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2007 Pearson Education 1-1

Supply Chain Management

Chapter 1

Understanding the Supply Chain

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Flow of the presentation

What is a Supply Chain?

Decision Phases in a Supply Chain

Process View of a Supply Chain

The Importance of Supply Chain Flow

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All stages involved, directly or indirectly, in fulfilling

a customer request

Includes manufacturers, suppliers, transporters,

warehouses, retailers, and customers

Within each company, the supply chain includes all

functions involved in fulfilling a customer request

(product development, marketing, operations,distribution, finance, customer service)

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2007 Pearson Education


Customer is an integral part of the supply chain

Includes movement of products from suppliers tomanufacturers to distributors, but also includes

movement of information, funds, and products in bothdirections

Probably more accurate to use the term supplynetwork or supply web

Typical supply chain stages: customers, retailers,distributors, manufacturers, suppliers.

All stages may not be present in all supply chains

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Supply Chain for a Manufacturing

Organization

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Suppliers A

Suppliers B

Suppliers C

Storage Mfg Storage Distributors

Retailer

Customer

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Supply Chain for a Service

Organization

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Suppliers A

Suppliers B

Storage Service Customers

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Customer wants

detergent and goes

to Jewel

Jewel

Supermarket

Jewel or third

party DC

P&G or other

manufacturer

Plastic

Producer

Chemical

manufacturer

(e.g. Oil Company)

Tenneco

Packaging

Paper

Manufacturer

Timber

Industry

Chemical

manufacturer

(e.g. Oil Company)

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Flows in a Supply Chain

Customer

Information

Product

Funds

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The Objective of a Supply Chain

Maximize overall value created

Supply chain value: difference between what the final

product is worth to the customer and the effort the

supply chain expends in filling the customers request

Value is correlated to supply chain profitability

(difference between revenue generated from the

customer and the overall cost across the supply chain)

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Supply chain profitability is total profit to be sharedacross all stages of the supply chain

Supply chain success should be measured by total

supply chain profitability, not profits at an individualstage

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Sources of supply chain revenue: the customer

Sources of supply chain cost: flows of information,

products, or funds between stages of the supply chain

Supply chain management is the management of

flows between and among supply chain stages to

maximize total supply chain profitability

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Decision Phases of a Supply Chain

Supply chain strategy or design

Supply chain planning

Supply chain operation

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Supply Chain Strategy orDesign

Decisions about the structure of the supply chain andwhat processes each stage will perform

Strategic supply chain decisions

Locations and capacities of facilities

Products to be made or stored at various locations

Modes of transportation

Information systems

Supply chain design must support strategic objectivesSupply chain design decisions are long-term and

expensive to reverse must take into account marketuncertainty

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Supply Chain Planning

Planning decisions:

Which markets will be supplied from which locations

Planned buildup of inventories

Subcontracting, backup locations

Inventory policies

Timing and size of market promotions

Must consider in planning decisions demand

uncertainty, exchange rates, competition over the time

horizon

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Supply Chain Operation

Time horizon is weekly or daily

Decisions regarding individual customer orders

Supply chain configuration is fixed and operating

policies are determinedGoal is to implement the operating policies as

effectively as possible

Allocate orders to inventory or production, set order

due dates, generate pick lists at a warehouse, allocatean order to a particular shipment, set deliveryschedules, place replenishment orders

Much less uncertainty (short time horizon)

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Process View of a Supply Chain

Cycle view: processes in a supply chain are divided

into a series of cycles, each performed at the

interfaces between two successive supply chain stages

Push/pull view: processes in a supply chain are

divided into two categories depending on whether

they are executed in response to a customer order

(pull) or in anticipation of a customer order (push)

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Cycle View of Supply Chains

Customer Order Cycle

Replenishment Cycle

Manufacturing Cycle

Procurement Cycle

Customer

Retailer

Distributor

Manufacturer

Supplier

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Cycle View of a Supply Chain

Each cycle occurs at the interface between two successive

stages

Customer order cycle (customer-retailer)

Replenishment cycle (retailer-distributor)Manufacturing cycle (distributor-manufacturer)

Procurement cycle (manufacturer-supplier)

Cycle view clearly defines processes involved and the

owners of each process. Specifies the roles andresponsibilities of each member and the desired outcome

of each process.

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Push/Pull View of Supply Chains

Procurement,Manufacturing andReplenishment cycles

Customer Order

Cycle

Customer

OrderArrives

PUSHPROCESSES PULL PROCESSES

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Push/Pull View of

Supply Chain Processes

Supply chain processes fall into one of two categories

depending on the timing of their execution relative to

customer demand

Pull: execution is initiated in response to a customerorder (reactive)

Push: execution is initiated in anticipation of customer

orders (speculative)

Push/pull boundary separates push processes from

pull processes

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Push/Pull View of

Supply Chain Processes

Useful in considering strategic decisions relating to

supply chain design more global view of how

supply chain processes relate to customer orders

Can combine the push/pull and cycle views

The relative proportion of push and pull processes can

have an impact on supply chain performance

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THE TOP 25 FOR 2011

GARTNER SUPPLY CHAIN

REPORT

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Rank Company Peer Opinion1

(156 voters)(25%)

GartnerOpinion1

(32 voters)(25%)

3-YearWeighted

ROA2

(25%)

InventoryTurns3

(15%)

3-YearWeightedRevenueGrowth

CompositeScore5

1 Apple 2950 536 17.9% 49.3 40.9% 8.50

2 Dell 1909 457 6.6% 38.9 4.1% 5.14

3 P&G 1726 660 9.6% 5.6 2.4% 5.13

4 Research InMotion (RIM)

550 215 25.1% 17.7 43.9% 5.10

5 Amazon 2267 402 6.6% 11.2 34.0% 5.07

6 Cisco Systems 1501 550 10.2% 11.8 5.5% 4.82

7 Wal-MartStores

1755 449 9.0% 8.5 3.6% 4.40

8 McDonald's 711 161 15.3% 141.8 2.6% 4.35

9 PepsiCo 740 445 12.0% 7.8 18.8% 4.11

10Samsung

857 361 9.8% 16.9 22.5% 3.98

11 The Coca-ColaCompany

1305 265 15.3% 5.3 7.9% 3.96

12 Microsoft 566 128 21.4% 16.6 6.1% 3.72

13 Colgate-Palmolive

560 239 20.0% 5.1 3.0% 3.62

14 IBM 994 238 12.5% 21.1 0.8% 3.60

15 Unilever 449 459 11.5% 5.3 5.2% 3.53

16 Intel 871 247 13.6% 4.5 9.7% 3.37

17 HP 949 331 7.0% 14.3 6.7% 3.28

18 Nestle 389 62 22.6% 5.5 0.8% 3.0519 Inditex 376 180 16.9% 4.4 10.5% 3.05

20 Nike 781 144 13.0% 4.7 3.3% 2.72

21 Johnson &Johnson

548 121 13.4% 3.6 -0.3% 2.38

22 Starbucks 544 127 10.6% 8.6 5.1% 2.35

23 Tesco 524 190 5.3% 18.3 8.0% 2.34

24 3M 760 7 13.2% 4.6 5.8% 2.25

25 Kraft Foods 471 192 4.4% 5.9 15.6% 2.03

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What Is Demand-Driven

Excellence?

This model has three overlapping areas of responsibility:

Supply management Manufacturing, logistics,

supply planning and sourcing

Demand management Marketing, sales, demand

planning and service

Product management R&D, engineering and

product development

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Key Findings

The Top 5 include three mainstays Apple, Dell and

P&G and two that joined the list for the first time

last yearResearch In Motion (RIM) and Amazon.

Four new companies joined the list this year: Nestle,Starbucks, 3M and Kraft Foods.

Four key themes emerged this year among the leaders,

including how they deal with volatility, their

approaches to value chain network integration, their

focus on sustainable execution and their abilities to

orchestrate.

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Recommendations

Maximizing Supply Chain Flexibility ( also a Top

Requirement for Global Supply Chain Executives,

According to New Survey from PRTM)

Develop supply chain processes and methodologiesthroughout your trading partner network.

Supplement a clearly articulated, long-term value

chain vision with strong, agile, and sustainable

execution capabilities.

Measure your supply chain as your customers

experience it.

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