Marketing 2 Chapter 14 Supply Chain Management

Supply Chain Management
* refers to a set of approaches and techniques firms employ to effeciently and effectively integrate their suppliers, manufacturers, warehouses, stores, and transportation intermediaries into a seamless operation in which merchandise is produced and distributed in the right quantities, to the right locations, and at the right time, as well as to minimize systemwide costs while satisfying the service levels their customers require.
* are firms that buy, take title to, often storing, and physically handling goods in large quantities, then reselling the goods to retailers or industrial or business users.
What is Supply Chain Management?
Supply chain management is the effort to coordinate suppliers, manufacturers, warehouses, stores, and transportation intermediaries so that products are produced in the right amounts and sent to the right locations when the consumer wants them.
Supply Chain, Marketing Channels, and Logistics are Related
* Marketing channel management traditionally has been the responsibility of marketing departments, under the direction of a marketing vice president.
* Logistics was traditionally the responsibility of operations, under a vice president of operations.
* Firms have come to realize there is tremendous opportunity in coordinating marketing and logistics activities not only within a firm but also throughout the supply chain.
* Thus, because supply chain management takes a systemwide approach to coordinating the flow of merchandise, it includes both channel marketing and logistics and therefore the terms are interchangable.
* is the set of institutions that transfer the ownership of and move goods from the point of production to the point of consumption; as such , it consists of all the institutions and marketing activities in the marketing process.
* Thus, a marketing channel and a supply chain are virtually the same and the terms could be used interchangeably.
* Describes the integration of two or more activities for the purpose of planning, implementing, and controllong the efficient flow of raw materials, in-process inventory, and finished goods from the point of origin to the point of consumption.
* These activities may include, but are not limited to, customer service, demand forecasting, distribution communications, inventory control, materials handling, salvage and scrap disposal, traffic and transportation, and warehousing and storage.
* Logistics management is the element of supply chain management that concentrates on the movement and control of physical products; supply chain management as a whole also includes an awareness of the relationships among members of the supply chain or channel and the need to coordinate efforts to provide customers with the best value.
How do supply chains add value?
* They add value by finding raw materials, manufacturing products, or getting them to where they could be used.
* They help bind together company functions.
Suppy Chain Marketing Affects Marketing
* Every marketing decision is affected by and has an effect on the supply chain.
* When products are designed and manufactured, how and when the critical components reach the factory must be coordinated with production.
* The sales department must coordinate its delivery promises with the factory or distribution centers.
Five interrelated activities emerge in supply chain management.
* Making information flow
* Making merchandise flow
* Managing inventory
* Designing the supply chain
* Manageing the relationships among supply chain partners.
* Furthermore, advertising and promotion must be coordinated with those departments that control inventory and transportation.
How does a supply chain work?
* Supply chain managment is the effort to coordinate suppliers, manufactures, warehouses, stores, and transportation intermediaries so that products are produced in the right amounts and sent to the right locations when the customer wants them.
* Suppy chain managenent includes the managerial aspects of the products.
Making Information Flow
* Flow 1- (Customer to store) scann of the Universal Product Code(UPC)
Fow 2-( Store to Buyer) The sales information is incorporated into an inventory management system and used to monitor and analyze sales and to decide to reorder, change a price, or plan a promotion. Buyer also send information to stores on averall sales for the chain, how to display the merchandise, upcoming promotions, ect.
* Flow 3-(Buyer to Manufacturer) The puchase information from each store is typically aggregated by the retailer as a whole, which creates an order for new merchandise and sends it to the manufacturer.
* Flow 4-( Store to Manufacturer) In some situations, the sales transaction data are sent directly from the store to the manufacturer, and the manufacturer decides when to ship more merchandise to the distribution center and the stores.
* An electronic document that the supplier sends the retailer in advance of a shipment to tell the retailer exactly what to expect in the shipment.
Data Warehouse
* Purchase data collected at the point of sale goes into a huge database known as a data warehouse. The information stored in the data warehouse is accessible on various dimensions and levels.( Time, Location, and Merchandise)
Electronic Data Interchange (EDI)
* is the computer-tocomputer exchange of business documents from a retailer to
a vendor and back.
* in addition to sales data, purchase orders, invoices, and data about returned merchandise can be transmitted back and forth.
* EDI enables vendors to transmit information about on-hand inventory status, vendor promotions, and cost changes to the retailer, as well as information about purchase order changes, order status, retail prices, and transportation routings.
* EDI is transmitted over the Internet through either Intranets or Extranets
The use of EDI provides three main benefits to supply chain members.
* 1. EDI reduces the cycle time, or the time between the decision to place an order and the receipt of merchandise. Information flows quicker using EDI, which means that inventory turnover is higher.
* 2. EDI improves the overall quality of communications through better recordkeeping; fewer errors in inputting and receiving an order; and less human error in the interpretation of data.
* 3. The data transmitted by EDI are in a computer-readable format that can be easily analyzed and used for a variety of tasks ranging from evaluating vendor delivery performance to automating reorder processes.
…because of these benefits, many retailers are asking their suppliers to interface with them using EDI.
Vendor-Managed Inventory
* is an approach for improving supply chain efficiency in which the manufacturer is responisble for maintaining the retailer’s inventory levels in each of its stores.
* By sharing the data in the retailer’s data warehouse and communicating that information via EDI, the manufacturer determines a reorder point– a level of inventory at which more merchandise is required.
* When inventory drops to the order point, the manufacturer generates the order and delivers the merchandise.
Colaborative Planning, Forecasting, and Replenishment (CPFR)
* is the sharing of forecast and related business information and collaborative planning between retailers and vendors to improve supply chain efficiency and product replenishment.
* CPFR is a more advanced form of retailer-manufacturer colaboration that involves sharing proprietary information, such as business strategies, promotion plans, new product developments and introductions, production schedules, and lead time information.
Pull and Push Supply Chains
* Although generally mire desiravle, a pull approach to a supply chain is not the most effective in all situations.
* Because both pull and push supply chains have their advantages, most retailers use a combination of these approaches.
Pull Supply Chain
* a supply chain in which orders for merchandise are generated at the store level on the basis of sales data captured by POS terminals.
* the demand for an item pulls it through the supply chain.
* their is less likelihood of being overstocked or out of stock because the store orders merchandise as needed on the basis of consumer demand.
* increases inventory turnover and is more responsive to changes in customer denand
* more efficient when demand is uncertain and difficult to forecast because the forcast is based on consumer demand
Push Supply Chain
* stategy in which merchandise is allocated to stores on the basis of historical demand, the inventory position at the distribution center, and the stores’ needs.
* requires a more costly and sophisticated information system to support it.
* for some merchandise, retailers do not have the flexibility to adjust inventory levels on the basis of demand.
* are efficient for merchandise that has steady, predictable demand, such as milk and eggs, basic mens underwear, and bath towels.
What are the various supply chain links associated with each information flow step?
What is the difference between push and pull supply chains?
* Making mechandise flow involves first deciding if the merchandise is going to go from the manufacturer to a retailer’s distribution center or directly on to stores. Once in a distribution center, multiple activities take place before it is shipped on to a store.
Distribution Centers versus Direct Store Delivery
* Although manufactures and retailers may collaborate, the ultimate decision is usually up to the retailer and depends on the characteristics of the mercdhandise and the nature of demand. To determine each distribution system is better, retailers consider the total cost associated with each alternative and the customer service criterion of having the right merdhandise at the store when the customer wants to buy it.
Advantages of using a Distribution Center
* More accurate sales forecasts are possigle when retailers combine forecasts for many stores serviced by one distribution center rather than doing a forecast for each store.
* Distribution centers enable the retailer to carry less merchandise in the individual stores, which results in lower inventory investments systemwide.
* It is easier to avoid running out of stock or having too much stock in any particular store because merchandise is ordered from the distribution center as needed.
* Retail store space is typically much more expensive than space at a distribution center, and distribution centers are better equipped than stores to prepare merchandise for sale. As a result, many retailers find it cost-effective to store merchandise and get it ready for sale a center rather than in individual stores.
The Distribution Center
* The Distribution Center performs the following activities:
* Management of inbound transportation
* Receiving and checking using UPC and Radio Frequency Identification (RFID) device.
* Storing and Cross-Docking
* Getting merchandise floor ready
* Preparing to ship merchandise to a store
* Shipping merchandise to stores
* is the person who coordinates the deliveries to the distribution center.
Receiving and Checking using UPC and Radio Frequency Identification Tags
* is the process of redording the receipt of merchandise as it arrives at a distribution center or store.
* is the process of going through the goods upon receipt to ansure they arrived undamaged and that the merchandise ordered was the merchandise received.
* are tiny computer chips that automatically transmit to a special scanner all the information about a container’s contents or individual products.
* making the checking in merchandise much faster and accurate.
Storing and Cross-Docking
* after the mechandise is received and checked in, it is either stored or cross-docked
* Merchandise sales rate and degree of perishability or fashionability typically determine whether cartons are cross-docked or stored.
* a distribution method whereby merchandise is unloaded from the shippers’ truck and within a few hours reloaded onto trucks going to stores. These items are prepackaged by the vendor for a specific store.
* the cartons are routed on the conveyor system automatically by sensors that read the UPC label on the cartons.
* Cross-Docked merchandise is in the center only for a few hours before it is shipped to the store.
Getting merchandise Floor-Ready
* additional tasks are udertaken in the distribution center to make the merchandise floor ready.
* Getting merchandise floor ready entails ticketing, marking, and in the case of some apparel, placing garments on hangers.
* some companies demand that merch be shipped in ready to sell units.
* merchandise that is ready to be placed on the selling floor immediately.
* refers to affixing price and identification labels to the merchandise.
Preparing to ship merchandise to a store.
* is a document or display on a screen in a forklift truck indicating how much of each item to get from specific storage areas.
Shipping merchandise to stores
* To handle theis complex transportation provlem, the centers use sophisticated routing and scheduling computer systems that consider the locations of the stores, road conditions, and transportation operating constraints to develop the most effecient routes possible.

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