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Introduction
to
Supply Chain
What is a Supply Chain?
Chemical
Plastic Tenneco
manufacturer
Producer Packaging
(e.g. Oil Company)
Chemical
Paper Timber
manufacturer
Manufacturer Industry
(e.g. Oil Company)
PC Industry Supply Chain
Tracing back the screen you stare at for the bulk of your time.
Tools and Strategies for Optimization
Supply
Inventory &
warehousing
costs
Production/
purchase Transportation Transportation
costs costs costs
Inventory &
warehousing
costs
Conflicting Objectives in the Supply Chain
1. Purchasing
• Stable volume requirements
• Flexible delivery time
• Little variation in mix
• Large quantities
. Manufacturing
• Long run production
• High quality
• High productivity
• Low production cost
Conflicting Objectives in the Supply Chain
3. Warehousing
• Low inventory
• Reduced transportation costs
• Quick replenishment capability
4. Customers
• Short order lead time
• High in stock
• Enormous variety of products
• Low prices
Logistics in the Manufacturing Firm
Profit
• Profit 4%
Manufacturing
Cost
Importance of Supply Chain
Supply Chain: The Magnitude
mitigating disruptions.
•Cognitive analytics. Helps an organization answer complex
process.
Hospitals
Domestic
Dealers
Int’l
Meditech
Affiliates
Internal Supply Chain
- 16 1
weeks weeks week
Production Planning
Annual
Forecast
Monthly
Revision
Transfer
Requirements
Monthly
Plan
MRP
Parts Weekly
Procurement Assembly
Plan Schedule
Production Planning
Monthly
Plan
MRP
Order point;
Material
Order quantity
Plan
1. Planning:
• A strategy for managing all the resources that goes toward meeting customer
demand for your product or service.
• Balances aggregate demand and supply to develop a course of action which best
meets the requirements for:
-Sourcing
- Production, and
-Delivery
BASIC COMPONENT OF SUPPLY CHAIN MANAGEMENT
(contd)
. Sourcing:
•Choose the suppliers that will deliver the goods and services you need to create
your product or service.
•Develop a set of pricing, delivery and payment processes with suppliers and
create metrics for monitoring and improving the relationships.
•Put together processes for managing the inventory of goods and services you
receive from suppliers.
BASIC COMPONENT OF SUPPLY CHAIN MANAGEMENT
(contd)
3. Making: (The manufacturing step. )
It Involves:
- Coordinating the receipt of orders from customers
- Developing network of warehouses
- Picking carriers to get products to customers, and
- Set up an invoicing system to receive payments.
BASIC COMPONENT OF SUPPLY CHAIN
MANAGEMENT (contd)
1. First important revolution which is in the beginning of 0th century around 1910 and 19 0
that time and this is characterized by the ford supply chain
Right from birth to death of the car ford supply chain is known to be one of the most efficient
supply chain, on one side Ford used to have its own Iron ore and on the other side they used
to distribute the cars, finished car on the market, so on one side they were having the mining
business, they were used to process the iron ore to get the screen use that is steel in making
the car and then distribute the car.
Japanese revolution which came around 1950s and 1960s after Second World War
Now what they did, Toyota developed a pool of vendors and these pool of vendors they
Toyota.
Toyota used to distribute these finish cars to the customers, so instead of doing all things on
its own.
Toyota started developing the capabilities of the vendors and actually this is a model which
nowadays most of the companies follow, now it is very rare though the example.
Ford is always known as always popular for its very high level of efficiency.
Iron-ore and
19 0 Ford Customers Fixed
Mining
Demand forecasting
Purchasing
Requirements planning
Purchasing/
Production planning Materials
Management
Manufacturing inventory
Warehousing
Logistics
Material handling
Packaging
Order processing
Transportation
Customer service
Strategic planning
Information services
Marketing/sales
Finance
The Third Revolution > 1960’s
Supply Chain Planning
What is Supply Chain Planning ?
Component Production
Requirement Plan
Order Management
Supply Chain planning of MNC
STRATEGIC
TACTICAL
OPERATIONAL
Customer
Retailer
Replenishment Cycle
Distributor
Manufacturing Cycle
Manufacturer
Procurement Cycle
Supplier
50
Cycle View of a Supply Chain
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.
51
Customer Order Cycle
Customer arrival
56
Raw
Material
Part
Designing
Production
Warehouse Assembling
Testing QC
Procurement Cycle
Customer Order
Procurement, Cycle
Manufacturing and
Replenishment cycles
Customer
Order Arrives
62
Push/Pull View of Supply Chain Processes
68
Analytics in Supply chain
Logistics
• Ease in tracking and material handling, movement of inventory can
be guaranteed by analytics.
2. Inventory planning
4. Inventory control
7. Quality management
8. Equipment failure
9. Space optimization
Critical Key Performance Indicators
• Demand Variability
locations.
• Real-time monitoring of demand, critical events, KPI and
• Companies these days are investigating much deeper into their data to
data.
• Analytics will help define the future demand, thereby ensuring lesser
• Balance between supply and demand will ensure that clients are
raw materials.
strategy for how the supply chain will function in its environment to
strategies".
Supply chain strategy is an iterative process that evaluates the
cost- benefit trade-offs of operational components.
Business strategy involves leveraging the core competencies of the
organization to achieve a defined high-level goal or objective.
Supply Chain Drivers
• The five drivers provide a useful framework for thinking about
• Decisions made about how each driver operates will determine the
achieving.
Many companies that sell products through catalogs or on the Internet are
FedEx and UPS are two companies that can provide very responsive
to customer desires.
• Efficiency can be emphasized by transporting products in larger
• The power of this driver grows stronger every year as the technology
for collecting and sharing information becomes more wide spread,
easier to use, and less expensive.
• Companies in these supply chains, the manufacturers, distributors, and the big
retailers all collect and share data about customer demand, production schedules,
equipment, etc.).
• When to be Efficient and
• When to be Responsive
Efficiency is Good
• The push for efficiency increased productivity and lowered the prices of
products from automobiles to home appliances thus making them available to
a wide segment of the population.
• Yet efficiency requires Two Things that are becoming much harder to find.
You need to know that demand and prices will remain relatively stable for
Because then you can build factories and stores and transportation
companies (Ford, GM, US Steel, Kodak, Whirlpool etc.), but the big
Tencent, etc.).
• All these 21st century companies certainly need to be efficient, but their success
is based mostly on their ability to sense and respond quickly to changing markets
• Lowest price is not always the deciding factor in purchasing decisions; people
• They want products and services that respond quickly and meet their needs and
desires.
• Apple and Starbucks do not sell the lowest priced laptops or cups of coffee, nor
does Porsche make the lowest priced cars, but as long as people value the quality
and innovation offered by those companies and others like them they will pay
Developing a supply chain strategy
Business Elements
Structural Infrastructural
(Tangible) (Intangible)
• Buildings People
• Equipment Policies
• Computer systems Decision rules
• Other capital Organizational
assets structure
Definition
organization’s domain.
Definitions
decisions.
Key Budgeting.
Finance Analysis.
Interactions Funds.
What IT solutions
MIS
to make it all work together
Sustainability.
Design Quality.
Manufacturability
Supply
Chain Performance measurement systems.
Strategy
Planning and control
Accounting
Entry
Audit
Human
Skills? Training?
Resources
What products?
What volumes?
Marketing Costs?
Quality?
Delivery?
Decisions Guided by the Structural Strategy
Capacity
Facilities
Technology
Sourcing/Purchasing
• Sourcing strategies, Supplier selection, Supplier performance measurement
• Value Index - A measure that uses the performance and importance scores for
• Quality
• Time
• Flexibility
• Cost
Four Performance Dimensions
• Quality
• Performance Quality – The basic operating characteristics
of the product or service.
• Time
• Flexibility
or services.
• Cost
• Labor costs
• Material costs
• Engineering costs
• Quality-related costs
Trade-offs among Performance Dimensions
• Order Winners
• Order Qualifiers
“Best in
Class”
Minimum
Needs
“Best in
Class”
Minimum
Needs
• Performance against
• Customer needs
• Business objectives or standards
• Comparisons to competitors