Supply Chain Management

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Supply Chain Management

• Lecture 1

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What is Supply Chain Management?
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What is a Supply Chain?

• A supply chain consists of all parties involved,
  directly or indirectly, in fulfilling a customer
  request
• Manufacturers, suppliers, transporters,
  warehouses, retailers, and customers
• A supply chain includes all functions involved in
  receiving and filling a customer request
• New product development, marketing, operations,
  distribution, finance, and customer service
• A supply chain is the entire process of moving a
  product or service from suppliers to customers

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Stages of a Detergent Supply Chain
TennecoPackaging
PaperManufacturer
TimberCompany
Customer
Wal-Mart Store
Wal-Mart or ThirdParty DC
PG or OtherManufacturer
PlasticProducer
ChemicalManufacturer
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Example Wal-Mart
Wal-Mart or third-party distribution centers
Procter Gamble
Customers Request Buying detergent, clothes, TV,
...
Wal-Mart Stores
Da-Fa Clothing, Inc. (China)
SONY Factory (Malaysia)
Fabric Producer
Electronics Components Producer
Plastic Producer
Zipper Producer
Plastic Producer
Chemical Producer
Thread Producer
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Example HP
USA DCs
Suppliers
IC Mfg
Retailer
Consumer
Europe DCs
Retailer
FAT
Suppliers
PC Board
Consumer
AsianDCs
Retailer
Consumer
Subassembly
Suppliers
Suppliers
FAT Final assembly test IC Mfg Integrated
circuit manufacturing PC Board Printed circuit
board
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Example Dell
Monitors by SONY (Mexico)
Dell Assembly Plant
Keyboards by Acer (Taiwan)
Customers order computers on Dells website
CPU by Intel (USA)
Other components
Dell is significantly revamping its entire supply
chain strategy and, in large measure, abandoning
its make-to-order model April, 2008
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Supply Chain Flows
Value-Added Services
Manufacturer
Distributor
Retailer
Customer
Supplier
Material/Product Flow
Funds/Demand Flow
Information Flow
Reuse/Maintenance/After Sales Flow
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Supply Chain Stages

• A typical supply chain may involve a variety of
  stages

Manufacturer
Distributor
Retailer
Customer
Supplier
Most supply chains are actually supply networks
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The Objective of a Supply Chain

• Supply chain value is the difference between what
  the final product is worth to the customer and
  the costs the supply chain incurs in filling the
  customers request
• Supply chain profitability (or supply chain
  surplus) is the difference between the revenue
  generated from the customer and the overall cost
  across the supply chain

Maximize overall value created
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The Objective of a Supply Chain

• Sources of supply chain revenue Customer
• Best Buy receives 60 from a customer for a
  wireless router
• Sources of supply chain cost Flows of
  information, products, and funds between any pair
  of stages in the supply chain
• Difference between 60 and the sum of all costs
  is the supply chain profit or supply chain surplus

Supply chain profitability is the total profit to
be shared across all supply chain stages and
intermediaries
Supply chain success should be measured by total
supply chain profitability, not profits at an
individual stage
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What is Supply Chain Management?
Supply chain management is the management of
flows (product, information, funds, etc) between
and among supply chain stages to maximize total
supply chain profitability
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The Importance of Supply Chain Management

• Supply chain design, planning, and operation play
  a significant role in the success or failure of a
  firm
• Wal-Mart
• Dell
• Seven-Eleven Japan
• Amazon
• Toyota
• W.W. Grainger and McMaster-Carr
• Webvan
• Snapple

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Overview

• Part I
• Understanding the supply chain
• Chapters 1, 2, 3
• Part II
• Designing the supply chain network
• Chapters 4, 5, 6
• Part III
• Planning demand and supply in a supply chain
• Chapters 7, 8, 9

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Overview

• Part IV
• Planning and managing inventories in a supply
  chain
• Chapters 10, 11, 12
• Part V
• Designing and planning transportation networks
• Chapter 13
• Part VI
• Sourcing and pricing decisions in a supply chain
• Chapters 14, 15, 16, 17