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Chapter 4

Commerce 2KA3 - Chapter 4 Summary

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Chapter 4: Supply Chain Management
Basics of Supply Chain
Supply chain: consists of all parties involved, directly or indirectly, in the
procurement of a product or raw material
Supply Chain Management: involves the management of information flows
between and among stages in a supply chain to maximize total supply chain
effectiveness and profitability
Today’s supply chain is a complex web of suppliers, assemblers, logistic
firms, sales/marketing channels, and other business partners linked primarily
through information networks and contractual relationships
The Supply chain has three main links
oMaterials flow from suppliers and their upstream suppliers at all levels
oTransformation of materials into semifinished and finished products-
the organization’s own production processes
oDistribution of products to customers and their downstream customers
at all levels
SCM is becoming increasingly important in creating organizational efficiencies
and competitive advantages
Technology advances in the five SCM components have significantly
improved companies’ forecasting and business operations
Information Technology’s role in the Supply Chain
Info Tech’s primary role in SCM is creating the integrations or tigh process
and information linkages between functions within a firm and between firms,
which allow the smooth, synchronized flow of both information and product
between customers, suppliers, and transportation providers across the supply
Visibility, consumer behaviour, competition, and speed are a few of the
changes resulting from advances in information technology that are driving
supply chains

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The five Basic Supply Chain Management components
Plan: A big piece of planning is developing a set of metrics to monitor the
supply chain so that it is efficient, costs less, and delivers high quality and
value to customers
Source: companies must carefully choose reliable suppliers that will deliver
goods and services required for making products
Make: this is the step where companies manufacture their products or
Deliver: this step is commonly referred to as logistics. Logistics is the set of
processes that plans for and controls the efficient and effective transportation
and storage so supplies from suppliers to customers
Return: Companies must create a network for receiving defective and excess
products and support customers who have problems with delivered products
Supply Chain visibility is the ability to view all areas up and down the supply
Organizations must know about customer events triggered downstream, but
so must their suppliers and their suppliers’ suppliers
Bullwhip Effect: occurs when distorted product demand information passes
from one entity to the next throughout the supply chain. These changes
ripple throughout the supply chain, magnifying the issue and creating excess
inventory and costs
Consumer Behaviour
Demand planning software: generates demand forecasts using statistical
tools and forecasting techniques.
Companies can respond faster and more effectively to consumer demands
through supply chain enhancements such as demand planning software

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Supply Chain management software can be broken down into (1) supply
chain planning software and (2) supply chain execution software. Both
increase a company’s ability to compete
Supply Chain planning (SCP) software: uses advanced mathematical
algorithms to improve the flow and efficiency of the supply chain while
reducing inventory. It depends entirely on information for accuracy
Ideally, the supply chain consists of multiple organizations that function as
efficiently and effectively as a single organization, with full information
Supply chain Execution software: automates the different steps and stages of
the supply chain.
New forms of servers, telecommunications, wireless applications, and
software are enabling companies to perform activities that were once never
thought possible. These systems raise the accuracy, frequency, and speed of
communication between suppliers and customers, as well as between
internal users
Another aspect of speed is the company’s ability to satisfy continually
changing customer requirements efficiently, accurately, and quickly
Supply chain Management Success Factors
To succeed in today’s competitive markets, companies must align their
supply chains with the demands of the markets they serve
To achieve success such as reducing operating costs, improving asset
productivity, and compressing order cycle time, an organization should follow
the seven principles of supply chain management
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