SUPPLY CHAIN MANAGEMENT

Anoop Kumar Verma (PGDM 2nd year)

WHAT IS A SUPPLY CHAIN?
 All stages involved, directly or indirectly, in fulfilling a
customer request

 Includes manufacturers, suppliers, transporters,

warehouses, retailers, customers

 The goal of supply chain should be to maximize overall

supply chain profitability.

 Customer is an integral part of the supply chain

WHAT IS A SUPPLY CHAIN?
 Includes movement of products from suppliers to
manufacturers to distributors, but also includes
movement of information, funds, and products in both
directions

 Typical supply chain stages: Suppliers , Manufacturers,

Distributors, Retailers, Customers
SMDRC
 All stages may not be present in all supply chains
(e.g., no retailer or distributor for Dell)
 WHAT IS A SUPPLY CHAIN?

Tenneco Paper Timber

Packaging Manufacturer Industry

Wal-Mart
P&G or other Wal-Mart
or third Customer
manufacturer Store
party DC

Chemical Plastic Fig: Stages of a Detergent

manufacturer Producer Supply Chain
OBJECTIVE OF A SUPPLY CHAIN :-
 Maximize overall value generated

 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”

 For most commercial Supply Chains, Value will be strongly

correlated with Supply Chain Profitability (also known as
Supply Chain Surplus)
(difference between revenue generated from the customer and
the overall cost across the supply chain)
OBJECTIVE OF A SUPPLY CHAIN :-
 Supply chain incurs costs (information, storage,
transportation, components, assembly, etc.)

 Supply chain profitability is total profit to be shared

across all stages of the supply chain

 Supply chain success should be measured by total supply

chain profitability, not profits at an individual stage
OBJECTIVE OF A SUPPLY CHAIN :-
 Sources of supply chain cost: flows of information,
products, or funds between stages of the supply chain

 “Supply chain management is the management of flows

between and among supply chain stages to maximize
total supply chain profitability”
FLOW IN A SUPPLY CHAIN :-

Information

Suppliers Product
& Customer
Manufacture
Funds
DECISION PHASES OF A SUPPLY CHAIN
“Supply chain decision phases may be categorized as
design, planning, or operational, depending on the time
frame during which the decisions made apply”

 Supply chain strategy

 Supply chain planning

 Supply chain operation

SUPPLY CHAIN STRATEGY
 This phase, given the Marketing & pricing plans for a
product

 Decisions about how to structure of the supply chain

over the next several years

 Strategic supply chain decisions

 How resources will be allocated
 Locations and capacities of facilities
 Products to be made or stored at various locations
 Modes of transportation
 Information systems
SUPPLY CHAIN STRATEGY
 Supply chain design decisions are long-term and
expensive to reverse – must take into account uncertainty
in anticipated market conditions

 Used for increasing the Supply Chain Surplus during this

phase
SUPPLY CHAIN PLANNING
 For this phase the time frame considered is a quarter to a
year; strategic phase is fixed

 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
 Inventory policies to be followed
 Timing and size of marketing and price promotions

 Must consider in planning decisions demand uncertainty,

exchange rates, competition over the time horizon
SUPPLY CHAIN OPERATION
 Time horizon is weekly or daily

 During this phase company make Decisions regarding

individual customer orders

 Supply chain configuration is fixed and operating

policies are determined

 Goal is to implement the operating policies to handle

incoming customer order in the best possible manner
SUPPLY CHAIN OPERATION
 In this phase, firms allocate inventory or production, set
order due dates, generate pick lists at a warehouse,
allocate an order to a particular shipping mode &
shipment, set delivery schedules of trucks, and place
replenishment orders

 Operational decisions are being made in the short term

(Minutes, hours, or Days)

 Goal during the operation phase is reduce uncertainty &

optimize performance
PROCESS VIEW OF A SUPPLY CHAIN
“A supply chain is a sequence of processes and flows that
take place within and between different stages and
combine to fill a customer need for a product.”

 There are two different view;

 Cycle view
 Push / Pull view
PROCESS VIEW OF A SUPPLY CHAIN
 Cycle view: The 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: The 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
“Each cycle occurs at the interface between two successive stages”
“The five stages thus result in four supply chain process”

Customer
Customer Order Cycle

Retailer
Replenishment Cycle

Distributor

Manufacturing Cycle

Manufacturer
Procurement Cycle
Supplier
1ST : CUSTOMER ORDER CYCLE
 Involves all processes directly involved in receiving and
filling the customer’s order

C Receives/
Customer
Demand Full
Demand
fill

Order
Delivers
placed

Receive Order
R
order Process
2ND : REPLENISHMENT CYCLE
 All processes involved in replenishing retailer
inventories (retailer is now the customer)

R Receives/
Retailer
Demand Full
Demand
fill

Order
Delivers
placed

Receive Order
D order Process
3RD : MANUFACTURING CYCLE
 All processes involved in replenishing distributor
(Distributor is now the customer) inventory

D Receives/
Distributor
Demand Full
Demand
fill

Order
Delivers
placed

Receive Product
M order Manufacturing
4TH : PROCUREMENT CYCLE
 Manufacturer orders components from suppliers to
replenish component inventories

M Receives/
Manufacturer
Demand Full
Demand
fill

Order
Delivers
placed

Receive Order
S order Process
PUSH/PULL VIEW OF SUPPLY CHAINS
“A push/pull view of the supply chain categorized processes
based on whether are initiated in response to a customer
order (pull) or in anticipation of a customer order (push).
This view is very useful when considering strategic relating
to supply chain design”

 Push:
 execution is initiated in anticipation of customer orders/demand
(speculative process)
 Demand is forecasted
PUSH/PULL VIEW OF SUPPLY CHAINS
 Pull:
 execution is initiated in response/react to a customer demand
(reactive process)
 Demand is not known and must be forecast

 Push/pull boundary separates push processes from pull

processes

Push Pull

(Customer demand is (Customer demand is

not known) known)
PUSH/PULL VIEW OF SUPPLY CHAINS
Push/Pull Boundary
Procurement,
Manufacturing and Customer Order
Replenishment cycles Cycle

PUSH PROCESSES PULL PROCESSES

Customer
Order Arrives
PUSH/PULL PROCESSES FOR DELL
SUPPLY CHAIN

Customer Order & PULL

Manufacturing Cycle PROCESSES

Customer order &

Manufacturing Cycle
Customer
Order
Arrives Procurement
Cycle
PUSH
Procurement Cycle PROCESSES
SUPPLY CHAIN MACRO PROCESSES IN A
FIRM
“Three macro processes manage the flow of Information,
Product, & funds required to generate, receive, & fulfill a
customer request”

 Supplier Relationship Management (SRM) : All processes

that focus on the interface the firm and its suppliers.
 Source
 Negotiate
 Buy
 Design Collaboration
 Supply Collaboration
SUPPLY CHAIN MACRO PROCESSES IN A
FIRM
 Internal Supply Chain Management (ISCM) : All
processes that are internal to the firm.
 StrategicPlanning
 Demand Planning
 Supply Planning
 Fulfillment
 Field Service
SUPPLY CHAIN MACRO PROCESSES IN A
FIRM
 Customer Relationship Management (CRM) : All
processes that focus on the interface between the firm
and its customers
 Market
 Price
 Sell
 Callcenter
 Order Management