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CHAPTER 2
The Supply Chain Management The Supply Chain Management ConceptConcept
© 2008 Prentice Hall 2-2
Learning Objectives
To learn about supply chains and their management
To understand differences between transactional and relational exchanges
To realize the importance of leveraging technology
To appreciate barriers to supply chain management
© 2008 Prentice Hall 2-3
The Supply Chain Concept
Key Terms– Bullwhip effect
– Contract logistics
– Coopetition
– Customer power
– Fourth-party logistics (4PL)
Key Terms– JIT II– Lead logistics
provider (LLP)– Logistics
outsourcing– Partnerships– Relational
exchanges
© 2008 Prentice Hall 2-4
The Supply Chain Concept
Key Terms– SCOR model
– Strategic alliances
– Supply chain
– Supply chain councils
– Supply chain management
Key Terms– Third-party
arrangements
– Third-party logistics
– Transactional exchanges
© 2008 Prentice Hall 2-5
About Supply Chains…
A supply chain “encompasses all activities associated with the flow and transformation of goods from the raw material stage (extraction), through to the end user, as well as the associated information flows.”
Source: Robert B. Handfield and Ernest L. Nichols, Jr., Introduction to Supply Chain Management
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Figure 2-1: Different Supply Chain Configurations
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Supply Chain Management
– Supply chain management is “the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses in the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole.”
Source: John T. Mentzer et al., “ Defining Supply Chain Management,” Journal of Business Logistics
© 2008 Prentice Hall 2-8
Successful Supply Chains have…
an enterprise-to-enterprise point of view a systems approach across all organizations in
the supply chain– Companies recognize interdependencies– Goals and objectives are compatible
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Figure 2-2: The Supply Chain Operations Reference (SCOR) Model
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JIT II
Developed by Bose Corporation Supplier integration program
– A more realistic competitive perspective– “In-plants”
© 2008 Prentice Hall 2-11
Globalization of Supply Chains
Increasing globalization– Lower priced materials and labor– Global perspective of companies– Development of global competition
Extremely difficult to execute due to differences– Cultural, economic, and technological– Political, spatial, and logistical
© 2008 Prentice Hall 2-12
Key Attributes of Supply Chain Management
Customer power Long-term orientation
– Relational exchanges– Transactional exchanges
Leveraging technology Enhanced communication across
organizations
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Key Attributes of Supply Chain Management
Inventory control– Bullwhip effect– JAZ
Interactivity, interfunctional, and interorganizational coordination– Supply chain councils– Coopetition
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Barriers to Supply Chain Management
Regulatory and political considerations Lack of top management commitment Reluctance to share, or use, relevant data Incompatible information systems Incompatible corporate cultures
© 2008 Prentice Hall 2-15
Supply Chain Management and Integration
Long-term, mutually beneficial agreements– Partnerships– Strategic alliances– Third-party arrangements– Contract logistics
Methods used to integrate– Vertical integration– Formal contracts– Informal agreements
© 2008 Prentice Hall 2-16
Supply Chain Management and Integration
Third-Party Logistics (3PL)– Logistics outsourcing– Contract logistics
Fourth-party logistics (4PL) primarily used in global companies– Lead logistics provider (LLP)
Supply chain software
