Managing Supply Chains

Prepared by Saroop Anwer

BS Computer Science MS Business Management Ph. D Scholar Supply Chain Management

Learning Objectives
1. Supply Chain Management Introduction and basics 2. Origin of supply chain management 3. Problems that are faced by the companies of TODAY 4. Why there is a need of Supply chain management?

Concept of a Supply Chain

A Supply Chain is the network of organisations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate consumers.
[Christopher, 1998, pg. 4]

A simple supply chain

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing

Definitions
Concept of a Supply Chain Management
Supply Chain Management unifies a network of connected but interdependent organisations, mutually and cooperatively working together to control, manage and improve the flow of material and information, from the suppliers to the end users, while increasing value to the end users delivering at less cost as a whole. (Christopher & Ballou) SCM not only includes all activities like logistics & distribution but in addition to that it also includes activities like intense coordination with marketing, new product development, finance & customer services
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Modern supply chain view

Managing the supply chain is coordinating all of the operations of a company with the operations of its suppliers and customers.
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Various flows
SCM includes the management of flows of material, information, and funds.
OWNER

ARCHITECT/ ENGINEER

GENERAL CONTRACTOR

SUBCONTRACTOR

VENDOR/ SUPPLIER

...

RAW MATERIALS PROVIDER

Origins of Supply Chain Management

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. 2005 Thomson Business and Professional Publishing

Factor of Uncertainty
There is uncertainty in the supply chain at every stage
Wrong forecasts Late deliveries Poor-quality materials or parts Machine breakdowns Cancelled orders Erroneous or slow information Transportation breakdowns
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Examples
A typical box of cereal spends 104 days from factory to sale Compaq estimates it lost $.5 billion to $1 billion in sales in 1995 because laptops were not available when and where needed P&G estimates it saved retail customers $65 million by collaboration resulting in a better match of supply and demand
Supply chain management by Sunil Chopra 3rd edition 10

Usual way of dealing with Uncertainties Availability to customers when and where they want it
Companies cope with this uncertainty with

INVENTORY

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Conflicts within the supply chains

High inventories higher customer service levels [ but supply chains operate inefficiently] Low inventories Efficient supply chain operations [ but customer service levels are at stake] Supplier objective
Large stable demand for less variety of materials
Flexible delivery schedules

Manufacturer objective
Desire low product variety / high production volumes
Flexible delivery schedules

Retailer objective
Reduce inventory and transportation costs
Rapid replenishment

Customer objective
Low price & high product quality and variety
JIT receiving of products, short lead times

Supply chain management best practices by Blenchard 12

Simple Supply Chain

Suppliers have time to make materials and deliver them Consumer places order

Factory has time to order materials, make the product and deliver it.

Logistics & SCM by Martin Christopher

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Adding Complexity
A point of sale is established holding stock of product

Logistics & SCM by Martin Christopher

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Adding Complexity
More points of sale get added and the owner creates a Distribution Centre that supplies the POSs

Logistics & SCM by Martin Christopher

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Adding Complexity
The factory decides to add a warehouse to hold stock of finished product

Logistics & SCM by Martin Christopher

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Adding Complexity
The factory then decides to have a warehouse for the materials needed to make the product

Logistics & SCM by Martin Christopher

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Adding Complexity
Suppliers add in a warehouse to hold stock of materials

Logistics & SCM by Martin Christopher

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Consequences
Reduced Profitability Higher Costs Lower Revenue

High Inventory

High Inventory
Long Lead Times for Innovations

Logistics & SCM by Martin Christopher

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Traditional silos oriented supply Chain

Logistics & SCM by Martin Christopher

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Intra Company Collaboration

Within an organization

Result of reducing uncertainties, risks and conflicts

Logistics & SCM by Martin Christopher

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Inter Company Collaboration

Across multiple organizations

Result of reducing uncertainties, risks and conflicts

Logistics & SCM by Martin Christopher

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External Company Collaboration

Covering an entire Supply Chain

Managing the whole supply chain brings down the Barriers

Logistics & SCM by Martin Christopher

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Is it necessary ?
Long term competitive position Provides not only want profits but profits at the faster rate by optimizing the supply chain Integrating and aligning all strategies with the tactics at operational level Reduces conflicts within different departments To control overlapping Balances supply with demand by using real time information Reduces the factor of Risk / Uncertainty
Various books

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Gateway: A Direct Sales Manufacturer

Gateway has multiple production facilities in the US in comparison with Dell, which has far less facilities? Mostly do not carry finished goods inventory Dell sells directly without any retail stores Why? What could be the factors

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7-Eleven
What factors influence decisions of opening and closing stores? Location of stores? Why has 7-Eleven chosen off-site preparation of fresh food? Why does 7-Eleven discourage direct store delivery from vendors? Where are distribution centers located and how many stores does each center serve? How are stores assigned to distribution centers? Why does 7-Eleven combine fresh food shipments by temperature? What point of sale data does 7-Eleven gather and what information is made available to store managers? How should information systems be structured?
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Toyota
Where should plants be located, what degree of flexibility should each have, and what capacity should each have? Should plants be able to produce for all markets? How should markets be allocated to plants? What kind of flexibility should be built into the distribution system? How should this flexible investment be valued? What actions may be taken during product design to facilitate this flexibility?

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Amazon.com
Why is Amazon building more warehouses as it grows? How many warehouses should it have and where should they be located? What advantages does selling books via the Internet provide? Are there disadvantages? Why does Amazon stock bestsellers while buying other titles from distributors? Does an Internet channel provide greater value to a bookseller like Borders or to an Internet-only company like Amazon? Should traditional booksellers like Borders integrate ecommerce into their current supply? For what products does the e-commerce channel offer the greatest benefits? What characterizes these products?
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