CHAPTER TEN - EXTENDING THE ORGANIZATION - SCM

 

SUPPLY CHAIN MANAGEMENT

The supply chain has three main links:

-  Materials flow from suppliers and their “upstream” suppliers at all levels.

-  Transformation of materials into semifinished and finished products through the organization’s own production process.

-  Distribution of products to customers and their “downstream” customers at all levels.

Organizations must embrace technologies that can effectively manage supply chains.

Supply chain management improves ways for companies to find the raw components they need to make a product or service, manufacture that product or service, and deliver it to customers.

Plan – This is the strategic portion of supply chain management. A company must have a plan for managing all the resources that go toward meeting customer demand for products or services.

Source – Companies must carefully choose reliable suppliers that will deliver goods and services required for making products.

Make – This is the step where companies manufacture their products or services. This can include scheduling the activities necessary for production, testing, packaging, and preparing for delivery.

Deliver – This step is commonly referred to as logistics. Logistics is the set of processes that plans for and controls the efficient and effective transportation and storage of supplies from suppliers to customers. 

Return – This is typically the most problematic step in the supply chain. Companies must create a network for receiving defective and excess products and support customers who have problems with delivered products.

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

- more visible models of different ways to do things in the supply chain have emerged. High visibility in the supply chain is changing industries, as Wal-Mart demonstrated.

- 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 must respond to demanding customers through supply chain enhancements.

- 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

-  increased competition makes any organization that is ignoring its supply chain at risk of becoming obsolete.

- 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.

Speed

- These system raise the accuracy, frequency, and speed of communication between supplier and customers, as well as between internal users.