Definitions

• Logistics - Logistics is that part of the supply chain process that plans, implements, and controls the
efficient, effective forward and reverse flow and storage of goods, services, and related information
between the point of origin and the point of consumption in order to meet customers' requirements.
(CLM)
• Supply Chain Management - the systemic, strategic coordination of the traditional business functions
and the tactics across these business functions within a particular company and across businesses
within the supply chain for the purposes of improving the long-term performance of the individual
companies and the supply chain as a whole. (CLM)
• Logistics - Science of managing (controlling) the movement and storage of goods (or people) from
acquisition to consumption.

Inexpensive Transportation and

Inventory
Inexpensive transportation: Inexpensive inventory/warehousing:
• Allows specialization in space. • Allows specialization in time.
• De-couples supply and demand regions. • De-couples supply and demand in time.
• Increases availability and competition. • Increases availability and competition. 1
2
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 Scope of the Supply Chain for Key Activities/Processes
Most Firms
· Primary
Business logistics - Setting customer service goals
- Transportation
Physical supply Physical distribution
(Materials management) - Inventory management
Sources of Plants/ - Location
supply operations Customers

•Transportation •Transportation
Inventory
• maintenance Inventory
• maintenance · Secondary, or supporting
•Order processing •Order processing
•Acquisition Product
• scheduling - Warehousing
Protective
• packaging Protective
• packaging
•Warehousing •Warehousing - Materials handling
Materials
• handling Materials
• handling
Information
• maintenance Information
• maintenance - Acquisition (purchasing)
- Protective packaging

Focus firm’s internal supply

- Product scheduling
chain - Order processing
 Relationship of Logistics to Logistics/SC in
Marketing and Production Diverse Areas

LOGISTICS
Sample ·Manufacturing—most common
activities: MARKETING
PRODUCTION/
OPERATIONS
· Transport Interface Sample ·Environment—causing
Interface · Inventory activities:
Sample activities: activities:
· Quality control activities: · Order · Customer · Promotion restrictions
· Product processing service · Market
· Detailed production
scheduling
scheduling · Materials standards research ·Service—emerging
· Plant handling · Pricing · Product
· Equipment maint.
· Capacity planning location · Packaging
mix opportunities
· Purchasing · Retail · Sales force
· Work measurement
& standards
location management ·Non-profits—little explored
·Military—long history
Production-
logistics Marketing-
interface logistics
interface

Internal Supply Chain

Key Trends In Logistics

Supply chain Information Global markets

Quality emphasis. Service industries.
integration. technology. and competition.

Disruptions,
shortages,
Product variety. Quick response. Regulation. Security.
inflation,
recession.

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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.

The supply chain includes not only the manufacturer and suppliers,
but also transporters, warehouses, retailers, and even customers
themselves.

What is A Supply Chain: Organization

• Within each organization, such as a manufacturer, the supply chain
includes all functions involved in receiving and filling a customer
request. These functions include, but are not limited to, new product
development, marketing, operations, distribution, finance, and
customer service. 12/25/2024
Stages in a Supply Chain: Detergent

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Supply Chain as a Network
• The term supply chain may also imply that only one player is involved
at each stage. In reality, a manufacturer may receive material from
several suppliers and then supply several distributors. Thus, most
supply chains are actually networks. It may be more accurate to use
the term supply network or supply web to describe the structure of
most supply chains

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Supply Chain as a Network

Supply Chain Stages

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Customers Retailers Wholesalers/distributors Manufacturers Component/raw material

suppliers 12/25/2024
Supply Chain Stages
• Each stage in a supply chain is connected through the flow of
products, information, and funds. These flows often occur in both
directions and may be managed by one of the stages or an
intermediary.
• The appropriate design of the supply chain depends on both the
customer’s needs and the roles played by the stages involved.

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Lecture 1 – Part 2

Logistics and Supply Chain Management: Introduction

12/25/2024
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Dell Servers vs. Dell PCs

Dell Dell

Servers PCs Servers PCs

Online Walmart Make to Make to

Order (MTO) Stock (MTS)

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 Supply Chain Objective
• The objective of every supply chain should be to maximize the overall
value generated.

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Supply Chain Surplus: Example
• For example, a customer purchasing a wireless router from Best Buy pays $60, which represents the revenue
the supply chain receives.
• Customers who purchase the router clearly value it at or above $60. Thus, part of the supply chain surplus is
left with the customer as consumer surplus. The rest stays with the supply chain as profit.
• Best Buy and other stages of the supply chain incur costs to convey information, produce components, store
them, transport them, transfer funds, and so on.
• The difference between the $60 that the customer paid and the sum of costs incurred across all stages by
the supply chain produce and distribute the router represents the supply chain profitability: the total profit
to be shared across all supply chain stages and intermediaries.
• The higher the supply chain profitability, the more successful the supply chain. For most profit-making supply
chains, the supply chain surplus will be strongly correlated with profits.

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Importance of Supply Chain Decisions
• There is a close connection between the design and management of
supply chain flows (product, information, and funds) and the success
of a supply chain.
• Supply chain design, planning, and operation decisions play a
significant role in the success or failure of a firm. To stay competitive,
supply chains must adapt to changing technology and customer
expectations.

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Decision Phases in A Supply Chain

Strategy or
Operations
Design

Planning

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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 to be made available along different
shipping legs, and the type of information system to be used.

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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. This
configuration establishes constraints within which planning must be done.
• The goal of planning is to maximize the supply chain surplus that can be generated over the
planning horizon given the constraints established during the strategic or design phase.
• Companies start the planning phase with a forecast for the coming year (or a comparable time
frame) of demand and other factors, such as costs and prices in different markets.
• Planning includes making decisions regarding which markets will be supplied from which
locations, the subcontracting of manufacturing, the inventory policies to be followed, and the
timing and size of marketing and price promotions.

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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 by which 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.
• Because operational decisions are being made in the short term (minutes, hours, or days), there is less
uncertainty about demand information. Given the constraints established by the configuration and planning
policies, the goal during the operation phase is to exploit the reduction of uncertainty and optimize
performance.

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Process Views of A Supply Chain
• 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 the 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. Pull processes are initiated by a customer
order, whereas push processes are initiated and performed in anticipation of
customer orders.

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C YC L E V I E W
o Each cycle occurs at the interface
between two successive stages of the
supply chain.
o Not every supply chain will have all four
cycles clearly separated.
o 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 servers directly to
customers.

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C YC L E V I E W
o Each cycle occurs at the interface between two successive stages of
the supply chain.
o Not every supply chain will have all four cycles clearly separated.
o 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 servers directly to
customers.

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Cycle View: Subprocesses

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C YC L E V I E W
o The subprocesses in Figure 1-4 can be linked to the
source, make, deliver, and return processes in the
supply chain operations reference (SCOR) model.
o The SCOR model provides a description of supply
chain processes, a framework for relationships
between these processes, and a set of metrics to
measure process performance.
o When customers shop online at Amazon, they are
part of the customer order cycle—with the
customer as the buyer and Amazon as the supplier.
In contrast, when Amazon orders books from a
distributor to replenish its inventory, it is part of
the replenishment cycle—with Amazon as the
buyer and the distributor as the supplier.

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Cycle View

In each cycle

Buyer’s Supplier’s
objectives objectives

To ensure To achieve To reduce the

To forecast
product economies of cost of receiving
customer orders
availability scale in ordering. the orders

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 In the customer order cycle, demand is external to the supply
chain and thus is uncertain.
CYCLE VIEW
Differences among cycles
In all other cycles, order placement is uncertain but can be
projected based on policies followed by the particular supply
chain stage.

The second difference across cycles relates to the scale of an

order.

A customer buys a single car, but the dealer orders multiple cars
at a time from the manufacturer, and the manufacturer, in turn,
orders an even larger quantity of tires from the supplier.

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C Y C L E V I E W : S U M M A RY
o The detailed process description of a supply chain in the cycle view is useful
when considering operational decisions because it clearly specifies the roles of
each member of the supply chain. The cycle view is used by enterprise resource
planning (ERP) systems to support supply chain operations.
o A cycle view of the supply chain clearly defines the processes involved and the
owners of each process. This view is useful when considering operational
decisions because it specifies the roles and responsibilities of each member of
the supply chain and the desired outcome for each process.

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Push/Pull View
of Supply Chain Processes

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 P U S H / P U L L V I E W O F S U P P LY
C H A I N P R O C E SS E S
o All processes in a supply chain fall into one of two categories, depending on the timing of their
execution relative to end customer demand.
o With pull processes, execution is initiated in response to a customer order.
o With push processes, execution is initiated in anticipation of customer orders based on a
forecast.
o The push/pull boundary in a supply chain separates push processes from pull processes, as
shown in Figure 1-5.
o 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.

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P U S H / P U L L V I E W O F S U P P LY
C H A I N P R O C E SS E S

All processes in a supply chain fall

With push processes, execution is
into one of two categories, With pull processes, execution is
initiated in anticipation of
depending on the timing of their initiated in response to a
customer orders based on a
execution relative to end customer order.
forecast.
customer demand.

Push processes operate in an

The push/pull boundary in a uncertain environment because
supply chain separates push customer demand is not yet
processes from pull processes, as known. Pull processes operate in
shown in Figure 1-5. an environment in which
customer demand is known.

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 PUSH/PULL VIEW
O F S U P P LY C H A I N P R O C E S S E S

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 P U S H / P U L L V I E W O F S U P P LY
C H A I N P R O C E SS E S
o A push/pull view of the supply
chain categorizes processes
based on whether they are
initiated in response to a
customer order (pull) or in
anticipation of a customer order
(push). This view is useful when
considering strategic decisions
relating to supply chain design.

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T H A N K YO U
Dr Khaled Hussein
[email protected]