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

CustomerWal-Mart

Store

Wal-Mart or ThirdParty DC

P&G or OtherManufacturer

PactivCorporation

PaperManufacturer

TimberCompany

PlasticProducer

ChemicalManufacturer

Example: Wal-Mart

Customers Request:Buying detergent,clothes, TV, …...

Wal-Mart Stores

Wal-Mart or third-partydistribution

centers

Procter & Gamble

Plastic ProducerFabric Producer

Da-Fa Clothing, Inc. (China)

SONY Factory (Malaysia)

Electronics Components Producer

Chemical Producer

Zipper Producer

Thread Producer

Plastic Producer

Example: HP

Subassembly

Suppliers

FAT

USA DCs

Europe DCs

AsianDCsSuppliers

FAT = Final assembly & testIC Mfg = Integrated circuit manufacturingPC Board = Printed circuit board

Suppliers

Suppliers PC Board

IC Mfg Retailer Customer

Retailer Customer

Retailer Customer

Example: Dell

Customers order computers on Dell’s website

Dell Assembly

Plant

Monitors by SONY (Mexico)

Keyboards by Acer (Taiwan)

CPU by Intel (USA)

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

Manufacturer Distributor Retailer CustomerSupplier

Most supply chains are actually supply networks

Supply Chain Flows

Manufacturer Distributor Retailer CustomerSupplier

Value-Added Services

Material/Product Flow

Funds/Demand Flow

Information Flow

Returns/Recylcing

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

Marketing

Product design

Suppliers

Manufacturing

Logistics

Customer

Reverse logistics

The Objective of a Supply Chain

• 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

Maximize overall value created

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