OUTLINE

Understanding the Supply Chain ¡ What is a Supply Chain?

Course - 1 ¡ Decision Phases in a Supply Chain

¡ Process View of a Supply Chain
¡ The Importance of Supply Chain Flows
¡ Examples of Supply Chains
SUPPLY CHAIN MANAGEMENT

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SUPPLY CHAIN: AN EXAMPLE DETERGENT SUPPLY CHAIN (WAL-MART)

Information Flow

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 SUPPLY CHAIN WHAT IS A SUPPLY CHAIN?

¡ All stages involved, directly or indirectly, in fulfilling

a customer request (Chopra, 2016)

¡ Includes manufacturers, suppliers, transporters,

warehouses, retailers, and customers

¡ Within each company, the supply chain includes all

functions involved in fulfilling a customer request
(product development, marketing, operations,
distribution, finance, customer service)
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WHAT IS A SUPPLY CHAIN? SUPPLY CHAIN STAGES

¡ Customer is an integral part of the supply chain
¡ Includes movement of products from suppliers to
manufacturers to distributors, but also includes movement
of information, funds, and products in both directions
¡ Probably more accurate to use the term “supply network”
or “supply web”
¡ Typical supply chain stages: customers, retailers,
distributors, manufacturers, suppliers
¡ All stages may not be present in all supply chains
(e.g., no retailer or distributor ) 1-7 1-8

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 PROJECT #1 SOLUBLE COFFEE

¡ Select a product, preferable consumer goods, (produced by

mass production) that you can find in a supermarket
¡ Discuss the products flow from raw material until it reach
customers
¡ Draw the product’s supply chain.
¡ Indicate flows along SC
¡ Facilities required along SC

¡ Describe Process view and Push-pull view in Your SC

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DISCUSSION ON OPENING CASE FLOWS IN A SUPPLY CHAIN

Lesson learned from the case:

¡ Understand important of flow of information from Information
manufacture – distributor – retailer – customer
¡ SCM is very important in any company: costly Product
¡ Understand business process – stages and cost: save cost Customer
è larger profit
Funds
¡ We must concentrate on: correct Quantity – time – cost
¡ Finding efficiency in SC
¡ Increasing profit with better SC 1-11 1-12

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 THE OBJECTIVE OF A SUPPLY CHAIN THE OBJECTIVE OF A SUPPLY CHAIN

¡ Maximize overall value created ¡ Example: Dell receives $2000 from a customer for a
computer (revenue)
¡ Supply chain value (Supply Chain Surplus) : difference
¡ Supply chain incurs costs (information, storage,
between what the final product is worth to the transportation, components, assembly, etc.)
customer and the effort the supply chain expends in
filling the customer’s request ¡ Difference between $2000 and the sum of all of these
costs is the supply chain profit
¡ Value is correlated to supply chain profitability ¡ Supply chain profitability is total profit to be shared
(difference between revenue generated from the across all stages of the supply chain
customer and the overall cost across the supply chain)
¡ Supply chain success should be measured by total supply
chain profitability, not profits at an individual stage
Supply Chain Surplus = Customer Value - Supply Chain Cost
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DECISION PHASES OF A SUPPLY CHAIN

THE OBJECTIVE OF A SUPPLY CHAIN

¡ Sources of supply chain revenue: the customer

¡ Supply chain strategy or design
¡ Sources of supply chain cost: flows of information,
products, or funds between stages of the supply
¡ Supply chain planning
chain ¡ Supply chain operation
¡ Supply chain management is the management of
flows between and among supply chain stages to
maximize total supply chain profitability

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 SUPPLY CHAIN STRATEGY OR DESIGN SUPPLY CHAIN PLANNING
¡ Decisions about the structure of the supply chain and
what processes each stage will perform
¡ Definition of a set of policies that govern short-term operations
¡ Strategic supply chain decisions
¡ Fixed by the supply configuration from previous phase
¡ Locations and capacities of facilities
¡ Products to be made or stored at various locations ¡ Starts with a forecast of demand in the coming year
¡ Modes of transportation
¡ Information systems
¡ Supply chain design must support strategic objectives
¡ Supply chain design decisions are long-term and
expensive to reverse – must take into account market
uncertainty 1-17 1-18

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SUPPLY CHAIN PLANNING SUPPLY CHAIN OPERATION

¡ Time horizon is weekly or daily
¡ Planning decisions:
¡ Decisions regarding individual customer orders
¡ Which markets will be supplied from which locations
¡ Supply chain configuration is fixed and operating policies
¡ Planned buildup of inventories are determined
¡ Subcontracting, backup locations
¡ Goal is to implement the operating policies as
¡ Inventory policies effectively as possible
¡ Timing and size of market promotions ¡ Allocate orders to inventory or production, set order due
dates, generate pick lists at a warehouse, allocate an
¡ Must consider in planning decisions demand order to a particular shipment, set delivery schedules,
uncertainty, exchange rates, competition over place replenishment orders
the time horizon 1-19
¡ Much less uncertainty (short time horizon) 1-20

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 PROCESS VIEW OF A SUPPLY CHAIN CYCLE VIEW OF SUPPLY CHAINS
Customer
¡ Cycle view: processes in a supply chain are divided into a Customer Order Cycle
series of cycles, each performed at the interfaces between
two successive supply chain stages Retailer
¡ Push/pull view: processes in a supply chain are divided into Replenishment Cycle
two categories depending on whether they are executed in Distributor
response to a customer order (pull) or in anticipation of a
customer order (push) Manufacturing Cycle
Manufacturer
Procurement Cycle
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Supplier

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CYCLE VIEW OF A SUPPLY CHAIN PUSH/PULL VIEW OF SUPPLY CHAINS

¡ Each cycle occurs at the interface between two successive Procurement, Customer Order Cycle
stages Manufacturing and
Replenishment cycles
¡ Customer order cycle (customer-retailer)
¡ Replenishment cycle (retailer-distributor)
¡ Manufacturing cycle (distributor-manufacturer)
¡ Procurement cycle (manufacturer-supplier) PUSH PROCESSES PULL PROCESSES
¡ Cycle view clearly defines processes involved and the owners
of each process. Specifies the roles and responsibilities of each
member and the desired outcome of each process. Customer Order Arrives
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 PUSH/PULL VIEW OF SUPPLY CHAIN PUSH/PULL VIEW OF
PROCESSES SUPPLY CHAIN PROCESSES

¡ Supply chain processes fall into one of two categories depending

on the timing of their execution relative to customer demand ¡ Useful in considering strategic decisions relating to
supply chain design – more global view of how supply
¡ Pull: execution is initiated in response to a customer order
(reactive) chain processes relate to customer orders

¡ Push: execution is initiated in anticipation of customer orders ¡ The relative proportion of push and pull processes
(speculative) can have an impact on supply chain performance

¡ Push/pull boundary separates push processes from pull processes

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SUPPLY CHAIN MACRO PROCESSES

IN A FIRM

¡ Supply chain processes discussed in the two views can be

classified into :
¡ Customer Relationship Management (CRM)
¡ Internal Supply Chain Management (ISCM)
¡ Supplier Relationship Management (SRM)
¡ Integration among the above three macro processes is
critical for effective and successful supply chain management

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