EEC 231

9
COURSE LEARNING OUTCOMES
At the end of the course, you should be
able to:
1. Promote the Louisian core values
in making sound supply chain
management decisions.
2. Discuss fundamentals of supply
chain management as they
pertain to sustainable
relationships among various
industry players
3. Apply supply chain and
distribution management
concepts, principles, processes
SUPPLY CHAIN and strategies in case analysis
MANAGEMENT and practical business decision
making situations
4. Critique supply chain drivers and
supply chain operations
5. Integrate concepts/techniques
learned through application in
the preparation of a
comprehensive distribution plan
6. Evaluate alternative solutions to
supply chain issues, trends, and
transformations related to the
dynamics of the environment

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 No matter how prepared you are, there will always be times when things don’t do to plan. The key is to
prepare as well as you can, but at the same time train yourself to adapt to change and be solution-
focused in the moment.

Once you have momentum, fight to keep it. Fight for it with everything you can because it’s one of the
hardest things to create. When you have it, you can ask for things that you never could have without
it.

– Daniel Flynn

COURSE INTRODUCTION
Enterprising individuals and organizations face the unprecedented challenges of the
current economy. Having the competency to make objective choices, rational decisions
and a resilient attitude are necessary to sustain business operations.
In practice, supply chain managers need to be well-versed in process management
and development to ensure maximum product offerings and optimal shipments that
guarantee business client’s order specifications and customer order requirements.
This course intends to equip you with the necessary competencies of a supply chain
manager to facilitate beneficial interdependencies among diverse industries. You are
expected to be able to examine via observation and synthesis the general concepts of
supply chain management to develop a comprehensive purview of the logistical processes
linking the whole supply chain networks. This will enable you to have an ethical perspective
and attitude towards supply chain decision making with a clear focus on value-laden
relationships while maintaining a balance of responsiveness and efficiency leading to the
development and crafting of strategies that emphasize on the philosophy of sustainable
business enterprises. Given the vital role of supply chain managers, this three-unit course
hopes to nurture your potential in decision making relevant to supply chain management.
Supply chain management course covers a comprehensive study of the concepts,
processes and strategies used in the management of supply chains with particular emphasis
on the interrelationships of logistics among diverse industries vis-à-vis the value laden
relationships among the supply chain participants. Moreover, key strategic business
principles relative to channel management or logistics management will also be covered.
Physical distribution as a functional area within the firm and its interface with channel
intermediaries will be analyzed emphasizing on the inter-organization management of the
relationship of these institutions. Specific topics include the supply chain drivers and supply
chain operations that stresses on the systems-approach to managing the entire information
flows, financial flows and materials and services from raw materials suppliers to the end-users.
Current trends and issues in the global perspective will also be introduced to aid you with
competency in supply chain management decision making in the perspective of a supply
chain manager.

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 MODULE9. SUPPLY CHAIN OPERATIONS (Make)

After the completion of this module you should be able to:

a) Explain the integral relationship of product design, production scheduling and facility
management
b) Analyze the MAKE decision-choices required to develop and build goods and
services
c) Interpret the impact of MAKE to supply chain performance and operations

ENGAGE:
Describe the characteristics of manufacturing firms and service operations.

Instruction: Compare and contrast goods producing versus service-oriented organizations

Factor of Comparison Manufacturing Firms Service Providers
Example: Longer shelf life and can be Short shelf life and cannot
Perishability stored for later use be inventoried nor stored

EXPLORE:
Discuss the product design, production scheduling and facility management

The MAKE includes the operations required to develop and build the products and services
that a supply chain provides to customers.

a) Product design
– Product designs and selections of the components needed to build these
products are based on the technology available and product performance
requirements.
– When considering product design from supply chain perspective the aim is to
design products with fewer parts, simple designs, and modular construction from

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 generic sub-assemblies. Noted here is that the supply chain required to support a
product is molded by the product’s design.
– The product design defines the shape of the supply chain and this has a great
impact on the cost and availability of the product.
– There is a natural tendency for design, procurement, and manufacturing people
to have different agendas unless their actions are coordinated.
– A cross functional team can evaluate existing preferred suppliers and
manufacturing facilities.

b) Production scheduling
– Production scheduling allocates available capacity (equipment, labor, and
facilities) to the work that needs to be done. The goal is to use available capacity
in the most efficient and profitable manner.
– The production scheduling operation is a process of finding the right balance
between several competing objectives:
▪ high utilization rates: long production runs and centralized manufacturing
and distribution centers. The idea is to generate and benefit from
economies of scale
▪ low inventory levels: short production runs and just-in-time delivery of raw
materials.
▪ The idea is to minimize the assets and cash tied up in inventory
▪ high levels of customer service: high levels of inventory or many short
production runs. The aim is to provide the customer with quick delivery of
products and not to run out of stock in any product.
– When a single product is to be made in a dedicated facility, scheduling means
organizing operations as efficiently as possible and running the facility at the level
required to meet demand for the product.
– When several different products are to be made in a single facility, each product
will need to be produced for some period of time and then time will be needed
to switch over to production of the next product.
– The first step in scheduling multi-product production is to determine economic lot
size. And the second step is to set the right sequence of production runs for each
product.
– Single product production: scheduling means organizing operations as efficiently
as possible and running the facility at the level required to meet demand
– Multiple product production: single facility on a single assembly line means each
product will need to be produced for some period of time and then time will be
needed to switch over to production of the next product.
– Schedule production so that products with the shortest run out times are made
first.
– After scheduling is done, the resulting inventory should be continuously checked
against actual demand. Is inventory building up too fast? Should the demand
number be changed in the calculation of run out time? Reality rarely happens as
planned so production schedules need to be constantly adjusted.

c) Facility management.
– Facility management decision happen within the constraints set by decisions
about facility locations. Ongoing facility management takes location as a given

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 and focuses on how best to use the available capacity including the role of each
facility, how capacity is allocated in each facility and the allocation of supplies
and markets to each facility.
▪ The role of each facility will play involves decisions that determine what
activities will be performed in which facilities. If a facility is designated to
perform only a single function or serve only a single market, it usually cannot
easily be shifted to perform a different function or serve a different market
if supply chain needs change.
▪ How capacity is allocated in each facility is dictated by the role that each
facility plays. It is easier to change capacity allocation decisions than to
change location decisions but still it is not cost effective to make frequent
changes in allocation. Capacity allocation strongly influences supply chain
performance and profitability. Allocating too little capacity to a facility
creates inability to meet demand and loss of sales. Too much capacity in
a facility results in low utilization rates and higher supply chain costs.
▪ The allocation of suppliers and markets to each facility depend on the first
two decisions. The facility will require certain kinds of suppliers and the
products and volumes that it can handle mean that it can support certain
types of markets. Decisions about the suppliers and markets to allocate to
a facility will affect the costs for transporting supplies to the facility and
transporting finished products from the facility to customers.

EXPLAIN:
Discuss manufacturing decisions on making or buying and insourcing or
outsourcing processes.

In MAKE, the production process is presents opportunities to increase market share and
enhance product offerings to the delight of saturated customers. It is inevitable for
organizations to give customers what they want, how they want, where they want and when
they want products. This comes with costs but certainly the supply chain has to be efficient
and responsiveness in delivering customer order specifications at the right quantity, right
quality, right cost, and right moment.

Suppliers, manufacturers, distributors and services providers have to maintain service levels
at all times as much as possible. However, if demand requires excessive inventories, if
product offerings are no longer attracting customers and if reducing costs and complexity
throughout your supply chain is urgent, then designing products can be considered to
strengthen supply chains to provide greater benefits. Understanding costs and benefits in
product design plans have to be underway including product packaging until product
launching.

MAKE decisions are cost-related and requires calculation of resource utilization. In a make-
or-buy decision, an option to make products inside the company (insource) or to hire
external supply chain partners (outsource) requires details on capacity and resources
needed, appropriate manufacturing or service process to use, information systems,

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 purchasing activities, selection of qualified suppliers and managing collaborative efforts are
worth the consideration.

Insourcing decisions assume that products can be made cheaper, finished products are
manufactured by limited firms, the part needs extremely close quality control monitoring,
and can be manufactured from existing facilities with experienced operators. Outsourcing
decisions assume high investment requirements, no available production facility,
unavailable skilled workers, demand is temporary or seasonal and adherence to legal
formalities.

Reasons for Insourcing are as follows:

– Cost concerns – Lack of competent suppliers
– Desire to expand the manufacturing – Volume too small to get a supplier
focus attracted
– Need of direct control over the – Reduction of logistic costs
product – To maintain a backup source
– Intellectual property concerns – Political and environmental reasons
– Quality control concerns – Organizational pride
– Supplier unreliability

Reasons for Outsourcing are as follows:

– Lack of technical expertise – Insufficient capacity to produce in-
– Supplier’s expertise on the technical house
areas and the domain – Brand preferences
– Cost considerations – Strategic partnerships
– Need of small volume

Study the examples presented below to enhance your understanding of the supply chain
operation – MAKE. DELL’s four supply chains. Dell Inc. created four supply chains, each
dedicated to a different customer segment, but all configured in such a way that the
company could take advantage of synergies across the different supply chains.

BUILD-TO-ORDER BUILD-TO-PLAN BUILD-TO-STOCK BUILD-TO-SPEC

Customer Online/Low volume Online/popular
Retail Corporate clients
Segment configurations configurations
Small number of Small number of
Configuration defined Designed for
Products configurations configurations
by customers customer
designed for market designed for market
Production batch
One Large Large Large
size
Quantity and
Production Assembly is driven by Smooth production to Smooth production to
schedule designed by
strategy individual order cut cost cut cost
customer order
Finished goods
No Yes (at retailer) Yes (at Dell) No
inventory
Long from
manufacturing to Long to reduce
Short to achieve Long to reduce
Lead time stocking locations and shipping cost
responsiveness shipping cost
short to
to customer locations
Planning horizon Short Long Medium Long

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 The figure below is from the study of Parvez, Ullah, Sabui and Islam (2018) who proposed for
Build-to-Order for Dell Inc. The research was on the production of laptops where they
developed an optimum supply chain network and build-to-order management for laptop
manufacturing. Their findings suggest that if Dell Inc starts their business with Buill-to-Order
supply chain tactic, they will be able to increase more market share and gain more profit.

Build-to-order (BTO)is also known as made-to-order which focuses on production after the
customer demands the product. Build-to-stock (BTS) is also known as make-to-stock which
focuses on production before demand for the product is actually available

BTO is ideal for higher-end and technological products like vehicles or armaments.
Manufacturers only fulfil customer order placements making them less prone to losses.
However, there is difficulty in meeting sudden changes in demand.

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 BTS is great for companies that specialize in a few products or those with little need for
customization like processed food and textile. Mass production helps bring down costs.
However, lower than expected demand results to losses on already made products while
higher than expected demand means companies will lose out on sales.

ELABORATE:
Suggest best practices and benchmarks in manufacturing/

Instruction: Look for reading materials, news items, feature stories or watch video-clips of
factories or manufacturing firms. Gather insights on how they manage their supply chains in
terms of designing products, scheduling production, administering assembly operations,
maintaining standards in their facilities particularly in their manufacturing plants and
warehouse.

EVALUATE:
Critique the ‘make’ as a supply chain operation.

Short essay questions. Answer what is asked in 150 – 200 words.

1. Why do stores operating in central business districts situate their factories in the
outskirts of the city proper?
2. How can the product design be aligned to the supply chain operations?
3. When is it likely for an international supplier of furniture to insource or outsource its
production? Explain your choice.

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means, electronic, mechanical, photocopying, recording, or otherwise of any part of this document, without the prior written permission of SLU, is strictly prohibited. 8