CHAPTER 10 : EXTENDING THE ORGANIZATION – SUPPLY CHAIN MANAGEMENT

CHAPTER 10 : EXTENDING THE ORGANIZATION – SUPPLY CHAIN MANAGEMENT

QUESTION FROM THIS CHAPTER: 

- List and describe the components of a typical supply chain
- Define the relationship between decision making and supply chain management
- Describe the four changes resulting from advances in IT that are driving supply chains

SUPPLY CHAIN MANAGEMENT

The average company spends nearly half of every dollar that it earns on production
In the past,  companies focused primarily on manufacturing and quality improvement to influence their supply chains

BASIC OF SUPPLY CHAIN

The supply chain has three main links:
1. Material flow from suppliers and their “upstream” suppliers al all levels
2. Transformation of materials into semi finished and finished products through the organization’s own production process
3. Distribution of products to customers at all levels

List and describe the components of a typical supply chain:

• Supplier’s supplier, Supplier, Manufacturer, Distributor, Retailer, Customer, Customer’s Customer

INFORMATION TECHNOLOGY’S ROLE IN THE SUPPLY CHAIN

            As companies evolve into extended organizations, the roles of supply chain participants are changing. It is now common for suppliers to be involved in product development and for distributors to act as consultants in brand marketing. The nation of virtually seamless information links within and between organizations is an essential element of integrated supply chains. 

            Information technology’s primary role in Supply Chain Management is creating the integrations or tight process and information linkages between functions within firm such as marketing, sales, finance, manufacturing and distributions. Information technology integrates planning, decision-making processes, business operating processes and information sharing for business performance management. 

Factors Driving SCM

VISIBILITY

SUPPLY CHAIN VISIBILITY  

Is the ability to view all areas up and down the supply chain. Changing supply chain requires a comprehensive strategy buoyed by information technology. Organizations can use technology tools that help them integrate upstream and downstream, with both customers and suppliers.

THE BULLWHIP EFFECT
Its occurs when distorted product demand information passes from one entity to the next throughout the supply chain. The misinformation  passes information regarding a slight rise in demand  for a product could cause different members in the supply chain, magnifying the issue and creating excess inventory and costs. For example, Pizza.

CONSUMER BEHAVIOUR
      The behavior of customers has changed the way businesses compete. Customers will leave if a company does not continually meet their expectations. They are more demanding because they have information readily available, they know exactly what they want and they know when and how they want it.
      Demand planning software- generates demand forecasts using statistical tools and forecasting techniques. Companies can respond faster and more effectively to consumer demands through supply chain enhancements such as demand planning software. 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 organization’s performance.

COMPETITION

Supply chain management software can be broken down into :

-Supply chain planning (SCP) software- uses advanced mathematical algorithmas to improve the flow and efficiency of the supply chain more too transactional

-Supply chain execution (SCE) software- automates the different steps and stages of the supply chain

SPEED

During the past decade, competition has focused on speed. New forms of servers, telecommunications, wireless applications, and software are enabling companies to perform activities that were once never thought possible. Another aspect of speed is the company’s ability to satisfy continually changing customer requirements efficiently, accurately and quickly.

Three factors fostering speed

SUPPLY CHAIN MANAGEMENT SUCCESS FACTORS 

Supply chain management industry best practices include:

1. Make the sale to suppliers

2. Wean employees off traditional business practices

3. Ensure the SCM system supports the organizational goals

4. Deploy in incremental phases and measure and communicate success

5. Be future oriented

SCM SUCCESS STORIES 

Numerous decision support systems (DSSs) are being built to assists decision makers in the design and operation of integrated supply chains.

DSSs allow managers to examine performance and relationships over the supply chain and among:
- Suppliers
- Manufacturers
- Distributors
- Other factors that optimize supply chain performance 

Define the relationship between decision making and supply chain management: 

⇉SCM  enhances decision making. Collecting, analyzing, and distributing transactional information to all relevant parties, SCM systems help all the different entities in the supply chain work together more effectively. SCM systems provide dynamic holistic views of organizations. Users can “drill down” into detailed analyses of supply chain activities in a process analogues to DSS. Without SCM systems, organizations would be unable to make accurate and timely decisions regarding their supply chain.

Describe the four changes resulting from advances in IT that are driving supply chains:

⇉Although people have been talking about integrated supply chain for a long time, it has only been recently that advances in information technology have made it possible to bring the idea to life and truly integrate the supply chain. Visibility, consumer behavior, competition and speed are a few of the changes resulting from advances in information technology that are driving supply chain.