SUPPLY CHAIN MANAGEMENT-01

e m a i l: r a s h idal i47 8 0 @ gmail. c om

 WHAT IS A SUPPLY CHAIN?

• A supply chain consists of all activities involved, in fulfilling a

customer request or customer demand
• The supply chain includes not only the manufacturer and
suppliers, but also transporters, warehouses, retailers, and
even customers themselves.
• Within each organization, such as a manufacturer, the
supply chain includes all functions involved in receiving and
filling a Customer request.
• These functions include, new product development, marketing,
operations, distribution, finance, and customer service.
• Consider a customer walking into a Wal-
Mart/Imtiaz Super Store store to purchase
Cooking oil or any product.
• The supply chain begins with the customer and
his or her need for Cooking Oil or any product.
• The next stage of this supply chain is the Wal-Mart
retail store/Imtiaz Super Store that the customer
visits.
• Wal-Mart stocks its shelves using inventory that
may have been supplied from a finished-goods
warehouse or a distributor. .
• A supply chain is dynamic and involves the constant flow of
information, product, and funds
• In our example, Wal-Mart/Imtiaz Super Store,
• Provides the product, as well as Pricing and availability
information, to the customer.
• The customer transfers funds to Wal-Mart/Imtiaz Super Store.
Wal-Mart conveys point-of-sales data as well as replenishment
orders to the warehouse or distributor, who transfers the
replenishment order via trucks back to the store.
• Then Wal-Mart/Imtiaz Super Store, transfers funds to the
distributor .
• The distributor also provides Pricing information and sends
delivery schedules to Wal-Mart.
• Similar information, material, and fund flows take
place across the entire supply chain.
• In another example, when a customer makes a purchase
online from Dell Computer, the supply chain includes,
• The Web site provides the customer with information
regarding Pricing, Product variety, and Product availability.
• Having made a product choice, the customer enters the order
information and pays for the product.
• The supply chain use customer order information to fill the
request.
• That process involves flow of information, product, and
funds among various stages of the supply chain.
 WHAT IS A SUPPLY CHAIN?
Customer is an” integral” part of the supply chain
Includes “Movement of “Products from suppliers to Manufacturers
to Distributors”,
But also includes movement of “Information, Funds, and
Products”
In fact, the primary purpose of any supply chain is to satisfy customer
needs and, in the process, generate profit for itself

All stages may not be present in all supply chains

(e.g., no retailer or distributor for Dell)
FLOWS IN A SUPPLY CHAIN

Information

Product
Customer
Funds
 SUPPLY CHAIN & SUPPLY CHAIN MANAGEMENT

•Supply chain is all about the sourcing, purchasing,

procurement, warehousing, distribution and
logistics. on the other hand supply chain
management is all about how do you manage all
these things. the efficient and effective use of the
above resources so the work productivity will
increase by the minimum input of resources.
 SUPPLY CHAIN MANAGEMENT

Supply Chain Management is primarily concerned with the

efficient integration of suppliers, factories, warehouses
and stores so that merchandise is produced and
distributed in the right quantities, to the right locations
and at the right time, and so as to minimize total system
cost subject to satisfying service requirements &
Customer needs
 THE OBJECTIVE OF A SUPPLY CHAIN

• The objective of every supply chain should be to maximize the

overall value generated.
• The value (also known as supply chain surplus) a supply chain
generates is the difference between what the value of the final
product is to the customer and the costs the supply chain
incurs in filling the customer’s request or need.
• Supply Chain Surplus = Customer Value – Supply Chain
Cost.
• The value of the final product may vary for each customer
and can be estimated by the maximum amount the customer is
willing to pay for it.
• For example a customer purchase cooking oil from Super Store
pays Rs. 600
• The difference between the 600 Price per liter of Cooking
Oil, that the customer paid and the sum of all costs
incurred by the supply chain to produce and distribute the
product represents the supply chain profitability.
• The higher the supply chain profitability, the more
successful is the supply chain.
• Supply chain success should be measured in terms of
supply chain profitability and not in terms of the profits at
an individual stage .
• For any supply chain, there is only one source of revenue:
the customer.
• The value obtained by a customer purchasing detergent or nay
product at Wal-Mart depends upon several factors, including the
functionality of the detergent, how far the customer has to travel
to Wal-Mart, and the likelihood of finding the detergent or
product in stock.
• The customer is the only one providing positive cash flow for
the Wal-Mart supply chain.
• All other cash flows are simply fund exchanges that occur within
the supply chain, given that different stages have different
owners.
• When Wal-Mart pays its supplier, it is taking a portion of the
funds the customer provides and passing that money on to
the supplier
 THE IMPORTANCE OF SUPPLY CHAIN
DECISIONS
• Wal-Mart, Amazon, and Seven-Eleven Japan, food panda are
examples of companies that have built their success on superior
design, planning, and operation of their supply chain..
• Wal-Mart has been a leader at using supply chain design, planning,
and operation to achieve success.
• From its beginning, the company invested heavily in transportation
and information infrastructure to facilitate the effective flow of goods
and information.
• Wal-Mart designed its supply chain with clusters of stores around
distribution centers to facilitate frequent replenishment at its retail
stores in a cost-effective manner.
• Wal-Mart has been a leader in sharing information and
collaborating with suppliers to bring down costs and improve
product availability.
 DECISION PHASES IN A
SUPPLY CHAIN
• Successful supply chain management requires many
decisions relating to the flow of information, product,
and funds.
• Each decision should be made to raise the supply
chain surplus.
 1. SUPPLY CHAIN STRATEGY OR DESIGN:

• During this phase, a company decides how to structure the

supply chain over the next several years.
• It decides what the chain’s configuration will be, how
resources will be allocated, and what processes each stage
will perform.
• Strategic decisions made by companies include whether to
outsource or perform a supply chain function in-house, the
location and capacities of production and warehousing
facilities, the products to be manufactured or stored at
various locations, the modes of transportation , and the
type of information system to be utilized.
• Structuring the Supply Chain
• Supply Chain Configuration.
• Supply Chain Network Design
 2. Supply Chain Planning
• For decisions made during this phase, the time frame
considered is a quarter to a year.
• Therefore, the supply chain’s configuration determined in the
strategic phase is fixed.
• The goal of planning is to maximize the supply chain
surplus that can be generated given the constraints
established during the strategic or design phase.
• Planning includes making decisions regarding
• Which markets will be supplied from which locations,
• Subcontracting of manufacturing,
• Inventory policies to be followed,
• and the timing and size of marketing and price promotions.
 3. Supply Chain
• Operation
The time horizon here is weekly or daily.
• During this phase, companies make decisions regarding
individual customer orders.
• At the operational level, supply chain configuration is
considered fixed, and planning policies are already
defined.
• The goal of supply chain operations is to handle
incoming customer orders in the best possible manner.
• During this phase, firms allocate inventory or production to
individual orders, set a date that an order is to be filled,
• Generate pick lists at a warehouse, allocate an order to a
particular shipping mode and shipment, set delivery
schedules of trucks, and place replenishment orders.
• The design, planning, and operation of a supply chain
 PROCESS VIEWS 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 ways to view the processes performed
in a supply chain.
1. Cycle View: The processes in a supply chain are
divided into a series of cycles, each performed
at the interface between two successive stages
of a supply chain.
2. 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 or in anticipation of customer
orders.
3. Pull processes are initiated by a customer order,
4. Whereas push processes are initiated and
performed in anticipation of customer orders.
 CYCLE VIEW OF SUPPLY CHAIN PROCESSES

• Customer order cycle

• Replenishment cycle
• Manufacturing cycle
• Procurement cycle
• Each cycle occurs at the interface between two successive
stages of the supply chain.
• For example, a grocery supply chain in which a retailer stocks
finished-goods inventories and places replenishment orders
with a distributor is likely to have all four cycles separated.
• Dell, in contrast, bypasses the retailer and distributor when it
sells directly to customers.
 PUSH/PULL VIEW OF SUPPLY CHAIN PROCESSES

• Pull processes are initiated by a customer order,

whereas push processes are initiated and performed
in anticipation of customer orders.
• Push processes operate in an uncertain environment
because customer demand is not yet known.
• Pull processes operate in an environment in which
customer demand is known.
 PUSH/PULL VIEW OF
SUPPLY CHAIN PROCESSES

Supply chain processes fall into one of two categories

depending on the timing of their execution relative to
customer demand
Pull: execution is initiated in response to a customer order
(reactive)
Push: execution is initiated in anticipation of customer
orders (speculative)
 THE OBJECTIVE OF A SUPPLY
CHAIN

Example: Dell receives $2000 from a customer for a

computer (revenue)
Supply chain incurs costs (information, storage,
transportation, components, assembly, etc.)
Difference between $2000 and the sum of all of these costs
is the supply chain profit
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
 CYCLE VIEW OF A SUPPLY CHAIN

Each cycle occurs at the interface between two

successive stages
Customer order cycle (customer-retailer)
Replenishment cycle (retailer-distributor)
Manufacturing cycle (distributor-manufacturer)
Procurement cycle (manufacturer-supplier)
 NUMERICAL
A company wants to produce 10,000 units of an item over the
next three months at a level rate. The first month has 20
working days; the second, 21 working days; and the third, 12
working days because of an annual shutdown. On the average,
how much should the company produce each day to level
production?
Solution:
 APPROACHES FOR MAKE OR BUY DECISION

The types of approach followed I make or buy

decision are as follows:
1. Simple cost analysis
2. Economic analysis
3. Break even analysis
 SIMPLE COST ANALYSIS

In this analysis, cost of making a product and that of buying a

product are calculated.
Then, the alternative which involves the minimum cost is
suggested for implementation.
This concept is illustrated using an example problem.
Example1:
An automobile company has extra capacity that can be used to
produce gears that the company has been buying for Rs. 300 each.
If the company makes the gears, it will incur materials cost of Rs. 90
per unit, labor cost of Rs. 120 per unit and variable overhead cost of
Rs. 30 per unit.
The annual fixed cost associated with the unused capacity is Rs.
240,000.
Demand over the next year is estimated at 4000 units
1. Would it be profitable for the company to make the gears?
2. Suppose the capacity could be used by another department for
the products of some agricultural equipment that would cover its
fixed and variable cost and contribute Rs. 90,000 to profit.
Which would be more advantageous, gear production or
agricultural equipment production?
 WHAT IS CONTEMPORARY ISSUES IN
SUPPLY CHAIN MANAGEMENT

• Contemporary issues in supply chain management refer to

current challenges and trends that impact the way
businesses manage their supply chain operations.
• Some of the significant contemporary issues in supply
chain management include:
• Supply chain visibility: Achieving end-to-end visibility of
the supply chain is becoming increasingly crucial for
businesses.
• With the rise of e-commerce and globalization, customers
now demand real-time updates on their orders, and
businesses need to track their inventory, shipments, and
suppliers' performance to ensure on-time delivery and
reduce disruptions.
Sustainability:
• The increasing focus on sustainability and social
responsibility is driving businesses to incorporate ethical
and environmentally friendly practices into their supply
chain management.
• Companies are expected to minimize waste, reduce
carbon emissions, and ensure the responsible sourcing
of raw materials.
Globalization:
• The rise of globalization has made supply chains more
complex and challenging to manage.
• Businesses need to deal with multiple suppliers,
navigate different regulations, and manage various
currencies and time zones.
Supply chain risk management:
• Supply chain disruptions, such as natural disasters, political
instability, and cyber-attacks, can have a significant impact
on a business's operations.
• Effective supply chain risk management is critical to
mitigate the impact of these disruptions and ensure
business continuity.
Supply chain resiliency:
• The COVID-19 pandemic has highlighted the importance of
supply chain resiliency.
• Businesses need to be smooth and adapt quickly to sudden
changes in demand, supply, and logistics to ensure that
they can continue to deliver products and services to their
customers.