Supply Chain Management
Lecture 1
Announcements
• Workshop on applying for scholarships
– Jan 19, 10:00am-1:00pm, KOBL 360
– Jan 28, 12:00pm-2:00pm, KOBL 360
• Signup sheet outside Trep Café
– Jan 13, 8:00am-1:00pm
– Jan 14, 8:00am-1:00pm
What is Supply Chain Management?
What is a Supply Chain?
• A supply chain consists of all parties involved, directly or
indirectly, in fulfilling a customer request
– Suppliers, manufacturers, transporters, warehouses, retailers, and
customers
• A supply chain includes all functions involved in receiving
and filling a customer request
– New product development, marketing, operations, distribution,
finance, and customer service
• A supply chain is the entire process of moving a product
or service from suppliers to customers
Stages of a Detergent Supply Chain
Timber
Company
Chemical
Manufacturer
Paper
Manufacturer
Pactiv
Corporation
P&G or Other
Manufacturer
Wal-Mart
or Third
Party DC
Plastic
Producer
Wal-Mart
Store
Customer
Example: Wal-Mart
Procter & Gamble
Da-Fa Clothing, Inc. (China)
Wal-Mart
or third-party
distribution
centers
Wal-Mart
Stores
Customers Request:
Buying detergent,
clothes, TV, …...
SONY Factory (Malaysia)
Fabric Producer
Electronics Components Producer
Zipper Producer
Plastic Producer
Plastic Producer
Chemical Producer
Thread Producer
Example: HP
Suppliers
IC Mfg
Suppliers
PC Board
Suppliers
Subassembly
FAT
USA
DCs
Retailer
Customer
Europe
DCs
Retailer
Customer
Asian
DCs
Retailer
Customer
Suppliers
FAT = Final assembly & test
IC Mfg = Integrated circuit manufacturing
PC Board = Printed circuit board
Example: Dell
Monitors by SONY (Mexico)
Keyboards by Acer (Taiwan)
CPU by Intel (USA)
Dell
Assembly
Plant
Customers order
computers on
Dell’s website
Other components
Dell is significantly revamping its entire supply
chain strategy and, in large measure, abandoning
its make-to-order model [April, 2008]
Supply Chain Stages
• A typical supply chain involves a variety of stages
Supplier
Manufacturer
Distributor
Retailer
Customer
Most supply chains are actually supply networks
Supply Chain Flows
Value-Added Services
Supplier
Manufacturer
Distributor
Material/Product Flow
Funds/Demand Flow
Information Flow
Returns/Recylcing
Retailer
Customer
What is a Supply Chain?
• A supply chain consists of all parties involved, directly or
indirectly, in fulfilling a customer request
– Suppliers, manufacturers, transporters, warehouses, retailers, and
customers
• A supply chain includes all functions involved in receiving
and filling a customer request
– New product development, marketing, operations, distribution,
finance, and customer service
• A supply chain is the entire process of moving a product
or service from suppliers to customers
Supply Chain Cycle
Reverse logistics
Customer
Marketing
Product design
Logistics
Suppliers
Manufacturing
The Objective of a Supply Chain
Maximize overall value created
• Supply chain value is the difference between
what the final product is worth to the customer
and the costs the supply chain incurs in filling the
customer’s request
• Supply chain profitability (or supply chain
surplus) is the difference between the revenue
generated from the customer and the overall cost
across the supply chain
The Objective of a Supply Chain
• Sources of supply chain revenue: Customer
– Best Buy receives $60 from a customer for a wireless router
• Sources of supply chain cost: Flows of information,
products, and funds between any pair of stages in the
supply chain
– Difference between $60 and the sum of all costs is the supply
chain profit or supply chain surplus
Supply chain profitability is the total profit to be shared
across all supply chain stages and intermediaries
Supply chain success should be measured by total supply
chain profitability, not profits at an individual stage
The Importance of Supply Chain
Decisions
• Supply chain design, planning, and operation
play a significant role in the success or failure of a
firm
–
–
–
–
–
–
–
–
Wal-Mart
Dell
Seven-Eleven Japan
Amazon
Toyota
W.W. Grainger and McMaster-Carr
Webvan
Snapple
Overview
• Part I
– Understanding the supply chain
• Chapters: 1, 2, 3
• Part II
– Designing the supply chain network
• Chapters: 4, 5, 6
• Part III
– Planning demand and supply in a supply chain
• Chapters: 7, 8, 9
Overview
• Part IV
– Planning and managing inventories in a supply chain
• Chapters: 10, 11, 12
• Part V
– Designing and planning transportation networks
• Chapter: 13
• Part VI
– Sourcing and pricing decisions in a supply chain
• Chapters: 14, 15, 16, 17