7.3 Supply chain management

Supply chain management is the backbone of effective marketing, ensuring products reach consumers at the right time and place. It encompasses a network of entities, from suppliers to retailers, working together to deliver goods and services efficiently.

The supply chain strategy aligns operations with business objectives, impacting product availability and customer satisfaction. Key concepts include push vs. pull strategies, lean vs. agile supply chains, and various integration methods to enhance coordination among partners.

Definition of supply chain

• Encompasses the entire network of entities involved in producing and delivering a product or service to the end customer
• Plays a crucial role in marketing by ensuring products are available to consumers at the right time and place

Components of supply chain

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• Suppliers provide raw materials and components to manufacturers
• Manufacturers transform inputs into finished products
• Distributors move products from manufacturers to retailers
• Retailers sell products directly to consumers
• Customers represent the end-users of products or services

Supply chain vs value chain

• Supply chain focuses on the flow of goods and information from supplier to customer
• Value chain emphasizes activities that add value at each stage of production and distribution
• Supply chain management aims to optimize operational efficiency
• Value chain analysis identifies opportunities for competitive advantage

Supply chain strategy

• Aligns supply chain operations with overall business objectives and marketing goals
• Impacts product availability, pricing, and customer satisfaction

Push vs pull strategies

• Push strategy involves producing goods based on demand forecasts
  • Emphasizes economies of scale and inventory buildup
  • Suitable for products with stable demand (household staples)
• Pull strategy produces goods in response to actual customer orders
  • Reduces inventory costs and improves responsiveness
  • Effective for customized or perishable products (made-to-order furniture)

Lean vs agile supply chains

• Lean supply chains focus on eliminating waste and reducing costs
  • Emphasizes efficiency and continuous improvement
  • Works well for products with predictable demand (commodity items)
• Agile supply chains prioritize flexibility and responsiveness to market changes
  • Adapts quickly to fluctuations in demand or supply disruptions
  • Suitable for innovative products with unpredictable demand (fashion items)

Supply chain integration

• Enhances coordination and information sharing among supply chain partners
• Improves overall efficiency and responsiveness to market demands

Vertical integration

• Involves a company taking control of multiple stages of the supply chain
• Forward integration expands control towards the customer (manufacturer acquiring retail stores)
• Backward integration expands control towards suppliers (retailer purchasing farms)
• Provides greater control over quality and costs

Horizontal integration

• Occurs when a company acquires or merges with competitors at the same stage of the supply chain
• Increases market share and economies of scale
• Can lead to reduced competition and potentially higher prices for consumers

Virtual integration

• Utilizes information technology to coordinate activities across independent supply chain partners
• Enables real-time information sharing and collaboration without ownership
• Provides flexibility and scalability while minimizing capital investment

Demand forecasting

• Critical for aligning supply with expected customer demand
• Informs marketing strategies and product availability decisions

Forecasting methods

• Time series analysis examines historical data to identify patterns and trends
• Causal methods consider external factors influencing demand (economic indicators)
• Qualitative techniques rely on expert opinions and market research
• Machine learning algorithms process large datasets to predict future demand

Demand planning techniques

• Collaborative planning, forecasting, and replenishment (CPFR) involves sharing data with supply chain partners
• Scenario planning prepares for multiple potential demand outcomes
• Demand sensing uses real-time data to adjust short-term forecasts
• Segmentation tailors forecasting approaches to different product categories or customer groups

Inventory management

• Balances the costs of holding inventory with the need to meet customer demand
• Impacts product availability and marketing effectiveness

Types of inventory

• Raw materials used in production processes
• Work-in-progress items partially completed products
• Finished goods ready for sale to customers
• Safety stock maintains buffer against unexpected demand or supply disruptions

Inventory control systems

• Economic Order Quantity (EOQ) model determines optimal order size
• Continuous review systems monitor inventory levels constantly
• Periodic review systems check inventory at fixed time intervals
• ABC analysis categorizes items based on their importance and value

Just-in-time inventory

• Minimizes inventory levels by receiving goods only as needed for production
• Reduces carrying costs and improves cash flow
• Requires close coordination with suppliers and accurate demand forecasting
• Increases vulnerability to supply chain disruptions

Procurement and sourcing

• Involves acquiring goods and services needed for business operations
• Impacts product quality, costs, and overall supply chain performance

Supplier selection criteria

• Quality of products or services provided
• Price and total cost of ownership
• Reliability and on-time delivery performance
• Financial stability and long-term viability
• Technological capabilities and innovation potential
• Sustainability practices and ethical standards

Strategic sourcing

• Analyzes spending patterns to identify opportunities for cost savings
• Develops long-term relationships with key suppliers
• Leverages volume to negotiate better terms and pricing
• Considers total cost of ownership, not just purchase price

Outsourcing vs insourcing

• Outsourcing involves contracting external parties to perform certain functions
  • Allows focus on core competencies
  • Provides access to specialized expertise
• Insourcing keeps functions within the organization
  • Maintains greater control over processes
  • Protects proprietary knowledge and technologies

Logistics and distribution

• Ensures efficient movement and storage of goods throughout the supply chain
• Directly impacts product availability and customer satisfaction

Transportation modes

• Road transport offers flexibility for short to medium distances
• Rail transport provides cost-effective solution for large volumes over long distances
• Air freight enables rapid delivery for time-sensitive or high-value goods
• Sea freight offers economical option for international shipments
• Intermodal transportation combines multiple modes for optimal efficiency

Warehousing and storage

• Centralized warehouses consolidate inventory for efficient distribution
• Cross-docking facilities minimize storage time by quickly transferring goods between vehicles
• Automated storage and retrieval systems (AS/RS) improve space utilization and picking efficiency
• Temperature-controlled storage preserves perishable goods

Last-mile delivery

• Represents the final stage of delivery from distribution center to customer
• Impacts customer experience and satisfaction
• Includes options like home delivery, click-and-collect, and parcel lockers
• Utilizes route optimization software to improve efficiency and reduce costs

Supply chain technology

• Enhances visibility, efficiency, and decision-making across the supply chain
• Enables better coordination between marketing and supply chain functions

Enterprise resource planning

• Integrates various business functions into a single system
• Provides real-time visibility into inventory levels and order status
• Facilitates better coordination between departments (sales, production, procurement)
• Improves data accuracy and reduces manual data entry errors

Radio frequency identification

• Uses radio waves to automatically identify and track tagged items
• Enhances inventory accuracy and reduces manual counting
• Improves traceability of products throughout the supply chain
• Enables real-time monitoring of stock levels and product movement

Blockchain in supply chain

• Creates a decentralized, tamper-proof record of transactions
• Enhances transparency and traceability of products
• Reduces fraud and counterfeiting in supply chains
• Facilitates faster and more secure payments between supply chain partners

Supply chain risk management

• Identifies and mitigates potential disruptions to supply chain operations
• Ensures continuity of product availability and protects brand reputation

Types of supply chain risks

• Supply risks include supplier bankruptcy or quality issues
• Demand risks involve unexpected fluctuations in customer orders
• Process risks encompass equipment failures or production errors
• Environmental risks include natural disasters or geopolitical events
• Cyber risks involve data breaches or system failures

Risk mitigation strategies

• Diversifying supplier base to reduce dependence on single sources
• Building buffer inventory for critical components or products
• Developing contingency plans for potential disruptions
• Implementing robust cybersecurity measures to protect data
• Using financial instruments (insurance) to transfer certain risks

Sustainability in supply chains

• Addresses environmental and social impacts of supply chain operations
• Aligns with growing consumer demand for responsible business practices

Green supply chain practices

• Reducing carbon emissions through optimized transportation and logistics
• Implementing energy-efficient manufacturing processes
• Using sustainable packaging materials
• Minimizing waste generation and increasing recycling efforts
• Sourcing raw materials from environmentally responsible suppliers

Circular supply chains

• Designs products for easy disassembly and recycling
• Implements reverse logistics to recover used products
• Refurbishes or remanufactures products to extend their lifecycle
• Utilizes waste from one process as input for another (industrial symbiosis)
• Shifts from selling products to providing services (product-as-a-service models)

Performance measurement

• Evaluates the effectiveness and efficiency of supply chain operations
• Identifies areas for improvement and aligns supply chain with marketing goals

Key performance indicators

• On-time delivery rate measures ability to meet customer expectations
• Inventory turnover ratio assesses efficiency of inventory management
• Order fulfillment cycle time tracks speed of order processing
• Perfect order rate measures accuracy and completeness of deliveries
• Supply chain costs as a percentage of revenue evaluates overall efficiency

Balanced scorecard approach

• Financial perspective considers cost reduction and asset utilization
• Customer perspective focuses on order fulfillment and customer satisfaction
• Internal process perspective evaluates operational efficiency and quality
• Learning and growth perspective assesses employee skills and innovation
• Provides a holistic view of supply chain performance across multiple dimensions

Global supply chain management

• Addresses challenges and opportunities of operating across international borders
• Impacts product sourcing, distribution, and marketing strategies

International trade considerations

• Tariffs and trade barriers affect costs and feasibility of cross-border transactions
• Exchange rate fluctuations impact pricing and profitability
• Longer lead times require careful planning and inventory management
• Compliance with diverse regulatory requirements across different countries
• Managing multiple transportation modes and customs procedures

Cultural factors in supply chains

• Communication styles influence negotiations and relationship building with partners
• Decision-making processes vary across cultures, affecting collaboration
• Time orientation impacts expectations for delivery schedules and planning horizons
• Power distance affects hierarchical structures and management approaches
• Uncertainty avoidance influences risk tolerance and contract specificity

Supply chain trends

• Shapes the future of supply chain management and its integration with marketing

Digitalization of supply chains

• Internet of Things (IoT) enables real-time tracking and monitoring of goods
• Artificial Intelligence and machine learning optimize forecasting and decision-making
• Cloud computing facilitates data sharing and collaboration across supply chain partners
• Digital twins create virtual replicas of physical supply chains for simulation and optimization
• Robotic process automation streamlines repetitive tasks and improves efficiency

Omnichannel supply chains

• Integrates multiple sales channels to provide seamless customer experience
• Requires unified inventory visibility across all channels
• Enables flexible fulfillment options (ship from store, buy online pick up in-store)
• Demands agile supply chain capabilities to meet diverse channel requirements
• Leverages data analytics to optimize inventory allocation across channels