Chapter 14 ♦ Supply Chain Management 14–13
Key Terms
ABC segmentation
green supply chain management
outsourcing (contract logistics)
activity-based costing (ABC)
horizontal position
postponement
agile supply chain management
horizontal structure
product development and
commercialization process
automatic replenishment programs
internal operations integration
Balanced Scorecard Approach
inventory control system
radio-frequency identification
(RFID)
Suggested Homework:
• The end of each chapter contains numerous questions that can be assigned or used as the basis for longer
investigations into marketing.
REVIEW AND APPLICATIONS
1.1 Discuss the benefits of supply chain management. How does the implementation of supply chain management
result in enhanced customer value?
Supply chain management is a key means of differentiation for a firm and a critical component in marketing and
2.1 Discuss the concept of supply chain integration. How does it result in better customer-related outcomes?
Students’ answers will vary but should reflect understanding of supply chain integration. Supply chain integration
occurs when multiple firms in a supply chain coordinate their activities and processes so that they are seamlessly
benchmarks
Leagile supply chain management
relationship integration
Bullwhip effect
lean supply chain management
returns management process
business processes
logistics information system
role specificity
customer integration
manufacturing flow management
supplier relationship management
process
supply chain integration
cross-docking
materials-handling system
supply chain team
demand management process
measurement integration
supply chain resilience
distribution resource planning (DRP)
metrics
supply chain sustainability
electronic data interchange (EDI)
order fulfillment process
systems approach
electronic distribution
order processing system
technology and planning integration
2.2 What are some of the likely outcomes of a firm’s failure to embrace one or more supply chain integration
types?
3.1 What are the key processes in supply chain management, and who performs them? How does each process
lead to increased customer satisfaction?
The key processes of supply chain management include customer relationship management, supplier relationship
units.
4.1 When should firms pursue lean, agile, and/or Leagile supply chain strategies?
Students’ answers will vary. Because products and marketplaces may differ substantially in their core
characteristics from place to place and product to product, supply chain management strategies should be selected
4.2 What are the expected benefits that may come from supply chain mapping?
Students’ answers will vary. In addition to the selection and implementation of an overarching supply chain
5.1 Assume that you are the supply chain manager for a producer of expensive, high-tech computer
components. Identify the most suitable method(s) of transporting your product in terms of cost, transit time,
reliability, capability, accessibility, and traceability. Now, assume you are the supply chain manager for a
producer of milk. How does this change your choice of transportation?
Students’ answers will vary. The computer components should be transported with the highest reliability, quick
Chapter 14 ♦ Supply Chain Management 14–15
6.1 Why is supply chain performance measurement necessary and important?
Students’ answers will vary. Supply chain performance measurement is necessary and important because “that
6.2 How does the Balanced Scorecard Approach help firms within the supply chain to establish and meet
common goals?
The Balanced Scorecard Approach combines multiple different categories of measurements that can be used at all
7.1 Research IBM’s recent push to green its supply chain. Write a report discussing the implications for IBM,
the electronics industry, and why greening an electronics supply chain has different implications than doea
greening Pepsi’s supply chain.
8.1 Visit the Web site of Menlo Logistics at www.menlolog.com. What logistics functions can this third-party
logistics supplier provide? How does its mission fit in with the supply chain management philosophy?
Supplemental Exercise: Group Work
Review and Applications
Review and Applications Questions 1.1, 2.2, 3.1, 5.2, and 8.1 lend themselves well to group work. For those
activities, divide the class into small groups of 4-5 people. Students from each group should read the question and
14–16 Chapter 14 ♦ Supply Chain Management
APPLICATION EXERCISE
Purpose: For students to experience through their own investigation the complexity of supply chains.
Setting It Up: This works best as an individual assignment. If you have a small class, you can do as described below and
have students submit a detailed story board depicting the supply chain they researched. Alternatively, you can have
students submit textual descriptions on regular paper if your class is larger.
John L. Beisel
Pittsburg State University
IDENTIFYING CHANNELS OF DISTRIBUTION
Students in my Distribution Management class are required to pick a product of their choice and to trace the channel(s)
of distribution for that product as far back as is feasibly possible. They then must draw the structure of the channel on a
large poster and give a five-minute presentation of their findings in class, utilizing the poster as a visual aid. All products
Bricks produced by a local brick manufacturer—the kiln from a company in Germany; the clay from an open pit mine in
Weir, Kansas; the water from Baxter Springs, Kansas; the sand from Kansas City; the manganese sulfate and iron oxide
from Springfield, Missouri; and the color additives from St. Louis.
Diamonds sold by a local jewelry store—purchased direct from diamond wholesalers in the Netherlands; bought by
wholesalers from diamond cutters in South Africa; brought out of mines owned by a company in South Africa.
Students often choose to research a product whereby they can have easy access to information—one of their parents or
other relatives who can give them details relating to their business, or even a present or former employer who is willing
This results in a decidedly different perspective for our students from which to view the rationale and concepts of
international trade. These “new countries” are still larger than most European countries, but we now must cope with
multiple languages, cultures, infrastructure, monetary systems, communication modes, legal systems, and tariffs.
Students readily grasp that international marketing would have been an inevitable result of this alternative history. It
becomes obvious that each area would take advantage of its natural resources, climate, the special talents, competence
ETHICS EXERCISE
1. Should companies such as Nike, Liz Claiborne, and Target avoid structuring their supply chains so that
they include polluters, even if the pollution is occurring somewhere far from the United States?
Companies should not associate themselves with supply chains that include polluters or law violators, regardless
2. What are the pros and cons associated with using supplies and/or labor sourced from supply chain
partners (direct and indirect) based in countries that do not have strict pollution standards?
Students’ answers will vary. A company with lenient pollution standards would have lower costs to dispose of
3. Does the AMA Statement of Ethics address the issue of environmental protection in supply chain
the Liz Claiborne president that describes how the AMA Statement of Ethics addresses the dilemma faced by
the company.
Students’ memos will vary. The AMA Statement of Ethics addresses citizenship, which is to fulfill the economic,
MARKETING PLAN EXERCISE
The next stage of the strategic planning process continues defining the elements of the marketing mix, and this section
focuses on place, or distribution. Use the exercises on page 525 to guide you through the distribution part of your
strategic marketing plan.
CASE STUDY
The U.S. Transportation Industry: Planning for a Potential Post-Recession Capacity Crunch
1. Discuss the types of strategic supply chain decisions involved in making the types of carrier modifications
discussed in the case.
Answers will vary. Students may discuss demand management in terms of a company consolidating the
2. How can companies leverage this type of information to have successful knowledge management?
14–18 Chapter 14 ♦ Supply Chain Management
Answers will vary. By understanding the types of information as reported in this case, companies can
3. Which of the criteria for choosing a mode of transportation are most affected by the crunch?
Discuss how that knowledge affects choosing transportation.
Based on this case information, a shortage of drivers when demand increases affects the relative cost by
LESSON PLAN FOR VIDEO
Company Clips: Sephora—Business Is Beautiful
The beauty-retail store, Sephora, was founded in 1969 in France and since then has become a leader in sales of heath
and beauty-aid products. It opened its first store in the United States in 1998 on 5th Avenue in New York City and prides
itself on being ahead of the market in skin care trends. Its luxurious environment is the selling point for over 250 brands.
On its shelves, Sephora maintains a balance of big brand names with lesser-known, up-and-coming brands. Sephora
also carries its own private brand, which it promotes independently in the store. Each sales representative in a Sephora
store is trained to best help customers find the products that best fit their skin types and lifestyles. Watch the video to
learn what techniques Sephora uses to keep its shelves stocked and customers happy.
1. Why is important to customers that Sephora keep detailed information about its inventory? What does
Sephora do to insure its numbers are accurate?
The customer should expect to find the product available when visiting the store. Sephora has constant awareness of
2. How does Sephora manage its supply chain? What information goes into deciding which suppliers become
incorporated?
Sephora merchandisers, located in San Francisco, manage each vendor, or brand, relationship. Once on board, the
Supplemental Exercise: Video
Company Clips
Pre-Class Prep for You:
• Preview the Company Clips video segment for Chapter 14. This exercise reviews concepts for LO1-LO7.
• Review your lesson plan.
• Make sure you have all of the equipment needed to show the video to the class, including the DVD and a way to
project the video.
Pre-Class Prep for Students:
Video Review Exercise Activity
• Warm-up
o Briefly discuss students’ findings from the third Pre-Class Prep activity. How many Sephora shops are
there in their area? How many brands does the store carry?
• In-Class Preview
• Follow-up
o Divide students into groups of 3-5 and have them describe how Sephora handles the six main logistical
components of their supply chain. For components that aren’t specifically addressed by the video, have the
students conjecture what Sephora might do.
14–20 Chapter 14 ♦ Supply Chain Management
Supplemental Exercise: Class Activity
Physical Distribution
In this exercise students will learn how to select a mode of transportation.
Divide the class into small groups and randomly assign each group to a product and a customer location. The groups
Students should assume that the shipments are made from the town in which your school is located.
Here are some suggestions:
1. Twenty-four air compressors, each in a shipping crate 36″ by 36″ by 60″, weighing 400 pounds each, to a customer
1,000 miles away. Choose a city relevant to your location.
4. Two 12-ounce, 4-inch gears that are needed at a plant 300 miles away for a customer‘s machine that has broken
down and stopped an assembly line.
Supplemental Exercise: Class Activity
Selection of a Channel or Distribution
The purpose of this exercise is to get students to evaluate how the marketplace moves raw materials to manufacturers and
then on to the consumer.
Ask each student to select one product and trace it through every step of its distribution journey. This should be an
Chapter 14 ♦ Supply Chain Management 14–21
GREAT IDEAS FOR TEACHING CHAPTER 14
Debra Decelles, Anthony Rossi, Susan Sunderline, and John Gardner, State Univ. of New York College
– Brockport
EGG-SPRESS DISTRIBUTION: A SIMULATED DISTRIBUTION EXERCISE
Introduction
Active learning by students allows for better understanding and memorability. The activity in this exercise helps
students to internalize the difficulty of developing a distribution system for a new product.
Goal
In the discussion of Physical Distribution Management, the object is to achieve a high level of customer service
Activity
To teach this concept to a class, the idea of “Egg-spress” Distribution is introduced. This exercise involves sending
groups formed within a class through an obstacle course (distribution channel), carrying “Eggman” (the product). The
Rules
again. Example forms of transportation included a softball mitt, a ladle, a plastic bowl, a paper baggy, a lacrosse stick,
and a small hand towel. By giving more choices of transportation than there were legs to the course, the students were
made to contemplate the benefits and disadvantages of each. Further, the students had to strategically plan out the best
path through the course given the resources available.
Operations
Once the instructions were understood, the students were given a few minutes to design their approach. In this time
Learning Objectives
The student should better understand:
• The importance and implications of forming proper distribution channels.
14–22 Chapter 14 ♦ Supply Chain Management
• The use of new logistics tactics such as postponed assembly and the coordination of marketing and logistics
through packaging (e.g., inserting the push pins at the end or the course).
• To continually challenge corporate channel cultures that need reassessment in order to react to internal and
external environmental changes (e.g., creative thinking).
Evaluation
The exercise was tested by a Marketing Management class. Teams were formed, briefed, and ran the course with varied
strategies. The strategies lead to a relevant debriefing using distribution terms and tactics. The class evaluated the
Chapter 14 ♦ Supply Chain Management 14–23
Katryna Johnson, Concordia University
LOGISTICS AND RELAY RACES
Most students at some point in their lives have completed a relay race. The purpose of this relay race is to help
MATERIALS
1. Items to be transported (CARGO): big wad of chewed gum, cotton balls, sugar, cheerios, water, eggs
(anything else you want)
ACTIVITY
1. Before class, set up a room for the race. At one end of the room you will have all of the “cargo” and all of the
“Modes” of Transportation, at the other end of the room will be the “finish.”
2. Divide the students into teams (the number of teams will depend on the size of your class). Assign a few
students to observe the teams. Tell the students that you have measured the cargo in advance to see which items
work best in which modes of transportation (for instance – you know that the sugar best fits in a ½ measuring cup
and the cheerios best fit in a 1/3 measuring cup). Instruct the class that you will give them a few minutes to develop
a strategy to most efficiently and effectively transport all of the items from one end of the room to another.
3. Tell students that they can reuse any of the transportation devices. Inform students that spilling any of the
OBJECT LESSON
Students learn about the importance of planning in logistics to increase efficiency and effectiveness. As an example,
if you put sugar in a bowl that had water in it previously, some of the sugar will stick to the bowl. It does work to
Douglas K. Ross, Franklin University
THE CHOCOLATE CANDY BRANDING EXERCISE
I have used this exercise in classes ranging from Principles of Marketing to MBA level Marketing Management.
This is a fun small group exercise that fits will when discussing brands and branding or when discussing the
marketing mix variables. I use this after discussing what constitutes a good brand name and how the target market,
packaging, etc. must be considered. It usually takes approximately 40-45 minutes but can be accomplished in as
little as 30 minutes.
Break the class into small groups – three or four students per group works best. On an overhead or PowerPoint I
have a small paragraph explaining that each group is a marketing team that works for a company that has developed
a new chocolate. The chocolate is different in that it contains a large (really extreme) amount of caffeine. The team
must:
▪ Determine the most appropriate target market(s)
The groups have between 20-30 minutes to accomplish this. Divide the blackboard (or give each group an overhead
transparency and marker) and have them draw their product including the brand name on the board. They should
also indicate the colors used on the package. This part of the activity takes approximately 5-10 minutes. A member
from each group then talks about their brand.
▪ Why they chose the target market(s) they did
▪ How the came up with the brand name