Supply Chain Management -Introduction

TIP FTP UB 2015

What is a supply chain?

• A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request

• A supply chain is dynamic and involves the constant flow of information, product, and funds between different stages

• A supply chain stages include:

– Customers

– Retailers

– Wholesalers/distributors

– Manufacturers

– Component/raw material suppliers

Consumer

Retailer

Manufacturing

Material Flow

VISA ®

Credit Flow

Supplier

Supplier Wholesaler

Retailer

Cash Flow

Order Flow Schedules

Supply Chain Stages

Flows in a Supply Chain

Timber Company

Department Store

Paper Manufacturer

Packaging Corporation

Chemical Manufacturer

P&G Manufacturer

Third Party DC

Customer

Plastic Producer

Ex. : Stages of SCM at P&G’s Detergent Product

What is a supply chain? (cont.)

• Planning, organizing, directing, & controlling flows of materials – Begins with raw materials

– Continues through internal operations

– Ends with distribution of finished goods

• Involves everyone in supply-chain – Example: Your supplier’s supplier

• Objective: Maximize value & lower waste

Why supply chain?

• Local market, local supply vs. global market, global sourcing.

• Global competition. • Shorter product life. • Higher customer expectation • Rate of change in technology • Information & communication systems • Variety of transportation modes

All these factors lead to an increase in challeges to reduce costs & Supply Chain Management provides the opportunity.

Past paradigm of SCM

New paradigm of SCM

Decision phases in a supply chain

• Supply chain strategy or design long term

decision

– Decide what the chain’s configuration

– How resources will be allocated

– What processes each stage will perform

– Strategic decisions

– The location & capacities of production & warehouse

– Modes of transportation

– Type of information system

• Supply chain planning quarter to a year

– Forecast for coming year

– Which market will be supplied from which location

– Subcontracting or manufacturing

– Inventory policies

– Timing and size of marketing

– Promotion

• Supply chain operation short term decision

– Allocate inventory or production to individual orders

– Date of order to be filled

– Shipping mode

– Delivery schedule

– Replenishment order

Supply Chain : Planning and Operation

Process view of a supply chain • Cycle view

– The processes in SC are divided into a series of cycle, each performed at the interface between two successive stages of a SC

• Push/pull view

– The processes in SC are divided into two categories:

• Pull process:

– Initiated by customer orders reactive process

– Customer demand is known

• Push process:

– Initiated and performed in anticipation of customer orders

speculative process

– Operate in an uncertain environment customer demand is not

yet known

Cycle view of SC processes

Customer Order Cycle

Replenishment Cycle

Manufacturing Cycle

Procurement Cycle

Customer

Retailer

Distributor

Manufacturer

Supplier

Sub-processes in each SC process cycle

Supplier stage markets product

Buyer stage places order

Supplier stage receives order

Supplier stage supplies order

Supplier stage receives supply

Buyer return reserve flows to

supplier/third party

Push/pull view of SC processes Example for make to stock environment

Customer Order Cycle

Replenishment Cycle & Manufacturing Cycle

Procurement Cycle

Customer

Clothes Company

Manufacturer

Supplier

PULL PROCESSES

PUSH PROCESSES

Customer order arrives

Customer Order & Manufacturing Cycle

Procurement Cycle

PULL PROCESSES

PUSH PROCESSES

Customer order arrives

Customer

DELL Company

Supplier

Push/pull view of SC processes Example for make to order environment

Supply chain macro processes in a firm

Supplier Relationship Management (SRM)

Internal Supply Chain Management

(ISCM)

Customer Relationship

Management (CRM)

Supplier Firm Customer

•Source •Negotiate •Buy •Design Collaboration •Supply Collaboration

•Strategic planning •Demand planning •Supply planning •Fulfillment •Field service

•Market •Price •Sell •Call centre •Order management

Supply chain decision making framework

Responsiveness Efficiency

Supply Chain Structure

Facilities Inv & trans. Sourcing&Pricing Info system

Competitive Strategy

Supply Chain Strategy

Strategic Fit

Drivers