Supply Chain Management
Supply Chain Management (SCM
The average company spends nearly half of every dollar it earns on production needs—goods and services it needs from external suppliers to keep producing. A supply chain consists of all parties involved, directly or indirectly, in the procurement of a product or raw material. Supply chain management (SCM) involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability.
In the past, companies focused primarily on manufacturing and quality improvements within their four walls; now their efforts extend beyond those walls to influence the entire supply chain including customers, customers’ customers, suppliers, and suppliers’ suppliers. Today’s supply chain is a complex web of suppliers, assemblers, logistic firms, sales/marketing channels, and other business partners linked primarily through information networks and contractual relationships. SCM systems enhance and manage the relationships.
Business Dilemma
Netflix reinvented the video rental business using supply chain technology. Netflix, established in 1998, is the largest online DVD rental service, offering flat rate rental-by-mail to customers in the United States. Headquartered in Los Gatos, California, it has amassed a collection of 80,000 titles and over 6.8 million subscribers. Netflix has over 42 million DVDs and ships 1.6 million a day, on average. Netflix previously claimed to spend about $300 million a year on postage. On February, 25 2007, Netflix announced the delivery of its billionth DVD.
The company provides a monthly flat-fee service for the rental of DVD movies. A subscriber creates an ordered list, called a rental queue, of DVDs to rent. The DVDs are delivered individually via the United States Postal Service from an array of regional warehouses (44 in 29 states). A subscriber keeps a rented DVD as long as desired but has a limit on the number of DVDs (determined by
The average company spends nearly half of every dollar it earns on production needs—goods and services it needs from external suppliers to keep producing. A supply chain consists of all parties involved, directly or indirectly, in the procurement of a product or raw material. Supply chain management (SCM) involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability.
In the past, companies focused primarily on manufacturing and quality improvements within their four walls; now their efforts extend beyond those walls to influence the entire supply chain including customers, customers’ customers, suppliers, and suppliers’ suppliers. Today’s supply chain is a complex web of suppliers, assemblers, logistic firms, sales/marketing channels, and other business partners linked primarily through information networks and contractual relationships. SCM systems enhance and manage the relationships.
Business Dilemma
Netflix reinvented the video rental business using supply chain technology. Netflix, established in 1998, is the largest online DVD rental service, offering flat rate rental-by-mail to customers in the United States. Headquartered in Los Gatos, California, it has amassed a collection of 80,000 titles and over 6.8 million subscribers. Netflix has over 42 million DVDs and ships 1.6 million a day, on average. Netflix previously claimed to spend about $300 million a year on postage. On February, 25 2007, Netflix announced the delivery of its billionth DVD.
The company provides a monthly flat-fee service for the rental of DVD movies. A subscriber creates an ordered list, called a rental queue, of DVDs to rent. The DVDs are delivered individually via the United States Postal Service from an array of regional warehouses (44 in 29 states). A subscriber keeps a rented DVD as long as desired but has a limit on the number of DVDs (determined by