Supply Chain Management For Dummies
Overview
Putting together all the links in the supply chain
Supply Chain Management For Dummies gives you the full rundown on what a supply chain is, how it works, how to optimize it, and the best education for a rewarding supply chain career. This new edition is fully updated for changes to the supply chain in a post-Covid world. You’ll learn about the latest supply chain technologies, analytics and data-based optimization, and new strategies for delivering on your organization’s promises. This approachable resource can take your supply chain management skills to the next level with step-by-step explanations, expert tips, and real-life examples.
- Gain a foundational knowledge of issues in supply chain management
- Learn about today’s global supply chains, plus trends like reshoring and near-shoring
- Wrap your mind around how an organization’s moving parts can be coordinated in today’s high-tech world
- Discover strategies for dealing with disruptions, focusing on diversity, and increasing resilience
This For Dummies guide is great for entry-level supply chain professionals and anyone who needs an update on need-to-know concepts and recent changes in supply chain management.
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About The Author
Daniel Stanton, aka "Mr. Supply Chain," is an executive, entrepreneur, and educator who helps companies improve the management of their supply chains. He teaches supply chain management at Bradley University and the University of Arkansas, and is a researcher at Cranfield University. Stanton is the author of the previous editions of Supply Chain Management For Dummies.
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supply chain management for dummies
CHEAT SHEET
A supply chain is a complex system made up of people, processes, and technologies that deliver value to a customer. Supply chains connect the functional departments within a company, and they connect every company to its customers and suppliers. Supply chain management involves coordinating all the work that is required to profitably deliver a product or service to your customer.
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One of the most exciting and challenging aspects of supply chain management is how quickly things change. New customers, new suppliers, and new technologies are added to supply chains every day. In order for supply chain managers to meet their goals of delivering value to customers while maximizing profits, they need to always be looking for ways to improve.
Supply chain management involves five main functions: aligning flows, integrating functions, coordinating processes, designing complex systems, and managing resources.
Aligning flows: As money, materials, and information are passed between customers and suppliers, supply chain management keeps them flowing up and down a supply chain.
James B. Ayers is a well-known supply chain management expert who works with manufacturers, service companies, and government agencies. In Handbook of Supply Chain Management, 2nd Edition (Auerbach Publications, 2006), Ayers says that supply chain management should concentrate on five tasks:
Designing supply chains for strategic advantage: Consider how your supply chain can help you create value.
Supply chain managers must know how to lead projects effectively, because doing so helps them lower costs, improve customer service, and reduce environmental effects. The DIRECT framework spells out the six tasks of a supply chain project leader:
D (Define the opportunity): The project team needs a clear goal.
Operations
APICS is one of the oldest, best-known supply chain management associations. Originally the American Production and Inventory Control Society, the organization became more global and expanded beyond inventory and production control, so it dropped the long name. You can find information about APICS certifications online.
Operations
Managing a business is like playing a full-contact sport: So many moving pieces are involved, and so many things can change in an instant, that making long-term plans is virtually impossible. How can you really plan for commodity price swings, natural disasters, and financial meltdowns? You can't. You can't ignore those possibilities, either.
If you've ever taken a personality test, such as the Myers-Briggs Type Indicator, then you know that these tests can reveal important differences in the way that people approach problems and make decisions. It turns out that groups of people have "personalities," too. These personalities form the culture of a group, and culture matters a lot when it comes to managing a supply chain.
Most supply chain managers spend a lot of their time looking for ways to reduce costs. But one of the big challenges with supply chains is that things are often interconnected, so making a change in one area to lower costs can cause a change somewhere else that actually increases the cost. That's not to say that you shouldn't look for cost-savings opportunities, but you need to understand how the system works to ensure that you aren't creating new problems in the process.
The most complicated way to look at a supply chain is to look at it as a system. Like many other systems that you encounter every day, supply chains are made up of many interconnected components that can behave in unpredictable ways.Your car is a good example of a system that you depend on every day. You expect your car to move you from Point A to Point B.
It's often useful to think about your supply chain as a network. Networks are made up of nodes and links. As the figure shows, every stop that a product makes between raw materials and a customer is a node of the network. A factory is a node; so is a warehouse, a distribution center, and a retail store. Nodes are connected by links.
Operations
One of the best ways to deal with the challenge of leading a cross-functional supply chain project is to have a solid project plan. Building the plan gives everyone a chance to provide input and catch interdependencies. Human resources, for example, may not be able to start training employees in a new process until the necessary equipment has been delivered and installed.
Operations
When there are lots of people working on a project, they often have different opinions about their roles and responsibilities. You need to establish a clear understanding of what everyone is doing to make sure that all of the tasks are completed. It is much easier to set expectations up front than to confront misunderstandings later on.
The New Supply Chain Agenda, by Reuben E. Slone, J. Paul Dittmann, and John T. Mentzer (Harvard Business Review Press, 2010) is a business book — the kind that you'd find in an airport bookstore — that breaks down the challenge of supply chain management in a way that focuses on senior executives. The authors talk about working capital and liquidity, strategy, and alignment, and they lay out a five-step system for making a company better at supply chain management.
Managing risks in the supply chain is a necessary evil. To make a difference in your supply chain and manage the complex challenges that come with it, you need to decide what to do about each risk. ©Shutterstock/alexmillosThe good news is that your options for handling any risk in the supply chain are fairly simple.
One great way to explain a supply a chain is to think of it as three rivers that flow from a customer all the way back to the source of raw materials. These rivers, or flows, are materials, money, and information, as shown.Materials flow downstream in the supply chain, starting with raw materials and flowing through value-added steps until a product finally ends up in the hands of a customer.
Operations
Supply chain plans are built on assumptions about what will happen in the future, and these assumptions are usually based on past experience. In any event, it’s a good idea to have a supply chain plan for difficult times. ©Shutterstock/Wright StudioFor example, if the transit time between one of your suppliers and one of your factories has always been 15 days in the past then you would assume that the transit time will be 15 days for future orders, too.
You can look at a supply chain in terms of flows, functions, communities, or systems. But in order to manage a supply chain, you need to be able to measure what's happening. Virtually every process in a supply chain can be measured with quantitative metrics or qualitative metrics.Quantitative metrics are objective, numerical indicators.
A friend has a sign on her desk that reads "Good, Fast, Cheap … Pick Any Two." The message is relevant for supply chain management because you often have to figure out what's most important to you and be willing to compromise on the rest.
Step 1: Understand what customers value
To make good decisions about what to prioritize in a supply chain, start with your customers.
Operations
Six Sigma is a process improvement method that's built on statistics. The basic idea is that variation is bad. When you're running a manufacturing process or a supply chain, you need consistency and predictability. If you don't have consistency, some percentage of the things that you make probably isn't useful for your customers.
Many people try to describe supply chain management by talking about what they do, which is a bit like describing a cake by giving someone a recipe. A different approach is to describe what supply chain management actually creates. To continue the cake example, that means describing how the finished cake tastes and what it looks like.
Operations
A supply chain is a complex system made up of people, processes, and technologies that deliver value to a customer. Supply chains connect the functional departments within a company, and they connect every company to its customers and suppliers. Supply chain management involves coordinating all the work that is required to profitably deliver a product or service to your customer.
Operations
Supply chains connect companies and cut across the silos within a company. As a result, supply chain projects commonly involve team members from many functions. A supply chain project team might include people from business development, customer services, shipping, receiving, manufacturing, information technology, accounting, and human resources.
Operations
Each company in a supply chain has an effect on all the others. If your company surprises one of your suppliers with a big order, that order is likely to create problems — and cost the supplier money. But if your supplier has a pretty good idea of what you're going to buy and when you're going to buy it, the supplier can plan in such a way to meet your needs while keeping its own inventory and transportation costs low.
Operations
Engineering teams are always looking for ways to innovate, make changes, and improve products. For their innovation processes to work well, engineers often develop relationships with suppliers that can be flexible and collaborative, but this flexibility and the time invested in understanding the engineers' needs have a cost.
Operations
Inventory costs money because it ties up working capital, eats up labor and real estate, and depreciates quickly. Many supply chain professionals and business analysts will even tell you that inventory is the enemy. You may wonder why everyone doesn't immediately eliminate all inventory. Wouldn't supply chain management be a whole lot easier if you didn't have to deal with warehouses, distribution centers, and stock rooms?
Operations
Manufacturing operations focus on maximizing the amount of product that they're able to make in a given period. Sometimes, manufacturing processes need to be shut down. Planned shutdown times typically are based on the shifts that people work. Planned shutdowns may also occur so that the company can perform maintenance or change equipment to make different products.
Operations
Procurement teams look for ways to get the same materials at lower cost. Two common ways reduce costs are to buy in larger quantities and to buy from a supplier in a low-cost region. Both of these options are likely to provide lower cost per item, but they also can have the unintended result of increasing logistics costs.
Operations
Salespeople often say that you can't sell a product you don't have, and if you ask them how much product the company should make, the number is high. In other words, the salespeople want to make sure that you have enough product to meet all the customer demand that they can possibly generate, plus a little bit more.
Operations
The Theory of Constraints (TOC) is one of the simplest, most powerful supply chain concepts. The basic idea is that every process is limited by some kind of constraint (think of the saying, "A chain is only as strong as its weakest link"). TOC is really about tuning an entire supply chain to run at the same pace as the slowest step in the process.
Supply chain management can also be described as integrating three of the functions inside an organization: purchasing, logistics, and operations. Each of these functions is critical in any company, and each of them has its own metrics. But these functions are interdependent, so making good decisions in any of these areas requires coordination with the other two.
Lean is an approach to supply chain management that originated with Toyota, which is why you may hear it referred to as the Toyota Production System (TPS). The idea behind Lean is that you use the least amount of time, effort, and resources by maintaining smooth and balanced flow in a supply chain. The best way to accomplish this is by having logical, disciplined processes and excellent communications.
Operations
Managing your supply chain always comes with risk. If you hope to mitigate those successfully, you’ll need to understand the risks you may be facing. Use this guide to identify, classify, and score risk in your supply chain.
Identifying risks in the supply chain
The first step in managing risks in a supply chain is identifying them.
The Supply Chain Operations Reference (SCOR) is a process framework maintained by the APICS Supply Chain Council. SCOR focuses on manufacturing supply chains but has been adapted for retail and service supply chains too.SCOR organizes all the processes in a supply chain into six groups:
Plan: Decide what to make, when to make it, and where to make it.
In spite of the current hype, supply chains aren't really that new. Entrepreneurs have been buying things from suppliers and selling products to customers for almost as long as people have inhabited the earth. However, supply chain management is new. In fact, the basic principles of supply chain management only began to take shape in the 1980s, at about the same time that personal computers came onto the business scene.
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