INTRODUCTION

TO SUPPLY CHAIN
MANAGEMENT

Prepared by Mark A. Jacobs, PhD

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
 Supply Chain Management Defined

A supply chain consists of the flow of products and

services from:
 Raw materials manufacturers
 Component and intermediate manufacturers
 Final product manufacturers
 Wholesalers and distributors and
 Retailers
Connected by transportation and storage activities, and
Integrated through information, planning, and integration
activities
Many large firms are moving away from in-house
Vertically Integrated structures to Supply Chain
Management

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2
 Supply Chain Management Defined
(continued)

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3
 Supply Chain Management Defined
(continued)

The design and management of seamless, value-added processes

across organizational boundaries to meet the real needs of the end
customer Institute for Supply Management
The coordinated set of techniques to plan and execute all steps in the
global network used to acquire raw materials from vendors, transform
them into finished goods, and deliver both goods and services to
customers
Logistics and Supply Chain Management Society
The planning and management of all activities involved in sourcing
and procurement, conversion, and all logistics management activities
… also includes coordination with channel partners, which can be
suppliers, intermediaries, third party service providers, and customers.
Council of Supply Chain Management Professionals

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
4
 Operations and
Supply Chain Strategy
 Supply Chain Management
• The organization of
supply chain activities
• Maximize customer
value.
• Maximize competitive
advantage.
Source: © Image Source/Corbis

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 Difference Between Operations
& Supply Chain Management
• Operations Management refers to processes
within a SINGLE firm.
• Supply Chain Management refers to processes
and exchanges across MULTIPLE firms.

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 Kellogg’s Company
• Maker of popular cereal, breakfast, and snack
products, such as Kellogg’s Corn Flakes, Rice
Krispies, Raisin Bran, Pop-Tarts, Eggo Waffles,
and Nutri-grain bars
• Founded in 1906 in Battle Creek, Michigan, by
W. K. Kellogg.
• Adhere to strong quality standards and
developing new technologies, such as Waxtite
wrappers to keep cereal fresh for long periods of
time.

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 Figure 1.1: Kellogg’s 2006
Sales Around the World (in $ billions)

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 Kellogg’s Supply Chain
• The supply chain consists of 27 manufacturing
plants in the United States and 19 plants in 15
countries around the world, including Australia,
Mexico, India, Brazil, and Japan.
• Key supply chain decisions must be made
throughout Kellogg’s network of plants.

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 Operations Strategy
within a Single Organization
• Cost
– Low-cost operations
• Quality
– Consistent Quality
– Superior Quality
• Time/Delivery
– On-time Delivery
– Delivery Speed
– Product Development speed
• Flexibility
– Range of products/customization
– Variety
– Volume Flexibility

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 Cost
• Cost is often the first thing that companies think
of when they are developing an operations
strategy.
• Lowering prices will lead to reduced profits or
even losses.
• Low-cost operations seek to provide a product
or service that is less expensive than similar
products or services offered by competitors:
– Automation
– Low wage countries

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 Quality
• Quality involves offering a product or service that
is superior to the alternatives in the eyes of the
customer.
• Two Key Aspects of Quality:
– Consistent quality involves meeting the product
specifications and the promises made to customers
with high reliability
– Superior quality is a term describing a product or
service that clearly is better than another in one or
more aspects.

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 Time/Delivery
• Time/delivery refers to the gap between when a
customer orders a product and when he or she
receives it.
– On-time delivery involves delivering a product when
it is promised, but not necessarily quickly.
– Delivery speed means that a corporation offers to
deliver a product or service faster than a competitor.
– Product development speed refers to the time
between generations or major changes to a product.

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 Flexibility
• Differentiate their offerings from those of
companies that emphasize low cost.
– Customization is the ability to make a product to
exactly fit customer needs.
– Mass customization the process in which products
are produced in high volume at roughly the same
cost as standard products, but are customized to
individual customer tastes.
– Postponement which involves keeping products in a
standard format and then adding unique components
for the individual customer at the last possible
moment.

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 Operations’ Role
within Business Strategy
• Business Strategy
• Mission Statement
• Functional Strategies
– Core Goals of Each Department
• Ex. Marketing - % Market Share, Sales Revenue etc.

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 Figure 1.4: Relationships Between
Business Strategy and Functional Strategies

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 Operational Decision Areas
• Operational Decision Areas
– Tactical Tools
• Infrastructural Decisions
– Shorter Term, more frequent, less capital
• Structural Decisions
– Long term, high capital, less frequent

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 Supply Chain Strategy
• Linked set of multiple organizations
• Structured fashion
• Supply Chains have existed since trading routes
were developed.
• Information Technology
– Quick & Inexpensive Communication
• Globalization

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 Global Nature of Supply Chains
• Many companies have increased their offshore
sourcing of parts, components, and finished
goods.
• Manage multiple suppliers and shippers.
• According to the World Trade Organization,
world merchandise exports have risen from
$157 billion in 1963 to $8.907 trillion in 2004, an
increase of 57 times.

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 Global Nature of Supply Chains
• China’s trade with the United States has grown
from $5.7 billion in 1981 to $286 billion in 2005.
• The Council of Supply Chain Management
Professionals (CSCMP) estimates that logistics
costs 9.5 percent of U.S. GDP.
• Numerous challenges in managing that global
supply chain include differing laws and
regulations, different languages, cultural
barriers, and political strife.
• Supply chain management plays a critical role in
managing the manufacture and flow of goods
around the world.
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 Supply Chain Within
a Single Organization
• Many companies have elevated the importance of supply
chain management over the past 10 years .
• Many large companies signal the importance of supply
chain management by appointing a vice president or
director of supply chain management.
• Two Major Supply Chain Areas for Companies
– Sourcing/purchasing includes the processes associated with
identifying material and service needs, locating and selecting suppliers,
negotiating contract and payment terms, and tracking to assess
supplier performance.
– Logistics plans, implements, and manages the efficient, effective flow
and storage of goods and services from the point of origin to the point
of end consumption.

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 Figure 1.5: Organizational Structure
with Detail on Supply Chain Positions

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 Supply Chain
Challenges in Tracing Food
• Complex supply chain for food products in developed
world.
• Traceability in the food supply chain is becoming a major
issue.
• RFID
– Indirect reading
– Allow multiple items to be read
– More information on code
• Contaminated Pet Food from China
– 4,000 pets died
• Food Poisoning
– 76 million illnesses
– 5,000 deaths

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PURCHASING & SUPPLY CHAIN MANAGEMENT, 4e

Introduction to
Purchasing and Supply
Chain Management
Chapter 1

CENGAGE LEARNING
Monczka – Handfield – Giunipero – Patterson
 Cereal Value Chain Example
Grain Cereal
Farmer Processor Packaging Distributor

Packaged
Cereal
Paperboard
Grocer

Corrugated
Box Mfr

Wood Consumer
Labels

Lumber Label Material

Company Mfr
Information

Purchasing & Supply Chain Management, 4e

26
 Supply Chain Analysis in Beef
Industry

By: Dr Ferry Jie

Senior Lecturer, College of Business
RMIT University
 Definition
• Supply Chain Management is the integration of
suppliers, manufacturing, distribution and customers,
in which raw materials run from suppliers to
manufacturers who assemble them into finished
products and organise delivery into the hands of
customers
• Australian Beef Supply Chain is the chain or
sequence of all activities from the breeding property
to the domestic or overseas consumers
Australia Beef SC Structure 1

O
Feedlot V
Live Animal Exporter Importer
E
Farmer Feedlot R
S
Food Service Industry E
A
S
Broker
B
R
Butcher C
Wholesaler Shops O
E Importer
E N
D S
Backgrounding Supermarkets U
I
N Property Exporter M
Importer E
G
R
P S
R Feedlot D
Food
O Broker O
P
Service M
E E
R Food S
T Processing T
Auctions I
Y
Plus C
Wholesaler Butcher
Processing Shops C
(Abbatoir) O
N
S
Saleyards U
M Figure 5.1 Description of Australia
Supermarket E Beef Supply Chain
(Woolworths, R
Coles, Franklin)
Framework
Fattening Importer S
Property
 Background
• Beef sector in Australia is in rapid change because:
– globalisation
– highly competitive beef market (local and export)
– quicker production cycle
– delivery times and reduced inventories
– speed-up of the rate of change in the business
environment
– trend toward more outsourcing of activities
– rapid development of IT
 Supply Chain Practices
• SCM practices is defined as a set of activities
undertaken in an organization to promote
effective management of its supply chain.

• Seven elements of supply chain practice such

as agreed vision and goals, information
sharing, risk and award sharing, cooperation,
process integration, long-term relationship and
agreed supply chain leadership (Min & Mentzer 2004)
 Antecedent Cooperative
Behaviour
• Trust in trading partners is the willingness to
rely on a trading partner in whom one has
confidence (Ganesan 1994; Monczka et al. 1998; Wilson & Volsky 1998; Spekman et al. 1998;
Mariotti 1999).

• Commitment of trading partners is the

willingness of each partner to exert effort on
behalf of the relationship (Hamel & Prahaled 1989; Balsmeiere & Voisin 1996;
Burnell 1999; Dale 1999; Lee & Kim 1999; Tompkins et al. 2002).
 Factor affecting
meat supply chain
• Strategic Partnership and Collaboration
• Traceability
• Customer Relationship Management
• Information Flow and Technology
• Animal Welfare
• Manufacturing & Quality System
• Organisation
• Food Safety
• Logistics
 Conceptual Framework

Supply chain Competitive

Advantage
Supply performance
chain indicators
(Aramyan et al. 2006: Beamon 1999; Gunasekaran et al.
practice 2004: Lunning et al. 2002)
(Li 2002)

Antecedents of
cooperative behaviour
(Trust and Commitment)
(Li 2002)
Strategic supplier Long-term relationships designed to
partnership leverage the strategic and operational
capabilities of individual
participating organizations to achieve
significant ongoing benefits to each
party.
Customer Relationship The practices to manage customer
complaints, build long-term
relationships with customers, and
improve customer satisfaction.

Information sharing The extent to which critical and

proprietary information is
communication to one’s trading
partners.
Information Quality The extent to which
information exchanged is
accurate, timely, complete,
adequate, and credible.
Lean System The practice of driving out the
unnecessary cost, time and
other wastes from the entire
supply chain.
 Antecedents of
cooperative behaviour &
competitive advantage
Trust in trading Partners The willingness to rely on a
trading partner in whom
one has confidence.

Commitment of trading The willingness of each

partners partner to exert effort on
behalf of the relationship.

Competitive Advantage The extent to which an

organization is able to create
a defensible position over its
competitors.
 Supply chain practice framework
Supply Chain Practice
for Australian Beef Enterprises

Strategic Customer Information Information Lean

supplier relation- sharing quality System
partnership ship
 Supply chain performance framework
Supply Chain Performance
for Australian Beef Enterprises

Quality Efficiency Responsiveness Flexibility

• Food quality •Operations cost •Customer response
Animal welfare & (Farm or plant time Flexibility in
health costs) Lead time operations
Occupational
•Inventory cost Order fill rate Volume
Safety & Health
Environment Waste cost Backorders flexibility
Skilled or Transportation Customer returns Delivery
experienced cost On time delivery flexibility
employees Labor costs Handle the late
Records of all Profit orders
inspections and tests
performed
 Competitive advantage framework

Competitive
Advantage

PRICE QUALITY TIME TO SALES

MARKET GROWTH
 Group Assessment
• Form a group. A group consists of 5 students.
• Tasks:
– Choose an agriculture product (for example rice, tomato,
chicken, orange, fish/seafood, or etc)
– Describe company profile
– Draw a supply chain structure and describe/explain
upstream to downstream supply chain (see slide 29 as
example of Australia Beef Supply Chain Structure)
– In total 5 pages (maximum), please submit the report
(softcopy or hardcopy) on Monday 28 March 2016
– An example of Description of Australian Beef Supply
Chain Management structure can be seen in the
textbook (author: Ferry Jie et.al)
• Thanks for listening
• Any questions ?