Class 3

Professor: Dr. Sungchul Hong

Reference:
Supply Chain Management Strategy, Planning, and Operation.
Sunil Chopra, Peter Meindl
Prentice Hall, !!"
Chapter Summary
Chapter ": #nderstanding the Supply Chain
What is a supply chain?
Here is this $oo%&s e'planation of (supply chain):
(* supply chain consists of all stages in+ol+ed, directly or indirectly, in
ful,lling a customer re-uest. .he supply chain not only includes the
manufacturer and suppliers, $ut also transporters /arehouses,
retailers, and customers themsel+es.
* supply chain is dynamic and in+ol+es the constant 0o/ of
information, production and funds $et/een di1erent stages. 2ach
stage of the supply chain performs di1erent processes and interacts
/ith other stages of the supply chain.)
* typical supply chain may in+ol+e a +ariety of stages such as:
Customers
Retailers
3holesalers4distri$utors
Manufacturers
Component4ra/ material suppliers.
Some supply chain has all the stages $ut some has less according to
the $usiness&s en+ironment. 2ach stage could $e a mar%et or a
hierarchy 5please reference the ,rst class material6. 7n 7nternet supply
chain management, the designer must analy8e the $usiness&s
en+ironment identi,es these stages and types.
The Objective of a Supply Chain
7n a supply chain, each stage generates some +alue. *nd the o$9ecti+e
of e+ery supply chain is to ma'imi8e the o+erall +alue generated. .he
+alue a supply chain generates is the di1erence $et/een /hat the ,nal
product is /orth to the customer and the e1ort the supply chain
e'pends in ,lling the customer&s re-uest.
Supply chain pro,ta$ility is the total pro,t to $e shared across all
supply chain stages not the single stage&s ma'imum pro,t. 3e must
consider the entire chain&s pro,t. .he higher the supply chain
pro,ta$ility, the more successful the supply chain.
7&m emphasi8ing this one more time (Supply chain management
in+ol+es the management of 0o/s $et/een and among stages in a
supply chain to ma'imi8e total proftability.
Decision Phases in a Supply Chain
* Supply chain needs three phases to $uild. .hese phases are
strategy or design phase, planning phase, and operation phase.
"6 Supply chain strategy or design.
7n this phase, /e must consider ho/ to structure the supply
chain. :ocation, capacities of production and /arehousing facilities /ill
$e considered in this phase too.
6 Supply chain planning
7n this phase, companies de,ne a set of operating policies that
go+ern short;term operations. .hey collect data and produce mar%et
and in+entory le+el forecast. *nd they decide /hether they need
su$contract some of manufacturing or not in this phase.
36 Supply chain operation
7n this phase companies ma%e decisions regarding indi+idual
customer orders. .hen, allocate indi+idual orders to in+entory or
production. *nd they also manage shipments, deli+ery and schedules
of truc%s.
Process View of a Supply Chain
* supply chain is a se-uence of processes 5please reference the ,rst
class material6 and 0o/s that ta%e place /ithin and $et/een di1erent
supply chain stages and com$ine to ,ll a customer need for a product.
.here are di1erent +ie/s of this process:
Cycle +ie/: .he processes in a supply chain are di+ided into a series
of cycles, each performed at the interface $et/een t/o successi+e
stages of a supply chain.
Cycle <ie/ of Supply Chain Process has follo/ing cycles
Customer order cycle
Replenishment cycle 5at retailer4distri$utor6
Manufacturing cycle 5distri$utor4manufacturer6
Procurement cycle 5manufacturer4supplier 6
.he information 0o/s from top to $ottom and the products 0o/ from
$ottom to top.
7n the customer order cycle, there are processes performing customer
order cycle.
Customer Order Cycle
Replenishment Cycle
Manufacturing Cycle
Procurement Cycle
6 Push4Pull +ie/: .he processes in a supply chain are di+ided into
t/o categories depending on /hether they are e'ecuted in response to
a customer order or in anticipation of customer orders. Pull processes
are initiated $y a customer order, and push processes are initiated and
performed in anticipation of customer orders. .he pull process /or%s
/ell /ith a custom ordering as the push process /or%s /ell /ith mass
production.
Some supply chain has $oth push and pull in its chain and /e can
identify this push4pull process $oundary.
Here is an e'ample of :: =eans supply chain. .he customer order cycle
is a pull process and replenishment, manufacturing and procurement
cycles are push process.
.he Dell Computer&s Supply Chain 2'ample
7n this company, the customer order and manufacturing cycles are pull
process and only the procurement cycle is push process.
The !portance of Supply Chain "lows
.here is a close connection $et/een the design and management of
supply chain 0o/s and the success of a supply chain.
e.g.6 Dell has only "! days of in+entory contrast to other pc ma%ers of
>! to "!! days. .he success of the Dell supply chain is facilitated $y
sophisticated information e'change. 5Customi8ed /e$ pages6 and
outsourcing.
Dell Computer&s Supply Chain Stages