Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
 Introduction
1. Introduction of the Instructor
2. Introduction of the participants
3. Discussion on Course outline
a) Elective Course dynamics
b) Books
c) Quizzes
d) Assignments
e) Cases
f) Report and its presentation
4. Class Participation
5. Attendance and Class Discipline (Mobile and Laptop etiquettes)
6. Asking/responding questions
7. Mid Term Exam
8. Final Exam
9. Page/WhatsApp Group
10. 10. Tips for Exams. (How to attempt Questions)
11. 11. Counseling Hours (before and after every class by appointment)

12. Comments/Questions of Students:

Supply Chain Management by Sheikh Irfan
(smikhi@yahoo.com)
 Supply Chain Management:
The True Magnitude
• Compaq estimates it lost $.5 billion to $1 billion in
sales in 1995 because laptops were not available
when and where needed
• When the 1 giga processor was introduced ,
the price of the 800 mb processor dropped by 30%
• According to a report, almost 75% of the Milk produced in
Pakistan is wasted due to bad handling.

Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
 What is a Supply Chain?
• If you asked three persons in different businesses to
define the term supply chain, you would probably
receive three different definitions.
- For some, the phrase supply chain combines thoughts of
purchasing, procurement, and other activities needed to
acquire raw materials and components for production.
- For others, supply chain means warehousing and
distribution, transportation and retail channels.
- For still others, supply chain refers to sources of capital or
human resources.

Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
 What is Supply Chain Management?
Here are two standard definitions:
• The design and management of seamless, value-added
process across organizational boundaries to meet the real
needs of the end customer
Institute for Supply Management

• Managing supply and demand, sourcing raw materials and

parts, manufacturing and assembly, warehousing and
inventory tracking, order entry and order management,
distribution across all channels, and delivery to the customer
The Supply Chain Council

Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
 What is a Supply Chain?
• All stages involved, directly or indirectly, in fulfilling a
customer request
• Includes manufacturers, suppliers, transporters,
warehouses, retailers, and customers
• Within each company, the supply chain includes all
functions involved in fulfilling a customer request
(product development, marketing, operations,
distribution, finance, customer service)
• Examples: Detergent supply chain (Wal-Mart), Dell

Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
Detergent supply chain (Wal-Mart)

Supply Chain Management by Sheikh Irfan

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 What is a Supply Chain?

• “Supply Chain” may imply that only one player is

involved at each stage.
• Probably more accurate to use the term “supply
network ” or “supply web ”
• Typical supply chain stages: customers, retailers,
distributors, manufacturers, suppliers
• All stages may not be present in all supply chains
(e.g., no retailer or distributor for Dell)

Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
Supply Chain Stages

Supply Chain Management by Sheikh Irfan

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 Flows in a Supply Chain
• Customer is an integral part of the supply chain
• Includes movement of products from suppliers to
manufacturers to distributors, but also includes
movement of information, funds, and products in
both directions
Information

Product

Funds

Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
Services also have Supply Chains!

Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
 A Supply Chain
A chain is only as good as its weakest link

Recall that saying? The saying applies to the

principles of building a competitive infrastructure:

Strong, well-structured supply chains are critical to

sustained competitive advantage.

We are all part of a Supply Chain in everything we buy

What are characteristics of a chain?

Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
 Objective of a Supply Chain
The primary objective of each supply chain is to maximize
the overall value generated.

The VALUE a supply chain generates is the difference

between what the final product is worth to the customer and
the cost the SC incurs in fulfilling customers request.

In a Nut-Shell: Supply Chain Value is correlated to

bottom-line i.e. SC profitability (difference between
revenue generated and the overall cost across SC)
Supply Chain Surplus or Profitability
= Total Revenue - Total Costs
Supply Chain Management by Sheikh Irfan
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(smikhi@yahoo.com)
 Objective of a Supply Chain
• Sources of supply chain revenue: the customer
• Sources of supply chain cost: flows of information,
products, or funds between stages of the supply
chain

Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
 Important Elements of SCM
Purchasing- Supplier alliances, supplier
management, strategic sourcing
Operations- Demand management, MRP, ERP, JIT,
TQM, Inventory Management
Distribution- Transportation management, customer
relationship management, network
design, service response logistics
Integration- Coordination/Integration activities,
global integration problems,
performance measurement

Supply Chain Management by Sheikh Irfan

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Important Elements of SCM

Supply Chain Management by Sheikh Irfan

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 Importance of SCM
SC Decisions play an important role in the success
Or failure of a firm.
Example of Dell’s success:
No distributors and retailers
Clear understanding of customer’s needs
Postponement of final assembly
Less than 5 days inventory
Faster introduction of new components
Less Losses of reduced prices
Sensitive information sharing with suppliers
Defects not possible in large Quantities
Negative Cash Conversion Cycle

Example of Webvan’s Failure: Direct Grocery delivery to customers

Couldn’t compete with supermarkets
High transportation cost for home delivery

Supply Chain Management by Sheikh Irfan

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 Decision Phases of a Supply Chain
• Supply chain strategy or design

• Supply chain planning

• Supply chain operation

Design, planning and operation of a Supply Chain have a strong

impact on overall Profitability and success of an Organization.

Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
 Supply Chain Strategy/Design
• Given the Marketing and Pricing plan of a products, this stage
decides about the structure of the supply chain and what
processes each stage will perform
• Strategic supply chain decisions
- Locations and capacities of production/Warehousing facilities
- Products to be made or stored at various locations
- Modes of transportation
- Information systems
- Outsource or perform a function in house

• Supply chain design must support strategic objectives and Increase SC surplus

Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
 Supply Chain Strategy/Design

Characteristics of these decisions are:

1. Made for long term
2. Very expensive
3. Hard to alter in short term
4. Affects most of the Mainstream Organization

These decisions should therefore be well thought out and

should incorporate uncertainty and flexibility to the most
possible extent

Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
 Supply Chain Planning
• Result: Definition of a set of policies that govern
short-term operations (Generally Quarter to a year)

• Fixed by the supply configuration from previous phase.

That means planning decisions should remain within the
constraints established by strategy/design level.

• Starts with a forecast of demand in the coming

year

Supply Chain Management by Sheikh Irfan

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 Supply Chain Planning
• Planning decisions:
- Which markets will be supplied from which locations
- Subcontracting, backup locations
- Inventory policies
- Timing and size of market promotions

• Must consider in planning decisions demand uncertainty,

exchange rates, competition over the time horizon, etc.

Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
 Supply Chain Operation
• Time horizon is weekly or daily
• Decisions regarding individual customer orders
• Supply chain configuration is fixed and operating
policies are determined
• Allocate individual orders to inventory or production, set
order due dates, generate pick lists at a warehouse,
allocate an order to a particular shipment, set
delivery schedules, place replenishment orders
• Much less uncertainty (short time horizon)

Supply Chain Management by Sheikh Irfan

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 Process View of a Supply Chain
• A supply chain is a sequence of processes and flows
that take place within and between different stages and
combine to fill a customer need for a product.

• There are two different ways to view the processes

performed in a supply chain:
- Cycle view
- Push/Pull view

Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
 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)

Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
 Cycle View of Supply Chains
Each Cycle occurs at the interface of two consecutive stages. That means 5 stages
result in 4 Supply Chain process Cycles.

Customer
Customer Order Cycle

Retailer
Replenishment Cycle

Distributor

Manufacturing Cycle
Manufacturer
Procurement Cycle
Supplier
Supply Chain Management by Sheikh Irfan
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Sub-Processes in each Cycle

Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
 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

Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
 Push/Pull View of
Supply Chain Processes
• Useful in considering strategic decisions relating to
supply chain design - more global view of how
supply chain processes relate to customer orders
• Can combine the push/pull and cycle views
- L.L. Bean (Make to Stock)
- Dell (Make to Order)
• The relative proportion of push and pull processes
can have an impact on supply chain performance

Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
 Push/Pull View of Supply Chains

Procurement and Customer Order

Replenishment cycles and Manufacturing
Cycle

PUSH PROCESSES PULL PROCESSES

Customer
Order Arrives

Supply Chain Management by Sheikh Irfan

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(smikhi@yahoo.com)
 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)
• All three processes are aimed at serving the same
customer
• Integration among the above three macro processes
is critical for effective and successful supply chain
management but……..
Supply Chain Management by Sheikh Irfan
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(smikhi@yahoo.com)
 Principal Organizations
“Movers and Shakers ” in the field of Supply Chain Management:
• ISM (Institute of Supply Management)
- Founded in 1915
- Certified Professional in Supply Management (CPSM)
• SCC (Supply Chain Council)
- Organized in 1996; SC Operations Reference (SCOR®) Model
- SCOR Professional / Scholar (SCOR-P / S)
• APICS (Association for Operations Management)
- Certified Supply Chain Professional (CSCP)
- 40,000 members (10,000 CSCP in 72 countries)
• Supply & Demand Chain Executive Magazine
- Founded in 2000, a business technology magazine
- Issued in print 4 times/year and e-book form 7 times/year
- Award best performers: “Pros-to-Know”, “Top 100 Projects”
and “Green SC”
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