UNIT-3

Dynamics of Supply Chain

A supply chain is a network of organizations, people, activities,
information, and resources involved in the creation and delivery of a
product or service from suppliers to customers. The dynamics of a
supply chain refer to the interactions and flow of goods, information,
and money throughout this network. Efficient supply chain
management is crucial for reducing costs, improving product
availability, and maintaining customer satisfaction.
Supply Chain Interventions
Supply chain interventions are actions taken to improve the
functioning and efficiency of the supply chain. These interventions
might be needed when issues such as delays, shortages, or
inefficiencies arise. Some common interventions include:
1. Improved demand forecasting: Predicting future customer
needs more accurately.
2. Inventory management: Ensuring the right amount of stock is
available without overstocking or understocking.
3. Supplier relationships: Strengthening collaboration with
suppliers to ensure reliable and timely deliveries.
4. Technology integration: Using software and tools (like ERP or
supply chain management software) to automate and optimize
processes.
Push-Based, Pull-Based, and Push-Pull Supply Chains
These terms describe different ways to manage the flow of products in
a supply chain, based on demand and inventory management
strategies.
1. Push-Based Supply Chain
In a push-based supply chain, products are produced or ordered in
advance based on forecasted demand. This means that production is
driven by predictions of future sales rather than actual customer
orders. The products are then pushed through the supply chain to
retailers or distributors.
• Example: A company that produces clothing may predict that
10,000 shirts will be sold in the coming season. Based on this
forecast, the company manufactures the shirts and sends them to
retail stores in advance, hoping that customers will buy them. If
demand is lower than expected, the company might be left with
excess stock.
2. Pull-Based Supply Chain
In a pull-based supply chain, products are made or ordered only
when there is a real customer demand. This is a more responsive
approach, where the supply chain reacts to actual orders rather than
forecasts.
• Example: A restaurant is a pull-based supply chain. The
ingredients (e.g., vegetables, meat) are only bought when the
restaurant receives orders from customers. If the customer
orders a dish, only then do they prepare it using the ingredients
available. If there’s no customer demand, no ingredients are
purchased.
3. Push-Pull Supply Chain
A push-pull supply chain is a hybrid model where part of the supply
chain is driven by forecasts (push), and part of it reacts to actual
demand (pull). Typically, the initial stages of the supply chain (such as
manufacturing) are push-based, while the later stages (such as
distribution to retail stores) are pull-based.
• Example: A consumer electronics company may produce a
batch of smartphones based on forecasts (push). Once the
smartphones are in retail stores, however, they are sold based on
customer demand (pull). If the smartphones sell out, the
company may produce more, reacting to the actual sales data.
Network Design in the Supply Chain
Network design refers to the configuration and structure of the supply
chain, including the locations of suppliers, manufacturing plants,
distribution centers, and retailers, as well as the transportation routes.
A good network design aims to minimize costs and improve delivery
performance.
Key factors in network design include:
1. Location of Facilities: Deciding where factories, warehouses,
and distribution centers should be located to optimize
transportation and lead time.
2. Transportation: Choosing the most efficient routes and modes
of transportation (e.g., air, sea, road, rail) to move goods across
the supply chain.
3. Capacity Planning: Determining how much inventory or
production capacity is needed at each stage of the supply chain
to meet demand efficiently.
4. Inventory Management: Deciding where inventory should be
stored and how much should be kept at different points in the
supply chain.
• Example: A global footwear company might have factories in
countries with low production costs, warehouses located near
major markets, and retail stores in high-traffic areas. The
transportation network would involve shipping raw materials to
factories, then shipping finished products to regional
warehouses before they are distributed to retail stores.
Operations in the Supply Chain
Operations refer to the day-to-day activities required to produce and
distribute goods or services. Key operations in a supply chain include:
1. Procurement: Sourcing raw materials or products from
suppliers.
 2. Production: Manufacturing products or assembling
components.
3. Distribution: Shipping products from production plants to
warehouses and eventually to customers.
4. Customer Service: Handling returns, complaints, and after-
sales support.
Operations must be efficient to keep costs low and meet customer
expectations for speed and reliability.
• Example: In the case of an e-commerce company like Amazon,
operations involve procuring products from various suppliers,
storing them in regional fulfillment centers, and shipping them
quickly to customers through optimized logistics.
Example of Push, Pull, and Push-Pull Models in Action
Push Model (Retailer Example):
A toy manufacturer produces a large number of toys in anticipation of
demand during the holiday season. The toys are then sent to retail
stores across the country before the peak sales season begins. If
demand is higher than expected, the stores may run out of stock; if it's
lower, the manufacturer is left with excess inventory.
Pull Model (Grocery Store Example):
A local bakery only bakes bread when it receives customer orders.
The bakery doesn’t produce bread until there’s a customer request,
ensuring it has fresh stock without waste.
Push-Pull Model (Smartphone Example):
A smartphone company builds its latest model in advance based on
market trends and past sales data (push). However, after the phones
are distributed to retail stores, they are sold based on actual customer
demand. If certain models are popular, the company quickly pushes
more of those models into the stores.