MGMT339 K12 and K14

Supply Chain

Supply Chain

a sequence of activities and organizations involved in producing and delivering a good or service.

Supply chain sequence

1. suppliers

2. direct suppliers

3. producer

4. distributor

5. final customers

Supply Chain Management

The strategies coordination of the supply chain for the purpose of integrating supply and demand management.

Supply Chain Management Goal

To match supply to demand as effectively and efficiently as possible.

Supply Chain Management key issues

Determining the appropriate level of outsourcing, Managing procurement, Managing suppliers, Managing customer relationships, Being able to quickly identify problems and respond to them.

Purchasing Dept

Responsible for obtaining the materials, parts, supplies, and services
needed to produce a product or provide a service.

1. Purchasing receives the requisition

The requisitions includes a) a description of the item/material desired,
b) the quantity and quality necessary, c) desired delivery dates, d) who is
requesting the purchase

2. Purchasing selects a supplier

Identify suppliers who have the capability of supplying the desired
goods

Purchasing places the order with a vendor

Negotiating for large-volume, large expenditure orders, Annual negotiation of prices.

4. Monitoring orders

Routine follow-up on orders – lengthy lead times, potential delays, etc

5. Receiving orders

Checking incoming shipments for quality & quantity

Many examples of unethical behavior involving supply chains

Claiming a green supply chain when in reality the level of “green” is only
minimal, Ignoring health, safety, and environmental standards, Violating basic rights of workers, Misleading country of origin, Selling goods abroad that are banned at home

Risk of unethical behavior involving supply chains

Risk? When exposed in the media - the major company (brand) is blamed.

Typical supply Chain for a Manufacturer

1. supplier 2. mfg 3. storage 4. dist. 5. retailer 6. customer

typical supply chain for a service

1. supplier 2. storage 3. service 4. customer

Centralized Purchasing

Purchasing is handled by one special department

Benefits of Centralized Purchasing

Can obtain lower prices than decentralized units (higher volume by combining orders) and obtain better service and closer attention from suppliers

Decentralized Purchasing

Individual departments or separate locations handle their own purchasing

Benefits of Decentralized Purchasing

Can focus on local needs, offer quicker response than
centralized purchasing, Save transportation costs by buying
locally, and Create goodwill in the community

Companies can take advantage of both by permitting individual units to
handle certain items (e.g., small orders)

while centralizing purchases of other items.

The service sector now accounts for

more than 70% of jobs in the United States.

2 main reasons for lower manufacturing and higher service employment

increased outsourcing overseas and increased productivity

Increased outsourcing overseas

Some manufacturing work has been outsourced to more productive companies, many in other countries

Increased productivity

Companies find more productive ways of producing goods and can now maintain or even increase their output using fewer workers.

Outsourcing

Paying suppliers and distributors to perform processes and provide needed services and materials.

Vertical Integration

Purchasing the needed processes. A firm chooses vertical integration when it has the skills, volume, and resources to hit the competitive priorities better than outsiders can

Backward Integration

A firm’s movement upstream toward the sources of raw materials,
parts, and services through acquisitions (Ex. a major grocery chain investing in its own plants to produce house brands of ice cream, frozen pizza dough, and peanut butter)

Forward integration

Acquiring more channels of distribution, such as distribution centers and
retail stores (ex. a firm acquiring its business customers)

Benefits of outsourcing

Lower prices (lower labor costs), The ability to focus on core strengths, Shifting some risks to suppliers (e.g., valet parking), Taking advantage of supplier expertise

Outsourcing difficulties

The length of supply chain, Inflexibility due to longer lead times (distant suppliers), Increased transportation costs, Language and cultural differences, Loss of jobs, Loss of control

Offshoring

a supply chain strategy that involves moving processes to another country.

Benefits of Offshoring

Offshoring is more encompassing than outsourcing because it also includes ownership of facilities and internal processes in other countries, Firms are motivated to initiate operations offshore by the market potential and the cost
advantages it provides. The firm may be able to create new markets because of its presence in other countries and its ability to offer competitive prices due to its cost efficiencies.

Next-shoring

a supply chain strategy that involves locating processes in close proximity to
customer demand or product R&D, These processes may be outsourced or owned by the firm and may be in-country or offshore

Supply chain risk management

Managing the risks posed by any factor or event that can significantly disrupt a
supply chain.

A few suppliers exist that offer a very specialized product/service. What are
some supply chain risk management strategies that can be adopted to prepare
for situations where prices rise in one part of the world?

Consider adopting a supply chain strategy of contracting with a
number of geographically dispersed suppliers.