Understanding the Supply Chain Part II

Process View of a Supply Chain

Cycle view: processes in a supply chain are divided into a series of
cycles, each performed at the interfaces between two successive
supply chain stages
Push/pull view: processes in a supply chain are divided into two
categories depending on whether they are executed in response to a
customer order (pull) or in anticipation of a customer order (push)
 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)
Cycle view clearly defines processes involved and
the owners of each process. Specifies the roles
and responsibilities of each member and the
desired outcome of each process.
Cycle View of a Supply Chain

The supply chain is a concatenation of cycles with each cycle at the interface of
two successive stages in the supply chain. Each cycle involves the customer stage
placing an order and receiving it after it has been supplied by the supplier stage.
One difference is in size of order. Second difference is in predictability of orders -
orders in the procurement cycle are predictable once manufacturing planning has
been done.
This is the predominant view for ERP systems. It is a transaction level view and
clearly defines each process and its owner.
Cycle View of Supply Chains
Customer
Customer Order Cycle

Retailer
Replenishment Cycle

Distributor

Manufacturing Cycle

Manufacturer
Procurement Cycle
Supplier
Sub-processes in each supply chain
process cycle
Differences between cycles
In the customer order cycle, demand is external to
the supply chain and thus, uncertain.
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 relate to the
scale of an order.
Thus, sharing of information and operating policies
across supply chain stages becomes more
important as we move farther from the end
customer.
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)
Push/pull boundary separates push processes from pull processes
Push/Pull View of Supply Chains

In this view processes are divided based on their timing relative to the timing of a
customer order.
They key difference is the uncertainty during the two phases. At the time of
execution of a pull process, customer demand is known with certainty, whereas
at the time of execution of a push process, demand is not known and must be
forecast.
Pull processes are however constrained by inventory and capacity decisions that
were made in the push process.
 Push/Pull View of Supply Chains

Procurement, Customer Order

Manufacturing and Cycle
Replenishment cycles

PUSH PROCESSES PULL PROCESSES

Customer
Order Arrives
PC Value Chain
Performance of Traditional PC Manufacturer
PC Value Chain: Focus on Cost Reduction
Performance of Dell Computers
Push/pull processes for Dell Supply Chain

All processes in the customer order and manufacturing cycle are

initiated by customer arrival and are classified as pull processes.
Dell, however, does not place component order in response to
customer order. Inventory is replenished in anticipation of customer
demand. All processes in the procurement cycle are thus push
processes.
 Supply Chain Macro Processes in a Firm

Supply chain processes discussed in the two views can be classified

into:
Customer Relationship Management (CRM)
Internal Supply Chain Management (ISCM)
Supplier Relationship Management (SRM)
Integration among the above three macro processes is critical for
effective and successful supply chain management
 Supply Chain Challenges for the Indian FMCG Sector

Managing Availability in the Complex Distribution Set up

Working with Smaller Pack Sizes
Entry of National Players in the Traditional Fresh Products
Sector
Dealing with a Complex Taxation Structure
Dealing with Counterfeit Goods
Opportunistic Games Played by the Distribution Channel
Infrastructure
Emergence of Third-party Logistics Provider
Emergence of Modern Retail Chains
Reservation for Small-scale Sector
The Marico Supply Chain
Managing Supply Chain Operations

Demand forecasting
Procurement planning
Production planning
Inventory management
Transportation
Order processing
Relationship management
 Importance of The Supply Chain

Proliferation of Product Lines

Shorter Product Life Cycles
Cell phone, Laptop, Automobile
Higher Level of Outsourcing
Dell computers, Bharti Tele ventures
Shift in Balance of Power in Chain
Impact of organized retail chain
Globalization of Manufacturing
Impact of tariff structure
Enablers of Supply Chain Performance

Improvement in communication and IT

Better understanding of inter-firm coordination
issues
Entry of third-party logistics service providers
Supply Chain Functions
Depending on ones view, some of the functions below may be included within the supply
chain & logistics organization:
Procurement - The acquisition of goods or services from an outside external source.
Demand forecasting - Estimating the quantity of a product or service that customers
will purchase.
Customer service and order management - Tasks associated with fulfilling an order for
goods or services placed by a customer.
Inventory Planning and management.
Transportation For hire and private.
Warehousing Public and private.
Materials handling and packaging - Movement, protection, storage and control of
materials and products using manual, semi-automated and automated equipment.
Facility network Location decision in an organizations supply chain network.
Supply Chain Strategy for a Competitive Advantage
Cost Strategy Focuses on delivering a product or service to the
customer at the lowest possible cost without sacrificing quality. Walmart
has been the low cost leader in retail by operating an efficient supply
chain.
Time Strategy This strategy can be in terms of speed of delivery,
response time or even product development time. Dell has been a prime
example of a manufacturer that has excelled at response time by
assembling, testing and shipping computers in as little as a few days.
FedEx is known for fast, on-time deliveries of small packages.
Quality Strategy Consistent, high quality goods or services require a
reliable, safe supply chain to deliver on this promise. If Sony had an
inferior supply chain with high damage levels, it wouldnt matter to the
customer that their electronics are of the highest quality.
Flexibility Strategy Can come in various forms such as volume, variety
and customization. Many of todays e-commerce businesses such as
Amazon offer a great deal of flexibility in many of these categories.
Segmenting the supply chain

Product complexity based

Supply chain risk based
Manufacturing process and technology based
Customer service needs based
Market driven
 Figure: Organizational learning process through strategic alliance

From The Essentials of Supply Chain Management: New Business Concepts and Applications by Hokey Min (0134036239)
Copyright 2015 Pearson Education LTD. All rights reserved.
 On the Line:
Extreme Enterprise
Integrating new enterprise and supply chain management
solutions allowed Columbia Sportswear to keep up with
sales that increased from $3 million in 1984 to $470 million
in 1999.
With one store and a handful of outlets, distribution to its
customers is where the rubber meets the road.
Columbias president was determined not to let distribution
restrain growth, and backed it with money.
A 1 million square foot distribution center receives more
than 2 million units/month and set a record by shipping
172,000 items in one day, and more than 2 million items in a
month.
Figure: 6 Fs of going digital
Successful Supply Chain Strategies: Source: Supply Chain Management Review,
March/ April 2000, p. 29
A recent Andersen Consulting study revealed six different, but equally successful,
supply chain strategies.

Market Saturation Driven: Focusing on generating high profit margins, through

strong brands and ubiquitous marketing and distribution.

Operationally Agile: Configuring assets and operations to react nimbly to

emerging consumer trends along lines of product category or geographic region.

Freshness Oriented: Concentrating on earning a premium by providing the

consumer with product that is fresher than competitive offerings.

Consumer Customizer: Using mass customization to build and maintain close

relationships with end-consumers through direct sales.

Logistics Optimizer: Emphasizing a balance of supply chain efficiency and

effectiveness.

Trade Focused: Prioritizing "low price, best value" for the consumer (as with
the logistics optimizer strategy but focusing less on brand than on dedicated
service to tradeSource:
customers).
Supply Chain Management Review, March/ April 2000, p. 29.
Integrated supply chain organization
Organizational and Supply Chain Strategy
Figure: Competitive advantage and the Three Cs
Source: Ohmae, K., The Mind of the Strategist, Penguin Books, 1983
Figure: The experience curve
Figure: Investing in process excellence yields greater benefits
Figure: Price deflation in consumer electronics (UK high street prices)
Figure: Inventory profile of the automotive supply chain
Source: Holweg, M. and Pil, F.K., The Second Century, MIT Press, 2004
 Figure: The supply chain network for automobile seats

From The Essentials of Supply Chain Management: New Business Concepts and Applications by Hokey Min (0134036239)
Copyright 2015 Pearson Education LTD. All rights reserved.
 Figure: The five essentials of the total systems approach to supply chain integration

From The Essentials of Supply Chain Management: New Business Concepts and Applications by Hokey Min (0134036239)
Copyright 2015 Pearson Education LTD. All rights reserved.
 Figure: A Victory model for supply chain strategy

From The Essentials of Supply Chain Management: New Business Concepts and Applications by Hokey Min (0134036239)
Copyright 2015 Pearson Education LTD. All rights reserved.
Supply Chain Management: Integrating and Managing
Business Processes Across the Supply Chain
Career Opportunities in Supply Chain and Logistics Management