chain to make and store products. •Key Production Decision “Responsiveness VS Efficiency •Factories and Facilities with “Excess” Or “Limited” capacities? Focuses on: •Customer & market demand •Resource Management •Internal sourcing (what and which plants) •Outsourcing to capable suppliers •Capacity Management Inventory is spread throughout the supply chain and includes everything from raw material to work in process to finished goods that are held by the manufacturers, distributors, and retailers in a supply chain.
How Much Inventory and Where to Store It?
Reasons for holding inventory:
Cycle Inventory—This is the amount of inventory needed to satisfy demand for the product in the period between purchases of the product. Safety Inventory—that is held as a buffer against uncertainty.
Seasonal Inventory—This is inventory that is
built up in anticipation of predictable increases in demand that occur at certain times of the year
•Analysis of fluctuations in demand
•Identification of optimal storage locations in support of customer demand •Identification of optimal storage locations in support of customer demand •Location: refers to Strategic placement of production plants, distribution and stocking facilities
•It is the geographical positioning /siting of
supply chain facilities •Factors that relate to a given location including the cost of facilities, the cost of labor, skills available in the workforce, infrastructure conditions, taxes and tariffs, and proximity to suppliers and customers. Transportation: refers to movement of everything from raw material to finished goods between different facilities in a supply chain In transportation the trade-off between responsiveness and efficiency is manifested in the choice of transport mode. Ship which is very cost efficient but also the slowest mode of transport Rail which is also very cost efficient but can be slow. This mode is also restricted to use between locations that are served by rail lines Airplanes are a very fast mode of transport and are very responsive. Pipelines can be very efficient but are restricted to commodities that are liquids or gases such as water, oil, and natural gas Trucks are a relatively quick and very flexible mode of transport. Trucks can go almost anywhere. Electronic Transport is the fastest mode of transport and it is very flexible and cost efficient. However, it can only be used for movement of certain types of products such as data, and products composed of data such as music, pictures, and text. Timely and accurate information holds the promise of better coordination and better decision making. Information is used for two purposes in any supply chain: 1. Coordinating daily activities related to the functioning of the other four supply chain drivers: production; inventory; location; and transportation. 2. Forecasting and planning/Decision Making to anticipate and meet future demands. Obtaining, linking and leveraging information across the Supply Chain 1. Producers Raw materials, Intermediary Products, Finished goods 2. Distributors: are companies that take inventory in bulk from producers and deliver a bundle of related product lines to customers A distributor is typically an organization that takes ownership of significant inventories of products that they buy from producers and sell to consumers A distributor can also be an organization that only brokers a product between the producer and the customer and never takes ownership of that product
Distributors buffer the producers from
fluctuations in product demand by stocking inventory.
Perform Sales work and at times
Marketing/promotion / After Sales Services 3. Wholesalers: stock a range of products from several producers. The role of the wholesaler is to sell onto retailers. Wholesalers usually specialize in particular products. 4.Franchises: are independent businesses that operate a branded product (usually a service) in exchange for a license fee and a share of sales. 5. Agents: sell the products and services of producers in return for a commission (a percentage of the sales revenues) 6. Retailers operate outlets that trade directly with household customers. Retailers can be classified in several ways: • Type of goods being sold( e.g. clothes, grocery, furniture) • Type of service (e.g. self-service, counter- service) • Size (e.g. corner shop; superstore) • Location (e.g. rural, city-centre, out-of-town) • Brand (e.g. nationwide retail brands; local one-shop name) 7. Customers or consumers are any organization that purchases and uses a product
A customer organization may purchase a
product in order to incorporate it into another product that they in turn sell to other customers A customer may be the final end user of a product who buys the product in order to consume it. 8. Service Providers are the organizations that provide services to other participants which may include:
Logistic Providers which provide transportation
and warehousing services Financial Service providers such as Banks, collection agents, credit companies Other service providers such as Marketing Research companies, Advertising agencies, engineers , legal consultants, HR consultants etc… Decision Phases of a Supply Chain
• Supply chain strategy or design
• Supply chain planning • Supply chain operation 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 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 – L.L. Bean (Figure 1.6) – Dell (Figures 1.7) • The relative proportion of push and pull processes can have an impact on supply chain performance