Chapter 1: Supply Chain Management
What forces are driving the rate of change?
1. Globalisation
Has led to a more competitively intense economic and geopolitical environment
Time and distance has become compressed
The main challenges for supply chains
o Volatility of supply and demand
- Acts of terrorism has implications on the flow of commerce
- Contamination of food products from China can cause an interruption
in the flow of products
- Natural disasters have an effect
o Shorter product life cycles
- Technological companies are at a threat
- Provides inventory management problems for supply chains
o Blurring of traditional boundaries
- To maintain profitability, companies have to outsource
2. Technology
Major impact on the supply chains as a facilitator of change as companies have
transformed their processes
Individuals and smaller organisations can connect to the world’s “knowledge pools”
and can create collaboration in supply chains
Outsourcing has been enhanced by technology
Flow of commerce has become multidirectional
3. Organisational consolidation
Large retailers are given special consideration from consumer product companies
Services that allow retailers more efficiency:
o Scheduled deliveries
o Rainbow pallets
o Advance Shipment Notices (ASN)
, Retailer may be provided with value-added services such as vendor-managed
inventory (VMI)
More collaboration is being practiced between organisations in the supply chains to
gain mutual cost savings and improved customer service
4. The empowered consumer
Impact of the consumer is direct for supply chains because the consumer has placed
increased demands at the retail level for an expanded variety of products and
services
Due to information, consumers are more educated and empowered
They have the opportunity to compare prices
They have a low tolerance for poor quality
Consumers demand quicker response times and more convenient offerings
They don’t have loyalty
5. Government policy
Deregulation of important sectors
o Transportation
o Communication
o Financial institutions
,The Supply Chain Concept
1. Development of the concept
A. Physical distribution concept
Focused on the outbound side of a firm’s logistics system
Total systems cost and analysing trade-off scenarios to arrive at the lowest
system cost
B. Integrated logistics management concept
Added inbound logistics to the outbound logistics of physical distribution
Global sourcing of materials and supplies for inbound systems was growing in
importance
C. Value chain concept
Developed as a tool for competitive analysis and strategy
The more integrated nature of marketing sales, and manufacturing with
logistics is an NB dimension of the value chain
Includes procurement as an element of logistics
D. Supply chain
Extended enterprise that crosses the boundaries of an individual firm to span
the related activities of all companies involved
This extended enterprise should attempt to execute a coordinated two-way
flow
There are three of these two-way flows:
, Flow Description
Products and related services Customers expect their orders to be
delivered in a timely, reliable, and damage-
free manner; and transportation is critical
to this outcome
International flow Bull whip effect: if there are any long
term intervals between orders, the
members of the supply chain is faced
with a lot of uncertainty about the level
and pattern of demand, which usually
results in higher inventory/stock out
costs.
Sharing of sales information on a “real-
time” basis leads to less uncertainty
Financial/cash flow Supply chain compression = faster cash
flow
What forces are driving the rate of change?
1. Globalisation
Has led to a more competitively intense economic and geopolitical environment
Time and distance has become compressed
The main challenges for supply chains
o Volatility of supply and demand
- Acts of terrorism has implications on the flow of commerce
- Contamination of food products from China can cause an interruption
in the flow of products
- Natural disasters have an effect
o Shorter product life cycles
- Technological companies are at a threat
- Provides inventory management problems for supply chains
o Blurring of traditional boundaries
- To maintain profitability, companies have to outsource
2. Technology
Major impact on the supply chains as a facilitator of change as companies have
transformed their processes
Individuals and smaller organisations can connect to the world’s “knowledge pools”
and can create collaboration in supply chains
Outsourcing has been enhanced by technology
Flow of commerce has become multidirectional
3. Organisational consolidation
Large retailers are given special consideration from consumer product companies
Services that allow retailers more efficiency:
o Scheduled deliveries
o Rainbow pallets
o Advance Shipment Notices (ASN)
, Retailer may be provided with value-added services such as vendor-managed
inventory (VMI)
More collaboration is being practiced between organisations in the supply chains to
gain mutual cost savings and improved customer service
4. The empowered consumer
Impact of the consumer is direct for supply chains because the consumer has placed
increased demands at the retail level for an expanded variety of products and
services
Due to information, consumers are more educated and empowered
They have the opportunity to compare prices
They have a low tolerance for poor quality
Consumers demand quicker response times and more convenient offerings
They don’t have loyalty
5. Government policy
Deregulation of important sectors
o Transportation
o Communication
o Financial institutions
,The Supply Chain Concept
1. Development of the concept
A. Physical distribution concept
Focused on the outbound side of a firm’s logistics system
Total systems cost and analysing trade-off scenarios to arrive at the lowest
system cost
B. Integrated logistics management concept
Added inbound logistics to the outbound logistics of physical distribution
Global sourcing of materials and supplies for inbound systems was growing in
importance
C. Value chain concept
Developed as a tool for competitive analysis and strategy
The more integrated nature of marketing sales, and manufacturing with
logistics is an NB dimension of the value chain
Includes procurement as an element of logistics
D. Supply chain
Extended enterprise that crosses the boundaries of an individual firm to span
the related activities of all companies involved
This extended enterprise should attempt to execute a coordinated two-way
flow
There are three of these two-way flows:
, Flow Description
Products and related services Customers expect their orders to be
delivered in a timely, reliable, and damage-
free manner; and transportation is critical
to this outcome
International flow Bull whip effect: if there are any long
term intervals between orders, the
members of the supply chain is faced
with a lot of uncertainty about the level
and pattern of demand, which usually
results in higher inventory/stock out
costs.
Sharing of sales information on a “real-
time” basis leads to less uncertainty
Financial/cash flow Supply chain compression = faster cash
flow
