Chapter 1: Supply Chain Management
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,What forces are driving the rate of change?
1. Globalisation
• Has led to a more competitively intense economic and geopolitical
environment
• Time and distance has become compressed
• The main challenges for supply chains
o Volatility of supply and demand
§ Acts of terrorism has implications on the flow of commerce
§ Contamination of food products from China can cause an
interruption in the flow of products
§ Natural disasters have an effect
o Shorter product life cycles
§ Technological companies are at a threat
§ Provides inventory management problems for supply chains
o Blurring of traditional boundaries
§ To maintain profitability, companies have to outsource
2. Technology
• Major impact on the supply chains as a facilitator of change as companies
have transformed their processes
• Individuals and smaller organisations can connect to the world’s “knowledge
pools” and can create collaboration in supply chains
• Outsourcing has been enhanced by technology
• Flow of commerce has become multidirectional
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,3. Organisational consolidation
• Large retailers are given special consideration from consumer product
companies
• Services that allow retailers more efficiency:
o Scheduled deliveries
o Rainbow pallets
o Advance Shipment Notices (ASN)
• Retailer may be provided with value-added services such as vendor-managed
inventory (VMI)
• More collaboration is being practiced between organisations in the supply
chains to gain mutual cost savings and improved customer service
4. The empowered consumer
• Impact of the consumer is direct for supply chains because the consumer has
placed increased demands at the retail level for an expanded variety of
products and services
• Due to information, consumers are more educated and empowered
• They have the opportunity to compare prices
• They have a low tolerance for poor quality
• Consumers demand quicker response times and more convenient offerings
• They don’t have loyalty
5. Government policy
• Deregulation of important sectors
o Transportation
o Communication
o Financial institutions
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, The Supply Chain Concept
1. Development of the concept
A. Physical distribution concept
• Focused on the outbound side of a firm’s logistics system
• Total systems cost and analysing trade-off scenarios to arrive at the
lowest system cost
B. Integrated logistics management concept
• Added inbound logistics to the outbound logistics of physical
distribution
• Global sourcing of materials and supplies for inbound systems was
growing in importance
C. Value chain concept
• Developed as a tool for competitive analysis and strategy
• The more integrated nature of marketing sales, and manufacturing with
logistics is an NB dimension of the value chain
• Includes procurement as an element of logistics
D. Supply chain
• Extended enterprise that crosses the boundaries of an individual firm to
span the related activities of all companies involved
• This extended enterprise should attempt to execute a coordinated two-
way flow
• There are three of these two-way flows:
www.dopenotes.co.za
www.dopenotes.co.za
,What forces are driving the rate of change?
1. Globalisation
• Has led to a more competitively intense economic and geopolitical
environment
• Time and distance has become compressed
• The main challenges for supply chains
o Volatility of supply and demand
§ Acts of terrorism has implications on the flow of commerce
§ Contamination of food products from China can cause an
interruption in the flow of products
§ Natural disasters have an effect
o Shorter product life cycles
§ Technological companies are at a threat
§ Provides inventory management problems for supply chains
o Blurring of traditional boundaries
§ To maintain profitability, companies have to outsource
2. Technology
• Major impact on the supply chains as a facilitator of change as companies
have transformed their processes
• Individuals and smaller organisations can connect to the world’s “knowledge
pools” and can create collaboration in supply chains
• Outsourcing has been enhanced by technology
• Flow of commerce has become multidirectional
www.dopenotes.co.za
,3. Organisational consolidation
• Large retailers are given special consideration from consumer product
companies
• Services that allow retailers more efficiency:
o Scheduled deliveries
o Rainbow pallets
o Advance Shipment Notices (ASN)
• Retailer may be provided with value-added services such as vendor-managed
inventory (VMI)
• More collaboration is being practiced between organisations in the supply
chains to gain mutual cost savings and improved customer service
4. The empowered consumer
• Impact of the consumer is direct for supply chains because the consumer has
placed increased demands at the retail level for an expanded variety of
products and services
• Due to information, consumers are more educated and empowered
• They have the opportunity to compare prices
• They have a low tolerance for poor quality
• Consumers demand quicker response times and more convenient offerings
• They don’t have loyalty
5. Government policy
• Deregulation of important sectors
o Transportation
o Communication
o Financial institutions
www.dopenotes.co.za
, The Supply Chain Concept
1. Development of the concept
A. Physical distribution concept
• Focused on the outbound side of a firm’s logistics system
• Total systems cost and analysing trade-off scenarios to arrive at the
lowest system cost
B. Integrated logistics management concept
• Added inbound logistics to the outbound logistics of physical
distribution
• Global sourcing of materials and supplies for inbound systems was
growing in importance
C. Value chain concept
• Developed as a tool for competitive analysis and strategy
• The more integrated nature of marketing sales, and manufacturing with
logistics is an NB dimension of the value chain
• Includes procurement as an element of logistics
D. Supply chain
• Extended enterprise that crosses the boundaries of an individual firm to
span the related activities of all companies involved
• This extended enterprise should attempt to execute a coordinated two-
way flow
• There are three of these two-way flows:
www.dopenotes.co.za
