McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, All Rights Reserved

Chapter 10Chapter 10

Extending the Organization – Extending the Organization – Supply Chain ManagementSupply Chain Management

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Learning Outcomes

10.1 List and describe the components of a typical supply chain

10.2 Define the relationship between decision making and supply chain management

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

10.4 Summarize the best practices for implementing a successful supply chain management system

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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 improvements to influence their supply chains

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Basics of Supply Chain

• The supply chain has three main links:1. Materials flow from suppliers and their

“upstream” suppliers at all levels

2. Transformation of materials into semifinished and finished products through the organization’s own production process

3. Distribution of products to customers and their “downstream” customers at all levels

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Basics of Supply Chain

• Organizations must embrace technologies that can effectively manage supply chains

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Basics of Supply Chain

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Information Technology’s Role in the Supply Chain

• IT’s primary role is to create integrations or tight process and information linkages between functions within a firm

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Information Technology’s Role in the Supply Chain

Factors Driving SCM

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Visibility

• Supply chain visibility – the ability to view all areas up and down the supply chain

• Bullwhip effect – occurs when distorted product demand information passes from one entity to the next throughout the supply chain

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Consumer Behavior

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

• Demand planning software – generates demand forecasts using statistical tools and forecasting techniques

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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

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Competition

• SCP and SCE in the supply chain

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Speed

• Three factors fostering speed

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Supply Chain Management Success Factors

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Supply Chain Management Success Factors

• SCM 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

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SCM Success Stories

• Top reasons why more and more executives are turning to SCM to manage their extended enterprises

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SCM Success Stories

• Numerous decision support systems (DSSs) are being built to assist 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

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SCM Success Stories

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OPENING CASE STUDY QUESTIONS

Second Life1. Would you need supply chain management systems in

a virtual world such as Second Life? Why or why not?

2. How could a real company augment its supply chain management system through Second Life?

3. If you were an apparel company, such as Nike or REI, what would your virtual SCM system look like? Create a drawing of this system and be sure to include all upstream and downstream participants?

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CHAPTER TEN CASEBudNet

• Anheuser-Busch’s top-secret nationwide data network, BudNet, knows every time a six-pack moves off of a store shelf

• Information is entered into BudNet nightly from several thousand Anheuser-Busch distributors and sales representatives

• Anheuser-Busch has made a deadly accurate science out of determining what beer lovers are buying, as well as when, where, and why

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Chapter Ten Case Questions

1. Describe how an SCM system can help a distributor such as Anheuser-Busch make its supply chain more effective and efficient

2. SCM is experiencing explosive growth. Explain why this statement is true using BudNet as an example

3. Evaluate BudNet’s effect on each of the five factors that are driving SCM success