Coursera KAIST: SCM101

Supply Chain Management

A Learning Perspective
Lecture 1

Professor Bowon Kim

KAIST Business School
What is Supply Chain Management
Why does a firm exist?
A firm exists to earn profit. In turn, the firm maximizes its profit
by creating value for the market.
Value creation by providing products and services to the customers
through optimally managing processes, resources, and capabilities

Supply chain management is about creating value by

coordinating various activities, functions, and participants

Utility
Value =
Cost

1
Value Creation Hierarchy

Profitability

Value Creation
Value-Chain Perspective
Product/Service Inter-firm coordination

Supply Chain Management

Resource Process

Capabilities Resource Process

Fundamental
Capability
Building blocks

2
What is Value Chain
Value Chain (Porter 1985)

Infrastructure
Supportive
Activities
Human Resources
Technology, R&D
Sources Procurement Market,

Marketing,
Operations
Customers

Outbound

Services
Logistics
Logistics
Inbound

Sales
Primary
Activities

Upstream Activities Downstream Activities

3
Supply Chain
2nd-tier supplier 1st-tier supplier
(e.g., steel,
aluminum) (e.g., engine)

2nd-tier supplier 1st-tier supplier

(e.g., plastic,
Rubber) (e.g., tire)

2nd-tier supplier 1st-tier supplier

(e.g., bolts,
nuts) (e.g., car seat)
Consumer
Carmaker: assembly car Dealer

2nd-tier supplier 1st-tier supplier

(e.g., electronic
parts) (e.g., windows)

2nd-tier supplier 1st-tier supplier

(e.g., auto glass)
(e.g., electronics)

Multi-tier suppliers Manufacturer Distributor

Value Chain/Supply Chain System

4
Supply Chain

5
Value through Supply Chain Management
Value
Supply Chain System

S M D C

Supplier/vendor Manufacturer Distributor Customer

Service Service Service contact
supporter creator /provider

Efficiency-driven Responsiveness-driven
value more relevant value more relevant

Utility
Value = Responsiveness Efficiency
Cost

6
Supply Chain A Focal Company
Supply Chain System

S M D C

Supplier/vendor Manufacturer Distributor Customer

Service supporter Service creator Service contact
/provider
INTEL DELL BestBuy End Customer
LGD Circuit City
Microsoft WALMART

Part suppliers INTEL Third-party DELL

Raw materials Logistics Companies HP

CJ EMART Individual End customer

(a food company) (a major supermarket chain) Retail Stores

Third-party
Farm CJ EMART
Logistics Companies
(farmers, growers)
Writers Filmmaking CGV End consumer
(film producers) (a multiplex movie theater)
Actors (movie goers)
Various suppliers, Ritz-Carlton Hotel Internal customer contact points
vendors End consumer
(ladies and gentlemen serving) External contact points
(for foods, laundry, ) (e.g., on-line sites) (hotel guests)

Focal company
Approach the SCM issues from Ms perspective
7
Value Life Cycle
Value Life Cycle
Integration of new product innovation and SCM
New product innovation
Essential condition for sustainable competitive advantage
But, until very recently
Lack of identity
Treated as a separate issue, and dispersed research
Supply chain management
Traditionally focused on existing products/services
Coincided with traditional PLC (product life cycle)
Integration of NPI and SCM
Looking at the entire value cycle from the new product/service
conception to the end of the product/service life (and starting recycling)
Firm must understand it to achieve competitive advantage in the global
market

8
Value Life Cycle
Value Life Cycle
# of Alternative Cumulative Sales ($)
Concepts/Designs
PLC

NPC
(New Product Cycle)

Manufacturability
Pilot Production

Final Process for

Development

NPD-Process Knowledge
Concept

Initial
On-going
Ramp-up
Product-specific Knowledge Production
Production
(Design, R&D, Marketing, Quality, Mfg, Procure.)

Ramp-up Quality
Improvement

New Product Innovation

Product Life Cycle