Supply Chain Management

1. Supply Chain Management MD707 Operations Management Professor Joy Field

2. Definitions • Supply Chain • The interconnected set of linkages between suppliers of materials and services that spans the transformation of raw materials into products and services and delivers them to a firm’s customers • Supply Chain Management • Synchronizing a firm’s functions and those of its suppliers to match the flow of materials, services, and information with customer demand

3. Developing the Supply ChainInsourcing vs. Outsourcing Considerations

4. Developing the Supply ChainSupplier Relations • Competitive Orientation • The view that negotiations between buyer and seller is a zero-sum game. Often used when a firm represents a significant share of the supplier’s sales or many substitutes are available. Example: WalMart • Cooperative Orientation • The view that the buyer and seller are partners. Includes sole sourcing. Often used with strategically important and/or high value-added components. Example: McDonald’s • Mixed strategy • Seeks to combine the advantages of the competitive orientation (e.g. low prices) with the cooperative orientation (e.g. few suppliers). Example: Toyota

5. Managing Supply Chain Relationships

6. Strategic Management of the Supply Chain • Efficient Supply Chains • The purpose of efficient supply chains is to coordinate the flow of materials and services so as to minimize inventories and maximize the efficiency of the manufacturers and service providers in the chain. Efficient supply chains work best when demand is predictable and products/services are stable. Example of competitive priorities: low cost. • Responsive Supply Chains • The purpose of responsive supply chains is to react quickly to market demands by positioning inventories and capacities in order to hedge against uncertainties in demand. Responsive supply chains work best when demand is unpredictable, new product introduction is frequent, and product variety is high. Examples of competitive priorities: development speed, fast delivery, customization, volume flexibility. • In addition … • Innovations in information technology and other practices are facilitating the integration of the supply chain for greater efficiency and responsiveness and enabling “orchestrated” networks.

7. Global Outsourcing and Offshoring • Specific considerations • Capabilities/resources • Coordination requirements • Strategic control and risks

8. Supply Chain DynamicsBullwhip Effect Thebullwhip effect is characterized by fluctuations in inventory and order levels that tend to increase as one moves back up the channel from the final customer. Some causes include lack of visibility/communication throughout the supply chain, delays in information flows, ordering and shipping lags. • Thebullwhip effect can be alleviated by: • Reducing the number of stages in the supply chain • Communicating consumer demand directly up the supply chain • Reducing ordering and shipping delays • Reducing demand destabilizing practices • Counter consumer “gaming” during shortages