Chapter 1 Flashcards
Goal of SCM
- Meet customer needs better than competitors.
- Building processes that can design, make, and deliver innovative, high-quality, low-cost products and services that meet customer demand.
Adam Smith
1 - Wealth of a nation is the product of its labor.
2 - Greatest improvements in the product of labor result from division of labor.
Upstream Suppliers & Downstream Customers
- Purchased goods and services flow from upstream suppliers through the focal firm to downstream customers.
- Information flows both ways.
Definition of SCM
Supply Chain Management is the design and management of seamless value-added processes across organizational boundaries to meet the real needs of the end customer.
Value Chain - Michael Porter
- Executive mgmt defines the strategy & allocates resources.
- Research and development = new product design
- SCM coordinates upstream supply base
- Operations uses supplies to make products.
- Logistics moves products.
- Marketing manages downstream relationships.
- Accounting maintains records.
- Finance acquires and controls capital.
- IT builds and maintains systems.
The Bullwhip Effect
- As demand moves down the supply chain, it decreases.
- Greater uncertainty exists farther away from the final customer.
- Demand variations are likely to be exaggerated as decisions are made up the chain.
- Demand increases begin at the retailer level.
- Small changes in retail-level demand get magnified as they ripple through the chain.
Internal Process Integration
Goal is to increase collaboration among the company’s functional groups.
Backward Process Integration - 1st tier suppliers
Leading companies are extending this form of integration to 2nd tier suppliers.
Forward Process Integration - 1st tier customers
Few companies have targeted integration with their customers’ customers.
Complete forward and backward integrations
Goes from the suppliers’ suppliers to the customers’ customers.
SCM and relay races
- Each company does what it does best and then passes the baton to the next company in the chain.
- Relay teams have a coach but SC coaches don’t exist. Managers focus on a pair of hand offs, one to the supplier and one to the customer.
- Each relay involves 3 hand offs, success in business requires many hand offs.
- SCM is strategic, cutting across the whole organization.
Stratego
- Greek
- To plan the destruction of one’s enemies through effective use of resources.
- Strategies should do more than just beat the competition, they should help the company meet the real needs of the customer.
- The best strategy is the one that achieves key objectives w/o having to go to battle.
Contingency Theory
- Conceptualized the relationship between a changing environment, managerial decision making, and performance.
- Managers need to recognize the implications of a changing environment and use company resources effectively (contingent response determines how well a company can adapt)
- K-mart vs. Walmart and Target
Industrial Organization Theory
- Claims that market forces should drive decision making.
- Kimberly Clark (Kleenex)
- A company’s power to influence the market is determined by the power of:
1. Suppliers
2. Buyers
3. Existing Rivals
4. Potential Rivals
5. Providers of Substitute Products.
Resource-based Theory
- Emphasizes the management of internal resources to establish a hare-to-imitate advantage.
- Building organizational skills to deliver distinctive products and services.
- Honda (developed core competence)
Core Competence
When a company develops unique skills and processes that lead to competitive advantage.
Four Decision Areas of Strategy
- Environment
- Resources
- Objectives
- Feedback
Environment
- Great managers are aware of competition, economy, and politics.
- Culture in global operations
- Internal Environment
- Internal & external environments determine which competitive factors should be evaluated to help win.
Resources
- All assets, including people, technology, infrastructure, materials, and money.
- Success now involves investments in knowledge and processes (hard-to-copy - integrate human and tech. resources)
Objectives
- A goal that unifies decision making throughout the company.
- Focus on earnings, profitability, and stock price.
- Create customer value
Feedback
- Helps managers adapt the organization’s strategy to meet the demands of a changing world.
Internal Environments
- Corporate Culture
- Competitive Priorities
- Functional Relationships
- Reward Systems
External Environments
- Competitive
- Cultural
- Economic
- Legal
- Political
Competitive Factors
- Comparative Advantage Factors
- Core Competencies
- Customer Characteristics
- Industry Structure
- Source and Level of Competition
- Supply-Base Capabilities
SC Thinking
- Looking at the world differently
- See opportunities to build unique SC-enabled business models
- Dell (use of contract manufacturers), Honda (use of suppliers), Wal-Mart (use of cross-docking)
- Leverage the skills and resources of diverse companies in the SC to deliver exceptional value to end customers.
Valid Business Model
- What is our business?
- How can we do it better than anyone else? (resources)
- Peter Drucker - “valid definition of business power - to create a customer”
- Identitiy = ability to meet the real needs of customers.
SC Thinking and Environment
- View change as a challenge and opportunity.
- Leverage relationships and tech. to respond to changes.
- Assess the unique needs of consumers in diverse country markets.
SC Thinking and Resources
- Develop unique, boundary-spanning capabilities.
- Develop and manage supplier capabilities.
- Leverage customer resources when possible.
- Build world-class SC team. Develop skills to motivate members.
SC Thinking and Objectives
- Help the SC satisfy end-customer needs.
- Help 1st tier customers be more competitive.
- Build continuous-improvement-based advantage.
- Achieve sustained profitability.
SC Thinking and Feedback
- Measure process and SC performance.
- Share performance data to drive learning.
- 2 way info. and idea sharing with both customers and suppliers.
Road Map to SC Success
- Who are we? (defines why a company exists)
- How do we fit? How should we fit? (understanding how the chains operate)
- How do we get there?
“As-Is” Map
- Helps managers evaluate the SWOT of their company’s current position.
- See and grasp the nuances that define how the chain works.
“To-Be” Map
- Guides the process by creating visibility regarding the right players, the right relationships, the right roles and responsibilities, and the right organization structure and systems.
- Guides critical decisions.
4 decision areas to promote better collaboration:
- Relationship Management.
- Information Sharing
- Performance Measurement
- People Empowerment
