Chapter 2 developing a sustainable supply chain strategy balkan cetinkaya learning goals. Yet these low cost benefits are eroding through a combination of cost. Information systems and supply chain management strategic cost, procurement, and supply chain finance 3. One executive suggested that her supply chain organization is now focused on giving customers the innovation they want and need and not simply delivering on a generic cost reduction goal. In cost management, an approach to inventory valuation in which variable costs and a portion of fixed costs are assigned to or absorbed into each unit of production. Strategic cost management free download as powerpoint presentation.
Substantial opportunities exist for sustainability in supply chain operations. Profits for your company can rocket upward if you achieve sufficient savings in supply chain costs. Kasturi rangan, 0 president and fellows of harvard college. Scm is the active management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage, according to robert handfield, ph. Pdf supply chain management for aviation mro industry. Value chain for strategic management accounting in higher. The next generation of supply chain ideas how to better structure your supply chain strategy guidelines for making strategic sourcing and makebuy decisions how to integrate ebusiness thinking into supply chain strategy and management. Request pdf strategic cost management in supply chains, part 1. Strategic cost management of the esupply chain is one new concept which.
An example is bayer ag, which set up strategicsourcing teams to coordinate its buys. Management hierarchy as part of supply chain strategy supply chain strategy does not exist in isolation but rather throughout an organization in a management responsibility hierarchy, because it serves all levels of operations. Learn more about geps supply chain risk management services. The term supply chain management crystallizes concepts about integrated. The emergence of edi and supply chain management has increased the importance of costing out activities in the value chain and determining the cost to the. Reshaping the asset and cost base driving margins, cash and return on assets with specific programmes for each element of the cost base.
Strategic cost management or otherwise called as scm is the cost management technique that aims at reducing costs while strengthening the position of the business. Role in the supply chain set of business processes required to purchase goods and services in a supply chain. Request pdf on jan 1, 2002, lisa m ellram and others published strategic cost management in the supply chain. So, in order to achieve strategic impact, firms must connect customers and suppliers in the integrated supply chain. Strategic cost management in supply chains, part 2. This is especially relevant for thirdparty logistics and transportation management service providers, whose service fee is based on reducing cost and streamlining the shippers supply chain. The reorganization of the three air logistics depots. And in no part of the business is it any more critical than in procurement and sourcing activities. The driving force is senior management s need for strategic analysis in the face of globalization of the companys markets and supply chains, and competition in cost and service.
However, at least for the sample observed, companies appear to be far removed from the strategic and systemic perspective of supply chain management proposed by researchers when evaluating current. The fixed costs are usually allocated to units of output on the basis of direct labor hours, machine hours, or material costs. Cost management along the supply chain methodological. Theres some truth to this definition, but supply chain strategy really is broader. Logistics management and strategy logistics management.
The essentials of supply chain management strategic sourcing. Supply chains today must be robust enough to withstand social, economic and geopolitical risks, plus new and emerging threats such as cyberattacks. Cost management within a supply chain management domain has. Emphasizing cost, quality, time, and flexibility is an effective strategic approach for operations management. Structural cost management strategic cost management is the deliberate alignment of a firms resources and associated cost. May 16, 2011 the essentials of supply chain management strategic sourcing. Scm involves the flow of information and products between and among supply chain stages to maximize profitability. The supply chain logistics course will cover transportation, warehousing and inventory, and logistics network design.
Taxation labour and material costs have been, for many multinationals, the initial driver of supply chain considerations in china. The strategic importance of supply chain management. Overview of strategic cost management and procurement in the supply chain. Gep makes supply chain risk management an integral part of your supply chain strategy to help you identify and mitigate risks quickly. Dec 12, 2019 supply chain management operates at three levels. Strategic cost management in a global supply chain. Supply chain management definition and importance of its. Strategic cost management in supply chains, part 1. Shank and vijay govindarajan discuss in depth on the strategic cost management scg and the value chain concept applied in real world situation from the airline industry. This paper uses a multiple case study approach to contribute to the body of knowl. Wall street business magnate stephen chu, winner of the strathmores whos who registry honoring the most successful business tycoons in the world, says the demolisher betting system lived up exactly to its billing. Dekker and van goors 2000 case study of an activitybased costing model to. Airline companies are striving hard to reduce the supply.
Strategic cost management in supply chains is not a new concept. Strategic cost management in esupply chain revised version4 3 center for accounting studies of xiamen university in china strategic cost management in esupply chain yuanlue fu xiamen university, p. Objectives of scm a well designed sc is expected to support the strategic objectives of. And then, based on the customercentric conception, it will discuss the low price policy, cost control, loyalty card strategy, supply chain management, delivery system management and inventory management at the business unit strategy level and functional strategy level. Supply chain profitability is the difference between the revenue generated from the customer and the overall cost across the supply chain it is the total profit to be shared across all supply chain stages supply chain success is measured in terms of supply chain profitability and not in terms. Responsiveness versus efficiency sourcing role in the supply chain role in the competitive strategy components of sourcing decisions sourcing. Logistics and supply chain management continue to transform the competitive landscape and have become one of todays key business issues. Pdf on jan 1, 2004, vorst and others published supply chain management. This is why exchange rates have little to do with multinational company decisions between low cost country sourcing. We support a culture where we thrive as a motivated, engaged and futureready supply chain community. Supply chain management is primarily concerned with the efficient integration of suppliers, factories, warehouses and stores so that merchandise is produced and distributed in the right quantities, to the right locations and at the right time, and so as to minimize total system cost subject to satisfying.
Using selected studies in accounting, operations management, and business strategy, we provide an overview of strategic cost management in supply chains, highlight. We specialize in increasing the efficiency and effectiveness of procurement, materials management and manufacturing operations. The supply chain logistics course will cover transportation. Structural cost management employs tools of organizational design, product design and process design to create a supply chain cost structure that is coherent with firm strategy. Supply chain management definition and importance of its strategies definition of supply chain management if you go to a supermarket and pick up a few items off the shelf from electronics and white goods or even clothes and look at the labels, the chances are that you will find them having been manufactured in china or mexico. Strategic cost management is the juncture between managing pure cost in the supply chain and recognizing that pure cost is not the only criteria for making strategic sourcing decisions. Strategic supply management associates is a supply chain strategy and business process focused management consulting firm. Cost management cost management has taken on increasing importance in all aspects of the business. Structural cost management employs tools of organizational design, product design, and process design to create a supply chain cost structure that is coherent with firm strategy. Because these seven opportunities apply to almost every aspect of supply chain management, you can be. Analyzing and evaluating critically tescos current. Flexibility refers to a strategy that seeks to provide a product or service that is less expensive than similar products or services offered by competitors. Structural cost management strategic cost management is the deliberate alignment of a. Strategic cost management supply chain management cost.
This means incorporating it as a key requirement across all supply chain processes. You dont need to be a corporate giant to save big on supply chain costs. To understand the role that scma can play, it is important first to define supply chain management scm. Chapter 1operations and supply chain strategy 2 copy 1. The supply chain management specialization is made up of four basic courses in logistics, operations, planning, and sourcing, followed by a capstone course in supply chain management strategy.
Shank vilay govindarajan analysis in this article shank and govindarajan analyze several management accounting cases and emphasize how traditional analyses could lead managers to make poor decisions and how their strategy should lead managers to make better decisions. Yet these lowcost benefits are eroding through a combination of cost. Important strategic concepts about supply chain management, including. For those looking to get more effective transportation management. Pdf book supply chain strategy the logistics of supply. It is a process of combining the decisionmaking structure with the cost information, in order to reinforce the business strategy as a whole. Although the concept of supply chain management has been around for over 20 years, still there are many professionals who believe that supply chain is a simple tool that can be adopted and implemented without solid foundation and framework of how supply chain works. At the strategic level, company management makes highlevel strategic supply chain decisions that are relevant to whole organizations. Chapter 2 developing a sustainable supply chain strategy. Strategic cost management in esupply chain request pdf. Strategic cost management in a global supply chain 0 1. Executional cost management employs measurement and analysis tools e. Shank, 1996, which in combination are suggested to produce strategyrelevant cost data. Supply chain management scm involves the movement of products and services from suppliers to distributors.
But in setting supply chain strategy, youll need to look at three layers of cost. The strategic importance of supply chain management in creating value is. Three scm underlying concepts have been identified. Most notably, a companys commitment to supply chain management impacts its strategic orientation, which in turn significantly influences the supply chain s stability and the firms independence. Mar 14, 2017 supply chain management scm is an important part of every organization, whether small or large. Supply chain management is the integration of key business processes from end user through. Yet identifying the costs that can be eliminated and then doing so effectively can prove impossible without the right method. Existing literature on healthcare supply chain management. Coordinated actions between companies of the same chain, in order to reduce costs and end consumer price, offer opportunities for. Pdf strategic supply chain management implementation.
Practitioners and educators need a common definition of supply chain management, and a shared understanding of the processes. We recommend the definition of supply chain management developed and used by the global supply chain forum. Strategic management use these strategic management tips to learn every aspect of your supply chain, from forecasting to scheduling and cost cutting. Leading supplymanagement organizations also rely on their industrys experience curve to project and demand continuing cost reductions year after year. Jun 01, 2002 many leading firms in the usa have adopted an integrated strategic approach to purchasing and logistics management known as supply chain management. We enable a world class supply chain by investing in our people and capabilities. Increasing value in supply chain and procurement stretch of the function need for doing more realizing latent supply chain value applying structured approaches for sustainable value bringing it all together and ensuring the supply chain is a strategic enabler. Supply chain strategy is an iterative process that evaluates the cost. What are the objectives of supply chain management. A concise, applied and strategic introduction to the subject of logistics and supply chain management, perfect for modern managers and students of logistics and supply chain management.
The next generation of supply chain ideas how to better structure your supply chain strategy guidelines for making strategic sourcing and makebuy decisions how to integrate ebusiness thinking into supply chain strategy and management how the speed of industrial change is. These seven areas offer significant savings opportunities for companies of all sizes and across all industries. For most supply chains, cost reduction is imperative to longterm survival. Strategic cost management and the value chain 2097 words. It is important that every operations management professional understand how supply chain strategy underscores the. The strategic management process that unifies the systematic planning and. The essentials of supply chain management strategic. Scm also deals with the movement and storing of materials needed to create a product, as well as inventory management, and. Strategic cost management of the e supply chain is one new concept which integrates three fields.
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