Supply Chain

Management

Dr. Jayashree Dubey

IPE
Topics For Discussion:
 Defining the SCM
 Objective of supply Chain
 Functions of supply Chain
 Supply Chain partners
 Drivers
 Types
 What is SCM?
 SCM is a set of approaches utilized to efficiently integrate suppliers,
manufacturers, warehouses and stores, so that merchandise is produced
and distributed at the right quantities, to the right locations, at the right time,
in order to minimize system wide costs while satisfying service level
requirements.

 “Supply Chain management deals with the control of materials, information,

and financial flows in a network consisting of suppliers, manufacturers,
distributors, and customers”

 The supply chain is a worldwide network of suppliers, factories, warehouses,

distribution centers, and retailers through which raw materials are acquired,
transformed, and delivered to customers.
What is Supply Chain
Management?

Cooperation between producers,

processors, wholesalers, &/or retailers, to
guarantee high quality &/or minimize
costs
 Vertical Coordination includes:
 Strategic Alliances
 an agreement mutually entered into by two
independent firms to serve a common strategic
objective
 eg. Strategic alliance between pork processor and
pork producer to produce pigs via certain method at
certain quality (Niman Ranch)
 formal written contracts
 vertical integration
Requirements for Effective SP
 Advanced information systems
 Top management commitment
 Information must be shared
 Power and responsibility within an organization might
change (for example, contact with customers switches
from sales and marketing to logistics)
 Mutual trust
 Information sharing
 Management of the entire supply chain
 Initial loss of revenues
 Generalized Supply Chain Model
Relationship Management
Information, product, service, financial and knowledge flows

Material Flow
Supplier Network Information Flow

Integrated Enterprise

Distribution Network

End Consumers
Market
Materials

Procurement
Distribution

Manufacturing

Capacity, information, core competencies, capital, and human resource constraints

Supply chain process
 What is a Supply Chain?
Customer wants
P&G or other Jewel or third Jewel
detergent and goes
manufacturer party DC Supermarket
to Jewel

Chemical
Plastic Tenneco
manufacturer
Producer Packaging
(e.g. Oil Company)

Chemical
Paper Timber
manufacturer
Manufacturer Industry
(e.g. Oil Company)
Flows in Supply Chain
Flow of information, order, fund, material, ownership,
 Partners
 Manufacturers,
 Suppliers,
 Customers,
 Transporters,
 Warehouses,
 Retailers.
Objective
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)
Functions of supply Chain

 Physical function: includes converting raw

materials into products and transportation from
one point in the supply chain to the next; the
costs lie within production, transportation and
inventory storage.
 Market mediation function: to make sure that
the products reaching the market place
matches consumer demand
 SC Decisions

 SC Strategy
 SC Planning
 SC Operation

SC Profitability/ Surplus
 Strategic Decisions
 Strategic network optimization, including the number,
location, and size of warehouses, distribution centers
and facilities.
 Strategic partnership with suppliers, distributors, and
customers, creating communication channels for
critical information and operational improvements
such as cross docking, direct shipping, and third-party
logistics.
 Product design coordination, so that new and existing
products can be optimally integrated into the supply
chain, load management
 Information Technology infrastructure, to support
supply chain operations.
 Where to make and what to make or buy decisions
 Align overall organizational strategy with supply
strategy
 Tactical Decisions
 Sourcing contracts and other purchasing decisions.
 Production decisions, including contracting, locations,
scheduling, and planning process definition.
 Inventory decisions, including quantity, location, and
quality of inventory.
 Transportation strategy, including frequency, routes, and
contracting.
 Benchmarking of all operations against competitors and
implementation of best practices throughout the
enterprise.
 Milestone payments
 Operational Decisions
 Daily production and distribution planning, including all nodes in the
supply chain.
 Production scheduling for each manufacturing facility in the supply chain
(minute by minute).
 Demand planning and forecasting, coordinating the demand forecast of
all customers and sharing the forecast with all suppliers.
 Sourcing planning, including current inventory and forecast demand, in
collaboration with all suppliers.
 Inbound operations, including transportation from suppliers and receiving
inventory.
 Production operations, including the consumption of materials and flow of
finished goods.
 Outbound operations, including all fulfillment activities and transportation
to customers.
 Order promising, accounting for all constraints in the supply chain,
including all suppliers, manufacturing facilities, distribution centers, and
other customers.
Decision Phases of a Supply Chain
 Supply chain strategy or design
 Supply chain planning
 Supply chain operation
 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
 Supply chain design must support strategic
objectives
 Supply chain design decisions are long-term and
expensive to reverse – must take into account
market uncertainty
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
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
 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
 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)
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)
Cycle View of Supply Chains
Customer
Customer Order Cycle

Retailer
Replenishment Cycle

Distributor

Manufacturing Cycle

Manufacturer
Procurement Cycle
Supplier
 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)
 Figure 1.3
 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.
Customer Order Cycle
 Involves all processes directly involved in
receiving and filling the customer’s order
 Customer arrival
 Customer order entry
 Customer order fulfillment
 Customer order receiving
 Figure 1.4
Replenishment Cycle
 All processes involved in replenishing retailer
inventories (retailer is now the customer)
 Retail order trigger
 Retail order entry
 Retail order fulfillment
 Retail order receiving
 Figure 1.5
Manufacturing Cycle
 All processes involved in replenishing
distributor (or retailer) inventory
 Order arrival from the distributor, retailer, or
customer
 Production scheduling
 Manufacturing and shipping
 Receiving at the distributor, retailer, or
customer
 Figure 1.6
 Procurement Cycle
 All processes necessary to ensure that materials
are available for manufacturing to occur according
to schedule
 Manufacturer orders components from suppliers
to replenish component inventories
 However, component orders can be determined
precisely from production schedules (different
from retailer/distributor orders that are based on
uncertain customer demand)
 Important that suppliers be linked to the
manufacturer’s production schedule
Push/Pull View of Supply Chains
Procurement, Customer Order
Manufacturing and Cycle
Replenishment cycles

PUSH PROCESSES PULL PROCESSES

Customer
Order Arrives
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
 Types
SCM Views: Cycle (customer, replenishment,
Manufacturing, procurement)
& Push-pull view
• Responsive & Efficient Supply Chain (wide
range of product variety & Quantity, shorter
lead time, innovative product, high service
level)
• Push/ pull system: push executed in
anticipation of demand & pull in response to
customer order.
Tire 1, Tire II
• (Dell, 7 eleven, Wal-mart)
Selecting Type
 Drivers
 Inventory
 Transportation
 Facilities
 Information
 Sourcing
 Pricing
 Designing Supply chain
 Supply chain strategy determines the nature of
procurement, transportation, manufacturing and
distribution to the customers:
 Competitive strategy (Wal-mart (low price) &
Mc.Master-Carr (variety) (Dell & Compaq).
 Strategic fit between competitive and supply chain
strategy.
 Obstacles
 Increasing Variety
 Decreasing PLC
 Increasingly demand customer
 Fragmentation of supply chain ownership
 Globalization
 Difficulty executing new strategy
Questions?