Supply Chain Management

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Supply Chain Management

• MD707 Operations Management
• Professor Joy Field

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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 firms
  customers
• Supply Chain Management
• Synchronizing a firms functions and those of its
  suppliers to match the flow of materials,
  services, and information with customer demand

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Developing the Supply ChainInsourcing vs.
Outsourcing Considerations
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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
  suppliers 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 McDonalds
• 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

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Managing Supply Chain Relationships
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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.

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Global Outsourcing and Offshoring

• Specific considerations
• Capabilities/resources
• Coordination requirements
• Strategic control and risks

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Supply Chain DynamicsBullwhip Effect
The bullwhip 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.

• The bullwhip 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