EXTENDING THE ORGANIZATION-SUPPLY CHAIN MANAGEMENT

CHAPTER 10 : EXTENDING THE ORGANIZATION- SUPPLY CHAIN MANAGEMENT

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.

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

• Organizations must embrace technologies that can effectively manage supply chains

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

• Factors Driving SCM

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

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

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 in the supply chain

Speed

•Three factors fostering speed

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

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