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Chapter 8

GMS 401 Chapter Notes - Chapter 8: Reverse Logistics, Inventory Turnover, Electronic Data Interchange

Global Management Studies
Course Code
GMS 401
Wally Whistance- Smith

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Chapter 8 – Supply Chain Management
Supply Chains
Supply Chain = Value Chain
All facilities, functions, and activities associated with flow and transformation of goods and services from raw
materials to customer, as well as the associated information flows
An integrated group of processes to “source,” “make,” and “deliver” products
Collaboration of supply chain companies and coordination of their activities so that market demand is met as
efficiently and effectively as possible
Value Chains
Value chain
oevery step from raw materials to the eventual end user
oultimate goal is delivery of maximum value to the end user
Supply chain
oactivities that get raw materials and subassemblies into manufacturing operation
oultimate goal is same as that of value chain
Demand chain
oincrease value for any part or all of chain
Terms are used interchangeably
ocreation of value for customer is important aspect of supply chain management
Supply Chain Management (SCM)
Managing flow of information through supply chain in order to attain the level of synchronization that will
make it more responsive to customer needs while lowering costs
Supply Chain Uncertainty and Inventory
A major objective of SCM: respond to uncertainty in customer demand without creating costly excess
Negative effects of uncertainty
oincomplete orders
Inventory – insurance against supply chain uncertainty
Need for Supply Chain Management
Increasing competition (using lean or JIT)
Increasing levels of outsourcing
Increasing globalization
Increasing e-commerce
Manage orders & inventories (bullwhip effect)
Bullwhip Effect
Occurs when slight demand variability is
magnified as information moves back upstream
Demand/order variability gets progressively larger
the further back in a supply chain is the company.
Where to Hold Inventory?
Risk pooling – holding safety stocks in one central location rather than in multiple locations.
Delayed differentiation (postponement) – Production of standard components and products, and adding
differentiating features later in the process.
Consolidating shipments
Deconsolidating shipments
Cross Docking: Goods arriving at a warehouse from a supplier are unloaded from the supplier’s truck and
loaded onto outbound trucks
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