understanding the supply chain in the effective way
- 1. Supply Chain Management Chapter 1 Understanding the Supply Chain
- 2. Is It a Chain? 2
- 4. 4 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)
- 5. What is a Supply Chain? Customer is an integral part of the supply chain Not only 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 5
- 6. What is Supply Chain Management Supply chain management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies. 6
- 7. Supply Chain and Supply Chain Management 7
- 8. Supply chain Management Processes 8
- 9. Flows in a Supply Chain 9 Information
- 10. 10
- 11. Objectives of Supply Chain Management Competitiveness and efficiency Minimizing the time Minimizing work in progress Improving pipeline visibility Improving visibility of demand Improving quality Reduces transportation costs Reduces warehousing costs Maximize overall value 11
- 12. The Objective of a Supply Chain Maximize overall value created Supply chain value: difference between what the final product is worth to the customer and the effort the supply chain expends in filling the customer’s request Value is correlated to supply chain profitability (difference between revenue generated from the customer and the overall cost across the supply chain) Example: Dell receives $2000 from a customer for a computer (revenue) 12
- 13. The Objective of a Supply Chain Supply chain incurs costs (information, storage, transportation, components, assembly, etc.) Difference between $2000 and the sum of all of these costs is the supply chain profit Supply chain profitability is total profit to be shared across all stages of the supply chain Supply chain success should be measured by total supply chain profitability, not profits at an individual stage 13
- 14. The Objective of a Supply Chain Sources of supply chain revenue? -the customer Sources of supply chain cost? -flows of information, products, or funds between stages of the supply chain Supply chain management is the management of flows between and among supply chain stages to maximize total supply chain profitability 14
- 15. Importance of Supply Chain Decisions Superior design, planning, and operation Facilitate frequent replenishment at retail stores in a cost effective manner Sharing information and collaborating with suppliers to bring down costs and improve product availability. Low level of inventory Greater innovation Sophisticated information exchange Better demand forecasts 15
- 16. Reasons Behind Failure of a Firm If the firm fail to design appropriate supply chains. If the firm fail to manage supply chain flows effectively. 16
- 17. Decision Phases of a Supply Chain 3 Phases 1. Supply chain strategy or design 2. Supply chain planning 3. Supply chain operation 17
- 18. Supply Chain Strategy or Design Decisions about the structure of the supply chain and what processes each stage will perform Strategic supply chain decisions -Locations and capacities of facilities -Products to be made or stored at various locations -Modes of transportation -Information systems 18
- 19. Supply Chain Strategy or Design Supply chain design must support strategic objectives Supply chain design decisions are long-term and expensive to reverse – must take into account market uncertainty 19
- 20. Supply Chain Planning Definition of a set of policies that govern short-term operations Fixed by the supply configuration from previous phase Starts with a forecast of demand in the coming year 20
- 21. Supply Chain Planning Planning decisions: -Which markets will be supplied from which locations -Planned buildup of inventories -Subcontracting, backup locations -Inventory policies -Timing and size of market promotions Must consider in planning decisions demand uncertainty, exchange rates, competition over the time horizon 21
- 22. Supply Chain Operation Time horizon is weekly or daily Decisions regarding individual customer orders Supply chain configuration is fixed and operating policies are determined Goal is to implement the operating policies as effectively as possible 22
- 23. Supply Chain Operation Allocate orders to inventory or production, set order due dates, generate pick lists at a warehouse, allocate an order to a particular shipment, set delivery schedules, place replenishment orders Much less uncertainty (short time horizon) 23
- 24. Process View of a Supply Chain Cycle view: processes in a supply chain are divided into a series of cycles, each performed at the interfaces between two successive supply chain stages Push/pull view: processes in a supply chain are divided into two categories depending on whether they are executed in response to a customer order (pull) or in anticipation of a customer order (push) 24
- 25. Cycle View of Supply Chains 25
- 26. Cycle View of a Supply Chain Each cycle occurs at the interface between two successive stages Customer order cycle (customer-retailer) Replenishment cycle (retailer-distributor) Manufacturing cycle (distributor-manufacturer) Procurement cycle (manufacturer-supplier) 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. 26
- 27. Push/Pull View of Supply Chains 27
- 28. 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 28
- 29. Push/Pull View of Supply Chain Processes Useful in considering strategic decisions relating to supply chain design – more global view of how supply chain processes relate to customer orders Can combine the push/pull and cycle views The relative proportion of push and pull processes can have an impact on supply chain performance 29
- 30. 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 30