Week 1

Welcome to the OMGT 228

Supply Chain Management

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Current Event Sources

•Freightwaves.com
•Insidelogistics.ca
•Inboundlogistics.com
•Supplychaindive.com
•Supplychainbrain.com
•Supplychain247.com
•Trucknews.com
•Dcvelocity.com
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Supply Chain Management,
11e

Chapter 1: Supply Chain Management: An

Overview

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Learning Outcomes:
• Describe the forces driving supply chain the rate of change: globalization,
technology, organizational consolidation, empowered consumers and policy.
• Explain basic supply chain concepts: physical distribution, integrated logistics, total
costs, value chain, integrated supply chain, efficient consumer response and bull
whip effect

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Discussion Outline

•Five major external forces

•Development of supply chain management concept
•Integrated supply chain characteristics
•Supply chain flows
•Major supply chain issues

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John C. Maxwell Quote

“ Change is inevitable, but growth and improvement

are optional.”

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Leading Retailers (Sales Year)
2000 2010 2015 2019 2021

1. Wal-Mart 1. Wal-Mart 1. Wal-Mart 1. Wal-Mart 1. Wal-Mart

2. Kroger 2. Kroger 2. Costco 2. Amazon 2. Amazon

3. The Home 3. Target 3. Kroger 3. Kroger
3. Costco
Depot
4. Sears, Roebuck 4. Walgreen 4. The Home Depot 4. Costco 4. Home Depot
& Company
5. Kroger
5. Kmart 5. Home Depot 5. Target 5. Walgreens Boots Alliance
6. Walgreens
6. Albertson’s 6. Costco 6. Walgreen’s 6. The Home Depot
7. Target
7. Target 7. CVS Caremark 7. CVS Caremark 7. CVS Health Corporation
8. JC Penney 8. Lowe’s 8. Amazon.com 8. Target 8. CVS

9. Costco 9. Best Buy 9. Lowe’s 9. Lowe’s Companies 9. Lowes

10. Safeway 10. Sears Holdings 10. Best Buy 10. Albertsons Companies
Source: Table 1.1
10. Albertsons
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Six Major Change Drivers

Source Figure 1.1: Center for Supply Chain Research, Penn State University.

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1. Globalization

Globalization creates more economic and political risk, shorter product life cycle, and the blurring of
traditional organizational boundaries.

Inventory management challenges

 Faster duplicability of products & services
 Shorter product life cycles
 Requirement of new pricing policies
 Higher risk of obsolescence and disruptions

Longer and more complex supply chain challenges

 Growth and increased scope of outsourcing
Images courtesy of Daily Lending News

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2. Technology

Technology is a facilitator of internal process and supply chain transformation. It is also a major
force in changing the dynamics of the marketplace.

The Internet. “Connected” 24/7

Social networks. Impact on customer demand and the

speed of information transfers

The world’s “knowledge pool” connection. Opportunities

for collaboration in supply chains, smaller companies
can take advantage of larger market
Images courtesy of National Conference of
State Legislatures

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3. Organization Consolidation and Power Shifts

During the 1980s and especially the 1990s, economic power and the driving force in supply chains
shift from product manufacturers to the retail end of the supply chain.

More collaboration among organizations in

supply chains
 Win-win, improved services such as:
• Scheduled deliveries
• “Rainbow” pallets
• Advance shipments notices (ASNs)
• shrink-wrapped pallets
 Sharing of point-of-sale data to mitigate
“bullwhip effect”

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4. Empowered Consumers

Consumers are empowered by exponentially expanded access to product sources and related information
and increased buying power due to high income levels.

Increased pressures on supply chain due to

increased demands at the retail level in terms
of:
 Competitive prices
 High quality in products and services
 Tailored or customized products
 Convenience and responsiveness – 24/7
availability with a minimum of wait time
 Flexibility: Omni-channel distribution strategies
 Mass customization

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5. Government Policy and Regulation
More competitive environment is a result of the deregulation of several important sectors in the United
States occurred in the 1980s and 1990s.

The transportation industry. Expanded services beyond

transportation, with service providers’ role evolving to
outsourcing partners
The financial sector. More flexible and responsive to
customer needs, making businesses more cognizant of
supply chain management impact on efficiency and cash
flow
The communications industry. A component of the
information revolution, leading to dramatic
improvements and opportunities in logistics and supply
Images courtesy of Liberty Unyielding
chains

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6. Sustainability

The pursuit of sustainability is widely recognized as a key element of successful supply chain
management. This is critical to effective risk management and achieving competitive advantage.

Society. Focus on people is a significant concern in

the area of sustainability

Environment. The objective of being “green” is a key

element of making positive contributions to improving our
environment. There are many ways in which supply
chains may help to achieve desired outcomes.
Economy. Continued economic and financial
sustainability is essential to making future positive
impacts on society and the environment

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Evolution of Supply Chain Management Concept

Activity fragmentation to 1960s Activity integration 1980s 1990s +

Demand forecasting
Purchasing
Purchasing /
Requirements planning
Materials
Production planning
Management
Manufacturing inventory
Warehousing Integrated
Material handling
Logistics
Packaging
Finished goods inventory Supply Chain
Distribution planning Physical Management
Order processing Distribution
Transportation
Customer services
Strategic planning
Information services
Marketing/Sales
Finance

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Integrated Supply Chain – Basics

SCM is the art and science of integrating the flows of products, information and financials through the entire
supply pipeline from the supplier’s supplier to the customer’s customer.

Suppliers Contracted Manufacturers Wholesalers/ Retailers/

Manufacturers Distributors Customers

Product/Services Flow
Information Flow
Finance /Cash Flow
Demand Flow

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Integrated Supply Chain – Network

Raw
Manufacturing Manufacturing Wholesaler Retailer Retail Store
Material
Plant Warehouse Warehouse Warehouse
Supplier

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Supply Chain Flows

PRODUCT FLOW
• Physical movement of goods and materials

INFORMATION FLOW
• Enabling physical flow of products
• Decision making
• Supply chain collaborations

CASH FLOW
• Management of working capital

DEMAND FLOW
• Detect and understand demand signals
• Synchronize demand vs. supply

Source: Figure 1.8

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Major Supply Chain Issues

4 9
Transportation
Information
management
2 7
Performance
Complexity
1 5 measurement
10
Supply chain Cost and Supply chain
network value security
3 8
Inventory
Technology
deployment 11
6
Organizational Talent management
relationships

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GSCM accessible
Ch 1- 19website, in whole or in part. 19
Major Supply Chain Issues (continued)

Supply Chain Network Complexity Inventory Deployment

The challenges The challenges The challenges

Network system (facilities and  Increased requirements in  Increased requirements for
supporting transportation simplifying and continually coordination or integration to
services) must be capable and evaluating areas of reduce inventory levels on
flexible to respond and change complexity in the various horizontal (single-firm) and
with market dynamics. aspects of supply chains vertical (multiple-firms)
levels in the supply chain.
Images courtesy of (left to right) Elemica, The Mudd Partnership, Qstrock Inventory

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Major Supply Chain Issues (continued)

Organizational
Information Cost and Value
Relationships

The challenges The challenges The challenges

 Internal collaboration
 The sharing of information  The prevention of sub-
along the supply chain optimization. (marketing, sales, operations,
 The discipline to ensure the finance, etc.)
 External collaboration
integrity of the vast amount
of data collected and stored (vendors, customers,
transportation companies,
3PLs)
Images courtesy of (left to right) TTGT Media, in-sourcing, The Billing Project.

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Major Supply Chain Issues (continued)

Transportation
Performance Measurement Technology
Management

The challenges The challenges The challenges

 Connecting lower-level  Evaluate, strategically  Transport “perfect storm.”
metrics in an organization plan, and successfully Transport market changes;
directly to the high-level implement the technology driver shortages; fuel costs;
performance measures of the to make the improvements infrastructure constraints; and
organization and the supply desired regulatory changes
chain

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Major Supply Chain Issues (continued)

Supply chain security Talent management

The challenges
 Risk of disruptions, vulnerability, and The challenges
 Attract, develop, and maintain the
exposure to terroristic threats exacerbated
by distance and complexity in global supply appropriate pool of talent from entry level to
chain executive level

Images courtesy of (left to right) One Source Technology, MediaTec Publishing

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 The rate of change has been driven by a set of external
forces including globalization, technology, organizational
consolidation and shifts in power in supply chains,
empowered consumers, and government policy and
regulations.
 Supply chains are extended enterprises which require
managing four flows—products, information, financials
(cash), and demand on a collaborative basis.
 The global supply chains of the best companies must be
adaptive, resilient, and responsive to meet the
challenges of the global economy and develop
mitigating strategies for disruptive forces.

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