Ch 13 Notes Flashcards
13-1 Supply Chains and Supply Chain Management
Gives the company “total visibility and control” of the materials, processes, money, and finished products inside and outside the company they work for.
Visualizing and exerting control over the entire supply chain, companies can balance demand for their products and services as perfectly as possible with available supply which maximizes customer outcomes while creating efficiency at each level of the chain
Products are being driven by customer demand, and businesses need to balance demand with supply to ensure economic profits.
Supply Chain
13-1 Supply Chains and Supply Chain Management
Modern customers expect to receive product and service configurations matched to their unique needs, and this personalization is a catalyst that is increasingly driving demand.
The focus of businesses has shifted to determining how products and services are being “pulled” into the marketplace by customers and on partnering with members of the supply chain to enhance customer value
Supply Chain
13-1 Supply Chains and Supply Chain Management
The reversal of demand flow from “push” to “pull” has resulted in a radical reformulation of traditional marketing, production, and distribution functions
Agile companies synchronize their activities through the sharing of supply-and-demand market information, spend more time than their competitors focusing on activities that create direct customer benefits, partner closely with suppliers and service providers to reduce customer wait times for products, and constantly seek to reduce supply chain complexity through the evaluation and reduction (or elimination) of stock-keeping units (SKUs) that customers aren’t buying, among other strategies.
Supply Chain Agility
13-1 Supply Chains and Supply Chain Management
Because of the increasing complexity of supply chain operations, most companies do not manage their supply chains alone or in isolation.
Effective SCM requires a team effort between the firm and its partners.
-Outsourcing, Contract Logistics, 3PL
SCM
13-1 Supply Chains and Supply Chain Management
Enables companies to cut inventories and locate stock at fewer plants and distribution centers while still providing the same level of service
Many companies are now seeking solutions within (reshoring) or close to (nearshoring) their primary base of operations, to reduce supply chain risk and maintain tighter control over operations.
However, reshoring and nearshoring supply chain strategies are not the most efficient options for many companies
Outsourcing
13-1 Supply Chains and Supply Chain Management
Foreign markets are attractive due to the increasing demand for imported products worldwide.
Furthermore, cheap labor advantages and trade barriers/tariffs have encouraged firms to expand their global manufacturing operations.
**Uncertainty:
Moving operations offshore exposes companies to risks associated with geopolitical conflict, foreign nationalization of assets, unintended knowledge leakage to foreign competitors, and highly variable quality standards
Globalizing the supply chain
13-1 Supply Chains and Supply Chain Management
Resources needed to manufacture and sell goods that are increasingly in demand are becoming scarcer, and market boundaries are melting together.
Free trade markets continue to expand globally, and consumers living in nations with traditionally low demand now have access to previously unavailable goods and can place orders via the internet.
Benefits of Supply Chain
13-1a Benefits of Effective Supply Chain Management
Organizations with an intense focus on effective supply chain management commonly report lower inventory, transportation, warehousing, and packaging costs.
These supply chain-centric companies also realize greater logistical flexibility, improved customer service, and higher revenues
Well-managed supply chains can provide better value to customers with only marginal incremental expenditure on company assets
Supply Chain Management
13-1a Benefits of Effective Supply Chain Management
Lean strategy requires balancing the inventory needs of a business while minimizing the possibility of overstocking goods and maximizing the company’s cash flow.
The COVID-19 pandemic exposed how delicate lean supply chains can be and supply chain managers had to learn the hard way to always be prepared for the unexpected
Lean Supply Chains
13-1a Benefits of Effective Supply Chain Management
Agile strategy also carries risk, such as lost or incorrectly allocated inventories.
**Ex: was the toilet paper and hand sanitizer shortages in the early stages of the pandemic.
-Firms traditionally optimized manufacturing and distribution systems for two separate markets—commercial (office buildings, hotels, restaurants, etc.) and residential.
-However, during the COVID-19 pandemic, the market immediately switched to residential only, since almost everyone was working from home, shortages in the residential market were widespread.
Agile Strategy
13-2 Supply Chain Integration
Multiple entities (firms and/or their functional areas) should work together to perform tasks as a single, unified system, rather than as multiple individual units acting in isolation
Goal of this cooperation is that the overall effectiveness and performance of the supply chain for all the participants will be greater than the sum of its parts.
Key principle of supply chain management
13-2 Supply Chain Integration
Supply Chain Orientation
- They are credible
- They are benevolent
- They are cooperative
- They have the support of top managers
- They are effective at conducting and directing supply chain activity
13-2 Supply Chain Integration
They are Credible
They can deliver on promises they make
13-2 Supply Chain Integration
They are benevolent
They are willing to accept short-term risks on behalf of others, are committed to others, and invest in others’ success.
13-2 Supply Chain Integration
They are cooperative
They work with rather than against their partners when seeking to achieve goals.
13-2 Supply Chain Integration
They have support of top managers
These managers possess the vision required to do things that benefit the entire supply chain in the short run so they can enjoy more meaningful company successes in the long run.
13-2 Supply Chain Integration
They are effective at conducting and directing supply chain activity.
As a result, they are better off in the long run financially than those who are not as effective.
13-2 Supply Chain Integration
Integration can be either internal or external to a specific company or, ideally, both.
From an internal perspective, the top supply chain integration companies develop a managerial orientation toward demand–supply integration (DSI)
Supply Chain Integration
13-2 Supply Chain Integration
Functional areas in a company that creates customer demand (such as marketing, sales, or research and development) continually communicate and are fully synchronized with the areas of the business charged with fulfilling the created demand (purchasing, manufacturing, and logistics)
Companies operating under a DSI philosophy are better at their business because all the divisions within the company work in sync with each other
DSI Integration
13-2 Supply Chain Integration
Five types of external integration
- Relationship Integration
- Measurement Integration
- Technology and planning integration
- Material and service supplier integration
- Customer integration
13-2 Supply Chain Integration
Ability of two or more companies to develop social connections that serve to guide their interactions when working together.
The capability to develop and maintain a shared mental framework across companies that describes how they will depend on one another when working together.
This includes how they will collaborate on activities or projects so that the customer gains the maximum amount of total value possible from the supply chain.
Relationship Integration
13-2 Supply Chain Integration
Performance assessments should be transparent and measurable across the borders of different firms; it should also assess the performance of the supply chain while holding each individual firm or business unit accountable for meeting its own goals.
Measurement Integration
13-2 Supply Chain Integration
Creation and maintenance of information technology systems that connect managers across the firms in the supply chain. It requires information hardware and software systems that can exchange information when needed between customers, suppliers, and internal operational areas of each of the supply chain partners.
Technology and planning integration
13-2 Supply Chain Integration
Requires firms to link seamlessly to those outsiders that provide goods and services to them so that they can streamline work processes and thereby provide smooth, high-quality customer experiences.
Both sides need to have a common vision of the total value-creation process and be willing to share the responsibility for satisfying customer requirements to make supplier integration successful.
Material and service supplier integration
13-2 Supply Chain Integration
Competency that enables firms to offer long-lasting, distinctive, value-added offerings to the customers who represent the greatest value to the firm or supply chain.
Highly customer-integrated firms assess their own capabilities and then match them to customers whose desires they can meet and who offer large enough sales potential for the linkage to be profitable over the long term.
Customer integration
13-2 Supply Chain Integration
Are better at satisfying customers, managing costs, delivering high-quality products, enhancing productivity, and utilizing company or business unit assets, all of which translate into greater profitability for the firms and their partners working together in the supply chain.
Highly Integrated Supply Chains
13-2 Supply Chain Integration
Companies that work closely with their suppliers encounter problems such as corporate culture, information hoarding, and trust issues.
On the other hand, these companies can improve integration through long-term agreements, cross-organizational integrated product teams, and improved communication between partners.
Integration involves a balance between barriers and enablers
13-3 The Key Processes of Supply Chain Management
What is integration
“How” excellent supply chain management works.
13-3 The Key Processes of Supply Chain Management
The business processes on which the linked firms work together represent the “what” of supply chain management—they are what firms, departments, areas, and people focus on when working together to reduce supply chain costs or generate additional revenues
Represent key areas that some or all of the involved firms are constantly working on to reduce costs and/or generate revenues for everyone throughout supply chain management.
Business Processes
13-3 The Key Processes of Supply Chain Management
8 critical business processes
- Customer relationship management
- Customer service management
- Demand management
- Order fulfillment
- Manufacturing flow management
- Supplier relationship management
- Product development and commercialization
- Returns management
1. 13-3a Customer Relationship Management
Once higher-value customers are identified, firms should focus more on providing customized products and better service to this group than to others
Includes customer segmentation by value and subsequent generation of customer loyalty for the most attractive segments.
This process provides a set of broad principles for initiating and maintaining customer relationships and is often carried out with the assistance of specialized CRM computer software
Ex:StarbucksRewards
Designed to identify and build relationships with good customers
Customer Relationship Management
13-3b Customer Service Management
Designed to ensure that those customer relationships remain strong
When the process is well executed, it can have a strong positive impact on revenues, often because of a quick positive response to negative customer feedback and sometimes even in the form of additional sales gained through the additional customer contact
Facilitates touchpoints between the buyer and seller throughout this life cycle
Keeps current customers engaged, and reengage with lapsed customers
Reduce marketing costs while increasing customer communication
Customer Service Management
13-3c Demand Management
Deeks to minimize the costs of serving multiple customers with variable wants and needs
Allows companies in the supply chain to satisfy customers in the most efficient and effective ways possible. Collecting customer data, forecasting future demand, and developing activities that smooth out demand help align available inventory with customer desires.
Ease pressure on the production process and allow companies to satisfy most of their customers through greater flexibility in manufacturing, marketing, and sales programs
Demand Management
13-3c Demand Management
During these meetings, the demand-generating functions of the business (marketing and sales) work together with the production side of the business (procurement, production, and logistics) in a collaborative arrangement designed to both satisfy customers and minimize waste
Sales and Operations Planning
13-3d Order Fulfillment
Involves generating, filling, delivering, and providing on-the-spot service for customer orders.
The best order fulfillment processes reduce order cycle time, while ensuring that the customer receives exactly what they want.
The shorter lead times are beneficial in allowing firms to carry reduced inventory levels and free up cash that can be used on other projects.
Involves understanding and integrating the company’s internal capabilities with customer needs, and matching these together so that the supply chain maximizes profits while at the same time minimizing costs and waste
Order Fulfillment
13-3e Manufacturing Flow Management
Firms with flexible manufacturing can create various goods and/or services with minimal costs associated with changing production techniques.
Creates flexible agreements with suppliers and shippers so that companies can accommodate unexpected demand bursts without disruptions to customer service or satisfaction.
Centers on leveraging the capabilities held by multiple supply chain members to improve overall manufacturing output in terms of quality, delivery speed, and flexibility, all of which tie directly to profitability.
Manufacturing Flow Management
13-3e Manufacturing Flow Management
Products are built before demand occurs, but managers attempt to reduce as much waste as possible.
Lean Supply Chain
13-3e Manufacturing Flow Management
Lie on the other end of the continuum—they prioritize customer responsiveness more so than waste reduction
Wait for demand to occur and use communication and flexibility to fill that demand quickly
Agile Supply Chain
13-3f Supplier Relationship Management
Highly dependent on supplier relationships for flexibility.
Furthermore, as in the customer relationship management process, supplier relationship management provides structural support for developing and maintaining supplier relationships.
By integrating these two ideas, supplier relationship management supports manufacturing flow by identifying and maintaining relationships with highly valued suppliers.
Directly impacts each supply chain member’s bottom-line financial performance
Supplier Relation Management
13-3g Product Development and Commercialization
Commonly, a multicompany collaboration is used to execute new-product development, testing, and launch, among other activities
The capability to develop and introduce new offerings quickly is critical for competitive success versus rival firms, so it is often advantageous to involve many supply chain partners in the effort.
Requires the close cooperation of suppliers and customers, who provide input and serve as advisers and co-producers for the new offering(s).
Designing a new product with the help of suppliers and customers can enable a company to introduce features and cost-cutting measures into final products.
Customers provide information about what they want from the product, while suppliers can help design for quality and manufacturability.
When each supply chain partner shares responsibility for designing and manufacturing a new product, more obstacles can be identified early and opportunities for cost reduction are made possible.
Product Development and Commercialization
13-3h Returns Management
Deals with situations in which customers choose to return a product to the retailer or supplier, thereby creating a reverse flow of goods within the supply chain
Returns can potentially affect a firm’s financial position in a significant and negative way if mishandled. In specific industries, such as apparel e-retailing, returns can amount to as much as 40 percent of sales volume
Can also create additional marketing and customer service touchpoints that firms can leverage to create additional customer value above and beyond regular sales and promotion-driven encounters.
Handling returns quickly creates a positive image and gives the company an additional opportunity to please the customer.
Customers who have positive experiences with the returns management process can become more confident buyers who are more willing to reorder since they know problems encountered with purchases will most likely be quickly corrected.
In addition, the returns management process allows the firm to recognize potential weaknesses in product design and/or areas for potential improvement through direct customer feedback that initiates the return process.
Returns Management
13-4 Sustainable Supply Chain Management
Organization better addresses current business needs and develops long-term initiatives that allow it to mitigate risks and avail itself of future opportunities to preserve resources for future generations and ensure long-term viability.
Success at supply chain sustainability is measured using a concept known as the triple bottom line
Companies that fail to balance these performance objectives appropriately are susceptible to risks that, in the long term, can endanger the continuity of the business.
Sustainability activities within the supply chain include environmentally friendly materials sourcing; the design of products with consideration given to their social and environmental impact; and end-of-life product management that provides for easy recycling and/or clean disposal.
Companies can simultaneously generate cost savings, protect the Earth’s natural resources, and ensure that socially responsible business practices are enacted
Modern businesses are also balancing economic success with social sustainability practices like human rights, labor rights, employee-diversity initiatives, and quality-of-life concerns
Sustainable Supply Chain Management
