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Chapter 7

BUS 252 Chapter Notes - Chapter 7: Uptodate, Outsourcing, Digital Economy

Course Code
BUS 252

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Chapter 7: Supply Chain Management
Information flow resulting from the development of computer-based logistics are significant in terms of
amount and importance to the success of the business. As a result, supply-chain management (SCM) has
become increasingly important component of corporate strategy over the past several years.
SCM is also recognized as an essential aspect of ebusiness implementation. Customer making web-based
orders to expect vary fast service, which means that the supply chain must be particularly efficient.
The supply chain is the set of processes that encompasses everything from purchase of raw materials or
resources through to final delivery of a product or service to the end consumer. Supply chain includes
sourcing, transportation, manufacturing, distributing, wholesale, retailing, and final delivery of goods.
(The chain is not a linear process). SCM involves the oversight of materials, information, and finances as
they move in a coordinating and integrating these flows both within and among companies.
In addition, SCM also includes functions such as forecasting the demand for various types of material,
ordering from suppliers in economic order quantities, inbound logistics, warehousing, manufacturing,
outbound logistics, sales, and delivery to the end consumer. Therefore, we can say that supply chain
includes upstream, internal, and downstream components, all of which need to be effectively managed.
“upply chai aageet is closely related to other ters such as, value-chai aageet,
itegrated purchasig strategies ad supply-chai sychroizatio ad logistics
Out of all of these interchangeable terms, logistics is the most commonly used. Logistics is the process
of planning, implementing, and controlling the efficient and effective flow of storage of goods, services,
and related information from point of origin to point of consumption.
In the traditional supply chain model, suppliers produced goods in the most efficient manner for their
business, and sent large order to customers (wholesales and retailers). This system was referred as push
system. Under the push system, the supplier produced products depending on their efficiency rather
than the demand from customer (wholesaler and retailers). This system was most effective in the early
days of manufacturing, as a means of driving the cost down and bringing prices within the reach of most
people. Henry Ford pioneered this technique during his time at FORD. The traditional push system
became grew less cost-effective because of increased production costs, storage cost, cycle times,
obsolescence, and consumer wait times.
The rapid face of change in the business world today has affected SCM in a number of ways. The
following are some of the major forces of change:
Mass customization
Price sensitivity
Customer focus and time to market
Just-in-time inventory and inventory reduction
Enterprise resource planning
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