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What is a Supply Chain?

• The Supply Chain encompasses all activities
  associated with the flow and transformation of
  goods from the raw materials stage, through to
  the end users, as well as the information flows.
  Material and information flow both up and down
  the supply chain.

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What comprises a supply chain?

• Suppliers (including their suppliers)
• Manufacturers
• Distribution
• Retailers
• Customers

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???? R. B. HANDFIELD
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Extended Supply Chain

• Product design
• Market research
• Logistics provider
• Finance provider

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Suppliers

• Provide all basic input materials, such as
• Raw materials
• Components
• Subassemblies
• WIP
• Composite

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Suppliers Manufacturers

• Final product is produced
• Opportunity for cost reduction
• Raw material inventory (40-60)
• Excess paperwork
• Billing and information exchange

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Suppliers Manufacturers Distribution

• Putting products in customers hands
• Transporting the right amount of the right
  product to the right place at the right time (not
  easy!!)
• Opportunity for cost reduction
• Inventory
• Storage
• Avoid stockout
• Risk holding inventory for retailers

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Suppliers Manufacturers Distribution
Retailers Customers

• Retailers provide shelves and space to show and
  demo products.
• The role of the retailers is changing
• Who is the most important in the whole supply
  chain?
• The customers!!

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The flows in a SC network

• Material
• Information
• Cash

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The Supply Chain War

• The Japanese attack
• Just-in-Time
• Who holds Inventory ?
• Suppliers as partners
• Success of Compaq Computer
• From vertical integration to dis-integration to
  horizontal integration

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Whats required for a modern Supply Chain?

• Short cycle time
• Minimum safety stock to satisfy customers
• Minimum unit transportation cost
• Flawless information infrastructure
• A reasonable profit within an acceptable price to
  the customers

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How to integrate a SC network?(School of
thoughts - 1)

• Finding the most efficient way within the
  shortest product life cycle
• Fast introduction of new products, faster than
  all competitors
• However, less than 10 of new products survived

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How to integrate a SC network?(School of
thoughts - 2)

• Reduce every possible cost. Everyday low price
  so there is no need for promotion or discount
• Once customers are used to the low prices, the
  manufacturer has to face the pressure of reducing
  cost even further for higher profit.
• How can they deliver the products to the
  retailers shelves effectively and efficiently?

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How to integrate a SC network?(School of
thoughts - 3)

• Use the latest information technology to link
  every member in the SC network.
• Reduce paperwork to a minimum to avoid possible
  mistake.
• Low cost is inherent in this system.

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How to integrate a SC network?(School of
thoughts - 4)

• Change the traditional ways of pushing the
  products to the customers (promotion) to
  pulling product demand by customers purchasing
  over the internet.
• Produce whats needed at lowest costs
• Focus on quick response to reduce costs (only
  produce whats needed)
• Reduce costs of inventory and warehousing
• Data base that reflects whats consumed and
  service demanded

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How to combine all these?

• Its called
• SUPPLY CHAIN MANAGEMENT!!!!
• SCM the integration of all related activities
• through improved supply chain
• relationships to achieve a sustainable
• competitive advantage

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Through the SC, what are the problems? (1)

• How do manufacturers and distributors provide
  the products and services to ensure and maintain
  the revenue?
• How to identify the best selling or highest
  profit products and services and make sure their
  supplies are always met, and their delivery
  stable and trouble-free?

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Through the SC, what are the problems? (2)

• How to make sure the retailers shelves and floor
  space always filled with sufficient inventory at
  certain times or seasons?
• How to get funding (extra cash) to renew the
  system, software, hardware and all necessary
  investment to improve current operations?

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Identify what the customers want

• Too much effort spent on the up stream in the
  operation processes
• When customers change their preferences, all need
  to be done over again.
• Customers drive the whole supply chain!!!
• Retailers are more and more

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Retailers talk louder and louder

• They are the closest to the customers. They know
  what customers want.
• They have what the manufacturers want the most
• Market information
• Retailers take the most of the cost savings from
  the whole supply chain.
• Up-stream members in the SC see no incentive for
  further improvement-hard to optimize the SC.

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Align SC and Business Strategy

• Understand the requirements of your customers
• Define core competencies and the roles your
  company play to serve your customers
• Develop supply chain capabilities to support the
  roles your company has chosen

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Responsive Efficiency
Production Excess capacity Flexible manufacturing Many smaller factories Little excess capacity Focus Few central plants
Inventory High inventory levels Wide range of items Low inventory levels Fewer items
Location Many locations close to customers Few central locations serve wide areas
Transportation Frequent shipments Fast and flexible Few, large shipments Slow, cheaper
Information Collect and share timely, accurate data Cost of information drops while other costs rise
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Some terminologies

• Make to stock (MTS)
• Make to forecast (MTF)
• Make to order (MTO)
• Build to order (BTO)
• Assemble to order (ATO)
• Configure to order (CTO)