INSE 6300

Quality Assurance in Supply Chain Management

Concordia University, QC, Canada

Fall2019
Lecture 1.

Arash Mohammadi
Office: S-EV 9187
Email: arashmoh@encs.Concordia.ac
Homepage: http://users.encs.concordia.ca/~arashmoh/

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 Outline of this Class
Objectives:
• Have a big picture of what is going on in the course.
• Know the Grading Scheme of the course.
• Become familiar with Course Material and Course Website.
• Introduction to Supply Chain

References:

Check the following materials on the course website

• Course Outline
• Project Description
• Hand out General (HO-G)

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 Course Overview

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 General Information
Course Instructor:

Arash Mohammadi,

• Office: S-EV 9187

• Phone: (514) 848-2424 ext. 2712
• Email: arashmoh@encs.concordia.ca
• Homepage: http://users.encs.concordia.ca/~arashmoh/

Office Hours:

• Tuesdays: 11:30am -12:30pm (S-EV 9.187)

• Thursdays: 3:30pm - 4:30pm (S-EV 9.187)

Course Website: Moodle website.

• On the course website, you can find lecture slides, handouts, course
project information, and other resources.
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 Textbook
Course notes will be posted on Moodle.
Supply Chain Management: Strategy, Planning, and Operation

Seventh Edition

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 Grading Policy
Item Percentage Comments
Assignments 15% Total of 1 Assignment
Midterm 25% In class Midterm
Term Project 25% Report & Presentation
Final Exam 35%

Assignments:
• The solutions will be posted on Moodle.

Midterms (in class):

• Midterm Exam will focus on the first 6 or 7 Lectures.
• Midterm Exam will be taken on Oct. 25th.
Final Exam:
• Final Exam will cover material from the entire course.
• Final Exam will take place during the examination period (Dec. 5 to Dec.
19).
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 Important Dates
Date Event
September 27th Project Proposal
October 11th Assignment 1 Due
Oct. 25th Midterm Exam
Nov. 21st Project Slides Due
1 Week After Final Exam Project Report Due
December ?? Final Exam

Term Project
• Project to be done by team of two or three.
• The term project will have only two components: Written report and Presentation.
• Project Proposal of 1 Page identifying title, abstract, references, and team members is due on Sep.
27th before midnight.
• Presentation slides are due on Nov. 21, 2019 before midnight.
• More details will be posted on: MyConcordia Portal (Moodle)

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 Tentative Course Schedule

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 Brief Introduction

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 What is Supply Chain?
 A network of manufacturers and service providers that work together
to convert and move goods from the raw materials stage through to
the end user. These manufacturers and service providers are linked
together through different flows.

 SCM involves flows. Information

• Process flows, Supplier Customer

Products
• Information flows, Stage Stage
• Material flows, and; Funds

• Flows of funds
 A process is a set of logically related activities performed to achieve a
desired outcome.
 Each of these flows has to operate effectively, efficiently, and with
outstanding quality.

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 Supply Chain Management
Simchi-Levi’s Definition:

 Supply chain management is a set of approaches

utilized to efficiently
 integrate suppliers, manufacturers, warehouses, and stores, so
that right
 merchandise is produced and distributed at the right
quantities, to the right locations, and at the right time,
in order to
 minimize system wide costs while satisfying service level
requirements.

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 What Is a Supply Chain?

 Supply Cain is like a river with upstream

and downstream flows.

 The sums of these flows comprise the

Supply Chain.

Manufacturing plant

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 Supply Chain Management (SCM)

 The active management of supply chain activities and relationships

in order to maximize customer value and achieve a sustainable
competitive advantage. It represents a conscious effort by a firm or
group of firms to develop and run supply chains in the most
effective and efficient ways possible.

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 Supply Chain for Bottled Milk

An efficient, and effective supply chain is increasingly key to success within the dairy industry.
“Time, temperature, humidity, cost, distance, demand, forecasting, and packaging are all
important considerations in developing a strong dairy supply chain,”

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 Supply Chain Stages
A typical supply chain may involve a variety of stages:

1. Customers
2. Retailers
3. Wholesalers/distributors
4. Manufacturers
5. Component/raw material suppliers

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 Example: In-store Purchase

Consider a customer walking into a Walmart store to purchase detergent:

Stage 1. The supply chain begins with the customer’s need.

Stage 2. The next stage of this supply chain is the retail.
Stage 3. Distributer, e.g., a finished-goods warehouse or using trucks.
Stage 4. Manufacturer.
Stage 5. Suppliers.

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 Example: In-store Purchase

A supply chain is dynamic and involves the constant flow of information, product, and
funds among different stages.

• Walmart provides the product, as well as pricing and availability information.

• The customer transfers funds to Walmart.
• Walmart conveys point-of-sales data and orders to the warehouse or distributor.
• Distributer transfers the order via trucks back to the store.
• Walmart transfers funds to the distributor after the replenishment.
• The distributor also provides pricing information and sends delivery schedules.
• Walmart may send back packaging material to be recycled.

Similar information, material, and fund flows take place across the entire supply chain.

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 Example: Online Purchase

When a customer makes a purchase online from Amazon,

the supply chain includes:

• Amazon’s website,
• The Amazon warehouse,
• All of Amazon’s suppliers and their suppliers.

Stages of Supply-Chain:

• The website provides the customer with information regarding pricing, product variety, and
product availability.
• After making a product choice, the customer enters the order information and pays for the
product.
• The customer may later return to the website to check the status of the order.
• Stages further up the supply chain use customer order information to fill the request.
• That process involves an additional flow of information, product, and funds among various
stages of the supply chain.

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 Objective of Supply Chain
The objective of every supply chain should be to maximize the overall value generated.

The Value/Supply Chain Surplus: a supply chain generates is the difference between what
the value of the final product is to the customer and the costs the entire supply chain incurs
in filling the customer’s request.

• The value of the final product: the maximum amount the customer is willing to pay.
• Consumer Surplus: The difference between the total amount that consumers are willing
and able to pay for a good or service (indicated by the demand curve) and the total amount
that they actually do pay (i.e. the market price).
• Supply Chain Profitability: The difference between the revenue generated from the
customer and the overall cost across the supply chain.
• Example: Buying multi-task printer for $45.

 The higher the supply chain profitability, the more successful the supply chain.
 Supply chain surplus is typically strongly correlated with profits, therefore, we measure
supply chain success with “supply chain surplus”.

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 Objectives of Supply Chain

Sources of Value, Revenue, and Cost:

 For any supply chain, there is only one source of revenue: The Customer.
 The customer is the only one providing positive cash flow to the supply chain.
 All flows of information, product, or funds generate costs within the supply chain.

Effective Supply Chain Management involves the management of supply chain assets and
product, information, and fund flows to grow the total supply chain surplus.

Goal: Analyzing all supply chain decisions in terms of their impact on the supply chain
surplus.

Example: Difference in the supply chain structure between Canada and India.
• Canadian distributors play a much smaller role in this supply chain compared with their
Indian counterparts.

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 Decision Phases in a Supply Chain
• SCM requires many decisions relating to the flow of information, product, and funds.
• Each decision should be made to raise the supply chain surplus.
• SCM decisions fall into three categories or phases depending on: (i) The frequency of each
decision, and; (ii) The time frame during which a decision has an impact.

1. Supply Chain Strategy or Design:

– How to structure the supply chain over the next several years
– Strategic Phase decisions made include:

 Whether to outsource or perform a supply chain function In-house,

 The location and capacities of production and warehousing facilities,
 The products to be manufactured or stored at various locations,
 The modes of transportation to be made available
 The type of information system to be used

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 Decision Phases in a Supply Chain

2. Supply Chain Planning:

– Decisions over the next quarter or year.
– The goal of planning is to maximize the supply chain surplus.
– The planning phase starts with a forecast for the coming year of demand and other
factors, such as costs and prices in different markets.

– Planning Phase includes making decisions:

 Which markets will be supplied from which locations,
 The subcontracting of manufacturing,
 The inventory policies to be followed,
 The timing and size of marketing and price promotions

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 Decision Phases in a Supply Chain

3. Supply Chain Operation :

– Daily or weekly operational decisions.
– The goal of supply chain operations is to handle incoming customer orders in the
best possible manner.
– The planning phase starts with a forecast for the coming year of demand and other
factors, such as costs and prices in different markets
– Operation phase includes:
 Allocate inventory or production to individual orders,
 Set a date by which an order is to be filled,
 Generate pick lists at a warehouse,
 Allocate an order to a particular shipping mode and shipment,
 Set delivery schedules of trucks,
 Place replenishment orders

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 Process Views of a Supply Chain
A process is a set of logically related activities performed to achieve a desired outcome.

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 ways to view the processes performed in a supply chain:

1. Cycle view: The processes in a supply chain are divided into a series of cycles, each
performed at the interface between two successive stages of the supply chain.

2. Push/pull view: The processes in a supply chain are divided into two categories,
depending on whether they are executed in response to a customer order or in anticipation
of customer orders. Pull processes are initiated by a customer order, whereas push
processes
are initiated and performed in anticipation of customer orders.

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 Cycle View of Supply Chain Processes

Given the five stages of a supply chain, all supply chain processes can be broken
down into the following four process cycles:

 Customer order cycle

 Replenishment cycle
 Manufacturing cycle
 Procurement cycle

• Each cycle occurs at the interface between two successive

stages of the supply chain.
• Not every supply chain will have all four cycles clearly
separated.

Examples: (i) A Grocery Supply Chain, and; (ii) Dell

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 Cycle View of Supply Chain Processes
Each cycle consists of six sub-processes:

 Supplier marketing the product

 Buyer placing an order
 Supplier receiving the order
 Supplier supplies the order
 Buyer receives the order
 Buyer returning/replacing

• Depending on the transaction, the sub-processes are applied to the appropriate cycle.

Examples: (i) Buying online at Amazon, and; (ii) Amazon replenishment.

• Although each cycle has the same basic sub-processes, there are a few important differences:
1. In the customer order cycle, demand is external and thus is uncertain.
2. The scale of an order is different across different cycles.

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 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

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 Example: Push/Pull View of SC

Make-to-stock Environment

Push/Pull Processes for the L. L. Bean Supply Chain

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 Example: Push/Pull View of SC

Build-to-order Environment

Push/Pull Processes for Ethan Allen Supply Chain for Customized Furniture

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 Supply Chain Macro Processes
• Supply chain processes discussed in the two views can be classified into 3 macro
processes.
• These three macro processes manage the flow of information, product, and funds
required to generate, receive, and fulfill a customer request
1. Customer Relationship Management (CRM):
• All processes at the interface between the firm and its customers
2. Internal Supply Chain Management (ISCM):
• All processes that are internal to the firm
3. Supplier Relationship Management (SRM):
• All processes at the interface between the firm and its suppliers

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 Major Supply Chain Activities

1. Managing Business Processes

2. Forecasting
3. Purchasing
4. Logistics

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 1. Business Processes

 A process is a set of logically related activities

performed to achieve a desired business outcome.

Primary Process Support Process Development

Process
• Providing a service • Evaluating suppliers • Developing new
• Educating • Recruiting new products
Customers workers • Performing basic
• Manufacturing • Developing a sales and research
operations plan (SOP) • Training new
workers

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 2. Forecasting-Managing Demand

 Demand forecasts

 Supply forecasts

 Price forecasts

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 3. The Purchase Order

Sourcing
 Insourcing, outsourcing
 Single sourcing, multiple sourcing

Purchasing
 Supplier selection
 Supplier performance measurement
 Business-to-business exchanges (B2B)

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 4. Logistics

 Part of the supply chain process that plans, implements, and

controls the efficient, effective flow and storage of goods, services,
and related information from the point of origin to the point of
consumption to meet customers requirements

 Activities involved
 Transportation
 Warehousing
 Material handling
 Packaging
 Inventory management
 Logistics information systems

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 What’s Next?
What’s Next:

• Get course materials ready

• Check the following materials on the course website
 Course Summary
 Hand out General (HO-G)
 Project Folder

Topics of the Next Class

• Supply Chain Metrics
• Supply Chain Drivers
• Quality Attributes

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