BUS 3620 Logistics and SCMWe start our lecture to firstly gain the understanding of the following two fundamental questions:

What is Supply Chain Management (SCM)?

What is Logistics?

Chapter 1: Supply Chain Management

Supply Chain Management: IntroductionWhy do we need to know SCM?

Supply Chain Management: Introduction4 Reasons: Supply chain management now part of the business vocabulary.Impact of global marketplace drastically changed the landscape of business.Change was rapid and continuous in the 1990s.Doing business in the comfort zone was no longer synonymous with success.

The Changing Business Landscape: Five Driving ForcesThe Empowered ConsumerPower Shift in the Supply ChainDeregulationGlobalizationTechnology

The Changing Business Landscape: Five Driving Forces1. The Empowered ConsumerImpact on logistics is more direct.Informed consumers have low tolerance for poor quality in products and services.Changing demographics commands 24/7 service, become less royalIncreased customer service increases the importance of logistics and supply chains.

The Changing Business Landscape: Five Driving Forces2.Power Shift in the Supply ChainLarge retailers more demanding and commanding. Focus upon distribution costs and their impact on everyday low prices.Changing logistics and supply chain strategies resulted from shifts in the balance of economic power.

The Changing Business Landscape: Five Driving Forces3. Deregulation (4 main legs)Changing economic controls empowered creativity and competition.Changes in transportation fewer or no economic controls over rates and services.Change in financial institutions blurred traditional differences and increased competition.Change in the communications industry also resulted in more competition.Changes in the utility (energy) industry allows more competition.

The Changing Business Landscape: Five Driving Forces4. GlobalizationGlobal marketplace conceptGlobal network sourcing, manufacturing, marketing and distributionGlobal alternatives have blossomedNo geography --- access available to the worldSupply chain challengesWal-Marts challengesNew supply sources

The Changing Business Landscape: Five Driving Forces5. TechnologyInformation Age provides new and unrestricted access to the place aspect of business.My time, my placeWarehouse technology has changed dramatically with computer devices in use from the office space to the forklifts.

Success of story of SCM

How SCM helps to enhance the expansion of a business ventures?

On the Line: Extreme EnterpriseIntegrating new enterprise and supply chain management solutions allowed Columbia Sportswear to keep up with sales that increased from $3 million in 1984 to $470 million in 1999.With one store and a handful of outlets, distribution to its customers is where the rubber meets the road.Columbias president was determined not to let distribution restrain growth, and backed it with money. A 1 million square foot distribution center receives more than 2 million units/month and set a record by shipping 172,000 items in one day, and more than 2 million items in a month.

The Changing Business Landscape: The Supply Chain ConceptDefinitionDevelopment of the ConceptBusiness Case for Supply Chain ManagementCharacteristics of Supply Chain Management

1. The Supply Chain Concept: DefinitionAn extended enterprise that crosses over the boundaries of individual firms to span the logistical related activities of all the companies involved in the supply chain.

2. Development of the Concept

Five main elements:Total systems cost - remains an important element of logistics analysis.Outbound logistics - was the initial focus with higher value finished goods.Inbound logistics deregulation allowed new focus on coordination of inbound and outbound movements.Value chain analysis integrated logistics activities.Terminology growing as supply chain concept matures.

2. Development of the Concept

A general view: InboundOutboundSuppliers1960s physical distribution , emphasized on outbound Figure 1.11980s inbound logistics added, thus need coordination between both inbound and outbound systems value chain needed Figures 1-2-1.4

Figure 1-1 A View of Business Logistics in a Firm

Figure 1-2 Integrated Logistics ManagementIdentifying activities, Figure 1-3Figure 1-4

Figure 1-3Generic Value Chain

Figure 1-4 Logistics Supply Chain

3. Business Case for Supply Chain Management:Why so much attention on supply chain management?ECR and Best-in-class studies (Figures 1.5, 1.6 )(ECR - Effective customer response)Complexity of the supply chain (Figure 1.7)Extended enterprise conceptTwo-way flow of: (Figure 1.7)ProductsInformationCashInventory visibility (Figure 1.8)

Figure 1-5: Comparison of Average Throughput Time of Dry Grocery Chain before and after ECR Implementation

Figure 1-6: Total Supply Chain Management Cost --- All Sectors

Revenue %

Figure 1-7: Integrated Supply Chain

Figure 1-8: Running Lean

Number of times Dell and Compaq turn inventory over in each quarter, calculated at an annual rate.

4. Five Main Characteristics of Supply Chain Management1. Inventory Visibility managing flow and reduce or eliminate uncertaintyPull systems response to demand as opposed to pushing it to advance of demand2. Landed CostCompanies must realize that their strategies may affect the landed cost ie the final costCoordination of supply chain activities may lower the landed cost.

4. Five Main Characteristics of Supply Chain Management3. Real-time two way information flows4. Customer service levels must be tailored to each customer not to treat all customers the samenot all customers require the same service need to cater the special need of individual customers5. Supply chain relationshipsCollaborative planningShare risks and rewards

Figure 1-9: Traditional Supply Chain/Pipeline Inventory Flow 1970s and 1980s

Contemporary Supply Chain Pipeline

Chapter 1: Summary and Review QuestionsStudents should review their knowledge of the chapter by checking out the Summary and Study Questions for Chapter 1.

This is the last slide for Chapter 1

End of Chapter 1 SlidesSupply Chain Management