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Chapter 1: Supply Chain Management: An Overview

Learning Objectives
After reading this chapter, you should be able to do the following: Discuss the major change drivers in our economy and in the global marketplace. Understand the rationale for the development of supply chain management in leading organizations.

Appreciate the importance and role of supply chain management among private and public organizations.

Learning Objectives (cont.)

Understand the contributions of a supply chain approach to organizational efficiency and effectiveness. Analyze the benefits that can accrue from implementing effective supply chain practices. Understand the major challenges and issues facing organizations developing and implementing supply chain strategies.

Five major external forces seem to drive the rate of change and shape our economic and political landscape: globalization technology organizational consolidation the empowered consumer government policy and regulation

Physical supply materials management inbound logistics

Physical distribution outbound logistics

Development of the Supply Chain Concept

Started in the 1960s with the development of the physical distribution concept Initial focus on physical distribution or outbound logistics was logical since finished goods During the 1980s, the logistics or integrated logistics management concept developed in a growing number of organizations The underlying logic of the systems or total cost concept was also the rationale for logistics management Supply chain management can be viewed as a pipeline or conduit for the efficient and effective flow of products/materials, services, information, and financials

Major Supply Chain Issues

Supply Chain Networks The network facilities and supporting transportation is important Increased complexity for organizations is a problem Inventory Deployments inventory duplication the bullwhip effect Collection and storage of vast amounts of data Cost/Value efficiency (cost) and effectiveness (value) prevention of suboptimization Organizational Relationships Tradeoffs and optimization Performance Measurement Why and how

Major Supply Chain Issues


challenge is to evaluate and successfully implement the technology



right product, right time, right quantity, right quality, right cost, right destination


Chain Security

concern and potential challenge since 9/11

Chapter 1 Summary

Cash flow has become one of the most important measures of financial viability in todays global markets. Supply chains are an important determinant of improved cash flow since they impact order cycle time to customers. Supply chains are an important determinant of capital consumption since they impact working capital, inventory levels, and other assets such as warehouses. Efficient and effective supply chains can free up valuable resources and improve customer fulfillment systems so as to increase return on investment or assets and improve shareholder value.

The rate of change in our economy has accelerated the necessity of continuing changes in organizations or even transformation to remain competitive.

Chapter 1 Summary (cont.)

The rate of change has been driven by a set of external forces including but not limited to globalization, technology, organizational consolidation and shifts in power in supply chains, an empowered consumer, and government policy and regulations. The conceptual basis of the supply chain is not new. In fact, organizations have evolved from physical distribution management to logistics management to supply chain management. Supply chains need to focus on the customers at the end of the supply chain and be flexible and responsive. Technology is important to facilitate change, but it must follow a process and educate people to address problems and issues appropriately.

Chapter 1 Summary (cont.)

Transportation management and security have become increasingly important in the twenty-first century because of changes that have occurred. Supply chains are boundary spanning and require managing three flowsproducts, information, and financials (cash). Supply chain management is a journey, not a goal, and there are no silver bullets since all supply chains are unique. Information is power, and collaborative relationships internally and externally are a necessary ingredient for success. The performance of supply chains must be measured in terms of overall corporate goals for success.