SESSION 1: Introduction to Supply Chain

Management

2024 - 2 Ana María Rodríguez

Introduction to Supply Chain
Management
1. Introduction to SCM - VC
2. Logistics main role players
3. Global Supply Chain – Drivers
 BASIC CONCEPTS
Logistics is the process
Process: A series
of actions you
take to achieve a result.
Result: All companies
want profits!

Net = Total
- Total
Profit Income
Cost
 LOGISTICS
Logistics is the process of strategically
managing:
• The procurement,
• Movement and
Action

• Storage of materials, parts and

finished inventory (and the related
s

information flows) through the

organization and
• its marketing channels in such a way Result
that
current and future profitability are
maximized through the cost-
 RELATED INFORMATION
FLOWS
1. Physical flows
• Raw Materials
• WIP (Work in Progress)
• Finished Products

2. Information flows
• Customer Behavior
Result
• (3.)Finantial data (Money)
 INTERNATIONAL
LOGISTICS
Logistics is the process of strategically
managing the procurement, movement and
storage of materials, parts and finished
inventory (and the related information
flows) through the organization and its
marketing channels in such a way that
current and future profitability are
maximized through the cost-effective
A
fulfilment
Origin Country
of orders B
Destination Country
 Supply Chain
Information (Order)

Supply Chains are two

or more parties linked Information (Status)
by a flow of resources –
typically information,
Material (Delivery)
material, and money –
that ultimately fulfill a Money (Payment)
customer request.

Material (Recycling)
 Global Value Chain (GVC)
Information (Order)

Global Value Chains are

two or more parties in Information (Status)
different countries,
linked by a flow of
Material (Delivery)
resources – typically
material, information,
and money – that
A
Origin
Money (Payment)
B
Destinati
Country
ultimately fulfill a on
Country
customer request. Material (Recycling)
 Parties or SVC Participants

Service
Provider
Customer Manufacture
r
Wholesal Supplier
er
Retailer Distributo
r
 Supply Chain Management
The management of upstream and downstream relationships with
suppliers and customers in order to deliver superior customer value at
less cost to the supply chain as a whole.
TRADITIONAL APPROACH

UPSTREAM
 Value
• The importance or worth of
something for someone

• The amount of money that

can be received for
something
 The Value Chain: Internal activities for Value
Creation

Value Chain Analysis EXPLAINED | B2U | Business To You - YouTube

Source: Porter, M.E., competitive Advantage, The Free Press, 1985
 The Value Chain

ISCM (Internal Supply Chain Management)

Strategic Planning • Demand Planning •
Supply Planning • Fulfillment • Field Service
Source: Porter, M.E., competitive Advantage, The Free Press, 1985

https://hbsp.harvard.edu/product/TU0106-PDF-ENG?dialog=play-video&isAudioSample=false&productAvailabilityId=TU0108-AVO-ENG
Competitive Advantage
Cost advantage gives a lower cost profile and the value advantage
gives the product or offering a differential ‘plus’ over competitive
offerings.
Cost Advantage Value Advantage
Traditionally it has been suggested that the Customers don’t buy products, they buy
main route to cost reduction was through benefits
the achievement of greater sales volume
and in particular by improving market share. Service in this context relates to the
However, the blind pursuit of economies of process of developing relationships with
scale through volume increases may not customers through the provision of an
always lead to improved profitability augmented offer. This augmentation can
Hence it can be argued that it is increasingly take many forms including delivery service,
through better logistics and supply chain after-sales services, financial packages,
management that efficiency and produc- technical support and so forth
tivity can be achieved leading to
significantly reduced unit costs

Cost Vs. Value

What is the purpose of a Supply
To satisfyChain?
customer needs.

Improve level of service Maximize Profit Mimize Cost

Supply Chains try to maximize the total value

= generated
[What customer pays]
– [Total effort expended to fulfill]

OPTIMIZATION
Supply pyramid or Supply map
A supply pyramid describes the
structure of a supply chain with
the end product producer at the
top or at the head.
• OEM(Original Equipment
Manufacturer): The end
product producer.
• Supply Tiers: The different
levels of suppliers and
manufacturers. It’s through
these tiers that we end up with
all of the devices and
equipment we use today.
 MANUFACTURING TIERS Original Equipment
While tier 1 suppliers are Manufacturer.
creating parts and is the company whose name
equipment, they generally and brand is on the final
don’t make the pieces that package. For example, BMW is
make up those parts. For an OEM for cars, HP is an OEM
that, they turn to tier 2 for computers.
suppliers. Tier 2 suppliers
deal directly with the tier 1
suppliers, not the OEMs.

Tier 1 suppliers are

manufacturers that deal
A tier 3 supplier can be directly with OEM companies.
the company providing These are often major
raw material like steel or companies in their own right.
plastic, thus making them Bosch is primarily a tier 1
the end of the supply supplier for the automotive
chain industry
 What is Supply Chain
Management?
According to the Council of Supply Chain Management Professionals…

Incorporates the planning and management of all activities involved in

sourcing and procurement, conversion, and all logistics management
activities. Importantly, it also includes coordination and collaboration
with channel partners, which can be suppliers, intermediaries,
third-party service providers, and customers. In essence, supply
chain management integrates supply and demand management
within and across companies.
In simple words…

Supply Chain Management deals with the management of materials,

information and financial flows in a network consisting of suppliers,
manufacturers, distributors, and customers”
 THE 5 MAJOR SC DRIVERS
2.
1.
PRODUCTION INVENTORY
What, how, and when How much to make
to produce 5. and how much to store
INFORMATI
The basis
ON for
making these
4. decisions 3.
TRANSPORTAT LOCATION
How and
IONwhen to Where best to do
move product what activity

R. PRODUCT R. RIGHT TIME RIGHT R. R. RIGHT

CUSTOMER PLACE CONDITION Q UANT I T Y COST
WHA WH WHE WHERE HO HOW
T O N W MUCH
 Workshop:
Global Beer
Game
• 4 Groups
• Each team name the Beer
Company
• No PC, Just Physical notes
 Game
objective
The players per team produce and deliver the units of beer ordered.

Each of the groups must fulfill the orders and, at the same time,
the lowest costs to win the game.

Prize: 1 Unit in the Partial Test

Board • Each student is a
manager in a
company that is
part of a Beer
Supply Chain.
• In each company
can be 1-2
students.
• 1 Moves the
orders and
materials
• 1 Records the
inventory
• Each company has
a warehouse
where the Current
inventory is
located.
• 2 Directions:
• Information
Left to Right
• Materials:
Clock
Directions.
 Game Rules
1. NO communication is allowed
between retailers, wholesalers,
distributors and factories
2. Pay attention to the board to
coordinate movements.
3. Each week the retailer is the
only one who sees the
customer's demand
4. Fill out the form according to
the performance.
5. The game will continue until
50 weeks are completed or
until it is 11:30 am
Tutorial Video

Source: https://www.youtube.com/watch?v=PlXpJhOpeH4 - Heather Roberts

All steps:
1.Take the Placed
Order
2.Put it in Incoming
Orders
3.Deliver the Order
4.Record the delivery
and/or Backlog
1. Place Orders:
1.Take a Post-it of the
week
2.Write the needed 8
amount in the Post-it
3.Put the Post-it in the
box “Placed Orders”
4.Record the delivery in
the Inventory Sheet
Start. To calculate shipping: Place the
Order

8
1. “View order sheet and send current and backlog”
2. Formula:
• Orders to fill = backlog (on form) + current order

• Scenarios:
A. If (Current inventory) >= (orders to fill), then
• (Shipped quantity ) = (orders to fill)
• (New inventory) = (Previous inventory) - (Shipped
quantity)
• (Backlogs) = 0

B. If (Current inventory) < (orders to fill), then

• (Shipped quantity ) = (Current inventory)
• (New inventory) = 0
• (Backlogs)= (orders to fill) - (shipped quantity)
2. Place Order to our Direct Supplier:

8 8
3. Slide-Slide: In 1 Simultaneous
Movement
• From supply
delay to
Current
Inventory
• From supply
delay to
supply delay

Everybody
at the
4. Fill out Inventory Sheet:
• Inventory: Quantity in the
Warehouse
• Backlog: Quantity that was not
delivered to the next link
(partner)

• Order Placed: Amount required

during the week.
5. Sum each column and calculate the
cost: 1. Sum Inventory 1
2. Sum Backlog 1
3. Sum Inventory 2
4. Sum Backlog 2
5. (Inventory 1 + Inventory
2)x $0,5 +
(Backlog1+Backlog2)x$1,0
= Total Cost$
6. Sum All participants Total
Cost
7. Check How many orders are
backlog.
6. 1. Now you can use computers
Graphic the results:
2. Each position graphs its orders
and inventory, week by week.
• Backorders are graphed as
negative inventory
3. Mark the line on the graph with
the following colors:
• Factory: ORANGE
• Distributor: GREEN
• Wholesaler: BLUE
• Retailer: RED
 7. Discussion and
A. How did you feel? closure
• Calm, Collected, In control?
• Frazzled, Frustrated, at the mercy of
events?
B. What problems did you have?
C. What do you attribute it to?
D. Do you think your problems
were your neighbor's fault?
E. How can fluctuations in
inventories be mitigated?
F. What differences do you see
between the game and reality?
 WHAT ARE THE REASONS FOR MAPPING YOUR SUPPLY
CHAIN? Where exactly in your

% supply chain is the

most potential for cost
savings, better
sustainability
performance and safer
products?
OEM

Tier 3 Tier 2 Tier 1

supplier supplier supplierR&D? (New trends or new supplier)

OUTSOURCING?
VERTICAL OR VIRTUAL INTEGRATION?
TRACEABILITY: find the root cause of a quality
compliance!
SUSTAINABILITY VISION (brand reputation)

Inventory reduce Uncertainty

 References
• Chris Caplice; ”Supply Chain Analytics”; Courses Edx Sc0x. MicroMaster MIT.
• Heather Roberts; Beer Game (YouTube Video). In YouTube
https://www.youtube.com/watch?v=PlXpJhOpeH4
• K.Sashi Rao; “SCM Metrics”. 2011
• LOGYCA. (2017). LOGYCA INVESTIGACIÓN: Juego de la cerveza (YouTube Video). In YouTube
https://www.youtube.com/watch?v=96v_kSHFbBU
• Martin Christopher; "Logistics and supply chain management"; 4th Edition. Prentice Hall,
2011
• Michael Hugos; “Essentials of Supply Chain Management”; 3rd Edition. Black Andes Analytics,
2011.
• Peter Senge; “The fifth discipline”; Chapter 3. 1990.
• Sunil Chopra & Peter Meindl. “Supply Chain Management Strategy, Planning and Operation”.
5th Edition. Pearson. 2013
• United Nations Global Compact (UNGC), Business for Social Responsibility (BSR) (2014). A
Guideline to traceability. A practical approach to advance sustainability in the global supply
chain. Homepage: https://www.unglobalcompact.org/library/791