SUPPLY CHAIN
MANAGEMENT
COURSE
I N S T RU C TO R : N H U C H U N G - U E L
L E C T U R E 1 : U N D E R S TA N D I N G
T H E S U P P LY C H A I N
INTRODUCTION
What do you understand when we talk
about supply chain (management)?
Can you give an examples of a supply
chain?
How can you manage the supply chain?
What could be obstacles?
LEARNING OBJECTIVES
1.1 Discuss the goal of a supply chain and explain the impact of supply chain decisions on the success of a firm.
1.2 Define the three key supply chain decision phases and explain the significance of each one.
1.3 Describe the cycle and push/pull views along with the macro processes of a supply chain.
1.4 Identify important issues and decisions to be addressed in a supply chain.
1.5 Differentiate between Logistics and Supply Chain
CONTENTS
1. What is a supply chain?
2. The objective of a supply chain
3. The importance of supply chain decisions
4. Decision phases in a supply chain
5. Process views of a supply chain
6. Supply chain vs Logistics
1 . W H AT
IS A
S U P P LY
CHAIN?
1 . W H AT I S A
S U P P LY C H A I N ?
• “A supply chain consists of all parties involved, directly or
indirectly, in fulfilling a customer request. The supply chain
includes not only the manufacturer and suppliers, but also
transporters, warehouses, retailers, and even customers
themselves. Within each organization, such as a
manufacturer, the supply chain includes all functions
involved in receiving and filling a customer request. These
functions include, but are not limited to, new product
development, marketing, operations, distribution, finance,
and customer service.”
1. WHAT IS A SUPPLY CHAIN?
Figure 1.2: “The Three Flows in a Supply Chain”
Source: Chopra, Sunil. (2019) “Supply Chain Management:
Strategy, Planning, and Operation, Global Edition.”
STAGES WITHIN A SUPPLY CHAIN
SUPPLY CHAIN
COMPLEXITY
2. SUPPLY CHAIN
OBJECTIVE
• “The objective of every supply chain should be to
maximize the net value generated. The net value 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.”
2. SUPPLY CHAIN OBJECTIVE
2. SUPPLY CHAIN
OBJECTIVE
– Integrating supply chain players involved
– Minimizing system-wide costs, while meeting customer requirements
– Maximizing supply chain value
Supply Chain Surplus = Customer Value - Supply Chain Cost
Customer Surplus = Customer Value – Selling Price
Supply Chain Profitability = Selling Price – Supply Chain Cost
Supply Chain Surplus = Customer Surplus + Supply Chain Profitability
3. THE IMPORTANCE OF SUPPLY
CHAIN DECISIONS
3. THE IMPORTANCE OF SUPPLY
CHAIN DECISIONS
4. DECISION PHASES
IN A SUPPLY CHAIN
• Successful supply chain management includes many
decision to be made to increase the supply chain surplus.
• Three levels:
1.
Supply chain strategy and design: how to structure the
supply chain over the next several years
2.
Supply chain planning: decisions over the next quarter
or year
3.
Supply chain operations: daily or weekly operational
decisions
– Strategic supply chain decisions
o Locations and capacities of facilities
SUPPLY
CHAIN
STRATEGY OR
DESIGN
o Outsource or perform in house
o Products to be made or stored at various locations
o Modes of transportation
o Information systems
– Supply chain design must support strategic objectives
– Supply chain design decisions are long-term and
expensive to reverse
– Fixed by the supply configuration from previous
phase that establishes constraints for planning
– Supply chain planning decisions
SUPPLY
CHAIN
PLANNING
o A forecast of demand in the coming year
o Which markets will be supplied from which
locations
o Subcontracting
o Inventory policies
o Timing and size of market promotions
o Demand uncertainty, exchange rates, competition
5. PROCESS VIEW OF A SUPPLY
CHAIN
5. PROCESS VIEW OF A SUPPLY
CHAIN
5. PROCESS VIEW OF A SUPPLY
CHAIN
5. PROCESS VIEW OF A SUPPLY
CHAIN
CUSTOMER ORDER DECOUPLE POINT
6. LOGISTICS VS SUPPLY CHAIN
MANAGEMENT
– Logistics is responsible for the movement of raw materials, work-in-process, finished
inventories from suppliers through an organization to customers.
– “Logistics management is that part of supply chain management that plans, implements, and
controls the efficient, effective forward and reverse flow and storage of goods, services,
and related information between the point of origin and the point of consumption in
order to meet customers’ requirements.” (CSCMP)
à Logistics is a subset of supply chain
6. LOGISTICS VS SUPPLY CHAIN
MANAGEMENT
Logistics
Supply chain management
Logistics basically consists of activities within
an organization (intra-organization).
SCM refers to network among organizations
coordinating to deliver products to markets
(inter-organization)
Logistics focuses on transport, inventory
management, warehousing, etc.
SCM consists of logistics activities, marketing,
new product introduction, finance, customer
service
DICUSSION
QUESTIONS
• Should the members of a supply chain
maximize individual profits in order to
increase the overall supply chain surplus?
Explain.
• What are some strategic, planning, and
operational decisions that must be made by
H&M, a Swedish apparel retailer?
• Consider the supply chain involved when a
customer purchases a cup of coffee at a
local café. Identify the cycles in this supply
chain and the location of the push/pull
boundary.
• List some of the strategic, planning, and
operational decisions that an automotive
manufacturer must make with regards to
its supply chain.
THE END OF
LECTURE 1
T H A N K YO U A N D S E E YO U N E X T W E E K !