National Defense

Learning University
Objectives

• Discuss the goal of a supply chain, and explain the impact of supply chain
decisions on the success of a firm.

• NAME: Saira Arif

Identify the three key supply chain decision phases, and explain the significance
of each one.
EMAIL: saira.arif@live.com
• Describe the cycle and push/pull views of a supply chain.

Supply Chain Management

• 3 Credit
Classify the supply chain macro processes in a firm. Hrs.
 Learning Objectives
National Defense University

• Discuss the goal of a supply chain, and explain the impact of supply chain
decisions on the success of a firm.

• Identify the three key supply chain decision phases, and explain the significance
of each one. Saira Arif

• Describe the cycle and push/pull Supply

views ofChain Management
a supply chain.

CHAPTER :1
• Classify the supply chain macro processes in a firm.
Understanding the Supply Chain
 Learning Objectives

• Discuss the goal of a supply chain, and explain the impact of supply chain
decisions on the success of a firm.

• Identify the three key supply chain decision phases, and explain the significance
of each one.

• Describe the cycle and push/pull views of a supply chain.

• Classify the supply chain macro processes in a firm.

 What is a Supply Chain?

 All stages involved, directly or indirectly, in fulfilling a customer request.

 Within each company, the supply chain includes all functions involved in
fulfilling a customer request (product development, marketing,
operations, distribution, finance, customer service).

 These stages Includes,

i. Customer

ii. Retailer

iii. Distributor

iv. Manufacturer

v. Supplier
 What is a Supply Chain?
• Typical supply chain stages: customers, retailers, distributors, manufacturers,
suppliers.
 What is a Supply Chain?
 Customer is an integral part of the supply chain Includes movement of products
from suppliers to manufacturers to distributors, but also includes movement of
information, funds, and products in both directions.
 A supply chain is dynamic and
 It involves the constant flow of
i. Information,
ii. Product
iii. Funds between different stages
For example :Walmart provides the product, as well as pricing and availability
information, to the customer.
The customer transfers funds to Walmart. Walmart conveys point-of-sales data and
replenishment orders to the warehouse or distributor, which transfers the
replenishment order via trucks back to the store.
Walmart transfers funds to the distributor after the replenishment. The distributor also
provides pricing information and sends delivery schedules to Walmart. Walmart may
send back packaging material to be recycled.
 Flows in a Supply Chain
• Typical supply chain stages: customers, retailers, distributors, manufacturers,
suppliers.

S M D R C Flow of Products
u a i e u
Flow of Information p n s t s Flow of Information
p u t a t
l f r i o
i a i l m
Flow of Funds e c b e e
r t u r r
u t
r o
e r
r
 Flows in a Supply Chain

Supply chain is not just the movement of product or supply chain from supplier to
manufacturer to distributor to retails to customer along a chain
 Flows in a Supply Chain
All stages may not be present in all supply chains (e.g., no retailer or
distributor for Dell).

For example, Dell has two supply chain structures that it uses to serve its customers.
For its server business, Dell builds to order; that is, a customer order initiates
manufacturing at Dell.
Dell also sells consumer products such as PCs and tablets through retailers such as
Walmart, which carry Dell products in inventory.
 Flows in a Supply Chain
upstream

supplier

supplier

supplier

manufacturer distributer retailer customer

supplier
supplier
downstream

supplier

fig: an example of supply chain.

 What is the goal of Supply Chain?

Right Product  At Right Place

Right Quantity At Right Time

Right Quality At Right Value

Supply chain management is concerned with the efficient integration of suppliers,

factories, warehouses , stores so that products are produced and distributed
In right quantities
At right Place
At right time
In order to minimize total system cost & satisfy the customer requirements.
 The Objective of a Supply Chain
• Maximize overall value generated.

• The value (also known as supply chain surplus) a supply chain generates is the
difference between what the value of the final product is to the customer and the
costs the entire supply chain incurs in filling the customer’s request.

Supply Chain Surplus = Customer Value - Supply Chain Cost

Revenue generated from Overall cost across the

customer supply chain

The value of the final product may vary for each customer and can be estimated by the
maximum amount the customer is willing to pay for it.

The supply chain surplus becomes supply chain profitability, the difference between the
revenue generated from the customer and the overall cost across the supply chain
 The Objective of a Supply Chain

• Customer is the only source of revenue.

• Success should be measured by total supply chain profitability, not by profits at an

individual stage.

• The higher the supply chain profitability, the more successful the supply chain.

Example: A customer purchases a mobile phone from shop for 15,000 (revenue).Supply
chain incurs costs (information, storage, transportation, components, assembly, etc.).

• Difference between Rs 15,000 and the sum of all of these costs is the supply chain
profit. Supply chain profitability is total profit to be shared across all stages of the
supply chain.

• Effective supply chain management is the management of flows between and among
supply chain stages to maximize total supply chain surplus.
 Importance of Supply Chain Decisions

Examples:

• Wal-Mart, $1 billion sales in 1980 to $469 billion in 2013

• Seven-Eleven Japan, ¥1 billion sales in 1974 to ¥1.9 trillion in 2013

• Borders, $4 billion in 2004 to $2.8 billion in 2009

• Dell, $56 billion in 2006, adopted new supply chain strategies

Decision Phases of a Supply Chain
 Key Point

Supply chain design, planning, and operation decisions play a

significant role in the success or failure of a firm. To stay competitive,
supply chains must adapt to changing technology and customer
expectations.
Decision Phases of a Supply Chain

Depends upon

• Frequency of each decision

• The time frame during which a decision phase has an impact

1- Supply chain strategy or design

 How to structure the supply chain over the next several years

2- Supply chain planning

 Decisions over the next quarter or year

3- Supply chain operation

 Daily or weekly operational decisions

 Supply Chain Strategy or Design

• Decisions about how to the structure the supply chain and what processes
each stage will perform, over next several years .
• Strategic supply chain decisions
i. Locations and capacities of facilities
ii. Products to be made or stored at various locations
iii. Modes of transportation
iv. Information systems.

Supply chain design must support strategic objectives. Supply chain design
decisions are
i. Long-term
ii. Expensive to alter on short notices—must take into account market
uncertainty over the following years.
iii. Must be aligned along company’s long term goals.
 Supply Chain Planning

• The time frame is quarter to a year. Starts with a forecast of demand in the
coming year. The other factors are cost/prices. Companies must include in their
planning decisions
i. Demand uncertainty
ii. Exchange rates
iii. Competition over the time horizon

• Planning decisions include :

i. Which markets will be supplied from which locations

ii. Planned buildup of inventories

iii. Subcontracting, backup locations

iv. Inventory policies

v. Timing and size of market promotions

 Supply Chain Operation

• Time frame is weekly or daily. Much less uncertainty (short time horizon). For
example Decisions regarding individual customer orders.
• Supply chain design is fixed with planning policies already defined.
• The Goal is to implement the operating policies as effectively as possible.

• This phase can include the decisions about following

i. Allocate orders to inventory or production,
ii. set order due dates,
iii. generate pick lists at a warehouse,
iv. allocate an order to a particular shipment,
v. set delivery schedules,
vi. place replenishment orders.
 Key Point

Supply chain decision phases may be categorized as design,

planning, or operational, depending on the time frame during
which the decisions made apply.
To stay competitive supply chain must adapt to changing
technology and customer expectations.
 Process View of a Supply Chain

A supply chain is a sequence of processes and flows that take place within and
between different stages and combine to fill a customer need for a product. There
are two ways to view the processes performed in a supply chain.
1-Cycle view
2- Push/Pull View

• 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).
Cycle View of Supply Chain Processes
 Cycle View of Supply Chain Processes

All supply chain processes can be broken down into the following four process cycles,
1. Customer order cycle
2. Replenishment cycle
3. Manufacturing cycle
4. Procurement cycle

• Each cycle occurs at the interface between two successive stages of the supply
chain. Not every supply chain will have all four cycles clearly separated.
 Cycle View of Supply Chain Processes
1. Customer order cycle
Involves all processes directly involved in receiving and filling the customer’s order
• Customer arrival
• Customer order entry
• Customer order fulfillment
• Customer order receiving
2- Replenishment cycle
All processes involved in replenishing retailer inventories (retailer is now the
customer)
• Retail order trigger
• Retail order entry
• Retail order fulfillment
• Retail order receiving
 Cycle View of Supply Chain Processes
3-Manufacturing cycle
All processes involved in replenishing distributor (or retailer) inventory
• Order arrival from the distributor, retailer, or customer
• Production scheduling
• Manufacturing and shipping
• Receiving at the distributor, retailer, or customer
4- Procurement cycle
All processes necessary to ensure that materials are available for manufacturing to
occur according to schedule
• Manufacturer orders components from suppliers to replenish component
inventories
• However, component orders can be determined precisely from production
schedules (different from retailer/distributor orders that are based on
uncertain customer demand)
 Key Point

A cycle view of the supply chain clearly defines the processes

involved and the owners of each process. This view is useful
when considering operational decisions because it specifies
the roles and responsibilities of each member of the supply
chain and the desired outcome for each process.
 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: Here execution is initiated in response to a customer order (reactive).

• Push: Here execution is initiated in anticipation of customer orders

(speculative).

• Push/pull boundary separates push processes from pull processes.

Process View of a Supply Chain
 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 view

 Dell
 L.L.Bean

• The relative proportion of push and pull processes can have an impact on
supply chain performance.
Push/Pull View—L.L. Bean
 Push/Pull View—Dell

Figure 1-7
 Key Point

A push/pull view of the supply chain categorizes processes

based on whether they are initiated in response to a customer
order (pull) or in anticipation of a customer order (push). This
view is useful when considering strategic decisions relating to
supply chain design
 Difference between Push and Pull view in supply chain

No Push view Pull view

1. Execution initiate in anticipation of Execution initiate in response to
customer order customer order

2. Demand is uncertain Demand is certain

3. Speculative process Reactive process

4. High complexity Low complexity

5. Focus on resources allocation Focus on responsiveness

6. Objective is to minimize the cost Objective is to maximize the service

 Supply Chain Macro Processes

• All Supply chain processes discussed in the two process views can be classified
into three macro processes:

 Customer Relationship Management (CRM)

All processes at the interface between the firm and its customers

 Internal Supply Chain Management (ISCM)

All processes that are internal to the firm

 Supplier Relationship Management (SRM)

All processes at the interface between the firm and its suppliers

• The three macro processes manage the flow of information, product, and funds
required to generate, receive, and fulfill a customer request.

• Integration among the above three macro processes is critical for effective and
successful supply chain management.
 Supply Chain Macro Processes

Figure 1-8
 Key Point

Within a firm, all supply chain activities belong to one of three

macro processes: CRM, ISCM, and SRM. Integration among the
three macro processes is crucial for successful supply chain
management.
 Summary of Learning Objectives

• Discuss the goal of a supply chain and explain the impact of supply
chain decisions on the success of a firm.

• Identify the three key supply chain decision phases and explain the
significance of each one.

• Describe the cycle and push/pull views of a supply chain.

• Classify the supply chain macro processes in a firm.

Thanks