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CHAPTER 9

SUPPLY CHAIN DESIGN

"To create something this great, we have to go through


problems, not to mention the costs." - Anonymous

Overview of Supply Chain


key subsystem of value chain
focuses primarily on the physical
movement of goods and materials
all about speed and efficiency
the design or redesign of supply chains
becomes a critical issue as firm's product
lines and markets change or expand

Understanding the Supply Chain


The basic purpose of a supply chain is to
coordinate the flow of materials, services,
and information along the elements of the
supply chain to maximize customer value.

CUSTOMER DEMAND
INFORMATION

Administration
2

KEY MANAGEMENT
FUNCTIONS

Manufacturing
2

*Sales
*Finance
*Customer
Service

*Reduce costs
*Tightly integrate design,
development, production,
delivery, and marketing
*Provide more customization

*Order
Processing
*Transportation
and Distribution
*Operations
*Inventory
and Materials

Exhibit 9.1 Typical Goods Producing


Suppy Chain Structure

Distribution Centers
are warehouses that act as intermediaries
between factories and customers,
shipping directly to customers or to retail
stores where products are made available
to customers.

Inventory
refers to raw materials, work-in-process,
or finished goods that are maintained to
support production or satisfy customer
demand.
as inventory levels diminish, orders are
sent to the previous stage (upstream) in
the process for replenishing stock.

Supply Chain Operations


Reference (SCOR) Model
The Supply Chain Operations Reference (SCOR) Model is a
framework for understanding the scope of SCM based on
five basic functions:
1.Plan: developing a strategy that balances resources with
requirements.
2.Source: procuring goods and services to meet planned or
actual demand.
3.Make: transforming goods and services to a finished state to
meet demand.
4.Deliver: managing orders, transportation, and distribution to
provide the goods and services.
5.Return: customer returns, maintenance, dealing with excess
goods.

Plan
includes management policies
aligning the supply chain plan with
financial plans

Source

identifying and selecting supplies


scheduling deliveries
authorizing payments
managing inventory

Make

production rescheduling
managing work-in-process
manufacturing
testing
packaging
product release

Deliver
processing customer orders to routing
shipments
managing goods at distribution centers
invoicing the customer

Return

authorization
receiving
verification
disposition
replacement or credit

Supply Chain Management (SCM)


is the management of all activities that
facilitate the fulfillment of a customer order
for a manufactured good to achieve
satisfiedcustomers at a reasonable cost.
requires a clear understanding of the
interactions among all parts of the system.

The Value Chain and Supply Chain


at Dell, Inc.

The Value Chain and Supply Chain


at Dell, Inc.
Dell sells highly customized personal computers, servers, computer
workstations, and peripherals.
Most computers are assembled only in response to individual orders purchased
through a direct sales model.
Dells value chain electronically links customers, suppliers, assembly operations,
and shippers.
Preproduction services focus on gaining the customer, including corporate
partnerships, technical support, and strong supplier relationships.
Postproduction services focus on keeping the customer, including billing,
shipping, returns, and technical support.

The Value Chain and Supply Chain


at Dell, Inc.