Integrated Supply Chains and Logistics

Management of Digital Enterprise

An introduction to Supply Chain

Management. Definitions.
Silviu RAILEANU
University Politehnica of Bucharest
Spring 2016

Course objectives

Definition of the Supply Chain (SC) concept and models, supply chain management and
design (network design, network and operational planning), strategic decisions, activity
interdependency

Supply chain functions: purchasing, move, production, stock, distribution

Logistics (inventory and warehousing, transportation)

Metrics for measuring SC performance, operational and financial evaluation, forecasting

Planning and scheduling processes (which synchronize the orders with manufacturing and
distribution)

IT in SC

Support and decisional systems for advanced management of SCs

(barcodes and RFID)
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Presentations
Integrated Supply Chains and Logistics
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An introduction to Supply Chain Management.

Definitions. Modeling at strategic level.
Supply chain operations: Planning.
Supply chain operations: Procurement.
Supply chain operations: Making.
Supply chain operations: Deliver.
Closed loop supply chain: returns management.
Supply chain operations: Enable.
Measuring supply chain performance. Operational evaluation.
Measuring supply chain performance. Financial evaluation.
Information technology in supply chain management
E-Business and Supply Chain Integration
RFID for industrial usage
RFID in supply chain management
Logistics

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Practical sessions & projects

1. Projects (old) optional homework
i. Proposition of a Supply Chain Visibility System (1 seller, multiple buyers), XAMPP
ii. Proposition of an IT system for sales forecasting of multiple products
iii. Proposition of an IT system for product distribution (single and multiple delivery)
iv. Planning manufacturing processes as part of a supply chain for a jobshop/flowshop/openshop
infrastructure
v. Reports (IT systems for improving supply chain operation, bullwhip effect, dual-chain supply chains,
examples of supply chains, RFID/EPC/intelligent product driven supply chains, etc/sciencedirect)
Laboratory
1. Sales forecasting using spreadsheets
2. Network design using spreadsheets and constraint programming (DC and facility location (X3))
3. Aggregate production planning using the constraint programming technique (Excel, ILOG CPLEX)
4. Warehouse and Stock Management using spreadsheets (determining Economical Order Quantity, optimizing
orders)
5. Evaluating service level using a specified replenishing technique
6. Manufacturing Management (Planning and Scheduling) using constraint programming
7. Knapsack problem for the distribution process of a supply chain
Location ED003 (18 20)

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Grading

Laboratory activity 5 pct (5 on time, 2

late) ed003 starting at 18:00
Optional homework 2 pct (if late
laboratory activity)
Attendance 1 pct
Final written exam 4 pct
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References
Satyaveer Singh Chauhan, Cyril Duron, Jean-Marie Proth, Les
chaines dapprovisionnement. Conception, contrle et outils, 2003
Douglas M. Lambert, Martha C. Cooper, and Janus D. Pagh,
Supply Chain Management: Implementation Issues and
Research Opportunities, The International Journal of Logistics
Management, Vol. 9, No. 2, 1998, p. 7
Bowersox D.J. et al., Supply Chain Logistics Management, 3rd
edition, 2010,McGraw Hill International Edition
Hugos M., Essentials of Supply Chain Management, John
Wiley and Sons, Inc., 2006

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Chapter 1
Definition of a supply chain

Content:

Introduction / General description

Dominant partners classification

Supply chain functions

Loss and benefit sharing (sharing process)

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Introduction

Fig.1 Abstract Model of a Manufacturing System (adapted

from (Leitao,2004)) value chain
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Introduction
Clients

Manufacturing process model

Supply chain is one concept

associated
to
distributed
manufacturing, which deals with
the management of materials,
information and nancial ows in
a network, consisting of suppliers,
manufacturers, distributors and
customers. The goal of supplychain management is to have the
right product in the right place, at
the right price, at the right time, and
in the right condition (Harrison,
1992).

Orders

Client orders Propose new

with due dates delivery date
Global production
scheduler (objective:
production planning and
resource allocation)

Product presentation
and creation of new
products
Product &
Process KB
Read operation
list for desired
products

Delivery

GUI for order collection

and product definition

Real-time feedback on
system load

Planned and
scheduled orders
Active production entities
(objective: control of
production execution and
real-time rescheduling)
Informational
services

Physical
services

Finished
products
Adjust resource
weights according to
production needs

FMS: product transport

and processing
Raw
materials

Part
supply

Fig.2 The lifecycle of a client

order (Borangiu et al.,2010)

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Introduction
Flexible Manufacturing System; ON DEMAND concept
extended through:
Efficient usage, at request, of the hardware resources, by
activating them when needed;
Assuring the global system fault tolerance in case of power,
controller and workstation breakdown;
Assuring flexibility in resource, tools and associated programs
operation.

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General description
anticipatory business model (MTS)

responsive business model (MTO)

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General description

Value chain

Supply chain (SC)

A network of organizations (value chains) that cooperate in order to optimize the flow of materials between the
original supplier and the end user, resulting in a rapid and cost efficient flow of materials (Chauhan, 2003);

Supply chain management (SCM)

A set of activities that a firm performs in order to deliver a valuable product or service for the market;

SCM encompasses the planning and management of all activities involved in sourcing and procurement,
conversion, and all logistics management activities. It also includes coordination and collaboration with
channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In
essence, SCM integrates supply and demand management within and across companies. It includes all of
the logistics management activities noted above, as well as manufacturing operations, and it drives
coordination of processes and activities with and across marketing, sales, product design, finance and
information technology (Council of Supply Chain Management Professionals);

Logistics

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Logistics is the work required to move and geographically position inventory. It is a subset of and occurs within
the broader framework of a supply chain, adding value by timing and positioning inventory (Bowersox et al.,
2010)

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General description
VISA

Material Flow

Supplier

Credit Flow

Manufacturing

Supplier
Schedules

Retailer

Consumer

Wholesaler

Retailer

Order
Flow

Fig.3 Simple view of the supply chain and adjacent flows

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Cash
Flow

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General description

Projects

Departments

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Fig.4 Supply chain management a

project/departments approach

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General description
Partnership Definition
A partnership is a tailored business relationship based on
mutual trust, openness, shared risk and shared rewards
(sharing process) that results in business performance
greater than would be achieved by two firms working
together in the absence of partnership.

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General description
Drivers
Compelling
reasons to
partner

Facilitators
Decision to
create or adjust
relationship

Supportive
environmental
factors that enhance
partnership growth

Components
Drivers set
expectations
of outcomes

Joint activities and processes

that build and sustain the
partnership

Outcomes

Feedback to:
l Components
l Drivers
l Facilitators

The extent to which

performance meets
expectations

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Fig.5 The partnership model

(http://scm-institute.org/Partnership-in-the-supply-chain.htm)

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General description
Global Supply-Chain Issues
Supply chains in a global environment must be:
Flexible enough to react to sudden changes in parts availability,
distribution, or shipping channels, import duties, and currency rates;
Able to use the latest computer and communication technologies to
schedule and manage the shipment of parts in and finished products out;
Staffed with local specialists to handle duties, trade, freight, customs and
political issues.
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General description
Key Business Processes of SCM

Customer Relationship Management provides the structure for how relationships with customers are developed and
maintained, including the Professional Service Automation (PSA) between the firm and its customers.

Customer Service Management provides the firms face to the customer, including management of the PSAs, and provides
a single source of customer information.

Demand Management provides the structure for balancing the customers requirements with supply chain capabilities.

Order Fulfillment includes all activities necessary to define customer requirements, design the logistics network, and fill
customer orders.

Manufacturing Flow Management includes all activities necessary to move products through the plants, to obtain and
manage manufacturing flexibility in the supply chain.

Supplier Relationship Management provides the structure for how relationships with suppliers are developed and
maintained, including the PSAs between the firm and its suppliers.

Product Development and Commercialization provides the structure for developing and bringing to market new products
jointly with customers and suppliers.

Returns Management includes all activities related to returns, reverse logistics, gatekeeping and avoidance.

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General description

Integration. Why Integrate?

Because

companies tend to focus on their core competencies,

there might be potential for competitive advantages,
competitors might already be working on it,
it should bring more stability to the relationship,
it should bring improvements to customer service, profits, costs,
technology is driving businesses in that direction,
the world is becoming more global and business practices are changing,

when these systems have been implemented they become an intangible asset.

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General description
Tier 2
Suppliers

Tier 2
Customers

Initial Suppliers

Tier 1
Customers

Tier 1
Suppliers

Tier 3 to
Consumers/
End-customers

n
1

1
2
n

1
3
2

3
n

1
n

n
n

Consumers/End-customers

Tier 3 to
Initial
suppliers

1
2

1
n

n
Managed Process Links
Monitor Process Links
Not-Managed Process Links

Non-Member Process Links

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n
Focal Company
Members of the Focal Companys Supply Chain

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Non-members of the Focal Companys Supply Chain

Fig.6 Types of Inter-Company Business Process Links

(Lambert, 1998)

Synthesis
Supply chain definition:
A network of organizations that cooperate in order to optimize the flow of
materials between the original supplier and the end user (client),
resulting in a rapid and cost efficient flow of materials (Chauhan, 2003).
Supply chain view = project view which flows through different
departments
Two flows in the SCM upstream-> downstream (materials),
downstream->upstream (information)
SCM <> logistics
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Dominant partners
Definition
A partner that acts to maximize its profit rather than the profit of
the system as a whole (chain management);

Why is a partner dominant

Client proximity:
It knows what the client wants (type, quantity, price);
It possesses the distribution means to provide the client the
product in the best conditions;
High competence:
It possesses advanced technological means and the resources
to implement the technology
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Dominant partners
Classification
Dominant partner = f(SC type)
If client from mass population then the distributor is dominant
(ex.: agriculture)
Fig.7 Supplier-distributor-client chain
If custom orders then
the supplier is dominant
(ex.: PC manufacturing)
If manufactrurer has high
technology then it is the
dominant partner, but the
supplier is still important
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Dominant partners
Examples
Benetton, IBM, franchise systems, automobile industry over the dealers
Evolution to the dominance situation
Subcontracting can lead to dominating partners if the product/service
requires high-tech knowledge or its value in the final product is important
Disadvantages
Once established it excludes a healthy operation of the SC by
annihilating the partners creativity and leading to conflicts when
constraints are to strong

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Supply chain functions

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Fig.8 Supply chain strategic level

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Supply chain functions

The purchasing functionality objectives are to acquire the raw materials and the components
that enter the realization phase of a product, help identify the products and services that can
be best obtained externally and Develop, evaluate, and determine the best supplier, price,
and delivery for those products and services. Important purchasing aspects: product quality
and the capacity of the supplier to adapt.
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Fig.8 Supply chain strategic level

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Supply chain functions

The production/manufacturing functionality transforms the

raw materials into finished products.

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Fig.8 Supply chain strategic level

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Supply chain functions

The transport functionality realizes the continuity and fluidity of

the physical flows in a SC at a global level.

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Fig.8 Supply chain strategic level

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Supply chain functions

Its objective is to make the product/service available on the

market. It is the only function that realizes an income, thus it is
very important to a project. It is usually accompanied by
maintenance, formation and documentation, activities which are
planned at the SC design stage.
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Fig.8 Supply chain strategic level

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Supply chain functions

Information system
Key element assuring the link between the SC functions and allowing to
globally coordinate them
Suppliers linked to distributers to follow their products in a tight flow
Activities interdependence
The cancellation of the boundaries between the functions of a SC leads
to a strong interdependence between them at the strategic level
Objective: harmonize the evolution of different functions (ex.: launching a
new product might imply adding new resources, doing commercial efforts
to promote it, reanalyze suppliers)

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Closed loop Supply Chain

Product Recovery Process = management of product
recovery process + related supply chain

Fig.9 Closed loop Supply Chain (National Seminar on

REMANUFACTURING, New Delhi, 2009)

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Closed loop Supply Chain

Unique characteristics of Closed loop Supply Chain
management (National Seminar on REMANUFACTURING, New Delhi, 2009)

Uncertainty in timing and quantity of returns (used products)

Need for balancing demands with returns
Uncertainty in materials recovered from returned items
Requirements for a reverse logistics network
Disassembly operation
Materials matching problems
Stochastic and highly variable processing time

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Closed loop Supply Chain

Key management decision areas in closed loop supply chain

Returns Acquisition Management

Reverse Logistics Management
Remanufacturing Management
Inventory Management
Sales and Marketing

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Synthesis
Definition of the dominant partner
Supply chain strategic functions and
characteristics
The need for an integrated informational system
Identification of the interdependence between the
functions of the strategic layer
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References

Satyaveer Singh Chauhan, Cyril Duron, Jean-Marie Proth, Les chaines

dapprovisionnement. Conception, contrle et outils, 2003

Douglas M. Lambert, Martha C. Cooper, and Janus D. Pagh, Supply Chain Management:
Implementation Issues and Research Opportunities, The International Journal of
Logistics Management, Vol. 9, No. 2, 1998, p. 7

Bowersox D.J. et al., Supply Chain Logistics Management, 3rd edition, 2010,McGraw Hill
International Edition

Hugos M., Essentials of Supply Chain Management, John Wiley and Sons, Inc., 2006

Leitao, P, 2004, An Agile and Adaptive Holonic Architecture for Manufacturing Control,
PhD. Thesis
Donald Waters, Logistics.An Introduction to Supply Chain
Management, 2003

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