s1_UnderstandingSC

Understanding the Supply chain
Session 1
What is a Supply Chain?
• All stages involved, directly or indirectly, in fulfilling a

customer request
• 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)
What is a Supply Chain?
• Customer is an integral part of the supply chain
• Includes movement of products from suppliers to
manufacturers to distributors and information,
funds, and products in both directions
• May be more accurate to use the term “supply
network” or “supply web”
• Typical supply chain stages: customers, retailers,
wholesalers/distributors, manufacturers,
component/raw material suppliers
• All stages may not be present in all supply chains
(e.g., no retailer or distributor for Dell)
Logistics Defined
Logistics is the process of planning, implementing and
controlling the efficient, cost-effective flow and storage
of raw materials, in-process inventory, finished goods
and related information from the point of origin to point
of consumption for the purpose of conforming to
customer requirements.
Council of Logistics Management
Supply Chain Management Defined

SCM is the integration of all activities associated with the
flow and transformation of goods from raw materials
through to end user, as well as information flows, through
improved supply chain relationships, to achieve a
sustainable competitive advantage.
Handfield and Nichols
CR (2004) Prentice Hall, Inc. 1-4
SCM: function orientated versus
organisation orientated
• Functional orientation: purchases and

supply, logistics, transport, marketing and
business management
• Organizational orientation: organisation,
supply chain configuration and transaction
costs – network and processes.
– Network: structuring supply
– Processes: JIT, process reengineering
5
Supply chain management is concerned with managing the flow of
materials and information between a string of operations
that form the strands or ‘chains’ of a supply network
Flow between processes
Supply network management

concerns flow between operations


Supply chain management
concerns flow between a string
of operations
Supply chain management
• SCM: management of relationships in order to
achieve a more profitable outcome for all parties
in the chain.
• Demand: the chain should be driven by the
market
• Network
• Supply chain: a network of coordinated and
interdependant organizations mutually and
cooperatively working together to control,
manage and improve the flow of materials ans
information from suppliers to end users.
Supply chain management is concerned with the flow of
information as well as the flow of products and services
•Long-term plans and requirements
‘Upstream’ flow •Market research information
of customer •Individual orders
requirements •Payment
•Potential new products and services
Flow between Flow between Flow between

processes processes processes
Consumer
•Products and services ‘Downstream’ flow

•New products and services of products and services
•Delivery information for customer
•Payment request / Credit
fulfilment
The Objective of a Supply Chain
• Maximize overall value generated
Supply Chain Surplus

= Customer Value – Supply Chain Cost
The Multi-Dimensions of SC
SUPPLY
CHAIN
MANAGEMENT
Activity and process

administration
1-10
The Objective of a Supply Chain
• Customer the only source of revenue

• Sources of cost include flows of information,
products, or funds between stages of the
supply chain
• Effective supply chain management is the
management of supply chain assets and
product, information, and fund flows to grow
the total supply chain surplus
Decision Phases in a Supply Chain
1. Supply chain strategy or design

How to structure the supply chain over the next
several years
2. Supply chain planning
Decisions over the next quarter or year
3. Supply chain operation
Daily or weekly operational decisions
Supply Chain Strategy or Design
• Decisions about the configuration of the supply chain,
allocation of resources, and what processes each
stage will perform
• Strategic supply chain decisions
– Outsource supply chain functions
– Locations and capacities of facilities
– Products to be made or stored at various locations
– 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
Market-driven supply chains
• Demand chains instead of supply chains
• Identify customer’s service needs
– What are the key components of customer service
– What is the relative importance of customer service
components?
– Identify customer service segments.
• Define customer service objectives
– The whole purpose of supply chain management and
logistics is to provide customers with the level and
quality of service that they require and to do so at less
cost.
Setting service standards
• Pre-transaction
– Stock availability
– Target delivery dates
– Response time to queries
• Transaction
– Order fill rate, order cycle time
– On-time delivery
– Back orders by age
– Shipment delays
– Product substitutions
Setting service standards
• Post-transaction
– First call fix rate
– Customer complaints
– Return/claims
– Invoice errors
– Service parts availability
Process Views of a Supply Chain
1. Cycle View: The processes in a supply chain are
divided into a series of cycles, each performed at
the interface between two successive stages of the
supply chain.
2. Push/Pull View: The processes in a supply chain are
divided into two categories, depending on whether
they are executed in response to a customer order
or in anticipation of customer orders. Pull processes
are initiated by a customer order, whereas push
processes are initiated and performed in
anticipation of customer orders.
Cycle View
of Supply
Chain
Processes
FIGURE 1-3
Push/Pull View of Supply Chains
FIGURE 1-5
Push/Pull View of
Supply Chain Processes
• Supply chain processes fall into one of two categories
depending on the timing of their execution relative
to customer demand
• Pull: execution is initiated in response to a customer
order (reactive)
• Push: execution is initiated in anticipation of
customer orders (speculative)
• Push/pull boundary separates push processes from
pull processes
Order Penetration point
21
Supply Chain Macro Processes
Supply chain processes discussed in the two
views can be classified into
1. Customer Relationship Management (CRM):
all processes at the interface between the firm
and its customers
2. Internal Supply Chain Management (ISCM):
all processes that are internal to the firm
3. Supplier Relationship Management (SRM):
all processes at the interface between the firm
and its suppliers
Supply Chain Macro Processes
FIGURE 1-8
Useful S.C. frameworks
• The value of having standard business processes in place is that SC
managers from different organizations in the supply chain can
implement advanced collaborative and coordination technologies,
because their companies are using common concepts and methods
and have appropriate organizational culture. SCORE (the Supply
Chain Operations Reference) of the Organization of the Supply
Chain Council
• Frameworks
– the Global Supply Chain Forum (GSCF) model
– Supply Chain Management Process Standards of the Council of
Supply Chain Management Professionals
– Frazelle Model of Supply Chain Logistics developed by Ed. Frazelle
– Collaborative Planning Forecasting and Replenishment (CPFR®) of the
Organization of the Voluntary Interindustry Commerce Solutions (VICS)
and Integrated Business Planning (IBP) that brings together models of
CFPR si S&OP (Sales and operations planning)
SCORE (the Supply Chain Operations Reference) of the
Organization of the Supply Chain Council
SCORE offers a standard set of processes and methods for modeling the business
activities of a SC, performance measurement indicators and best practices to
solve problems identified during the stages of modeling and measurement
processes.
SCORE (the Supply Chain Operations Reference)
of the Organization of the Supply Chain Council
Supply chain decisions impact the resource footprint
Design Source Make Deliver Return
•The choice of •Location of •Improve energy •Optimise •Develop

materials for suppliers can efficiency. network ‘reverse
both the product impact configuration. logistics’
and the differentially on •Reducing waste, capabilities.
packaging. a resource re-work and •Minimise
footprint. scrappage. transport •Manage
•The physical intensity. products end-of-
characteristics of •Environmen-tal •Reduce/ life.
the product. implications of eliminate •Reconsider
supply source, pollution and transport modes. •Create ‘closed-
•Focus on e.g. ‘food emissions. loop’ supply
opportunities for miles’. chains.
re-use and
recycling. •Societal and
ethical issues.
27
The new SCORE MODEL
• https://scor.ascm.org/pro
cesses/introduction
• Level 0 process:
orchestrate (= integrate)
• Level 1 processes: Plan,
Order, Source, Transform,
Fulfill, and Return
28
The Global Supply Chain Forum (GSCF) model
Frazelle Model of Supply Chain Logistics
Frazelle Model of Supply Chain Logistics
SC Frameworks and standards
• The GSCF it has an extended area of applicability, ensure
the implementation of changes to the organizational
structure and is especially recommended to companies
migrating from a hierarchical structure to a process-
oriented structure.
• SCORE Model and the one offered by CSCMP are easier to
implement in the modeling business functions that refers
to sources, production and logistics management activities.
Also, these models are coupled with the standard
methodology for conducting Benchmarking operations.
• Frazelle Model is very close to logistic activities and can be
used for the implementation of effective and efficient
management of logistic activities.
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Understanding the Supply chain

• All stages involved, directly or indirectly, in fulfilling a

Supply Chain Management Defined

• Functional orientation: purchases and

Supply network management

Flow between processes

Flow between processes

Flow between processes

Flow between Flow between Flow between

•Products and services ‘Downstream’ flow

• Maximize overall value generated

Supply Chain Surplus

Activity and process

• Customer the only source of revenue

1. Supply chain strategy or design

Design Source Make Deliver Return

•The choice of •Location of •Improve energy •Optimise •Develop

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