Introduction to Agribusiness Supply Chain Management

Supply Chain Management

Supply Chain the core business processes in an organization that create and deliver a product or service, from concept through development and manufacturing or conversion, and into a market for consumption Supply Chain Management the methods, systems and leadership that continuously improve an organizations integrated processes for product and service design, purchasing, inventory management, logistics, distribution and customer satisfaction

Evolution of logistics and supply chain concepts, 19602000

Term first coined by Oliver and Webber in 1982

Evolution of Logistics to SCM

5PL E-Business 1990s to 2000s

Management of all parties of the supply chain in conjunction with e-Business Management of the whole supply chain

4PL Supply Chain Management

3PL Forwarding/Contract logistics 2PL Asset Based Logistics

1980s to 1990s

Management of complex service chains

Traditional Transport and warehousing management

1970s to 1980s

1PL Producer Managed Logistics

Own operation of logistics by the producer

SCM Definitions
Defined by Ellram and Cooper (1990) Sengupta and Turnbull (1996) Handfield and Nichols (1999) Definition SCM is an integrative philosophy to manage the total flow of distribution channel from supplier to ultimate user SCM is the process of effectively managing the flow of materials and finished goods from vendors to customers using manufacturing facilities and warehouses as intermediate stops SCM is the integration of these activities (activities associated with flow and transformation of goods from raw materials stage, through to the end user as well as associated information flows) through improved supply chain relationships to achieve sustainable competitive advantage SCM is the process of optimizing a companys internal practices and improving the interaction with its suppliers and customers

Zheng et al. (2000)

SCM Definitions
Defined by Definition

Logan and Harold (2001)

Russell (2001)

SCM involves seamlessly moving raw material through production and into the hands of the end user
SCM is the practice of co-coordinating the flow of goods, services, information, and finances as they move from raw material to parts supplier to manufacturer to wholesaler to retailer to consumer Supply Chain Management involves the flows between and among stages in a supply chain to maximize total profitability. SCM is more than a simple tool to evaluate and optimize a supply chain; it is a complex, structured business relationship model. It takes into consideration all aspects of the events required to produce your companys product in the most efficient and cost effective manner possible

Chopra and Meindl (2001) Quiett (2002)

SCM Definitions
Defined by Shapiro (2004) Definition SCM as a new business paradigm was motivated by interest in integrating procurement, manufacturing, and distribution activities integration made possible by advances in IT It starts with customer and ends with customer Through the loop flow all materials, finished goods, information, and transactions It requires looking at business as one continuous, seamless process This process absorbs distinct functions such as forecasting, purchasing, manufacturing, distribution, sales, and marketing into a continuous business transaction

Mohanty and Deshmukh (2005)

Verma et al, 2006

What is Supply Chain Management?

Developing a chain that links producers with consumers Each component of the supply chain is connected to other parts of the supply chain by

the flow of goods and services in one direction, the flow of orders and money in the other direction, and the flow of information in both directions.

Focuses both on backward and forward activities

Flows in a Supply Chain

Information

Suppliers

Product Funds

Customer

Supply Chain Management Functions?

2 Key Functions:

Operational efficiency and effectiveness for improvement in quality, reduction in losses, and increased customer satisfaction

Identify high loss points and poor product flow through systems analysis
1. 2. 3.

Map the flow of product- process flow chart Describe each handling process Measure losses at each point

Strategic decision making and relationship management between chain members

Focus is on how to work together to deliver a top quality product to the consumer Focus on long term relationships not one-off transactions Main key is trust between members

Shifting focus in supply chains

Shift 1: From Cross-Functional Integration to Cross-Enterprise Old question: how do we get the various functional areas of our company to work together to supply product to immediate customers? New question: how to record and do activities across companies, as well as across internal functions, to supply product to the market? Shift 2: From Physical Efficiency to Market Mediation/ Negotiation Old question: how do we minimize the costs our company incurs in production and distribution of our products? New question: how do we minimize the cost of matching supply and demand while continuing to reduce the costs of production and distribution? Shift 3: From Supply Focus to Demand Focus. Old question: how can we improve the way we supply product in order to match supply and demand better, given the demand pattern? New question: how can we get earlier demand information or affect the demand pattern to match supply and demand?

Shifting focus in supply chains

Shift 4: From single company, product design to collaborative, concurrent product, process and supply chain design Old question: how should our company design products to minimize product cost (our cost of materials, production, and distribution)? New question: how should collaborators designed the product, process, and supply chain to minimize cost? Shift 5: From cost reduction to breakthrough business models. Old question: how can we reduce our company's production and distribution costs? New question: what new supply chain and marketing approach would lead to a breakthrough in customer value? Shift 6: From mass-market supply to tailored offerings. Old question: how should we organize our company's operations to serve the mass-market efficiently while offering customized product? New question: how should we organize a supply chain to serve each customer or segment uniquely and provide a tailored customer experience?

Processes in a Supply Chain

Process - a collection of interacting activities that transform inputs to outputs Why take this perspective?

To determine efficient management structures To clearly identify roles of each supply chain member To model the system To develop information systems To identify bottlenecks and inefficiencies To redesign system To develop metrics for performance measurement (KPIs)

Supply-Chain Operations Referencemodel (SCOR)

Source: Russell & Taylor, 2007

Supply Chain Processes

Source: Russell & Taylor, 2007

Plan

Deliver

Deliver

Make

Deliver

Source

Make

Delive r

Delive r

Make

Deliver Source

Process View of a Supply Chain

Cycle View

Customer Order Cycle Replenishment Cycle Manufacturing Cycle Procurement Cycle Push Process: executed in anticipation of customer orders Pull Process: execution is initiated in response to a customer order

Push/ Pull View

A Cycle View of Processes

Processes interconnect entities (stages) in a supply chain

Customer Order Cycles exist on the boundary between customers and retailers Replenishment Cycles exist on the boundary between the retailer and distributor Manufacturing Cycles exist on the boundary between the distributor and the manufacturer Procurement Cycles exist on the boundary between the supply and manufacturer

Supply Chain Processes A Cycle View

Procurement Cycle
Suppliers Manufacturers

Manufacturing Cycle

Replenishment Cycle Retailers

Customer Order Cycle

Wholesale Distributors

Customers

Information Flow

Goods Flow

Revenue Flow

Customer Order Cycle

Customer & Retailer

Customer arrival

Customer Order Receiving

Customer Order entry

Customer Order fulfillment

The Customer Order Cycle

Customer Arrival Physical entry, phone or web interface Goal - facilitate interactions by easy access to goods, services or information with little delay to convert arrivals to orders Metrics - delay time, queueing, congestion Customer Order Entry Customer specifies products or services to be acquired Goal - ensure order entry is timely accurate and communicated to all processes effecting it

Customer Order Cycle (Ctd.)

Order Fulfillment Order filled and sent to customer Objective - get the correct and complete order to the customer at the promised date at the lowest cost and adjust internal stock records accordingly metrics - on time deliveries, correct orders , Order Receiving Physical delivery of product or service to customer and cash transferred to retailer

Replenishment Cycle

Retailer & Distributor

Retail order trigger

Retail Order Receiving

Retail Order entry

Retail Order fulfillment

Manufacturing Cycle
Manufacturer

Distributor &

Order arrival

Receiving

Production Scheduling

Manufacturing & Shipping

Procurement Cycle

Supplier & Manufacturer

Order arrival

Receiving at manufacturer

Supplier Production Scheduling

Component Manufacturing & Shipping

A Push/Pull View of Processes

Pull Process - Initiated in response to a customer demand. Also known as make to order processes or reactive processes.

Push Process - Initiated in anticipation of a customer demand. Also known as make to stock processes or speculative processes.
Obvious difference

in pull processes demand is known; in push processes demand is forecasted

In supply chains, some stages operate as push processes and others as pull processes.

This distinction important in supply chain design issues.

Goal is to increase number of pull processes.

Push/Pull View of Supply Chains: Maketo-stock

Procurement, Manufacturing and Replenishment cycles
Customer Order Cycle

PUSH PROCESSES

PULL PROCESSES

Customer Order Arrives

Push/Pull View of Supply Chains: Maketo-order

Procurement Cycle Manufacturing and Customer Order Cycle

PUSH PROCESSES

PULL PROCESSES

Customer Order Arrives