Chapter 14 ♦ Supply Chain Management 14-1
CHAPTER 14 Supply Chain Management
CHAPTER FEATURES
Chapter Features
Key Points
✓ Marketing & You
Students are given a survey to determine their level of commitment
to providing quality services to customers.
✓ Application Exercise
manufacturer shipping demands and maintain a workforce so there
Students trace the supply chain for a product of their choosing back
to the raw materials.
USING THIS MANUAL
Chapter fourteen includes eight learning outcomes that help students become more familiar with supply chain
management. The chapter outline provides detailed analysis of these learning outcomes, listing PowerPoint slides and
✓ Customer Experience
Automobile makers have adopted lean supply chain principles as a
method for improving customer outcomes.
first major company to choose an eastern European country for this
type of distribution system.
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LEARNING OUTCOMES
1 Define supply chain and supply chain management and discuss the benefits of supply
chain management
Supply chain management coordinates and integrates all of the activities performed by supply chain members into a
seamless process from the source to the point of consumption. The responsibilities of a supply chain manager include
2 Discuss the concept of supply chain integration and explain why each of the six types of
integration is important
Supply chain integration occurs when multiple firms in a supply chain coordinate their activities and processes so
that they are seamlessly linked to one another in the attempt to satisfy customers. The six types of integration are as
3 Identify the eight key processes of excellent supply chain management and discuss how
each of these processes impacts the end customer
The key processes that leading supply chain companies focus on are (1) customer relationship management, (2)
4 Discuss the key strategic decisions supple chain managers must make when designing
their companies’ supply chains
Based on the firm’s goals, the markets it competes in, and the availability of supply, firms will adopt a lean, agile, or
5 Describe the logistical components of the supply chain
The logistics supply chain consists of several interrelated and integrated logistical components: (1) sourcing and
procurement of raw materials and supplies, (2) production scheduling, (3) order processing, (4) inventory control, (5)
Chapter 14 ♦ Supply Chain Management 14-3
6 Explain why supply chain performance measurement is necessary and important
Because supply chains are often very complex, with each firm in the chain seeking to fulfill its own goals, it is
7 Discuss why supply chains of the present and future will be both environmentally
conscious and sustainable, and the implications of these changes.
Firms are more environmentally conscious with their supply chains because companies feel pressure to gain cost
8 Discuss new technology and emerging trends in supply chain management
Several emerging trends are changing the job of today’s supply chain manager. Technology and automation are bringing
CHAPTER OUTLINE
1 Define the terms supply chain and supply chain management,
and discuss their benefits
PowerPoint 14-5:
Supply Chains
Review Question 1.1
I. Supply Chains and Supply Chain Management
A. Supply Chain
14-4 Chapter 14 ♦ Supply Chain Management
PowerPoint 14-6, 14.7:
Supply Chains
2. Supply chain management is a management system that coordinates
and integrates all of the activities performed by supply chain members
into a seamless process, from the source to the point of consumption,
resulting in enhanced customer and economic value.
PowerPoint 14-8:
Supply Chain Managers
PowerPoint 14-9:
Benefits of Supply Chain
Management
5. Supply chain managers are responsible for making strategic decisions:
a. Coordinating the sourcing and procurement of raw materials
b. Scheduling production
B. Benefits of Supply Chain Management
1. Lower inventory, transportation, warehousing, and packaging costs.
5. Increased profitability.
2 Discuss the concept of supply chain integration and explain
why each of the six types of integration is important
PowerPoint 14-12:
Supply Chain Integration
Review Question 2.2
PowerPoint 14-13, 14.14:
Relationship Integration
II. Supply Chain Integration
A key principle of supply chain management is the system approach, in
which multiple firms work together to perform tasks as a single, unified
system, rather than as several individual companies acting in isolation.
A. Relationship integration is the ability of two or more companies to
develop social connections that serve to guide their interactions when
working together.
Chapter 14 ♦ Supply Chain Management 14-5
PowerPoint 14-15, 14-16:
Measurement Integration
PowerPoint 14-19:
Material and Service
Supplier Integration
PowerPoint 14-20, 14-21:
Internal Operations
Integration
accountable for meeting its own goals.
The firms in the supply chain should agree on and commit to principles of
activity-based costing (ABC), an accounting method used to assess the
costs associated with each supply chain activity.
quality customer experiences.
E. Internal operations integration links internally performed work into a
seamless process that stretches across departmental and/or functional
boundaries, with the goal of satisfying customer requirements.
Five distinct groups of activities for internal operations integration:
a. Firm must become cross-functionally unified
F. Customer integration is a competency that enables firms to offer long–
lasting, distinctive, value-added offerings to those customers who represent
the greatest value to the firm or supply chain.
Drivers of customer integration:
G. Barriers and Facilitators of Integration
Barriers to integration are practices or processes that make it difficult
for integration to occur. Facilitators of integration are practices or
3 Identify the eight key processes of excellent supply chain
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management, and discuss how each of these processes impacts
the end customer
PowerPoint 14-26:
PowerPoint 14-27:
Customer Relationship
PowerPoint 14-29:
Demand Management
PowerPoint 14-30:
PowerPoint 14-31:
Manufacturing Flow
Management
PowerPoint 14-32:
Supplier Relationship
Management
III. The Key Processes of Supply Chain Management
A. The customer relationship management process involves the
prioritization of a firm’s marketing focus on different customer groups
according to each group’s long–term value to the company or supply chain,
designed to identify and build relationships with good customers.
C. The demand management process involves the alignment of supply and
demand throughout the supply chain to anticipate customer requirements at
each level and create demand-related plans of action prior to actual
customer purchasing behavior.
D. The order fulfillment process involves generating, filling, delivering, and
providing on-the-spot service for customer orders.
E. The manufacturing flow management process ensures that firms in the
supply chain have the resources they need.
F. The supplier relationship management process supports manufacturing
flow by identifying and maintaining relationships with highly valued
suppliers.
4 Discuss the key strategic decisions supply chain managers
must make when designing their companies’ supply chains
IV. Strategic Supply Chain Management Decisions
Chapter 14 ♦ Supply Chain Management 14-7
PowerPoint 14-37:
Supply Chain
Management
PowerPoint 14-38:
Lean vs. Agile Supply
PowerPoint 14-39:
Mapping the Supply
Chain
Review Question 4.2
When implementing supply chain management, a number of strategic questions
are relevant:
• Based on the markets we compete in, the suppliers available, and the
Customer Experience
Response to Customer Unpredictability in the Automotive Industry: Get Lean
In the ultra-competitive U.S. automobile industry, delivering the right car to the right
A. Supply Chain Strategies
1. Lean supply chain management is a strategy that focuses primarily on
the removal of waste from the supply chain to achieve the lowest total
cost to the members of the supply chain system.
Postponement is the delay in final production in the Leagile supply
chain strategy that enables the company to take advantage of many of
the benefits of lean supply chain management while still providing the
agility that improves customer experiences.
B. Mapping the Supply Chain
Three dimensions of supply chain network design are commonly considered
by supply chain managers:
1. The horizontal structure is the number of tiers in the supply chain
representing the total number of levels through which goods and
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along the supply chain.
Global Perspectives
Lego Goes to Prague: A Distribution Dream of Supply Chain Nightmare?
5 Describe the logistical components of the supply chain
PowerPoint 14-42:
Logistical Components of
the Supply Chain
Review Question 5.1
PowerPoint 14-43:
Sourcing and Procurement
Order Processing
PowerPoint 14-45, 14-46:
Inventory Control
V. The Logistics Function in the Supply Chain
The logistics function f the supply chain is responsible for the movement and
delivery of goods and services into, through, and out of each firm in the supply
chain network. It consists of several interrelated and integrated logistical
components:
• Sourcing and procurement of raw materials and supplies
The supply chain team orchestrates the movement of goods, services and
information from the source to the consumer. It typically cuts across
organizational boundaries and may include participants from external members of
the supply chain.
A. Sourcing and Procurement
B. Order Processing
Electronic data interchange (EDI) uses computer technology to replace
the paper documents that usually accompany business transactions.
C. Inventory Management and Control
Chapter 14 ♦ Supply Chain Management 14-9
PowerPoint 14-47:
PowerPoint 14-48:
Materials Handling
Functions
Transportation Mode
Choice
PowerPoint 14-51:
Criteria for Ranking
Modes of Transportation
1. An inventory control system that manages inventory from the supplier
to the manufacturer is called materials requirement planning (MRP)
or materials management.
D. Warehousing and Materials Handling
1. Storage helps manufacturers manage supply and demand, and provides
time utility to buyers and sellers.
2. A materials-handling system moves inventory into, within, and out
of the warehouse. It includes these functions:
a. Receiving goods into the warehouse or distribution center.
E. Transportation
The five major modes of transportation are railroads, motor carriers,
pipelines, water transportation, and airways.
Supply chain managers choose a mode on the basis of:
3. Reliability: consistency with which the carrier delivers goods on time
and in acceptable condition.
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6 Explain why supply chain performance measurement is
necessary and important
Review Question 6.1
PowerPoint 14-53:
Supply Chain
Performance
PowerPoint 14-54:
The Balanced Scorecard
Approach
Review Question 6.2
VI. Supply Chain Performance Management
Metrics are standard measures that can be used repeatedly to assess
performance on a supply chain related process.
A good metric is characterized by five qualities:
1. It creates an understanding of strategic objectives and tactical plans.
5. It motivates continuous improvement.
A. The Balanced Scorecard Approach
1. The Balanced Scorecard Approach is a measurement system used to
evaluate overall supply chain performance.
2. The Balanced Scorecard addresses four areas of performance:
d. Business process metrics
PowerPoint 14-57:
Supply Chain
Management
PowerPoint 14-58:
7 Discuss why the supply chains of the present and future will be
both environmentally conscious and sustainable, and the
implications of these changes.
VII. Green and Sustainable Supply Chain Management
In response to the need for companies to both gain cost savings and act as leaders
in protecting the natural environment, many are adopting green supply chain
management principles as a key part of their supply chain strategy. Green supply
chain management involves the integration of environmentally conscious
thinking into all phases of key supply chain management processes.
There are several ways to green a supply chain:
Chapter 14 ♦ Supply Chain Management 14–11
to the physical environment, the sustainable one is that which employs
8 Discuss new technology and emerging trends in supply
chain management
PowerPoint 14-60:
Trends in Supply Chain
Management
Review Question 7.1
PowerPoint 14-62:
Advanced Computer
PowerPoint 14-63:
Outsourcing Logistics
Functions
VII. Trends in Supply Chain Management
Four important trends are the globalization of supply chain management,
advanced computer technology, outsourcing of logistics functions, and electronic
distribution.
A. Global Supply Chain Management
1. As global trade becomes a more decisive factor in success or failure
2. Companies need to be aware of the permits licenses, and registrations
they may need to acquire.
B. Advanced Computer Technology
1. Computer technology has boosted the efficiency of logistics
dramatically with tools such as automatic identification systems using
C. Outsourcing Logistics Functions
1. In outsourcing or contract logistics, a manufacturer or supplier turns
over the entire function of buying and managing transportation to a
third party.
D. Electronic Distribution
Electronic distribution includes any product or service that can be
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E. Supply Chain Security
1. Firms are expending more effort on securing their supply chains from
external threats than at any time in recent memory. Securing the
supply chain begins with identifying potential risks.
2. Examples of external threats include:
a. Natural disasters
F. Supply Chain Security and Resilience
The supply chain must be guarded from end to end because it is only as
strong as its weakest link, and managers are very concerned with what