INTRODUCTION TO SUPPLY CHAIN TOPICS

Professor Janice E. Carrillo Information Systems and Operations Management

What Is A Supply Chain?

The system of suppliers, manufacturers, transportation, distributors, and vendors that exists to transform raw materials to final products and supply those products to customers. That portion of the supply chain which comes after the manufacturing process is sometimes known as the distribution network.

What Is the Goal of Supply Chain Management?

Supply chain management is concerned with the efficient integration of suppliers, factories, warehouses and stores so that merchandise is produced and distributed: In the right quantities To the right locations At the right time In order to Minimize total system cost Satisfy customer service requirements (i.e. responsiveness, customization, etc.)

Sources: plants vendors ports

Regional Warehouses: stocking points

Field Warehouses: stocking points

Customers, demand centers sinks

Supply

Inventory & warehousing costs Production/ purchase costs Transportation costs Inventory & warehousing costs Transportation costs

Key Questions: Who is involved? What is the goal? What level of activities are involved? What do we mean by integration?

Flows in a Supply Chain

Information Product

Customer
Funds

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 Supply Chains

Customer
Customer Order Cycle

Retailer
Replenishment Cycle

Distributor
Manufacturing Cycle

Manufacturer
Procurement Cycle

Supplier

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.

Customer Order Cycle

Involves all processes directly involved in receiving and filling the customer s order Customer arrival Customer order entry Customer order fulfillment Customer order receiving

Replenishment Cycle
All processes involved in replenishing retailer inventories (retailer is now the customer) Retail order trigger Retail order entry Retail order fulfillment Retail order receiving

Manufacturing Cycle
All processes involved in replenishing distributor (or retailer) inventory Order arrival from the distributor, retailer, or customer Production scheduling Manufacturing and shipping Receiving at the distributor, retailer, or customer

Procurement Cycle
All processes necessary to ensure that materials are available for manufacturing to occur according to schedule Manufacturer orders components from suppliers to replenish component inventories However, component orders can be determined precisely from production schedules (different from retailer/distributor orders that are based on uncertain customer demand) Important that suppliers be linked to the manufacturer s production schedule

Why is Supply Chain Optimization Hard?

The supply chain is complex Different facilities have conflicting objectives The supply chain is a dynamic system
The power structure changes

The system varies over time

Conflicting Objectives in the Supply Chain

1. Suppliers

Stable volume requirements Flexible delivery time Little variation in mix Large quantities 2. Manufacturing Long run production High quality High productivity Low production cost

Conflicting Objectives in the Supply Chain

3. Warehousing Low inventory Reduced transportation costs Quick replenishment capability 4. Customers Short order lead time High in stock Enormous variety of products Low prices

Why Is Uncertainty Hard to Deal With?

Matching supply and demand is difficult. Forecasting doesn t solve the problem. Inventory and back-order levels typically fluctuate widely across the supply chain. Demand is not the only source of uncertainty:
Lead times Yields Transportation times Natural Disasters Component Availability

Dealing with Uncertainty

Pull Systems Risk Pooling Centralization Postponement Strategic Alliances Collaborative Forecasting

Key Issues
What are the tradeoffs and issues?
Distribution Network Configuration Inventory control Supply Contracts Distribution Strategies Integration and Partnerships Procurement Strategies and Outsourcing Product Design Information Technology

New Concepts
Push-Pull Strategies
Make-to-Stock and/or Make-to-Order

Direct-to-Consumer
Drop Shipping

Strategic Alliances E-Procurement Green Issues