MGT300 - CHAPTER 10

Extending the organization – Supply Chain           Management (SCM)

1. The average company spends nearly half or every dollar that it earns on production
2. In the past, companies focused primarily on manufacturing and quality improvements to influences their supply chains
3. The supply chain has three main links :

Ø  Materials flow from suppliers and their 'upstream' suppliers at all levels

Ø  Transformation of materials into semifinished and finished products through the organization's own production process

Ø  Distribution of products to customers and their 'downstream' customers at all levels

Ø  Plan

A company must have a plan for managing all the resources that go toward meeting customer demand for products and services

Ø  Source

Companies must carefully choose reliable suppliers that will deliver goods and services required for making products

Ø  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

Ø  Deliver (logistic)

Companies must be able to receive orders from customers, fulfil their orders via a network of warehouses, pick transportation companies to deliver the products and implement a billing and invoicing system to facilitate payments

Ø  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

Ø  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

Ø  Supply chain visibility

The ability to view all areas up and down the supply chain

Ø  Bullwhip effect

Occurs when distorted product demand information passes from one entity  to the next throughout the supply chain

Ø  Supply chain visibility allows organizations to eliminate the bullwhip effect

*To explain the bullwhip effect to your student discuss a product that demand does not change, such as diapers. The need for diapers is constant, it does not increase in Christmas or in the summer, diaper are in demand all year long. The number of newborn babies determines diaper demands, and that number is constant.

*Retailers order diapers from distributors when their inventory level falls below a certain level, they might order a few extra just to be safe

*Distributors order diapers from manufactures when their inventory level falls below a certain level, they might order a few extra just to be safe

*Manufacturers orders diapers from suppliers when their inventory levels below a certain level, they might order a few extra just to be safe

*Eventually the one or two extra boxes are ordered from a few retailers becomes several thousand boxes for the manufacturer. This is the bullwhip effect, a small ripple at one end makes a large waves at the other end of the whip

Ø  Consumer behaviour

*Companies can respond faster and more effectively to consumer demands through supply chain enhances

*Once an organization understands customers 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 organization performance

*Demand planning software – generates demand forecast using statistical tools and forecasting techniques

Ø  Competition

*Supply chain planning software(SCP) – uses advanced mathematical algorithm to improve the flow and efficiency of the supply chain

*Supply chain execution software (SCE) – automates the different step 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

Ø  Supply chain management success factors

*Make the sales to suppliers

*Wean employees off traditional business practices

*Ensure the SCM system supports the organizational goals

*Deploy the incremental phases and measure and communicate success

*Be future oriented

Ø  DSSs allows managers to examine performance and relationship over the supply chain and among:

*suppliers

*manufacturers

*distributors

*other factor that optimize supply chain performance