CHAPTER 3

SUPPLY CHAIN
OPERATIONS

Nguyen Thi Thuy Hanh, PhD

Faculty of Information Systems
 OBJECTIVES

❑ Listing key processes of supply chains.

❑ Describing roles of each process.

❑ Describing elements of each process

CONTENTS

Plan
Source
Make

Deliver

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 Supply Chain Operations Reference (SCOR)

1996 2014 2017

SCC and
SCOR is
American
developexd by Latest SCOR
Production and
the Supply Chain version, 12.0 1
Inventory Control
Council
Society (APICS)
(SCC) 1
were combined 1

1 APICS, 2017
4
 Identify necessities and corrective actions

Request, deliver, receive raw material items

Distribute products to customers
Manufacturing or producing

Get back products from customers to suppliers

( APICS, 2017)
5
 SUPPLY CHAIN OPERATIONS
1.1 SCOR

PLAN SOURCE

• Demand forecast ▪ Sourcing

• Pricing ▪ Credit and accounts
receivable
• Inventory management

DELIVER MAKE

• Order management • Product design

• Delivery schedule • Production schedule
• Equipment and
machine management

6
 I- PLANNING

• This refers to all the operations needed to plan and organize the
operations in the other three categories.

•
Planning Operation

Demand Product Inventory

forecasting pricing management.

7
Benefits of planning activities in supply chain
management?

● Balance Demand And Supply

● Coordinate All Departments
● Optimize The Supply Chain
● Smooth Out The Highs And Lows In Demand

8
 Demand forecasting

Source: Michael Hugos, Essentials of SC

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 Demand forecasting

Source: Michael Hugos, Essentials of SC

10
 Demand forecasting

Forecasting methods

Qualitative Định lượng

Quantitatives

Time series Casual

▪ Opinions of board of
directors
▪ Sales department
▪ Customer feedback -Statistical
▪ Expert opinion -AI- based techniques

Source. (Moroff et al., 2021), (İfraz et al., 2023) 11

12
 Product pricing

Source: Michael Hugos, Essentials of SC 13

 Inventory management
Inventory management is a set of techniques that are used to manage the inventory levels within different
companies in a supply chain

Economic order quantity (EOQ)

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What are the advantages of inventory management?

● Improves Accuracy
● Reduces costs
● Saves Time
● Improves Business Planning
● Improves Customer Service

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Inventory management

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 II-SOURCE ( PROCUREMENT)

Sourcing is the entire set of business processes required to purchase goods and services

The procurement function can be broken into five main activity categories:
1. Purchasing
2. Consumption Management
3. Vendor Selection
4. Contract Negotiation
5. Contract Management

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ROLE OF SOURCING IN A SUPPLY CHAIN
Benefits from effective sourcing decisions

Right source: quality & cost

Economies of scale
Efficient procurement transactions
Design collaboration in manufacturing
Better collaboration with suppliers
Appropriate sharing risks and benefits
Lower purchase price due to increasing competition
PROCUREMENT AIMS Procurement Aims

To ensure a reliable supply of materials in an organization

Organizing a reliable, uninterupted flow of materials
Developing relationships with user departments
Finding good suppliers
Buying right materials (right quality, right time, right place)
Good prices and conditions
Low stocks at the required service level
Moving materials quickly through a supply chain
Keeping abreast of conditions (price increase, scarcity, new product)
PURCHASING PROCESS
Purchasing Process
User department Procurement Suppliers

1. identify need

requests purchase 2. receive request

process

request quotations 3. receive request

process

4. receive quotation send quotation

discuss discuss and process

send purchase order 5. receive order

process

ship goods and

6. receive and check invoice
7. receive and check transfer

authorize payment 8. arrange payment receive payment

Source: Waters (2003)

 SUPPLIER SELECTION Supplier Selection
Supplier selection is the process by which firms identify, evaluate, and contract with suppliers

Process and product technologies

Willingness to share technologies and information
Quality
Cost
Reliability
Order system and cycle time
Capacity
Communication capability
Location
Service
 Supplier
SUPPLIER PERFORMANCE Performance Metrics
METRICS

Cost/price
Quality
Delivery
Responsiveness and flexibility
Environment
Technology
Business metrics
Total cost of ownership
23/60
OUTSOURCING Outsourcing

A supply chain function is performed by a third party

Benefits
Economies of scale
Risk pooling
Reduce capital investment
Focus on core competency
Increased flexibility

2
4
OUTSOURCING Outsourcing
How to solve?
Risks of outsourcing?

2
5
GLOBAL SOURCING Global Sourcing

Firms expand their supply base to include foreign suppliers

Rationale for low cost country sourcing
Low wage rates
Increase the number of possible sources
Use the best product and process technologies
Local presence in international markets
Challenges for low cost country sourcing
Identify relevant production sources
Protection of intellectual property
Import/export issues
Communications
Security in transit
Long lead time
2
6
 27/60

Benefits of outsourcing for eCommerce

1. Focus on core competencies

2. Improved efficiency
3. Access to specialized services
4. Scalability
5. Cost savings
6. Global talent pool
 III-MAKE
This stage is concerned with designing product; scheduling of production activities, testing of
products, and managing facility

Production Facility-
Product
scheduling management
design

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 Production scheduling
Production scheduling is a constant balancing act between utilization rates, inventory levels, and
customer service levels.

Source: Michael Hugos, Essentials of SC 29

 TypesSYSTEMS
TYPES OF PRODUCTION Of Production Systems

Make-to-stock (MTS): Finished product is produced prior to a customer order

Make-to-order (MTO): Finished product is produced in response to a specific
customer order from purchased components
Engineer-to-order (ETO): Finished product is designed, developed, and produced in
response to a specific customer request

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 MATERIAL REQUIREMENTS PLANNING
IV-DELIVER

Delivery
Order
Scheduling
management works within the
constraints
process of passing set by transportation
order information decisions
from customers
back through the
supply chain from
retailers to Two types of delivery
distributors to methods:
service providers
and producers -direct deliveries
- milk run deliveries

4
 MATERIAL REQUIREMENTS PLANNING
IV-DELIVER
Four Rules for Efficient Order Management

Source: Michael Hugos, Essentials of SC

 References
Moroff, N. U., Kurt, E., & Kamphues, J. (2021). Machine Learning and Statistics: A Study for assessing
innovative Demand Forecasting Models. Procedia Computer Science, 180(2019), 40–49.
https://doi.org/10.1016/j.procs.2021.01.127
İfraz, M., Aktepe, A., Ersöz, S., & Çetinyokuş, T. (2023). Demand forecasting of spare parts with regression
and machine learning methods: Application in a bus fleet. Journal of Engineering Research, 11(2),
100057. https://doi.org/10.1016/j.jer.2023.100057

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