speed

Supply chain management Success factors

SCM industry best practices include:

• Make the sale to suppliers
• Wean employees off traditional business practices
• Ensure the SCM system supports the organizational goals
• Deploy in incremental phases and measure and communicate success
• Be future oriented

SCM Success stories

• Top reasons why more and more executives are turning to SCM to manage their extended enterprises
• Numerous decision support systems (DSSs) are being built to assist decision makers in the design and operation of integrated supply chains
• DSSs allows managers to examine performance and relationships over the supply chain and among:

• Suppliers
• Manufacturers
• Distributors
• Other factors that optimize supply chain performance