Understanding Supply Chains

Supply Chains

• Supply chains enable the efficient flow of goods, services, and data, which is vital for the success of private, public, and non-profit organizations
• Private sector supply chains maintain competitiveness, reduce costs, and ensure customer satisfaction
• Public sector government rely on supply chains to deliver public services
• Non-profits rely on supply chains to deliver aid and resources

Forces Driving Change

• Technological advancements, globalization, sustainability concerns, demographic shifts, and evolving consumer expectations are major forces shaping industries, societies, and economies today

Evolution of Supply Chain Management (SCM)

• SCM has evolved over the years through technological advancements, globalization, and changing business strategies

Supply Chain Challenges

• Organizations face supply chain challenges impacting efficiency, resilience, and profitability due to technological advancements, geopolitical shifts, and environmental concerns

Globalization

• Globalization increases economic and political risk, shortens product life cycles, and blurs organizational boundaries

Business Environment Volatility

• Business Environment Volatility includes acts of terrorism, climate change, and pandemics

Inventory Management Challenges

• Inventory Management Challenges include faster duplication of products and services, faster reduction in demand, new pricing policies, and higher risk of obsolescence

Technology

• Technology facilitates internal processes and supply chain transformation, and significantly changes the marketplace

Social Networks

• Social networks impact customer demand and information transfer speed

Organization Consolidation and Power Shifts

• Economic power in supply chains is shifting from product manufacturers to the retail sector

Empowered Consumers

• Consumers can now access many product sources, have more information, and have increased buying power due to higher incomes

Consumer Demands

• Consumers now demand competitive prices, high-quality and customized products, and convenience and responsiveness (24/7 availability)

Government Policy and Regulation

• Policies, regulations, and taxes impact businesses and their supply chains

Deregulation

• Since the 1970s, deregulation has occurred in transportation, communication, and financial institutions

Sustainability

• Sustainability is recognized as crucial for successful supply chain management, effective risk management, and competitive advantage

Environmental Considerations

• Being "green" and improving the environment is a key objective

Economic Factors

• Continued economic and financial sustainability is important for positive impacts on society and the environment

Supply Chain Concept (1960s)

• Supply chain activities initially focused on outbound logistics, which included the movement of finished goods, transportation, warehousing, and inventory management

Supply Chain Integration

• Companies realized supply chain activities were interconnected; decisions in one area impacted others, prompting businesses to manage these elements as a system

Integrated Logistics Management (1980s)

• Businesses began considering inbound logistics (raw materials into production) alongside outbound logistics as supply chains grew more complex
• Integrated logistics management aimed to optimize the entire supply chain and cost reductions and efficiency improvements comes from looking at logistics holistically

Total Cost and Systems Approach

• The total cost concept became a guiding principle where companies minimized overall logistics costs, and not just individual components

Logistics Functions Integration

• The systems approach integrates logistics functions like transportation, inventory, materials handling, and packaging for efficiency

Supply Chain Management (SCM) Recognition

• SCM became a widely adopted business strategy in the 1990s, due to studies highlighting how companies could gain a competitive edge by integrating and optimizing supply chains

Key Benefits of SCM

• Cost reduction through improved efficiency
• Revenue growth through improved effectiveness and customer service

GMA Study Findings

• A Grocery Manufacturers Association (GMA) study indicated potential savings of $30 billion annually by reducing inventory levels

Supply Chain Council Study

• A Supply Chain Council comparison showed "best-in-class" companies spent 7.0 cents of every sales/revenue dollar on supply chain-related costs, while medium companies spent 13.1 cents

Supply Chain Management Definition

• Supply chain management is coordinating all activities involved in a product's progression, from raw materials to the end customer, optimizing efficiency, quality, and customer satisfaction

Product Flow

• Physical movement of goods and materials involves customers expecting timely, reliable, and damage-free orders, with two-way flows for both delivery to customers and returns

Information Flow

• Exchanging data and communication between supply chain stakeholders ensures efficiency and coordination, with real-time information flow increasing visibility and reducing uncertainty

Cash Flow

• Cash Flow involves the movement of money and payments across the supply chain

Demand Flow

• Demand Flow entails detecting and understanding demand signals to synchronize demand with supply

Supply Chain Complexity

• Supply chains are complex and non-linear, with transportation playing a major role

Supply Chain Networks

• Critical supply chain networks and supporting transportation face challenges from rapid changes

Supply Chain Complexity Factors

• Globalization and consolidation increased complexity with many SKUs, customers, suppliers, and trade regulations

Inventory Deployment Characteristics

• Inventory is often duplicated along the chain, and the bullwhip effect distorts demand forecasts

Information's Role

• Technology leads to vast data collection which can be powerful and substitute inventory by reducing uncertainty if it is timely, accurate, managed, and shared

Cost and Value Considerations

• Preventing sub-optimization is a supply chain challenge, in the environment global supply chains must compete

Organizational Relationships Focus

• Supply chain management emphasizes a horizontal process orientation, requiring collaboration with external entities like vendors and transportation companies

Performance Measurement Purpose

• Organizations use performance measures to analyze efficiency and progress, setting baseline objectives

Technology as Enabler

• Technology improves efficiency, but implementing it effectively is a challenge

Transportation's Role

• Transportation ensures "the right product at the right time, in the right quality and quantity, at the right cost, and the right destination"

Supply Chain Security

• There are increased risks of supply chain disruptions due to globalization

Talent Management Importance

• Educated and talented supply chain managers are needed due to complexity

Globalization Eras

• First era (1400-1800) was driven by countries seeking materials, the second (1800-2000) by companies seeking resources, and the third (since 2000) by individuals using technology

Absolute and Comparative Advantage

• Europe's industrial revolution created the awareness of international trade

Increase in Labor Efficiency

• Specialization increases labor efficiency, but can make the work monotonous and boring
• Technological advancements may lead to a decline in employment opportunities

Factor Endowment

• Countries with more factors of production compared to others use comparative advantage especially through national conditions

Global Demographics

• Global demographics includes considers population age distribution. Developed countries have lower birth rates and aging populations, and developing nations have young populations

Urbanization

• By 2030, 60% of people are expected to occupy megacities. Urbanization presents both opportunities and challenges

Critical Resources

• Land and resources consist of energy, food, and water and are critical for future development

Technology is a Change Agent

• Technology can enhance efficiency and introduce new competition through business models

Global Interdependence

• Positives include lower prices and more jobs, negatives include disease spread and increased competition

Supply Chain Focus

• Supply chains are interrelated firms delivering products and services to the end customer

Global Trade Agreements

• Global Trade Organizations facilitate multilateral trade by lowering barriers, fueled by FTAs, lifting tariff, quota, and tax limitations

Global Market Success Factors

• Strategies in product development, technology, marketing, manufacturing, and supply chains are needed for global market success

World Wide Sourcing

• Global supply chains supply components and source globally

Customer Service Perspective

• Global competition reduces product life cycle, organizational structures and business models will shift to incorporate more outsourcing

Logistics extends to NPOs

• Logistics extends to commercial and non-profit organizations offering the best product/app/website, responsive delivery and marketing

Logistics Management Defined

• Logistics Management consists of planning, implementing, and controlling storage, goods, services, and data, meeting customer requirements

Business Logistics defined

• Business Logistics involves the (forward and reverse) flow including, service and related data, is efficient and effective, using point of use to meet customer requirements

Event Logistics Elements

• Event logistics manages resources to organize, schedule, and deploy and withdraw events

Service Logistics Focus

• Service logistics uses facility, assets, and personnel to have sustainable business operation

Logistics Value Added

• Form/Transformation utility is value added to goods by a manufacturing or assembly process
• Possession utility results through promotion and sales with place, time, and quantity utilities
• Place utility moves goods from production to market, and increases competition extending the market

Time Utility

• TIme Utility adds value having product on had a required time via warehousing and inventory management

Quantity Utility

• Quantity and Place go together, delivering quantity when and where reduces stockout

Macro Logistics

• Logistics costs increases with the amount of products.

Micro Logistics

• Organizational functional boundaries examines a functional organizations relationship/ interaction

Competitive Relationships Affect Logistical Cost

• Order cycle reduces inventory requirement by the customer

Sustainability Affects Logistical Cost

• Customer service adds value for high product usage to reduce cost and lose

Spatial Relationships affect Logistical Cost

• Transportation costs impact fixed points of supply points

Logistical Systems Defined

• Group of parts where focus is on hoe the variables interact. Not just focus on operating individual variables