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FUNDAMENTALS OF SUPPLY
CHAIN MANAGEMENT
Introduction to Supply Chain Management
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Learning Objectives
What is Supply Chain?
Bullwhip Effect
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What Is Supply Chain?
“Global network used to deliver products & services from raw materials
to end customers through an engineered flow of information, physical
distribution, and cash.”
APICS – 13th Edition
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What Is Supply Chain?
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Why Supply Chain Is Important?
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Supply Chain Entities
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Supply Chain Entities
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Supply Chain Entities
Supplier
Provider of goods or services
Supplies materials, energy, services, or components for producing a product
or service
Producer
Receives services, materials, supplies, energy and components use to create
finish products
Customer
Receives the shipments of finish products for their own use or for the final
consumer (B2B or B2C)
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Considerations for Supply
Chain Drivers
Driver Efficiency Responsiveness
• Efficient Reactive
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Supply Chain Structures
Stable Supply Chain
Significant history of stability between supply & demand
Focuses on execution, efficiencies and cost performance
Simple connectivity technologies & little need for real-time information.
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Supply Chain Structures
Reactive Supply Chain
Acts for fulfill demand from trade partners’ sales & marketing strategies
Perceived as a cost center by all involved
Needs minimal connectivity technologies & capital assets to respond demand
Primary goal is to ensure the throughput at any cost
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Supply Chain Structures
Efficient Reactive Supply Chain
Supports competitive positioning by serving as an efficient, low-cost &
integrated unit
Focuses on efficiency & cost management on the total delivered cost of FG
Places greater importance on connectivity technologies & new equipment to
automate functions to reduce labor costs & improve capacity and
throughput
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Supply Chain Flow
Information Flow
Supplier – Producer – Customer are connected by Product, Information & Payment Flows
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Bullwhip / Whiplash Effect
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Supply Chain Operations
Reference Model (SCOR)®
This model is developed & endorsed by nonprofit
organization, Supply Chain Council (SCC).
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Supply Chain Operations
Reference Model (SCOR)®
Assumptions
Applies to All customer interactions from order entry through paid
invoice
All product transactions (defined as physical materials and services,
including equipment, spare parts, bulk product and software etc
All market interactions from understanding aggregate demand
through order fulfillment
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Vertical versus Horizontal
Integration
Vertical Integration
Bringing supply chain inside one organization
Ford motors pursued this strategy for their famous model T – Car.
Solves the problem of who will design, plan, execute, monitor, and
control supply chain activities.
Ownership
Management
Marketing / Sales
Finance
Distribution
Plant
Component Production
Information Flow
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Evolution & History of SC
Fragmentation Consolidation (1960-1980): Everything was
disintegrated, but gradually consolidated
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Evolution of Supply Chain
Management
Stage 1 – Multiple Dysfunction
Lacks clear internal definitions and goals – No external links other than
transactional ones
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Evolution of Supply Chain
Management
Stage 2 – Semi-functional Enterprise
Information
Supplier Customer
Production Marketing /
Purchasing Logistics Distribution
Control Sales
Supplier Customer
Materials / Payments
Service
ERP
Supplier Customer
Production Marketing /
Purchasing Logistics Distribution
Control Sales
Supplier Customer
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The Value Chain
( Product and Information flow?)
Support
Activities
Primary
Activities
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Supply Chain Management
“Manufacturing Plant”
Raw
Materials,
Customers
Finished Inspection,
Suppliers
Materials Management
Production Warehousing and Shipping
Purchasing
Control Inventory Control and Traffic