OPMAN LESSON 7

SUPPLY CHAIN MANAGEMENT (SCM)

coordination of all activities / starting to raw materials to satisfied customer

Supply Chain

encompasses suppliers, manufacturers and/or service providers, and distributors, wholesalers, and/or retailers who deliver the product or service to the final customer.

• The primary objective of SCM is to structure the supply chain in a way that maximizes competitive advantage and provides significant benefits to the ultimate consumer.

Key Component of SCM

Suppliers

Manufacturers and Service Providers

Distributors and Wholesalers

Retailers

Supplier

provide raw materials and components needed for production.

Play a crucial role in the quality and cost of the final product.

Manufacturers and Service Providers

• transform raw materials to finished products

• ensure efficient production processes to

meet demand and maintain quality.

Distributors and Wholesalers

Act as intermediaries between

manufacturers and retailers.

Manage logistics, storage, and transportation of goods.

Retailers

Sell products and services directly to

consumers.

Responsible for customer service and

final delivery.

Cost Efficiency

reduce cost and improve margins

Speed to Market

reduce lead times and ensure

timely delivery to customers.

Quality Control

close coordination with suppliers and manufacturers

Competitive Advantage

• Cost Efficiency

• Speed to Market

• Quality Control

Customer Satisfaction

Reliability

Responsiveness

Transparency

Reliability

ensures consistent product availability and reliable delivery times.

Responsiveness

ability to adapt to changing customer demands and market conditions.

Transparency

clear communication and tracking throughout the supply chain build customer trust.

Risk Management

Supply Chain Resilience

Flexibility

Supply Chain Resilience

mitigating risks such as supply disruptions, natural disasters, or geopolitical issues.

Flexibility

ability to adjust sourcing and logistics strategies in response to unexpected challenges.

Sustainability

• Environmental Impact

• Ethical Sourcing

Environmental Impact

adjust sourcing and logistics strategies in response to unexpected challenges.

Ethical Sourcing

Ensuring suppliers adhere to ethical labor practices and regulations.

Many Suppliers

A supplier responds to the demands and

specifications of a “request for

quotation,” / lowest bidder. This strategy is common for commodities and involves

playing one supplier against another.

Many Suppliers

Advantages: encourage competition, suppliers accountable

Disadvantages: lacks long term relationships, puts a burden.

Few Suppliers

Forms long-term relationships with a few

dedicated suppliers. This strategy allows

suppliers to understand the broader

objectives of the procuring firm and the

end customer.

Few Suppliers

Advantages: economies of scale, lower transaction costs, lower production costs, design innovation

Disadvantages: high cost of changing partners, risk of becoming captive to suppliers, concerns about trade secrets and supplier alliances.

Vertical Integration

buying a supplier or distributor/backward

Vertical Integration

Advantages: Cost reduction, higher

quality, timely delivery, inventory

reduction.

Disadvantages: High capital

investment, risk in industries

undergoing technological change,

difficulty in maintaining leadership in

every component.

Joint Ventures

technological skills, secure supply/ brand or conceding

Joint Ventures

Advantages: Shared costs and risks,

combined expertise, access to new

markets.

Disadvantages: High cost of

changing partners, risk of becoming

captive to suppliers, concerns about

trade secrets and supplier alliances.

Keiretsu Networks

combination of collaboration/financial supporters

Keiretsu Networks

Advantages: Long-term relationships,

collaboration as partners, technical

expertise, stable quality production.

Disadvantages: Complex network

management, potential for reduced

flexibility..

Virtual Companies

provide services on demand/payroll

Virtual Companies

Advantages: Specialized

management expertise, low capital

investment, flexibility, speed.

Disadvantages: Reliance on supplier

reliability, complexity in managing

dynamic supply chains.

Six Sourcing Strategies

Many Suppliers

Few Suppliers

Vertical Integration

Joint Ventures

Keiretsu Networks

Virtual Companies

Local Optimization

maximizing or minimize/upturns and downturns

Incentives

push merchandise

Large Lots

bias toward large lots/unit shipping

Managing the Integrated Supply Chain

Local Optimization

Incentives

Large Lots

Accurate Information

throughout the supply chain to avoid unintentional distortions.

Better Forecasting

predict demand

Order Smoothing

patterns

Improve Communication

to ensure transparency

Logistic Management

integration of procurement / acquisition/ competitive advantage.

Ethics and Sustainable Supply Chain Management

great stress/offload pollution/ accountability

Strategies for Ethical and Sustainable Supply Chain Management in Hospitality and Tourism

Implement Ethical Standards

Foster Positive Relationships

Engage Stakeholders

Monitor and Report