Fundamentals of Supply Chain Management

BCSC 611

PhD in Project Management & Entrepreneurship (Australia)

Master of Applied Project Management (Australia)
Dr. Torky Althaqafi Certified Project Management Professional (PMP)®
Certified Enterprise Risk Management Specialist (CERMS)
Email: tmalthaqafi@uj.edu.sa Certified Strategic Planning & KPIs Practitioner (SPKP)
College of Business Certified International Supply Chain Professional (CISCP)
University of Jeddah Certified International Supply Chain Consultant (CISCC)
Accredited SME Consultants (ASMEC)
Course Outline
Course Outline

1 Supply Chain Management & Logistics Management

2 Customer Service
3 Distribution strategy and cost analysis
4 Transportation
5 Matching Supply and demand
6 Strategic Lead Time Management
Textbooks

• Supply Chain Logistics Management, Bowersox, D.J., D.J. Closs, and M.B. Cooper,
2023, 6th ed, McGraw Hill International Edition

Support:
• Logistics & Supply Chain Management, Martin Christopher, 2023, 6th ed, FT Press
ISBN: 978-1292416182.
• Supply Chain Management: A Global Perspective, Sanders, 2020, Wiley.

• Martin, Ch. (2023). Logistics & Supply Chain Management, (6th ed.). FT Press.

• Nada, R. S. (2020). Supply Chain Management: A Global Perspective. John Wiley &
Sons, Inc.
Students Assessment Activities

Assessment timing Percentage of Total

No Assessment Activities *
(in week no) Assessment Score
1 Participation & Attendance Each session 10%
2 Assignments 16 10%
3 Group Projects & Presentation 18 20%
4 Midterm Examination 7 20%
5 Final Examination 19-20 40%
Chapter 1:
21st-Century Supply Chains
Introduction to Supply Chain Management
• What is supply chain management?
• Supply chain value and processes
• Customer service
• Business models and sourcing
• Manufacturing and integrated planning
• Integrated operations planning
• Advanced planning and scheduling
Introduction to Supply Chain Management
• Inventory management
• Transportation
• Warehousing and material handling
• Packaging
• Global supply chains
• Supply chain design
• Relationship management
• Performance measurement
• Future trends
Course Objectives
• Understand supply chain management and its role for the firm, the
supply chain, and the economy.
• Compare and contrast the supply chain characteristics for various
industries.
• Understand the differences between supply chain and value chain.
• Understand the functions, activities, and processes involved in supply
chain management, with a specific focus on procurement,
manufacturing, planning, and globalization.
What is Supply Chain Management?
• Define supply chain management
• Define supply chain value proposition
• Provide examples of supply chain management

– Manufacturing – Humanitarian
– Distribution – Facilities
– Services – Recycling
– Talent – Military

• Identify major industry disrupters and their impact

Supply Chain Management: Defined
Supply chain management is a set of processes used to effectively
and efficiently integrate suppliers, manufacturers, distribution
centers, distributors, and retailers so that products are produced and
distributed in the right quantities, to the right locations, and at the
right time in order to minimize system-wide costs while achieving the
consumer’s desired value proposition.
What is Supply Chain Management?
• Supply chain management is a way to link major business
processes within and across companies into a high-performance
business model that drives competitive advantage

• Supply chain management integrates supply and demand

management within and between companies
Additional Definition
“ Supply Chain Management encompasses the planning and
management of all activities involved in sourcing and procurement,
conversion, and all logistics management activities. Importantly, it also
includes coordination and collaboration with channel partners, which can
be suppliers, intermediaries, third-party service providers, and
customers. In essence, Supply Chain Management integrates supply
and demand management within and across companies.”

Council of Supply Chain Management Professionals – CSCMP

CSCMP Supply Chain Management Definitions and Glossary
Common Definition Themes
• Provides combination of product, service, or solution to end-
consumer
• Considers end-to-end activities across the supply chain
• Requires the performance of many physical and service
processes
• Integration within the firm and across supply chain partners
• Requires execution of sequence of functions
What is SCM and logistics?
Supply Chain Management and logistics are two closely related but
distinct concepts that play crucial roles in the efficient operation of
businesses, particularly those involved in the production and
distribution of goods and services.
What is SCM and logistics?
Supply Chain Management (SCM):
Definition: SCM refers to the end-to-end process of planning,
implementing, and controlling the flow of goods, services, information,
and finances from the point of origin to the point of consumption. It
involves the coordination and integration of various activities, including
procurement, production, transportation, warehousing, and distribution.
What is SCM and logistics?
Supply Chain Management (SCM):
Key Components:
Planning: Forecasting demand, managing inventory, and developing strategies
for production and distribution.
Sourcing: Selecting suppliers, negotiating contracts, and ensuring a reliable
supply of raw materials or components.
Manufacturing/Production: Transforming raw materials into finished goods
efficiently and cost-effectively.
Distribution/Logistics: Coordinating the movement of goods from the
manufacturer to the end consumer.
Return Management: Handling product returns and managing reverse logistics.
What is SCM and logistics?
Logistics:
Definition: Logistics is a subset of SCM and specifically focuses on the
physical movement and storage of goods. It involves the detailed
coordination and implementation of activities related to transportation,
warehousing, and distribution.
What is SCM and logistics?
Logistics:
Key Components:
Transportation: Selecting the most efficient and cost-effective methods of moving goods
from one location to another, whether by road, rail, sea, or air.
Warehousing: Managing the storage of goods, including inventory control, order picking,
and packing.
Distribution: Organizing the movement of products to their final destinations, often
involving coordination with various intermediaries such as retailers or wholesalers.
Order Fulfillment: Ensuring that customer orders are processed accurately and
delivered on time.
Reverse Logistics: Managing the return of goods from the customer back to the
manufacturer or other points in the supply chain.
The Transformation Process
Customer vs. Consumer
• Customers use product in additional process or product, such as:
– Manufacturers that consume product or use it as an integral part or component
– Wholesalers and retailers that purchase products from manufacturers for resale

• Consumers consume the product, such as:

– Residential homes that consume food and use appliances
– Industrial organizations that consume products for facility maintenance
Why Integration Creates Value
• It is useful to point out that customers have at least three perspectives of value.
1. The traditional perspective is economic value
– Economy of scale seeks to fully utilize fixed assets to achieve the lowest, total landed
cost.
– The focus of economic value is efficiency of product/service creation
– The customer take-away of economic value is quality at a low price.
2. A second value perspective is market value
– Market value is about presenting an attractive variety of products
– at the right time and place to realize effectiveness
– Market value focuses on achieving economy of scope in product/service presentation
– The creation of shopping malls, large-scale mass-merchandising retail stores, and
multivendor Internet fulfillment operations are all initiatives to achieve market value.
– As a result convenient product/service/solution/variety and choice.
Why Integration Creates Value
• It is useful to point out that customers have at least three perspectives of value.
2. increasingly firms are recognizing that business success also depends upon a third
perspective of value, referred to as relevancy value.
– It involves customization of value-adding services, over and above basic product
characteristics and physical location.
– Relevancy value means the right products and services, as reflected by market value,
at the right price, as reflected by economic value,
modified, sequenced, synchronized, and positioned in a manner
that creates customer-specific value
 Table 1.1
Integrative Management Value Proposition
Economic Value Market Value Relevancy Value
• Lowest total cost • Attractive assortment • Customization
• Economy-of-scale • Economy-of-scope • Segmental diversity
efficiency effectiveness • Product/service/solution
• Product/service creation • Product/service positioning
presentation
Procurement or Market or Supply Chain
Manufacturing Distribution Strategy
Strategy Strategy
Is Apple’s Supply Chain Really the No. 1? A Case Study

Supply Chain Planning at

Apple Inc
Is Apple’s Supply Chain Really the No. 1? A Case Study

Supply Chain Model of

Apple Inc
Is Apple’s Supply Chain Really the No. 1? A Case Study
Apple’s Supply Chain Challenges
– The global economy could affect the Company.
– Some re-sellers may also distribute products from competing manufacturers.
– Inventories can become out-dated or exceed anticipated demand.
– Some components are currently obtained from single or limited sources.
– Some custom components are not common to the rest of the industries.
– Ability to obtain components in sufficient quantities is important.
– Supply chain disruption such as natural and man-made disasters can be serious.
– The company depends on logistical services provided by outsourcing partners.
– The company also relies on its partners to adhere to the supplier code of conduct.
Supply Chain Value Adds…
• Reduced operating cost
• Increased revenue
– Fill rate
– Extended offerings
(e.g., location, mix)
– Product/service/solution
– Customization
– New product introduction
• Asset utilization
– Facilities
– Production
– Transportation
– Inventory
 Supply Chain Applications
Product Involving suppliers, manufacturers, distributors, and retailers for consumer
products.
Promotional For items that are being heavily promoted such as end-aisle tasting displays in
wholesale clubs. The major challenge is that all items related to the promotion
(e.g., product, utensils, cooking materials, display materials) must be assembled in
the cart and delivered to the store to meet the display schedule.
Bulk material Moves bulk products such as grains, metals, and chemicals. In many cases, these
materials are relatively low value, so all movement and handling in the supply
chain must take advantage of significant economies of scale and often specialized
vehicles.
Talent Applies supply chain principles to talent management, where individual talent
represents the products that are moved through the supply chain with the value-
added process being training and education.
Supply Chain Applications (cont.)
Business to Addresses the increasing volume of product that is sold online from
consumer (B2C) manufacturers or distributors directly to consumers.

Recycling Handles product returns for recycling of products, components, reprocessing,

and packaging.
Resource Provides facility resources for information-based supply chains, such as
server farms for cloud or social media applications. This includes the purchasing
and sequencing of land, regulatory approvals, utilities, and equipment to provide
the technology services.
Construction Provides and sequences the equipment and the building supplies for
construction.
Recovery Recovers material that has reached its useful life in the field. A recovery supply
chain is useful following military, construction, mining, or drilling operations.
Supply Chain Applications (cont.)
Humanitarian Provides post-event support for disaster recovery. This includes bringing in
equipment for recovery, food and medical care items, and commodities to support
reconstruction.
Global Sources and delivers from multiple regions around the world. While most
supply chains include global aspects, it is important to consider specific global
characteristics, such as demand variation, distance, and documentation.
Durables Facilitates the handling and delivery of heavy equipment, such as agricultural,
construction, or military equipment. The major differentiator for durables supply
chains is specialized transportation equipment due to infrastructure restrictions.
Agricultural Moves agricultural product from the farm to the commodity elevator or the
processing plant. In most cases, the challenge is to move this bulk product
commodity
economically and in a way that the farmer can still make money even when the
price is set by the buyer. In other words, if the farmer is too far from the buyer,
they will have no market for their products.
Supply Chain Applications (cont.)
Innovative Rapidly introduces new product to the market. This is typically a responsive
supply chain that is defined to bring new product variations to market or to have
souvenirs such as for movies, athletic events, or customized product
introductions available when the event is taking place (e.g., concerts, movies,
openings, etc.)
Military Supports military operations. Specialized requirements include the ability to
provide supply chains for a range of products (food, medical, and equipment) in
demanding environments (dessert, jungle, and supporting combat operations).
Clinical trials Supports the very precise demands for completing pharmaceutical clinical trials.
Clinical trials are very demanding due to the need for precise controls of
dosages, ingredient combinations, and drug combinations.
Integrative Management and Supply Chain Processes
Integrative Management and Supply Chain Processes

• Business operations are striving for improved integrative management across all activities,
challenging the long-standing tradition of functional specialization since the industrial
revolution.

• Best practices traditionally emphasized functional efficiency, leading to departmental

structures and performance measurement based on individual functions. Examples include
cost per unit manufactured and cost per hundredweight transported. However, this approach
limits cross-functional measurements and allocations, focusing primarily on common costs like
overhead and labor.

• Integrative management aims to overcome these limitations by aligning operations with

overall business objectives, emphasizing collaboration, and breaking down silos between
departments for more holistic performance evaluation.
 Integrative Management and Supply Chain Processes

Excellence in supply chain performance

requires the simultaneous achievement
of eight key processes.

Operational achievement of these eight

processes forms the essence of
achieving both operational integration
and performance excellence
 Table 1.3
Eight Supply Chain Integrative Processes
Process Description
Demand Planning This process allows companies to proactively match supply to demand. It includes forecasting and
Responsiveness synchronization of supply and demand to increase flexibility and reduce demand variability
Customer Relationship Development and administration of relationships with customers to facilitate strategic information
Collaboration sharing, joint planning, and integrated operations.
Order Fulfillment & More than just filling orders, this process encompasses all activities necessary to define customer
Service Delivery requirements and design processes that meet those requests while minimizing total delivered costs.
Product/Service This process focuses on developing new products and bringing them to market efficiently. It
Development Launch includes activities such as research, design, testing, and launching new products.
Manufacturing This process involves moving goods through production and managing manufacturing flexibility
Customization in the supply chain. Manufacturing flexibility reflects the ability to produce a wide variety of
products at an appropriate rate and lowest possible cost.
Supplier Relationship Development and administration of relationships with suppliers to facilitate strategic information
Collaboration sharing, joint planning, and integrated operations.
Life Cycle Repair and support of products during their life cycle. Includes warranty, maintenance, and repair.
Support
Reverse Logistics Handling product returns efficiently is essential. This process ensures that returned products are
managed effectively, minimizing waste and maximizing value.
 Integrative Management and Supply Chain Processes

• Excellence in supply chain performance requires the simultaneous achievement of eight key
processes.

• Operational achievement of these eight processes forms the essence of achieving both
operational integration and performance excellence.

• The focus of integrated management is lowest total process cost.

• Three important facets of supply chain logic resulted from increased managerial attention to
• (1) enterprise extension,
• (2) integrated service providers, and
• (3) collaboration.
Enterprise Extension
• Information sharing paradigm
Belief that achieving a high degree of
cooperative behavior requires that
supply chain participants voluntarily
share operating information and jointly
plan strategies.

• Process specialization paradigm

Commitment to focusing collaborative
arrangements on planning joint
operations, with a goal of eliminating
nonproductive or non-value-added
redundancy by firms in a supply chain.
Enterprise Extension
• The mass merchants such as Walmart, Target, and Best Buy, have applied enterprise extension
well. They have worked closely with their suppliers, contract manufacturers, and carriers to create
and deliver unique value propositions to their consumers.

• They share information such as new product plans, forecasts, production, and delivery plans.

• They collaborate by applying processes and technology that is as synchronized as possible.

Integrated Service Providers
• The two traditional logistics service providers are transportation and
warehousing specialists.
1. The for-hire transportation industry comprises numerous carriers specializing in moving goods
across different locations.
2. Over time, this industry has developed a comprehensive network offering a wide range of
services utilizing various transportation modes and advanced technology.
3. The value proposition of for-hire transportation is based on specialization, efficiency, and
economies of scale.
4. Carriers generate value by providing shared transportation services to multiple shippers,
optimizing resources and reducing costs.
5. Shippers have the choice to either invest in their transportation infrastructure or engage the
services of for-hire carriers.
6. This leads to a diverse market where many firms offer transportation solutions combining the
benefits of both options.
7. Such solutions cater to the varied needs of shippers while leveraging the expertise and resources
of the for-hire transportation sector.
Integrated Service Providers
1. In addition to transportation, a large number of service firms have traditionally provided
warehouse services. Traditionally called public or contract warehouses, these firms
provide product storage supplemented with other specialized services.

2. Two significant benefits are obtained when shippers use public or contract warehouses.

• First is elimination of capital investment in warehouse buildings.

• The second is the ability to consolidate small shipments for combined delivery with
products of other firms that use the same public warehouse.

3. Such multishipper consolidation achieves transportation efficiency not typically available

when firms ship from their own warehouses. Many firms combine private and public
warehouses into go-to-market and product supply networks.
Integrated Service Providers
1. In 1980, the landscape of for-hire services in the United States underwent significant change due
to the Motor Carrier Regulatory Reform and Modernization Act (MCA-80) and the Staggers Rail
Act.
2. These acts shifted the regulatory framework of transportation from economic to social regulation,
fostering an open transportation market with reduced government intervention.
3. The deregulation trend extended globally to free-market industrialized nations, leading to less
government control over transportation.
4. Unlike transportation, public warehousing firms were not subject to operational regulations by
federal or state governments.
5. With transportation deregulation, many warehousing firms began offering transportation services,
and transport carriers started providing warehouse services to customers.
6. This shift in offerings resulted from firms adapting to the newfound freedom in the transportation
market, expanding their service portfolios to meet evolving customer demands.
Integrated Service Providers
• What occurred in the logistics service industry was a radical shift from single function to
multifunctional outsourcing.
• Integrated service providers (ISPs) began to market a range of logistics services including
all work necessary to accommodate customers, ranging from order entry to product
delivery.
• For example, United Parcel Service (UPS) stocks Nike shoes and warm-ups at its
Louisville warehouse and processes orders hourly. All related communication and
financial administration are handled by a UPS call center. Thus, Nike has effectively
outsourced basic logistics and related value-added service to UPS.
Collaboration
1. Competition still drives free-market economies, but collaboration within supply chains
has become vital for competitiveness.
2. Global supply chains, led by companies like Amazon, Target, and Walmart, directly
compete for customer loyalty across various industries.
3. The complexity of modern supply chain management is exemplified by Amazon's global
reach, delivering products worldwide within days or hours.
4. Legislative changes, starting with the National Cooperative Research and Development
Act in 1984, encouraged collaborative working arrangements among firms.
5. Amendments to antitrust laws promoted cross-organizational sharing of information,
technology, and risk to enhance U.S. competitiveness.
6. Initiatives like the U.S. Department of Commerce's Advisory Committee for Supply Chain
Competitiveness underscore the focus on improving supply chain effectiveness.
7. While price collusion remains illegal, collaborative legislation fostered innovative
operating arrangements and the concept of enterprise extension.
Supply Chain Value Proposition
Supply Chain Value Proposition

Configure in a customer relevant way while

at the same time increasing quality, productivity and
operational excellence.

• Service Excellence → Effectiveness

• Cost Minimization and Avoidance → Efficiency
• Value Generation → Relevancy
• Continuous Improvement → Sustainability
EERS Value Performance Model

Effectiveness

Value
Sustainability Creation Efficiency

Relevancy
EERS Value Performance Model
1. Effectiveness refers to the supply chain’s ability to deliver products in a timely
manner to the consumer’s desired location.
2. Efficiency refers to the supply chain’s ability to deliver products at the minimum
total cost, including raw material acquisition, manufacturing, storage, inventory, and
transportation. Minimum total cost also includes minimizing the cost across the
entire supply chain.
3. Relevancy refers to the supply chain’s ability to be able to react to changes in the
environment, marketplace, or consumer requirements. For example, consumer
delivery requirements may change based on seasonality, competitive environment,
and customization requirements desired by the customer.
4. Sustainability refers to the firm’s ability to reconfigure the supply chain to enhance
both the environment and the firm.
Responsiveness
• Anticipatory (Push)
• Responsive (Pull or demand driven)
Responsiveness Emerges as Competitive Advantage
Figure 1.3 Anticipatory Business Model

Figure 1.4 Responsive Business Model

 Anticipatory Business Model (“Push”)
• Pushed based on forecast
• Essential work is completed prior to experiencing demand
• Higher risk in that inventory may be pushed to the wrong site
Responsive Business Model (“Pull”)
• Seeks to reduce or eliminate reliance on forecast
• Employs joint planning with supply chain partners
• Applies time-based competition by using technology to share knowledge
regarding demand
• Uses build-to-order model
Barriers to Implementing Responsive Systems
• Need for publicly held firms to deliver quarterly profits, which motivates
them to push product to customers
• Need to establish and sustain collaborative relationships
 Dimensions of Supply Chain Risk

Environmental Market
Compliance Performance Events Financial Segment
• Supplier code of • Achieving • Natural disasters • Public • Related
conduct excellence • Labor and companies industries
• Supplier high risk • Delivery operations talent • Private • Packaging
of audits • Quality disruption companies • Natural
• Restricted • Audit results • Geopolitical risks • Payment resources
materials • Capacity • Trade barriers changes
• Certification constraints • Duties and tariffs • Bankruptcy
• Pandemics • Ownership
• Terrorism changes
• Fires • Public press
releases
Dimensions of Supply Chain Risk 2

• Financial • Market Segment

• Public companies • Related industries.
• Private companies • Packaging.
• Payment changes • Natural resources.
• Bankruptcy
• Ownership changes
• Public press releases

56
Impact of SKUs on Revenue and Cost
Cost

Revenue

Profit

Stock Keeping Units (SKUs)

Globalization
• Globalization opportunities
• Globalization differences
 Globalization Offers Attractive Opportunities
• Demand exceeds local supply
90% of global demand is not fully satisfied by
local supply

• Strategic sourcing
Identifying and matching the sources of raw
materials and components to manufacturers
and distributors

• Offshoring
Moving manufacturing and distribution
operations to countries with favorable labor
costs and tax laws
 Significant differences for global logistics
• Distance of typical order-to-delivery operations is significantly longer compared
to domestic business.
• Documentation requirements for business transactions is significantly more
complex.
• Operations must be deal with significant Diversity in work practices and local
operating environments.
• How consumers Demand products and services must accommodate cultural
variations.
 Industry Disruptors
• Technology adoption
– Autonomous vehicles, IoT
– Artificial intelligence
– “Uberization”
– 3D printing
– Big data
– Alternative fuels
• Consumer requirements
– “Want it now”
– Personalization
– Millennial preferences
– Omnichannel shopping
– Aging consumer needs
Summary
• Integrated management is critical to continuous process improvement.
• Initiatives for cross-enterprise integration improve competitive advantage.
• Dynamic supply chain collaborations increase market share and operating
efficiency.
• Supply chain structure and strategy determine operating framework for
logistical requirements.