Supply Chain Management

– Level 1
Certification for New Joiners
 Agenda
• Understanding Supply Chain
–
• Constructing a Supply Chain
–
• Process Views of a Supply Chain


• Supply Chain in a firm



• Supply Chain Management



• Case Studies
Understanding Supply Chain
 Definitions

• A supply chain is a system of

organizations, people, technology,
activities, information and resources
involved directly or indirectly in fulfilling
a customer request.
•
• Supply chain activities transform natural
resources, raw materials and
components into a finished product that
is delivered to the end customer
•
Stakeholders/Stages in a Supply
Chain
• Customer


• Retailers


• Distributors/Reselle
rs
•
• Transporters


• Manufacturers


• Component/Raw
Material
Suppliers
Stages in a Supply Chain Network and
their interaction

A rro w re p re se n ts tra n sfe r o f p ro d u ct o r se rvice s b e tw e e n d iffe re n t

sta g e s in a su p p ly ch a in
A su p p ly ch a in m a y h a ve m o re th a n o n e p la ye r a t a n y sta g e .
 The Supply Chain – Functionality
Wise
Plan Buy
Source Make Deliver

Suppliers Manufacturers Warehouses & Customers

Distribution Centers

Transportation Transportation
Costs Costs
Material Costs Transportation
Manufacturing Costs Inventory Costs Costs

7
 Flows in a supply chain
D o w n stre a m Flo w

U p stre a m Flo w

o f p ro d u cts a n d se rvice s : U su a lly d o w n stre a m ( ca n b e u p stre a m so m e tim

Flo w o f fu n d s : U su a lly u p stre a m ( ca n b e d o w n stre a m so m e tim e s)

Flo w o f in fo rm a tio n : D o w n stre a m a s w e lla s U p stre a m

 Information in a Supply Chain
Plan
Suppliers Manufacturers Warehouses & Retailer
Distribution Centers

Source Make Deliver Sell

Each facility further away from It’s estimated

Order Lead Time actual customer demand must
make forecasts of demand that the typical
Delivery Lead Time  pharmaceutical
company supply
Lacking actual customer buying chain carries
Production Lead Time data, each facility bases its over 100 days of
forecasts on ‘downstream’
orders, which are more product to
variable than actual demand accommodate
uncertainty
To accommodate variability,
inventory levels are
overstocked thus increasing
inventory carrying costs
 9
 Objective of a Supply Chain

• Maximizing the overall value

generated
• Value generated = Worth of final
product to customer – Costs
Value

incurred in fulfilling the request

• Value = Supply chain profitability /
Surplus
• Worth of final product to customer
= Product price
• Costs incurred in fulfilling the
request = Cost of raw material,
manufacturing, storing,
transporting, selling etc.
 Performance of a Supply Chain

A n o rg a n iza tio n h a s to fin d a rig h t b a la n ce

b e tw e e n re sp o n sive n e ss a n d e fficie n cy in
its S u p p ly C h a in
Constructing a Supply Chain
 Decision Phases in a Supply Chain
1. Supply Chain Strategy or Design


– Time horizon of few years

– Supply Chain configuration, resource
allocation, production capacity, logistics,
type of information systems etc. are
decided
2. Supply Chain Planning


– Time horizon of quarter to a year

– Demand forecasting, inventory policies,
Price promotions, markets supplied etc.
are decided
3. Supply Chain Operation


– Time horizon of a day or a week

– Inventory allocation, shipping date, picking
Process Views of a Supply Chain
Process views of a supply chain
 Cycle View

• Supply Chain processes broken into four process

cycles (shown above)
• Each cycle occurs at interface between two
successive stages
• Not every supply chain will have all the four
cycles clearly separated
• Each cycle consists of six sub-processes
explained in next slide
•
 Cycle View (Contd.)
S u p p lie r sta g e m a rke ts B u ye r sta g e re ce ive s
p ro d u cts su p p ly

B u ye r sta g e p la ce s B u ye r sta g e re ce ive s

o rd e r su p p ly

S u p p lie r sta g e re ce ive s S u p p lie r sta g e su p p lie s

o rd e r o rd e r

• For each of the cycle the supplier stage is the

stage providing the product and buyer stage is
one buying the product
• For Manufacturing cycle supplier would be
Manufacturer and buyer will be Distributor
• Cycle view clearly specifies the roles and
responsibilities of each member and the
desired outcome of each process
• This view is useful for operational decisions
 Push/Pull View
Pu sh / Pu ll
B o u n d a ry
G e n e ric C u sto m ize d
Pro d u ct Pro d u ct
Pu sh Pro ce sse s Pu ll Pro ce sse s

C u sto m e r O rd e r
A rrive s
Pu ll Pro ce ss : E xe cu tio n in itia te d in re sp o n se to a
cu sto m e r o rd e r
Pu sh Pro ce ss : Execution initiatedin anticipation to
a cu sto m e r o rd e r
Pu sh / Pu ll b o u n d a ry : It se p a ra te s p u sh p ro ce sse s
fro m p u ll p ro ce sse s in a su p p ly ch a in
 Push/Pull View (Contd.)

Pu ll Pro ce ss
Pu sh Pro ce ss C u sto m e r d e m a n d kn o w n w ith ce rta in t
C u sto m e r D e m a n d n o t kn o w n b e fo re h a nRd e a ctive Pro ce ss
S p e cu la tive Pro ce ss Lo n g le a d tim e s
S h o rt le a d tim e s Lo w e co n o m ie s o f sca le
H ig h e co n o m ie s o f sca le

Pu sh / Pu llV ie w is u se fu lw h e n co n sid e rin g

stra te g ic d e cisio n s re la te d to su p p ly ch a in
 Choosing between Push/Pull

Pu ll H ig In d u strie s Where do the

Industries where: following industries
h w h e re : fit in this model :
•Demand is uncertain
•Scale economies are High
•C u sto m iza tio n is H ig h Automobile?
•D e m a n d is u n ce rta in
Aircraft?
•S ca le e co n o m ie s a re
Lo w Computer Fashion?
Furniture Petroleum refining?
equipment
Pharmaceuticals?
U n ce rta in ty

Biotechnology?
Industries where: Industries where:
D em and

Medical Devices?
•Uncertainty is low •Standard processes are 
•Low economies of scale the norm
•Push-pull supply chain •Demand is stable
•Scale economies are High

Books , CD ’ s Grocery ,
Beverages
Pu s Lo
h w Lo H ig
E co n o m ie s o f
w S ca le h
Pu ll Pu s
h
Supply Chain in a firm
Supply Chain Macro Processes in a
firm
S u p p lie Fir C u sto m
r m er

SRM : All processes that focus on interface

between the firm and its suppliers
ISCM : All processes that are internal to the
firm
CRM : All processes that focus on the interface
between the firm and its customers
Supply Chain Drivers

These drivers affect

Supply Chain
performance

Also they interact

with each other

Decision regarding one

can affect other
 Supply Chain Management
• A set of approaches used to efficiently integrate
– Suppliers
– Manufacturers
– Warehouses
– Distribution centers
• So that the product is produced and distributed
– In the right quantities
– To the right locations
– And at the right time
• System-wide costs are minimized and
• Customer requirements are satisfied

 Case Study : Amazon.com

• One of the pioneers of consumer e-

business
• Sells books, music and other items
• Amazon has six warehouses where it holds
inventory
• It stocks best selling books itself
• It gets other not so popular titles from
distributors or publishers.
• A different model as compared to
traditional book sellers
 Case Study : Amazon.com

• Key questions
– What advantages does selling books via the
internet provides over a traditional
bookstore ?
– What are the disadvantages ?
– For which type of products does the e-
commerce channel offer the greatest
advantage ?
–
–
Questions ?