Understanding the Supply

Chain
Dr. Ch. V. V. S. N. V. Prasad
Assistant Professor in
Management

Learning Objectives
Supply Chain
Supply Chain Management
Objective of a Supply Chain
Importance of Supply Chain Decisions
Decision Phases in a Supply Chain
Process Views of a Supply Chain
Supply Chain Macro Processes
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Supply Chain

Supply Chain is a network of various

business entities and processes linking
suppliers, operations and customers.
Business Entities

Supplier, manufacturer,
retailers and customers.

distributor,

transporters,

Processes

It consists of all activities/processes starting from

sourcing of raw material or components till delivery of
the finished product to the final customer.

SC includes all parties involved in fulfilling

a customer request
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Supply Chain
Supplier

Manufacturer

Distributor

Upstream

Retailer

Customer

Downstream

SUPPLY SIDE

+ + + + +

DEMAND SIDE

The right

The right

The right The right

The right

The right

Product

Price

Store

Customer

Time

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Quantity

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Higher

Profits

Supply Chain

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Supply Chain - Flows

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Detergent Supply Chain

P&G or other
manufacturer

Jewel or third
party DC

Plastic
Producer

Tenneco
Packaging

Chemical
Paper
manufacturer
Manufacturer
e.g. Oil Company)
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Customer wants
Jewel
detergent and goe
Supermarket
to Jewel

Chemical
manufacturer
(e.g. Oil Company)

Timber
Industry

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Dell Supply Chain

Direct Shipment

Master Board

Hard disk

Dell Assembly
Plant

Website
or Phone

Customer wants
To buy computer

Customers Order

RAM

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Supply Chain

Supply chains
Stretch
from
raw
materials
to
consumers
Include various entities and processes
Run in reverse as well as toward end
user
Contain cash, product, and information
flows
Connect to outside stakeholders.

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Supply Chain Management

Supply chain management of any firm
can be viewed as integration of all the
activities starting from purchasing,
manufacturing, and distribution by the
organization plus activities that stretch
between companys suppliers and its
customers.
It is an integrated approach of
managing various business processes
that links the supply chain partners.
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Objectives of a Supply Chain

Maximize overall value created
Supply chain value: difference between what the final
product is worth to the customer and the effort the
supply chain expends in filling the customers request
Value is correlated to supply chain profitability
(difference between revenue generated from the
customer and the overall cost across the supply
chain)
Revenue: Dell receives $2000 from a customer for a
computer (revenue)
Cost : Supply chain incurs costs (information, storage,
transportation, components, assembly, etc.)

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Objectives of a Supply Chain

Supply chain profitability is total profit to
be shared across all stages of the supply
chain
Supply chain success should be measured
by total supply chain profitability, not
profits at an individual stage
Sources of supply chain revenue: the
customer
Sources of supply chain cost: flows of
information, products, or funds between
stages of the supply chain
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Importance of Supply Chain

Decisions
Supply chain decisions have a large
impact on the success or failure of each
firm because they significantly influence
both the revenue generated and the cost
incurred.
Successful supply chains manage flows of
product, information, and funds to provide
a high level of product availability to the
customer while keeping costs low.
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Decision Phases in a Supply

Chain

Supply chain decision phases may be

categorized as design, planning, or
operational depending on the time
frame over which the decisions
made.
Supply chain strategy or design
Supply chain planning
Supply chain operation

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Decision Phases in a Supply

Chain
Strategic decisions
Relate to supply chain configuration
Long term impact lasting several years
Expensive to reverse
Support strategic objectives of the firm
Decisions include
Locations and capacities of facilities
Products to be made or stored at various locations
Modes of transportation
Types of Information systems to be utilized
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Decision Phases in a Supply

Chain
Planning decisions
Cover a period of a few months to a year
Definition of a set of policies that govern
short-term operations
Fixed by the supply configuration from
previous phase
Starts with a forecast of demand in the
coming year
Must consider demand uncertainty,
exchange rates, competition over the time
horizon for making planning decisions
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Decision Phases in a Supply

Chain

Planning decisions include

Which markets will be supplied from
which locations
Planned buildup of inventories
Subcontracting, backup locations
Inventory policies
Timing and size of market promotions

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Decision Phases in a Supply

Chain
Operational decisions
Time horizon is weekly or daily
Goal is to handle customer orders in the
best possible manner
Much less uncertainty (short time horizon)
Decisions include
Allocate orders to inventory or production,
set order due dates,
allocate an order to a particular shipment,
set delivery schedules,
place replenishment orders
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Process Views of a Supply

Chain

A supply chain is a sequence of

processes and flows that takes place
within and between different stages .
There are 2 different ways to view
the processes performed in a supply
chain
Cycle view
Push/pull view

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Process Views 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.
Clearly defines processes involved and owners of
each process
Specifies role and responsibilities of each member

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)
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Cycle View of SC Processes

Customer
Customer Order Cycle

Retailer
Replenishment Cycle

Distributor
Manufacturing Cycle

Manufacturer
Procurement Cycle

Supplier
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Cycle View of SC Processes

Customer Order Cycle
Involves all processes directly involved
in receiving and filling the customers order
Customer arrival
Customer walks in to a supermarket to make purchase
Open the website to give order

Customer order entry

Customer informing the retailer what products they
want to purchase

Customer order fulfillment

Customer order is filled and sent to customer.
(packaging and Shipping)

Customer order receiving

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Cycle View of SC Processes

Replenishment Cycle
All processes involved in replenishing
retailer inventories (retailer is now the
customer):
Retail order trigger
Product availability and cost of holding inventory

Retail order entry

Order is placed to distributor

Retail order fulfillment

Order fulfillment at distributor

Retail order receiving

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Cycle View of SC Processes

Manufacturing Cycle
All processes involved in replenishing
distributor (or retailer) inventory.
Order arrival from the distributor, retailer, or
customer.
Replenishment order trigger based on forecast demand
and current inventory
Order is conveyed to manufacturer

Production scheduling.
Orders are allocated to production planning

Manufacturing and shipping.

Receiving at the distributor, retailer, or customer.
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Cycle View of SC Processes

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.
Supplier production scheduling
Component manufacturing and shipping
Receiving at manufacturer

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Push/Pull View of SC
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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Push/Pull View of SC
Processes
Procurement,
Manufacturing and
Replenishment cycles

Customer Order
Cycle

PUSH PROCESSES

PULL PROCESSES
Customer
Order Arrives

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Push/Pull View of SC
Processes

Customer Order
And Manufacturing Cy

Procurement cycle

PUSH PROCESSES

PULL PROCESSES

Customer order
arrives
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Push/Pull View of SC
Processes
Demand is certain at the time of executing pull
process and demand is anticipated or
forecasted at the time of executing push
process.
Useful in considering strategic decisions
relating to supply chain design more global
view of how supply chain processes relate to
customer orders
The relative proportion of push and pull
processes can have an impact on supply chain
performance
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Supply Chain Macro Processes

in a Firm

Supply chain processes discussed in the

two views can be classified into
Customer Relationship Management (CRM)

All Processes that focus on the interface between firm

and customer

Internal Supply Chain Management (ISCM)

All processes that are internal to the firm

Supplier Relationship Management (SRM)

All Processes that focus on the interface between firm

and Supplier

Integration among the above three macro

processes is critical for effective and
successful supply chain management
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Supply Chain Macro Processes

in a Firm
SRM

ISCM

Source
Negotiate
Buy
Design
Collaboration
s
Supply
Collaboration
s

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CRM

Strategic
Planning
Demand
Planning
Supply
Planning
Fulfillment
Field Service

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Market
Price
Sell
Call Center
Order
Management

Supply Chain Macro Processes

in a Firm
CRM
Generate customer demand and facilitate
the placement and tracking of orders

ISCM
Planning internal production and storage
capacity, preparation of demand and supply
plans and internal fulfillment of actual orders

SRM
Supplier
selection,
and
evaluation,
negotiation
of
supply
terms,
design
collaborations, supply collaborations and
agreements
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Summary
What is supply chain and supply chain
management?
What is the goal of a supply chain and what is
the impact of supply chain decisions on the
success of the firm?
What are the three key supply chain decision
phases and what is the significance of each?
What are the cycle and push/pull views of a
supply chain?
How can supply chain macro processes be
classified?
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