2. 15-2
You should be able to:
LO 15.1 Explain the terms supply chain and logistics
LO 15.2 Name the key aspects of supply chain management
LO 15.3 List, and briefly explain, current trends in supply chain management
LO 15.4 Outline the benefits and risks related to outsourcing
LO 15.5 Explain what the main supply chain risks are, and what businesses can do to minimize
those risks
LO 15.6 Describe some of the complexities related to global supply chains
LO 15.7 Briefly describe the ethical issues in supply chains and the key steps companies can take to
avoid ethical problems
LO 15.8 Describe the three concerns of small businesses related to the supply chain and suggest
ways to manage those concerns
LO 15.9 List several strategic, tactical, and operational responsibilities related to managing the
supply chain
LO 15.10 Discuss procurement in terms of the purchasing interfaces, the purchasing cycle, ethics,
and centralized versus decentralized decision making
LO 15.11 Briefly describe the key aspects of supplier management
LO 15.12 Discuss the logistics aspects of supply chain management, including RFID technology
LO 15.13 Discuss the issues involved in managing returns
LO 15.14 Describe some of the challenges in creating an effective supply chain and some of the
trade-offs involved
Chapter 15: Learning Objectives
3. 15-3
Supply Chain:
the sequence of organizations - their facilities,
functions, and activities - that are involved in
producing and delivering a product or service
Logistics:
the part of a supply chain involved with the
forward and reverse flow of goods, services, cash,
and information.
Supply Chain
LO 15.1
4. 15-4
The goal of SCM is to match supply to demand as
effectively and efficiently as possible
Key issues:
1. Determining appropriate levels of outsourcing
2. Managing procurement
3. Managing suppliers
4. Managing customer relationships
5. Being able to quickly identify problems and respond to
them
Key Aspects of SCM
LO 15.2
5. 15-5
Trends affecting supply chain design and
management:
Measuring supply chain ROI
“Greening” the supply chain
Re-evaluating outsourcing
Integrating IT
Adopting lean principles
Managing risks
Trends in SCM
LO 15.3
6. 15-6
Benefits:
Lower prices may result from lower labor costs
The ability of the organization to focus on its core strengths
Permits the conversion of some fixed costs to variable costs
It can free up capital to address other needs
Some risks can be shifted to the supplier
The ability to take advantage of a supplier’s expertise
Makes it easier to expand outside of the home country
Risks
Inflexibility due to longer lead times
Increased transportation costs
Language and cultural differences
Loss of jobs
Loss of control
Lower productivity
Loss of business knowledge
Knowledge transfer and intellectual property concerns
Increased effort required to manage the supply chain
Benefits & Risks of Outsourcing
LO 15.4
7. 15-7
Supply Chain Risks
Supply chain disruption
Natural disasters
Supplier problems
Quality Issues
Another form of disruption that may disrupt supplies
and lead to product recalls, liability claims, and
negative publicity
Loss of control of sensitive information
If suppliers divulge sensitive information to
competitors, it can weaken a firm’s competitive
position
Supply Chain Risks
LO 15.5
8. 15-8
Global supply chains
Product design often uses inputs from around the world
Some manufacturing and service activities are outsourced to
countries where labor and/or materials costs are lower
Products are sold globally
Complexities
Language and cultural differences
Currency fluctuations
Political instability
Increasing transportation costs and lead times
Increased need for trust amongst supply chain partners
Global Supply Chains
LO 15.6
9. 15-9
Three small business SCM concerns:
1. Inventory management
Carry extra inventory as a way to avoid shortages due to supply chain interruption
Have backups for delivery from suppliers and to customers
2. Reducing risks
Use only reliable suppliers
Determine which suppliers are critical and get to know them and any challenges
they have
Measure supplier performance
Recognize warning signs of supplier issues
Have plans in place to manage supply chain problems
3. International trade
Work with someone who has expertise to help oversee foreign suppliers
Set expectations for demand and timing
Do not rely on a single supplier
Build goodwill to help in negotiations and resolving any problem that arise
Consider using domestic suppliers if the risks of working with foreign suppliers are
prohibitive
Small Business Concerns
LO 15.8
10. 15-10
Management Responsibility:
Strategic
Certain strategic responsibilities have a major
impact on the success of both supply chain
management and the business itself:
Supply chain strategy alignment
Network configuration
Information technology
Products and services
Capacity planning
Strategic partnerships
Distribution strategy
Uncertainty and risk reduction
LO 15.9
11. 15-11
The purchasing department is responsible for
obtaining the materials, parts, and supplies and
services needed to produce a product or provide
a service.
The goal of procurement
Develop and implement purchasing plans for
products and services that support operations
strategies
Procurement
LO
15.10
13. 15-13
Logistics
Logistics
Refers to the movement of materials, services,
cash, and information in a supply chain
Movements within a facility
Incoming shipments
Outgoing shipments
LO
15.12
14. 15-14
Reverse Logistics
The process of transporting returned items
Products are returned to companies or third party
handlers for a variety of reasons and in a variety of
conditions
Elements of return management
Gatekeeping
Screening returned goods to prevent incorrect acceptance of
goods
Avoidance
Finding ways to minimize the number of items that are
returned
Managing Returns
LO
15.13
15. 15-15
It begins with strategic sourcing
Analyzing the procurement process to lower costs by
reducing waste and non-value-added activities, increase
profits, reduce risks, and improve supplier performance
There must be
Trust
Effective communication
Information velocity
Supply chain visibility
Event management capability
Performance metrics
Creating an Effective Supply Chain
LO
15.14
