Supply Chain management unit 1

Five Major External Forces - GLOBALIZATION

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

Five Major External Forces - GLOBALIZATION, Why Global?

 Reach different sources of supply

 Reach more customers

 Take advantage of cost

differences

Five Major External Forces - GLOBALIZATION, Resulting Challenges

 Communication issues

 Currency fluctuation

 Political instability

 Longer lead-times

 Nationalist backlash

Five Major External Forces - 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.

Five Major External Forces - TECHNOLOGY, The internet

“Connected” 24/7

Five Major External Forces - TECHNOLOGY, Social networks

Impact on customer demand and the speed of information transfers

Five Major External Forces - TECHNOLOGY, Optimization

Technology helps us design and run supply chains more effectively

Five Major External Forces - TECHNOLOGY, Robotics

Assist, and in some cases, replace human workers with robots

Five Major External Forces - TECHNOLOGY, A.I

Major game-changer…just wait!

Five Major External Forces – ORGANIZATIONAL CONSOLIDATION

During the 1980s and especially the 1990s, economic power and the driving force in supply chains shifted from product manufacturers to the retail end of the supply chain. Now, there is a balance in power and emphasis on collaboration.

Five Major External Forces – ORGANIZATIONAL CONSOLIDATION, (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”

Five Major External Forces – EMPOWERED CONSUMER

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

Five Major External Forces – EMPOWERED CONSUMER, (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 – Omnichannel distribution strategies

 Deliver when and where I want!

 I’ll return it for ANY reason!

Five Major External Forces – GOVERNMENT POLICY & REGULATION

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

Five Major External Forces – GOVERNMENT POLICY & REGULATION, The transportation industry.

Allowed price competition.

Expanded services beyond transportation, with providers evolving to outsourcing. Airlines – 1978; Trains and Trucks – 1980.

Five Major External Forces – GOVERNMENT POLICY & REGULATION, The financial sector.

More flexible and responsive to customer needs, making businesses more cognizant of supply chain management impact on efficiency and cash flow. Banking – 1999.

Five Major External Forces – GOVERNMENT POLICY & REGULATION, The communications industry.

A component of the information revolution, leading to dramatic improvements and opportunities in supply chains. Telecom – 1996

Five Major External Forces – GOVERNMENT POLICY & REGULATION, The healthcare industry.

Government response to Covid-19 turned the supply chain world upside down! Covid-19 – 2020.

Five Major External Forces – GOVERNMENT POLICY & REGULATION, Trade Wars.

Global trading lanes and economics up in the air due to US-initiated trade negotiations. NAFTA – 1992; USMCA – 2020; Negotiations now – 2025 and 2026.

Five Major External Forces

• These forces acting on your supply chain are

relentless and ever-changing

• It may seem overwhelming to you now

• As you learn more about supply chain

management you will see how executives

tackle these issues

• Despite the challenges, supply chain

executives achieve great operating

performance and help their companies

achieve great financial results in the market!

• As a supply chain manager, you will play a

role in managing and solving many

challenges like these.

Organizational Integration of Enterprise Functions (How do the main functions of an organization work together in the supply chain?) TESTED

Sourcing connects the organization to suppliers, operations transform raw materials into finished products or services, logistics moves and positions inventory throughout the supply chain, and marketing connects the organization to customers. These functions overlap because they must collaborate to move products from suppliers through the organization to customers.

A Simple Supply Chain

Supply chain management (SCM) is the design and management of flows of products, information, and funds throughout the supply chain A supply chain is the network of all entities involved in producing and delivering a finished product to the final customer

The Bullwhip Effect

• A supply chain is composed of many

different companies, each with their

own objectives

• Fluctuation and distortion of

information increase as it moves up the

supply chain

o This is called the bullwhip effect

• The longer the supply chain, the greater

the opportunity for the bullwhip effect

• The way to combat the bullwhip effect

is to share point-of-sale information

with all members of the supply chain

Major Issues in Supply Chain Management, Supply Chain Network

The challenges

 Network system (facilities and

supporting transportation

services) must be capable and

flexible to respond and

change with market

dynamics.

Major Issues in Supply Chain Management, Complexity

The challenges

 Increased requirements in

simplifying and

continually evaluating

areas of complexity in the

various aspects of supply

chains

Major Issues in Supply Chain Management, Inventory Deployment

The challenges

 Increased requirements for

coordination or integration

to reduce inventory levels on

horizontal (single-firm) and

vertical (multiple-firms)

levels in the supply chain.

Major Issues in Supply Chain Management, Information

The challenges

 The sharing of information

along the supply chain

 The discipline to ensure the

integrity of the vast amount of

data collected and stored

Major Issues in Supply Chain Management, Cost and Value

The challenges

 Striking the right balance

between cost and value

 The prevention of sub-

optimization.

Major Issues in Supply Chain Management, Organizational

Relationships

The challenges

 Internal collaboration

(marketing, sales, operations,

finance, etc.)

 External collaboration

(vendors, customers,

transportation companies,

3PLs)

Major Issues in Supply Chain Management, Performance

Measurement

The challenges

 Connecting lower-level

metrics in an organization

directly to the high-level

performance measures of the

organization and the supply

chain

Major Issues in Supply Chain Management, Technology

The challenges

 Evaluate, strategically plan,

and successfully implement

the technology to make the

improvements desired

Major Issues in Supply Chain Management, Transportation

Management

The challenges

 Transport “perfect storm.”

Transport market changes;

driver shortages; equipment

shortages; fuel costs;

infrastructure constraints; and

regulatory changes

Major Issues in Supply Chain Management, Supply chain security

The challenges

 Risk of disruptions, vulnerability, and

exposure to terroristic threats

exacerbated by distance and

complexity in global supply chain

Major Issues in Supply Chain Management, Talent management

The challenges

 Attract, develop, and maintain the

appropriate pool of talent from

entry level to executive level

Characteristics of a Competitive Supply Chain

1. Responsiveness: The ability to respond to customers’

requirements in ever-shorter time frames has become critical.

2. Reliability: Supply chain coordination and sharing of real-time

data and information through information technology has

resulted in greatly improved supply chain reliability. Without

real-time visibility, supply chain disruptions occur.

3. Relationship Management: An important characteristic of

competitive supply chains is their focus on relationship building

and collaboration, rather than the arm’s-length adversarial

relationships that had been dominant in the past.

Gartner “Difference-Makers” in the Supply Chain Game

•Autonomous operations help supply chain organizations create

value and mitigate risk – “According to the 2025 Gartner CEO and Senior Business Executive Survey, within 3 years we will see a shift to 100% automated systems and processes operated without human involvement across many areas”

•Agentic AI introduces a new dimension of supply chain

transformation – “equipped to conduct complex tasks in dynamic environments”

•Leading supply chains are differentiated by well-defined water

stewardship strategies – “Leading companies demonstrate their leadership by integrating water considerations into strategic decisions like site selection and supply chain design.” Issues: droughts, contamination, restrictions, inflated costs, increased demand especially due to data center growth