Supply Chain Management

What is Supply Chain?

• The supply chain encompasses all of those

activities associated with moving goods/raw
materials from the point of origin to point of
destination.
What is Supply Chain Management?

 All facilities, functions, activities, associated with

flow and transformation of goods and services from
raw materials to customer, as well as the associated
information flows.

 A supply chain is a sequence of organizations - their

facilities, functions and activities - that are involved
in producing and delivering a product or service.

 An integrated group of processes to “source,”

“make,” and “deliver” products.
What is Supply Chain Management?
The design and management of seamless, value-
added processes across organizational boundaries
to meet the real needs of the end customers.
Institute for Supply Management
Managing supply and demand, sourcing raw
materials and parts, manufacturing and assembly,
warehousing and inventory tracking, order entry
and order management, distribution across all
channels, and delivery to the customers.
The Supply Chain Council
4
What is Supply Chain Management?

The planning and management of all activities

involved in sourcing and procurement,
conversion, and all logistics management
activities … also includes coordination with
channel partners, which can be suppliers,
intermediaries, third party service providers,
and customers.
Council of Supply Chain Management Professionals
 Supply Chain Overview

Transportation Transportation Customers

Warehousing

Information
flows
Factory

Transportation

Vendors/plants/ports
Warehousing Transportation

CR (2004) Prentice Hall, Inc. 1-2

Dickson Chiu 2006 SCM-6
 Drivers of Supply Chain Performance
• Facilities
– places where inventory is stored, assembled, or fabricated
– production sites and storage sites
• Inventory
– raw materials, WIP, finished goods within a supply chain
– inventory policies
• Transportation
– moving inventory from point to point in a supply chain
– combinations of transportation modes and routes
• Information
– data and analysis regarding inventory, transportation, facilities throughout the
supply chain
– potentially the biggest driver of supply chain performance
• Sourcing
– functions a firm performs and functions that are outsourced
• Pricing
3-7 – Price associated with goods and services provided by a firm to the supply chain
A Framework for Structuring Drivers

Competitive Strategy

Supply Chain
Strategy
Efficiency Responsiveness
Supply chain structure

Logistical Drivers

Facilities Inventory Transportation

Information Sourcing Pricing

Cross Functional Drivers

3-8
 Supply Chain Strategy
Determines the nature of procurement of raw
materials and transportation of the same to and
from the company ,manufacture of the products or
operation to provide the service and distribution of
the products to the customers along with any follow
up service.
 Types of Strategies
R&D
Strategy

Supply
Marketing
chain

Competitive
Strategy

Finance IT

HR
 1-11

Generalized Supply Chain Model

Relationship Management

Information, Product, Service, Financial and Knowledge Flows

SUPPLIER E
M NETWORK N
A INTEGRATED D
ENTERPRISE DISTRIBUTIVE
T NETWORK
E C
R Procurement Distribution
O
I N
A S
L U
Manufacturing
S M
E
R
S

Capacity, Information, Core Competencies, Capital and Human Resources

McGraw-Hill/Irwin
 Flows in a Supply Chain

Information

Product
Supplier Customer
Funds
What is a Supply Chain Flow?

14
 Anticipatory Business Model

BUY
COMPONENTS
FORECAST MANUFACTURER WAREHOUSE SELL DELIVER
AND
MATERIALS
Response-Based Business Model

BUY
COMPONENTS
SELL MANUFACTURER DELIVER
AND
MATERIALS
Objective of SCM
• Objective is to build a chain that focuses on
maximizing value to the ultimate customer.

• Competition is no longer between companies; it is

between supply chains.

• The main objectives of SCM :

– To improve the overall organization performance and

customer satisfaction by improving product or service
delivery to consumer.
Why is supply chain management so important?
To gain efficiencies from procurement,
manufacturing and distribution (logistics).
To make outsourcing more efficiently.
To reduce transportation and inventories cost.
To meet competitive pressures from shorter
development times, more new products, and
demand for more customization.
Why is supply chain management difficult?
Supply Chain is Multi-Enterprise
Conventional
Focus Scope
Company

Suppliers Customers

Supplier’s Consumers/
suppliers End users

Acquire Convert Distribute

Product and information and financial flow

Why is supply chain management difficult?
The Multi-Dimensions of SCM

SUPPLY
CHAIN
MANAGEMENT

Activity and process

administration
Why is supply chain management difficult?

Different organizations in the supply chain may

have different conflicting objectives.
 Manufacturers: long run production, high quality, high
productivity, low production cost
 Distributors: low inventory, reduced transportation costs,
quick replenishment capability
 Customers: shorter order lead time, high in-stock
inventory, large variety of products, low prices
 Why is supply chain management difficult?

- A supply chain consists of

Supplier Manufacturer Distributor Retailer Customer

Upstream
Downstream

Aims is to Match Supply and Demand,

profitably for products and services
SUPPLY SIDE DEMAND SIDE
- achieves

The right
Product
+ + + + +
The right
Price
The right
Store
The right
Quantity
The right
Customer
The right
Time
= Higher
Profits
Key issues in supply chain management include
– Distribution network configuration
• How many warehouses do we need?
• Where should these warehouses be located?
• What should the production levels be at each of our
plants?
• What should the transportation flows be between
plants and warehouses?
– Inventory control
• Why are we holding inventory? Uncertainty in
customer demand? Uncertainty in the supply process?
Some other reason?
• If the problem is uncertainty, how can we reduce it?
• How good is our forecasting method?
Key issues in supply chain management include
– Distribution strategies
• Direct shipping to customers?
• Classical distribution in which inventory is held in
warehouses and then shipped as needed?
• Cross-docking in which transshipment points are used to
take stock from suppliers’ deliveries and immediately
distribute to point of usage?
– Supply chain integration and strategic partnering
• Should information be shared with supply chain partners?
• What information should be shared?
• With what partners should information be shared?
• What are the benefits to be gained?
Key issues in supply chain management include
– Product design
• Should products be redesigned to reduce logistics costs?
• Should products be redesigned to reduce lead times?
• Would delayed differentiation be helpful?
– Information technology and decision-support
systems
• What data should be shared (transferred)
• How should the data be analyzed and used?
• What infrastructure is needed between supply chain
members?
• Should e-commerce play a role?
Key issues in supply chain management include

– Customer value
• How is customer value created by the supply
chain?
• What determines customer value? How do we
measure it?
• How is information technology used to enhance
customer value in the supply chain?
 Decision Phases in SCM
– Strategic - long term and dealing with supply chain design
• Determining the number, location and capacity of facilities
• Make or buy decisions
– Planning- intermediate term
• Determining inventory levels
• Quality-related decisions
• Logistics decisions
– Operation - near term
• Production planning and control decisions
• Goods and service delivery scheduling
 Decision Phases in SCM
Decision area Strategic Tactical Operational

Transportation Mode selection Seasonal equip- Dispatching

ment leasing

Inventories Location, Control policies Safety stock levels Order filling

Purchasing Development of supplier- Contracting, Expediting

buyer relations Forward buying

Warehousing Handling equipment Space utilization Order picking

selection, Layout design and restocking

Facility Number, size, and

location location of warehouses
Supply Chain Risk Management
Supply Chain Risks Example
 Risk Management Basics
• Risk is a situation involving exposure to danger.
• Organizational objectives are influenced by internal and
external factors which create uncertainty in achieving
those objectives. The effect of this uncertainty is “risk” to
the organization’s objectives.
• Risk Management is the coordinated activities to direct
and control an organization with regard to risk.
• Risk Management allows for multiple risk responses
dependent upon evaluation and analysis of risk.

RISK = Negative IMPACT to objectives X LIKELIHOOD of occurrence.

Types of Risk in Supply Chain
Risk Mapping in Supply Chain
THE END