Production Operations
Management
Supply Chain
Management
U. Akinc
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Supply Chains
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A supply chain encompasses all the facilities,
activities and functions in the delivery of products
to customers from the raw material to the finished
product stages.
Modern supply chain management is to manage
the facilities, activities and functions in an
integrated and coordinated way so as to maximize
customer satisfaction.
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Supply chain management:
is a strategic area of management
 involves strategic investments in
facilities, technologies and relationships
 significantly impacts the way the
company competes

Efficiency (cost)
 Delivery speed and reliability
 Quality
 Customization/flexibility
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Structure of Supply Chain
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I. Facilities
Involve plants, warehouses, distribution
centers, transportation infrastructure and
communication links.
Challenge: How should these be aligned and
realigned across the members of the SC to
maximize efficiency, speed and
responsiveness for the whole chain.
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II. Functions
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Traditional functional organization around
marketing, manufacturing, finance etc. does
not foster an integrated approach to the
challenges of the Modern Supply Chain
Management

A more of an inter-functional, team
approach to management is needed.
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III. Activities:

Traditional Materials management involve:
purchasing
 shipping/receiving
 inventory management
 production scheduling
 transportation/distribution
 customer service
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Supply-Chain Decisions
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Sourcing:
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Quality of materials/parts
Supplier selection
Location of suppliers
Ordering practices
In-bound transportation channels
Production
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Plant Location
Make versus Buy
Capacity of Plants
Product Quality
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SC Decisions (cont.)

Inventory
– How much safety stock?
– JIT practices
– Replenishment policies
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Distribution
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Channels of distribution
Transportation modes
In-house vs. out-sourced
DC locations
Recycling/recovery practices
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State of Integration

Stage I: traditional managemet where all
facilities, functions and activities are managed
independently (prior to 1960’s)

Stage II: A company integrates its material
management activities and functions within its
own 4 walls (1960’s)

Stage III: Enterprise Extension-- couple,
coordinate and integrate all facilities, functions
and activities for the entire supply chain (1990’s
and beyond)
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Three Flows

Physical goods, components, materials, recycling and recovery
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Information -- both upstream and
downstream.. Main means of integration

Financial
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Bull Whip Effect

Demand uncertainty is the main cause of
inefficiencies on the supply chain

Small variations in demand at the customer end
often produce dramatic and violent fluctuations in
orders down stream (bullwhip)

Integrating the supply chain tries to dampen these
fluctuations-- often by sharing information
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Supply Chain Strategies
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Responsive supply chains:
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Efficient supply chains:
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Great variety of short life cycle, customized
products --Innovative Products
Highly stable and predictable demand --Functional
products
A trade-off to be resolved
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Relationships

Creating a trusting, mutually beneficial
relationships among the members of the
supply chain is essential

Contrary to the traditional approach, in
modern SCM, the suppliers are not
considered as adversaries but as trusted
partners
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SC Challenges
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Involves a number of different companies with
diverse objectives, philosophies and management
styles
Information systems used by different members
may not be compatible for seamless information
sharing
Sharing the benefits and risks is not always easy
Lack of universally accepted performance
measures
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