Supply Chains and Management

Supply Chains and Supply Chain Management

• Effective supply chain management (SCM) gives companies a competitive edge.
• Companies balance product and service demand with supply by visualizing and controlling the entire supply chain.
• A supply chain is the interconnected network of business entities, both internal and external, performing or supporting logistical functions.
• Supply chain management coordinates and integrates activities of supply chain members into a seamless process from origin to consumption, enhancing customer and economic value.

Evolution of Supply Chain Management

• In the late 19th century mass production era, manufacturers pushed standardized products through marketing channels to consumers.
• Salespeople would persuade consumers to buy whatever was produced.
• The modern marketplace inverts this logic, with products and services being "pulled" into the marketplace by customers.
• Organizations are now partnering with supply chain members to enhance customer value.

Supply Chain Agility

• Supply chain agility is an operational strategy focused on creating inventory velocity and operational flexibility.
• Agile companies share supply-and-demand market information.
• Agile companies focus on activities that create direct customer benefits.
• Agile companies partner closely with suppliers and service providers to reduce customer wait times.
• Reduce complexity by evaluating and reducing stock keeping units (SKUs) not being purchased by customers.

Outsourcing

• Effective SCM requires teamwork between a firm and its partners.
• Outsourcing (contract logistics) involves a manufacturer or supplier using an independent third party to manage logistics functions like transportation, warehousing, or order processing.
• A third-party logistics company (3PL) provides functional logistics services
• 3PL companies help manage warehouse space, provide transportation solutions, assist with information sharing, and provide enhanced technological innovations.

Reshoring and Nearshoring

• Firms previously sought global partners for customer service or manufacturing, aiming for lower costs.
• Today's companies seek solutions reducing supply chain risk and tightening operational control.
• Reshoring reinstitutionalizes a business process from an outsource location back to the original location for economic advantage.
• Nearshoring transfers outsourced activity from a distant country to a nearby one.

Globalization of Supply Chains

• Companies globalize to tap into strong foreign markets and cheap labor, and to take advantage of trade barriers/tariffs.
• Moving offshore can expose companies to geopolitical conflict, foreign nationalization of assets, knowledge leakage to foreign competition, and quality risks.
• Resources for manufacturing and selling goods are becoming scarcer on a worldwide scale, thus market boundaries are melting.
• The balancing of supply and demand, and increased customer satisfaction worldwide is becoming more attainable.

Benefits of Effective Supply Chain Management

• Effective supply chain management results in, lower inventory, transportation, warehousing, and packaging costs.
• Effective supply chain management means greater logistical flexibility.
• Effective supply chain management means improved customer service.
• Effective supply chain management means higher revenues.
• Research indicates a clear correlation between supply chain performance and both profitability and company value.
• Radio-frequency identification (RFID) uses radio waves to locate inventory within a contained geographic space.

Lean Strategy

• A lean strategy balances inventory needs, minimizes overstocking, and maximizes cash flow.
• The COVID-19 pandemic highlighted the fragility of lean supply chains, making preparedness crucial for managers.
• As a result of supply chain problems, businesses are rethinking what it means to be agile.
• Redesigning a supply chain can improve the bottom line.

Supply Chain Integration

• Supply chain orientation is a system of management practices that are consistent with a "systems thinking" approach.
• Five characteristics of supply chain oriented organization:
  • Credibility
  • Benevolence
  • Cooperative
  • The support of top management
  • Effective execution and direction of supply chain activity.

Supply Chain Integration Definition

• Supply chain integration occurs when multiple firms or business functions coordinate activities and processes for seamless linkage to satisfy customers.
• Integration in modern supply chains can be internal, external, or both.
• Demand-supply integration (DSI) integrates supply management and demand-generating functions.

External Integration

• Five types of external integration for connected organizations in a world-class supply chain include:
  • Relationship integration
  • Measurement integration.
  • Technology and planning integration
  • Material and service supplier integration
  • Customer integration
• Achieving both internal and external integration is very important.
• Integration involves balancing both barriers and enablers.

Key Processes of Supply Chain Management

• Integration constitutes how excellent supply chain management functions.
• Business processes refer to the activities connected firms engage in which constitutes the objective of SCM, such as reducing expenses or boosting earnings.
• Business processes- Bundles of interconnected activities that stretch across firms in the supply chain

Customer Relationship Management

• Customer relationship management (CRM) prioritizes marketing focus on different customer groups based on each group's long-term value to the company or supply chain.
• CRM provides principles for initiating and maintaining customer relationships, often using specialized CRM computer software.

Customer Service Management

• Customer service management presents a unified multi-company response system to address customer complaints, concerns, questions, and comments.
• Executed well, customer service management can positively impact revenues.
• The use of customer care software enhances the customer service management process.

Demand Management

• Demand management aligns supply and demand by anticipating customer requirements at each level, creating demand-related plans before purchases.
• Activities include data collection, future demand forecasting, and smoothing activities for inventory alignment with customer desires.
• Sales and operations planning (S&OP) aligns production with demand by merging tactical and strategic planning across business functions.

Order Fulfillment

• The order fulfillment process involves generating, filling, delivering, and providing on-the-spot service for customer orders.
• The best processes to reduce order cycle time.
• Order fulfillment is a highly integrated process requiring coordination among multiple companies and functions for customer satisfaction.
• Order cycle time refers to the time delay that occurs between the placement of a customer's order and the ultimate receipt of that order.

Manufacturing Flow Management

• Manufacturing flow management ensures firms have resources for flexible manufacturing and multistage production.
• Flexible agreements with suppliers and shippers enable companies to accommodate demand without disrupting service.
• The goal is to leverage supply chain members' capabilities to improve output quality, delivery speed, and flexibility, directly tying to profitability.
• Modular refers to the standardized component parts designed so the parts are easily replaced or interchanged

Supplier Relationship Management

• Supplier relationship management supports manufacturing flow by identifying and maintaining relationships with highly valued suppliers
• Integrated relationships with customers and suppliers can improve performance.
• Supplier relationship management directly impacts each supply chain member's bottom-line financial performance.

Product Development and Commercialization

• Product development and commercialization includes activities that facilitate joint development and marketing between supply chain partner firms on new offerings
• Developing and introducing new items quickly is critical for success versus rivals, which makes many supply chain partnerships advantageous.
• Suppliers and customers collaboration in new product design can allow a company to introduce features and cost cutting measures to final products.

Returns Management

• Returns management enables firms to manage returned product efficiently, minimize costs, and maximize the value of returned assets
• Effective returns management can create more marketing and customer service touchpoints for creating additional customer value beyond regular sales and promotions

Sustainable Supply Chain Management

• Sustainable supply chain management involves optimizing both social and environmental costs, in addition to financial costs.
• The organization will be better able to address current businesss need and create initiatives that allow it to preserve resources to enable long term viability.
• Success at supply chain sustainability is measured using a triple bottom line.
• The triple bottom line includes the financial, social, and environmental effects of a company’s policies and actions.

Sustainable Practices

• Enacting sustainable supply chain management principles can simultaneously generate cost savings, protect resources, and ensure responsible business practices.
• Businesses must balance economic success with social sustainability initiatives like human rights, labor rights, employee diversity, and quality-of-life.
• Research supports a strong business case for sustainability initiatives.
• Greenwashing is when a firm publicly claims environmental or social sustainability but fails to meet these standards.

Digitalization of The Supply Chain

• Digitalization uses of digital technologies to change a business model and provide new revenue or value
• It occurs throughout modern SCM: Demand sensing and decision making, Digitalized process management, Digitalized distribution, Digitalized product and supply chain integrity/verification

Digitalized Demand Sensing and Decision Making

• The Internet of Things (IoT) involves interrelated computing devices, mechanical and digital machines, objects, animals, and people connected and able to transfer data over a network.
• Big data involves rapidly collected, difficult-to-process, large scale data sets that push current analytical capabilities.
• Supply chain analytics involves data analysis to support improved design and management of the supply chain.

Tech That Helps With Decisions

• So that computers not only calculate answers but also ask questions, using technology such as:
  • Artificial intelligence (AI) focuses on making machines simulate human intelligence.
  • Machine learning (ML) provides systems the ability to automatically learn and improve from experience without being explicitly programmed.

Digitalized Supply Chain Processes

• Applications and tools useful for executing supply process tasks include:
  • Cloud computing, the practice of using remote network servers to store, manage, and process data.
  • Advanced robotics to act autonomously, interact with people/environment, and modify behavior.
  • Automated vehicles, cars, trucks or other modes of transportation that do not require a human driver to operate safely.
  • Drones, unmanned aerial vehicles controlled remotely or autonomously.

Digital Distribution

• Digital distribution includes any product or service that can be distributed electronically, such as fiber optic cable.
• Beyond services composed of bits and bytes of information experiments with three-dimensional printing have been successful in a variety of industries.
• Three-dimensional printing creates three-dimensional objects through additive manufacturing, layering raw material into desired shapes.

Digitalizing Supply Chain Integrity

• Globalization means supply chains tend to get more complex, yet end users expect low errors.
• Supply chain traceability relates to the degree a business can track a product, raw materials states and during final delivery to the consumer.
• Blockchain is a digital ledger where transactions are made and recorded chronologically and publicly.

Marketing Channels

• A marketing channel is a pipeline for products, ownership, communication, financing, payment, and associated risk flow.
• A marketing channel or distribution is the same thing, and includes a set of interdependent organizations that enables the transfer of ownership as products move from producer to business user or consumer.
• Supply chain members move to component parts/raw materials to the producer, and marketing channel propel finished goods toward the customer, or provide value.
• Channel members negotiate, buy/sell products, and change the ownership between buyer and seller as goods move from manufacturer to final consumer

How Marketing Channels Work

• Marketing channels derive economies of scale through its specialization and division of labor, particularly for upstream producers lacking marketing resources.
• Some channel members have built strategic relationships with key suppliers or customers or have unique capabilities that enable them to accomplish tasks more efficiently.
• Marketing channels create utility for customers.

How Marketing Channels Create

Marketing channels make:

• Form utility – The elements of the composition and appearance of a product that make it desirable
• Time utility – The increase in customer satisfaction gained by making a good or service available at the appropriate time
• Place utility – The usefulness of a good or service as a function of the location at which it is made available
• Exchange utility – The increased value of a product that is created as its ownership is transferred

Channel Intermediaries

• Intermediaries negotiate, facilitate ownership transfer, move products from producer to the final consumer.
• A key difference separating intermediaries is whether they take title to the product, actually owning and controlling the terms of the sale.
• Examples of intermediaries include:
  • Merchant wholesalers which buys and receives, takes title to goods from manufacturers.
  • Agents and brokers which do not take title, but sell product from producer to user.
  • Retailers which facilitate channel and sell directly to consumers.
• The product, buyer considerations, and conditions determine the types and number of intermediaries the producer employs.

Channel Functions by Intermediaries

• Intermediaries in marketing channels perform functions that enable goods to flow between producer and consumer:
  • Transactional functions involve contacting and communicating with buyers to advise them of features and benefits.
  • Logistical functions involve transportation, storage, sorting, accumulation, consolidation, and allocation.
  • Facilitating functions include research and financing

Channel Structures

• A product takes a route to reach consumers.
• Producers use a direct channel to sell to consumers to keep prices low.
• Direct marketing like telemarketing, mail, catalog shopping and form of electronic retailing are good examples of direct channels.

Direct Channels

• A direct channel helps producers sell directly to consumers
• Direct channels have no intermediaries

Business and Industrial Channels

• There are five channel structures in business and industrial markets.
• Direct channels are typical in business and industrial markets.
• Industrial distributors are wholesalers, channel members that buy and take title to and keep inventories for their products to sell and service them.
• Small manufacturer firms that usually cannot afford employment will rely on representatives or sales associates to sell either to industrial distributors or users.
• Internet enables virtual distributors that force distributors to expand their business models.

Multi Channel Arrangements

• Dual or multiple distribution involves using two or more channels to distribute to target markets.
• Nontraditional channels facilitates unique market access to products and services
• Strategic channel alliances creates an agreement of business where they distribute products to other's established distribution.
• Gray marketing involves secondary channels that are an unintended product used by producers.

Channels That Enable

• Reverse channels involves consumers sending products back.
• Drop and shop involves having products returned retail entrance.

Digital Channels

• Digital channels are electronic pathways that allow products and information to flow from producer to consumer.
• M-commerce enables them to buy and sell good or services.
• Wireless connection to shop online on mobile devices.
• Growing users in terms of usage and access buying process.

Market Considerations

• Complex, customized, and expensive products tend to benefit from shorter and more direct marketing channels.
• Standardized products can be in a longer distribution channel as the amount of intermediaries increases.
• The choice of channel may also change the more available and less intimidating these available channels become.

Production Considerations

• With enough resources, producers are able to manage channel marketing.
• Weaker and smaller firms must rely on others with this service.
• Producers selling a variety will require more direct routes, leading to sales being spread.

Timing Considerations

• Timing should be a top priority
• The multiple channels include one in simultaneous sequential order.
• A product should be withdrawn from one if it is no longer as valuable.

Levels of Distribution Intensity

• Organizations have three options:
  • Intensive distribution* – product available in every outlet where target customers might want to buy it
  • Selective distribution* – screening dealers to eliminate all but a few in a single area
  • Exclusive distribution* – Distribution to only one or a few dealers within a given area.
• Emerging channel structure relates to the items for renting that are sold to consumers, or just consumers only. Subscription services have grown past books and magazines. Digital marketplaces sell the rights to entertainment channels and apps.

Omnichannel and Multichannel Marketing

• Multichannel marketing employs information, goods, services, and support through synchronized channels.
• Multichannel design creates redundancy and complexity that requires a high construction of the different chains, inventories, and metrics.
• Transitioning to omnichannels allows their operations to create equality and efficiency.