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Summary SCM CAB5
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Test Bank For Supply Chain Management: A Logistics Perspective - 11th - 2021 All Chapters - 9780357442135
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"Supply Chain Management: A logistics Perspective" Summary Chapter 1
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Guide to Supply Chain
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SCM chapter 1Six major external forces or change drivers are shaping supply chains:
Globalization → Creates more economic and political risk, shorter product life cycle (ability of
products to be duplicated quickly) and the blurring of traditional organizational boundaries. Inventory
management challenges are:
1. Faster duplicability of products and services
2. Faster reduction in demand
3. Requirement of new pricing policies
4. Higher risk of obsolescence
Longer and more complex supply chain challenges → Growth and increased scope of outsourcing.
Technology → Major impact on supply chains and in the dynamics of the marketplace:
1. Connected 24/7 and everyone has access to information on the internet.
2. Social networks influence supply chains because of their impact on customer demand and the
speed of information transfers.
3. Connection to the world’s knowledge pools to create and establish opportunities for
collaboration in supply chains.
Organizational consolidation → Economic power and the driving force in supply chains has shifted
from product manufacturers to the retail end of the supply chain. More collaboration among
organizations in supply chains:
1. Win-win, improved services that allowed retailers to operate more efficiently and often more
effectively and provide scale economies to the producers.
2. Organizations can gain shared cost savings and improved customer service.
Empowered consumer → Consumers are empowered by exponentially expanded access to product
sources and related information and increased buying power due to high income levels. There are
increased pressures on supply chain due to increased demands at the retail level in terms of:
1. Competitive prices
2. High quality in products and services
3. Tailored or customized products
4. Convenience and responsiveness
5. Flexibility → omni-channel distribution option
Government policy and regulation → Important deregulated sectors include:
1. Transportation sector → Expanded services beyond transportation.
2. Communication sector → Has become more competitive.
3. Financial sector → Became more flexible and responsive to customer needs. More knowledge
about the role that supply chain management could play with asset efficiency and cash flow.
,Sustainability → Pursuit of sustainability is widely recognized as a key element of successful supply
chain management. This is critical to effective risk management and achieving competitive advantage:
1. Society → Focus on people is a significant concern in this area.
2. Environment → The objective of being green is a key element of making positive contribtions
to improving our environment.
3. Economy → Continued economic and financial sustainability is essential to making future
positive impacts on society and the environment.
Development of the supply chain:
1. Physical distribution → Concept that focuses on the outbound side of a firm’s logistics system.
2. Integrated logistics management → Concept that added inbound logistics to the outbound
logistics of physical distributions. Coordination between outbound and inbound logistics
system provided opportunities for increased efficiency and improved customer service.
Inbound and outbound logistics are primary components of the value chain, they can contribute value
for customers and make the company financially viable to increase sales and improve cash flow.
Supply chain management is the art and science of integrating the flows of products, information and
financials through the entire supply pipeline from the supplier’s supplier to the customer’s customer.
Some companies may be part of several supply chains.
,The four supply flows are very important to the success of supply chains:
1. Product flow → Physical movement of goods and materials. Customers expect their orders to
be delivered in a timely, reliable, and damage-free manner. Growing importance of reverse
logistics because of returning products.
2. Information flow → Inventory can be eliminated from the supply chain by timely, accurate
information about demand and avoid the bullwhip effect. Forward information flow can help to
reduce uncertainty, lower supply chain-related costs and improve customer service.
3. Financial/cash flow → Cash flow has become an important metric for the financial markets to
measure the economic viability or vulnerability of companies. SCM plays an important role in
improving cash flow.
4. Demand flow → Detect and understand demand signals, synchronize demand vs. supply.
SCM provides organizations an opportunity to reduce cost (improve efficiency) and improve customer
service (effectiveness) to increase revenue.
Major supply chain issues are:
1. Supply chain networks → Companies need a network system that is capable and flexible to
respond and change with the dynamics of the marketplace whether in the short run or the long
run. Requires solid information systems.
2. Complexity → Companies need to take steps to simplify the various aspects of their supply
chains. Continually evaluating areas of complexity in the various aspects.
3. Inventory deployment → Challenge are increased requirements for coordination or integration
to reduce inventory levels on horizontal (single-firm) and vertical (multiple-firms) levels in the
supply chain. Inventory levels must be managed carefully to reduce working capital → free up.
4. Information → Challenge is the sharing of information along the supply chain and the
discipline to ensure the integrity of the data collected.
5. Cost and value → Challenge is the prevention of suboptimization.
6. Organizational relationships → Internal and external collaborative effort is critical.
7. Performance measurement → Challenge is connecting lower-level metrics in an organization
directly to the high-level performance measures of the organization and the supply chain.
8. Technology → Challenge is to evaluate and successfully implement the technology to make
the improvements desired.
9. Transportation management → Challenges are transport market changes such as driver
shortages, fuel costs, infrastructure constraints and regulatory changes.
10. Supply chain security → Risk of disruptions, vulnerability, and exposure to terroristic threats
exacerbated by distance and complexity in global supply chain.
11. Talent management → Attract, develop, and maintain the appropriate pool of talent from entry
level to execute level.
The global supply chains of the best companies must be adaptive, resilient, and responsive to meet
the challenges of the global economy and develop mitigating strategies for disruptive forces.
, SCM chapter 2
Rationale for global trade and commerce
An absolute advantage:
1. Lower cost and/or access to items not available locally
2. Regional specialization → economic benefit because leads to increased output and lower unit
costs. Mass production or assembly lines
Comparative advantage:
1. Differences in the cost of producing products in different countries
2. Focus on production of the product that has the greatest advantage
Both demonstrate that global trade and related global supply chain flows can be based not only upon
scarcity of items among countries but also differences in the cost of production.
Contributing factors for global commerce and supply chain flows
1. Population size and distribution → The huge size of the populations in China and India will
provide them with a potential economic advantage in terms of labor for growth as long as the
economies can support that population size. Age distribution is also important. Median age is
increasing. There is a difference in median age between most developed and least developed
countries. Lower birth rate and aging citizenry in the more developed countries has
implications for future economic development. These data have important implications relative
to economic growth, market size and development, capital flows, labor availability, consumer
needs, and utilization of natural and strategic resources.
2. Urbanization → Increase in migration in many countries from rural areas to cities or urban
areas. Most profound in less and least developed countries. Huge size and density of
megacities will require much effort and innovation to address the infrastructure shortages of
transportation, fresh water, etc. By 2030, 60% of world’s population wil live in urban areas.
3. Land and resources → Include items as crop & forest land, energy, food, and water which
are critical for economic viability and future development. Technology can play an important
role in mitigating scarcity of key resources.
4. Technology and information → Technology has two important dimensions:
▪ Technology as an ‘internal’ change agent: Enhanced efficiency, effectiveness, and
ability of an organization to compete in the global marketplace.
▪ Technology as an ‘external’ change agent: New forms of competition and new
business models (like omnichannel distribution, global outsourcing).
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