chapter 1 general introduction to supply chain and supply chain management autosaved

Chapter 1: Learning Objectives• Appreciate what a supply chain is and what it does• Understand where your company fits in the supply chains it participates in and the role it plays in th

Chapter 1: Learning Objectives

• Appreciate what a supply chain is and what it does• Understand where your company fits in the supply

chains it participates in and the role it plays in those supply chains

• Be able to discuss ways to align your supply chain with your business strategy

• Start an intelligent conversation about the supply chain management issues in your company

• Use interactive supply chain simulations to explore how supply chains operate

Table of contents

01

Course Overview

02

General Introduction

04

Development Process

05

Operating Method of SC

General Introductio

What is Supply Chain

Management?

“Supply chain management is coordination of production, inventory, location, transportation, and information among the participants in a supply chain to achieve the best mix of responsiveness and efficiency for the market being served.”

Hugos, Essentials Of Supply Chain Management, 4th Edition, 2018

“A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and distribution of these finished products to customers.”

Ganeshan and Harrison, “An Introduction to Supply Chain Management”, 1995

Supply Chain Process

Supply Chain

vs Logistics

CHAPTER 1

Differentiate “Supply Chain” and “Logistics”

Concepts and Roles

Concept of Supply Chain Management

Supply Chain Management encompasses a series of key activities and processes including:

1 Planning and Strategy: Determining how to best fulfill the

right location at the right time.

5 Returning: Handling defective products, excess, returns, and other

post-consumer processes.

Supply Chain Drivers

1.PRODUCTION

What, how, and when to produce

5.INFORMATION

Basis for making these decisions

How much to make, how much

to stock

3.LOCATION

Where best to do what activity

“Increase throughput

while simultaneously reducing inventory

and operating expense.”

Goldratt, The Goal,

Responsiveness vs.Efficiency

Supply Chain Drivers

1.Production

– Factories for making products

• Product Focus• Functional Focus– Warehouses for storing and distributing products

• Stock Keeping Unit Storage• Job Lot Storage

Supply Chain Drivers

3.Location– place facilities so as to maximize performance

- No excess capacity- Narrow product focus- Few large plants

2 Inventory - High inventory levels

- Wide range of items

- Low inventory levels- Narrow range of items

3 Location - Many locations

close to customers - Few central locations serve wide areas

4 Transportation - Frequent small shipments

- Fast & Flexible modes

- Few large shipments- Slower and cheaper modes

5 Information - Collect & share timely

and accurate data - Cost of information drops while other costs rise

Role of Supply Chain Management

1 Enhancing Competitive Advantage: Companies with effective SCM can reduce costs, improve

efficiency, and deliver products on time This can lead to increased customer satisfaction and can give businesses a competitive edge

2 Cost Efficiency: SCM aims to eliminate inefficiencies, reduce waste, and optimize processes to achieve

cost savings

3 Faster Time-to-Market: Effective SCM can speed up the product development cycle, allowing

companies to introduce new products faster

4 Improved Risk Management: With a well-managed supply chain, companies can identify risks faster

and develop strategies to mitigate potential disruptions

5 Increased Visibility: Modern SCM tools and technologies provide real-time insights into every stage of

the supply chain, which can aid decision-making and improve responsiveness

6 Sustainability and Ethical Practices: As global awareness of environmental and ethical issues grows,

SCM plays a pivotal role in ensuring that products and processes adhere to sustainability and ethical standards

7 Adapting to Change: With globalization and rapidly evolving market demands, SCM helps companies

adapt to changing conditions and ensure they can meet customer demands efficiently

8 Inventory Management: Efficient SCM ensures that inventory levels are optimal - not too much to incur

high holding costs and not too little to miss out on sales opportunities

9 Improved Supplier and Customer Relationships: Effective SCM can lead to better relationships with

suppliers and customers due to improved communication, trust, and collaboration

This Photo by Unknown Author is licensed under CC BY-SA-NC

Old Supply Chains vs New

VERTICAL INTEGRATIONhas given way to

“VIRTUAL INTEGRATION”

Companies now focus on their core competencies, and partner with other companies to create supply chains for fast moving markets.

Shift from Vertical Integration to Flexible

Supply Chains

1 Market Dynamics:

product variety.

frequent new products.

2 Technology:

suppliers.

enable efficient global collaboration.

competencies, and outsource the rest.

5 Globalization:

and sales.

6 Consumer Expectations:

innovation.

Operating Method of

Structure of the Supply

Structure of the Supply Chain

Producers Distributors Retailers Customers Service Providers

Ultimate Customer

Service Providers

Simple Supply Chain

Extended Supply Chain

Raw MaterialProducer Manufracture Distributor Retailer

Retail Customer

Logistics Provider

Finance Provider

Business CustomerMarket ResearchProduct

Designer

Example of an Extended Supply Chain

Chapter 1 Quiz Questions

1 Write a short description of what a supply chain is and what it does (see p 3 - 4)**2 What is the goal of supply chain management?

(“Increase throughput of goods and services while simultaneously reducing inventory and operating

expense.” Goldratt, The Goal)

3 What are the five major supply chain drivers? (see p 5 - 6)4 Explain the meaning of the saying “Amateurs talk strategy and professionals talk logistics.” (see p 8 - 10)5 What are two approaches to production used by factories and how are they different? (see p 11)

6 What are three approaches to warehouse operations and how are they different? (see p 11 -12)7 What are three kinds of inventory and what is the purpose of each? (see p 12 -13)

8 Describe four supply chain innovations introduced by Wal-Mart and explain why they are so powerful when used together (see p 18 - 19)

9 Discuss when a supply chain should emphasize responsiveness and when it should emphasize efficiency (see p 27 - 29)

10 What are the three main steps to align supply chain and business strategy and do they affect the way a company implements the five supply chain drivers? (see p.29 – 33)

** Page numbers refer to answers in Essentials of Supply Chain Management, 4th Edition