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Supply Chain

What is a Supply Chain?
Supply-chain is a term that describes how
organizations (suppliers, manufacturers,
distributors, and customers) are linked
Supply Chains
A basic supply chain consists of a company, an immediate
supplier, and an immediate customer directly linked by one
or more of the upstream and down stream flows of
products, services, finances, and information.
An extended supply chain includes suppliers of the
immediate supplier and customers of the immediate
customer, all linked by one or more of the upstream and
down stream flows of products, services, finances, and
An ultimate supply chain includes all the companies
involved in all the upstream and downstream flows of
products, services, finances, and information from the
initial supplier to the ultimate customer.
Supplier Focal firm Customer
(a) Basic supply chain

Suppliers Customers
Supplier Focal firm Customer
supplier customer
(b) Extended supply chain

Logistics (3PL) provider

Initial Ultimate
Supplier Focal form Customer
supplier customer

Financial Research firm
provider (c) Ultimate supply chain
Supply chain and the flows therein
Supplier 1 Forecasting and
scheduling information

Inventory Cash flow

Order flow

Supplier 3 Product returns/

Customer 1
Empty bins

Manufacturer Inventory Customer 2

(The focal firm)

Cash flow Inventory Distributor 1

Supplier 2
Materials flow
Customer 3
What is Supply Chain Management?

Supply-chain management is a total system

approach to managing the entire flow of
information, materials, and services from raw-
material suppliers through factories and
warehouses to the end customer
Evolution of SCM
Materials management

Physical distribution management

Logistics management

Supply chain management

Integrated supply chain management

Objectives of SCM
The objectives of a supply chain management are
manifold but most of them are derived from the
primary objective. The primary objective comprises
creating a superior mutual value for the customer in
terms of the product and service delivered at a time and
place in response to customer needs and demand.
By value, it is meant that the worth of the product and
service delivered to the customer must far exceed the
efforts and expenses put in by the company in fulfilling
the customers order, which gets paid in the form of
price by the customer.
Objectives of SCM (contd.)
The derived or secondary objectives are given as
Turnover Rate
Communication and coordination
Supply chain process cycles




Customer order
Bullwhip Effect
The magnification of variability in orders in the supply-
Retailers Orders Wholesalers Orders Manufacturers Orders

Time Time Time

A lot of can lead to can lead to

retailers each greater variability even greater
with little for a fewer number variability for a
variability in of wholesalers, single
their orders. and manufacturer.
Information distortion:
The bullwhip effect

Increasing demand variability up the supply chain

Consumption Customers Retailers Wholesalers Manufacturers Suppliers

Supply Chain Metrics
Integrated supply chain metrics, namely
Time (cycle time metrics)
Costs (cost metrics),
Customer satisfaction/quality (service quality
metrics), and
Asset metrics
Concepts of Supply Chain
Supply chains (SCs) should be aligned with the
uncertainties revolving around the supply process
side of the SC
A stable supply process has mature technologies
and an evolving supply process has rapidly
changing technologies
Types of SCs
Efficient SCs
Risk-Hedging SCs
Responsive SCs
Agile SCs
Supply Chain Categorization

Demand Uncertainty
Low (Functional High (Innovative
products) products)

Low Efficient SC Responsive SC

Supply (Stable
Ex.: Grocery Ex.: Computers
Risk-Hedging SC Agile SC
Uncertainty High
(Evolving Ex.: Hydro- Ex.: Telecom
Process) electric power