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· A network of activities that deliver a finished product or service to the customer |
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| The supply chain should be called..... |
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o Customers, retailers, distributors, manufacturers, suppliers |
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encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all Logistics Management activities
o Vital business function that coordinates and manages all the activities of the supply chain linking suppliers, transporters, internal departments, third party companies, and information systems
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o Provide the necessary raw materials, services, and component parts
o Purchased materials and services frequently represent 50% (or more) of the cots of goods sold |
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directly supplies materials or services to the firm that does business with the final customer
§ Ex. Cardboard container manufacturer
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o provides materials or services to tier one suppliers
§ Ex. Paper mill |
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o provides materials or services to tier two suppliers
§ Ex. Lumber company |
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| Internal functions include |
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| processing, purchasing, production planning & control, quality assurance, and shipping |
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· activities involved in obtaining, producing, and distributing materials and products in the proper place and in proper quantities |
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| the selection, scheduling & control of carriers for both incoming & outgoing materials & products |
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§ the packaging, storing & handling of products in transit to the end- user
· Responsible for movement of material from the manufacturer to the customer |
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| Inaccurate or distorted information created by the supply chain leads to the |
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| Some causes of the Bullwhip Effect are |
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| demand forecast updating, order batching, price fluctuations, rationing and shortage gaming |
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· Short- Circuit the Bullwhip by.. |
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o Make information transparent
§ Use Electronic Data Intercharge (EDI) to support Just- in- Time supplier replenishment
§ Use bar codes & scanning to share point- of- sale (pos) data
o Eliminate wholesale price promotions & quantity discounts
o Allocate scarce items in proportion to past sales to avoid attempts to “game” the system |
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| Electronic Data Intercharge (EDI): |
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| the most common method of using computer-to-computer links to exchange data between supply chain partners in a standardize format |
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| a measure of how much of the supply chain is controlled by the manufacturer |
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o acquiring control of raw material suppliers |
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| acquiring control of distribution channels |
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· entails paying third-party suppliers to provide raw materials and services, rather than making them in-house
o Is increasing as many firms try to focus their internal operations on what they do best
o Today they purchase 60-80% |
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o Cost minimization
o Refocus organization to core
o Improvement in operating efficiency
o Increased market share and revenue
o A reduction in direct operating costs |
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· Criteria for Choosing Suppliers |
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o Cost: cost per unit and transaction costs
o Quality: conformance to specifications
o On-time delivery: speed and predictability |
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· Arguments for One Supplier per Item |
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o May only be one practical source for the item
o The supply chain is integrated to support JIT or EDI
o Availability of quantity discounts
o Supplier may be more responsive if it is guaranteed all your business for the item
o Contract might bind you to using only one supplier
o Deliveries may be scheduled more easily |
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· Arguments for Multiple Suppliers per Item |
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o Competition among suppliers may provide better service and price
o Allows for testing of new suppliers without jeopardizing the flow of materials
o Provides greater volume flexibility
o Eliminates purchaser’s dependence on a single source of supply
o Government regulation may require multiple suppliers
o Multiple suppliers spreads the risk of supply chain interruption |
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| a process of developing a long-term relationship with a supplier based on mutual trust, shared vision, shared information, and shared risks |
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· used for long-term storage with minimal handling |
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· used for short-term shortage, consolidation, and product mixing
o Used for movement and handling
o Goods are received in large-volume lots and broken down into small individuals orders |
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