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The way materials flow through different organizations from the raw material supplier to the finished goods consumer.
planning.Flow of products and services from: – Raw materials manufacturers – Intermediate products manufacturers – End product manufacturers – Wholesalers and distributors and – Retailers Connected by transportation and storage activities Integrated through information. and integration activities .
Supply Chain for Milk Products .
directly or indirectly in fulfilling a customer request for goods or services.Supply Chain • A Supply Chain consists of all the parties involved. • Each party is involved in various functions involved in receiving and fulfilling a customers request .
Accounting.The Value Chain: Linkage between Supply Chain and Other Functions Finance. Information Technology. Human Resources New Product Development Marketing and Operations Sales Distribution Service 2-8 .
•Production: refers to the capacity of a supply chain to make and store products. •Key Production Decision ―Responsiveness VS Efficiency •Factories and Facilities with ―Excess‖ Or ―Limited‖ capacities? Focuses on: •Customer & market demand •Resource Management •Internal sourcing (what and which plants) •Outsourcing to capable suppliers •Capacity Management .
distributors.Inventory is spread throughout the supply chain and includes everything from raw material to work in process to finished goods that are held by the manufacturers. . How Much Inventory and Where to Store It? Reasons for holding inventory: Cycle Inventory—This is the amount of inventory needed to satisfy demand for the product in the period between purchases of the product. and retailers in a supply chain.
Safety Inventory—that is held as a buffer against uncertainty. Seasonal Inventory—This is inventory that is built up in anticipation of predictable increases in demand that occur at certain times of the year •Analysis of fluctuations in demand •Identification of optimal storage locations in support of customer demand •Identification of optimal storage locations in support of customer demand .
skills available in the workforce. distribution and stocking facilities •It is the geographical positioning /siting of supply chain facilities •Factors that relate to a given location including the cost of facilities. and proximity to suppliers and customers.•Location: refers to Strategic placement of production plants. taxes and tariffs. infrastructure conditions. . the cost of labor.
. This mode is also restricted to use between locations that are served by rail lines Airplanes are a very fast mode of transport and are very responsive. Ship which is very cost efficient but also the slowest mode of transport Rail which is also very cost efficient but can be slow.Transportation: refers to movement of everything from raw material to finished goods between different facilities in a supply chain In transportation the trade-off between responsiveness and efficiency is manifested in the choice of transport mode.
it can only be used for movement of certain types of products such as data. and products composed of data such as music. oil.Pipelines can be very efficient but are restricted to commodities that are liquids or gases such as water. However. Trucks can go almost anywhere. and text. Electronic Transport is the fastest mode of transport and it is very flexible and cost efficient. pictures. . and natural gas Trucks are a relatively quick and very flexible mode of transport.
2. Obtaining.Timely and accurate information holds the promise of better coordination and better decision making. Forecasting and planning/Decision Making to anticipate and meet future demands. Coordinating daily activities related to the functioning of the other four supply chain drivers: production. Information is used for two purposes in any supply chain: 1. location. linking and leveraging information across the Supply Chain . inventory. and transportation.
Intermediary Products.1. Producers Raw materials. Distributors: are companies that take inventory in bulk from producers and deliver a bundle of related product lines to customers A distributor is typically an organization that takes ownership of significant inventories of products that they buy from producers and sell to consumers . Finished goods 2.
Perform Sales work and at times Marketing/promotion / After Sales Services .A distributor can also be an organization that only brokers a product between the producer and the customer and never takes ownership of that product Distributors buffer the producers from fluctuations in product demand by stocking inventory.
4. Agents: sell the products and services of producers in return for a commission (a percentage of the sales revenues) . 5. Wholesalers: stock a range of products from several producers. The role of the wholesaler is to sell onto retailers.Franchises: are independent businesses that operate a branded product (usually a service) in exchange for a license fee and a share of sales. Wholesalers usually specialize in particular products.3.
local one-shop name) .6. superstore) • Location (e. nationwide retail brands. Retailers can be classified in several ways: • Type of goods being sold( e. out-of-town) • Brand (e. rural. furniture) • Type of service (e.g.g.g. grocery. corner shop. clothes. counterservice) • Size (e. Retailers operate outlets that trade directly with household customers. self-service.g. city-centre.g.
Customers or consumers are any organization that purchases and uses a product A customer organization may purchase a product in order to incorporate it into another product that they in turn sell to other customers A customer may be the final end user of a product who buys the product in order to consume it. .7.
legal consultants. collection agents. Advertising agencies. credit companies Other service providers such as Marketing Research companies. HR consultants etc… . Service Providers are the organizations that provide services to other participants which may include: Logistic Providers which provide transportation and warehousing services Financial Service providers such as Banks.8. engineers .
The design and management of seamless. value-added process across organizational boundaries to in order to minimize total system cost and satisfy end customers .
Reliability Responsiveness Flexibility Cost Asset Management Quality .
Increased Sales: • • • • • • • • • • • • • • Faster to Market Improved Quality Pricing Flexibility Innovation Acquisition Cost Processing Cost Quality Cost Downtime Cost Risk Cost Cycle Time Cost Conversion Cost Non-value Added Cost Supply Chain Cost Post Ownership Cost Lower Total Cost: .
000 Minus Cost of Goods Sold $3.25 (1.300.Labor $700.000 Multiply Inventories $500.000) Divided by Sales $5.075.000) Plus Sales $5.100.000.000 Assets Current assets $1.000 ($1.000 What if we decrease materials cost by 5%? (or $115.000.000) Plus Net income $400.000) Overhead $800.000 ($475.000 ($3.0%) Other costs $800.000 Divided by Total assets $4.800.000 .900.000 Fixed assets $2.000) Account receivable $300.000.000.000) Asset turnover rate 1.000 Operating cost elements Sales $5.26) Cash $300.000 Profit margin 8% (10.0% (13.000) Return on Investments 10.685.000 ($3.185.000 ($515.3%) Materials $2.975.000 ($2.
($1.08 new sales = $1. the following calculation provides the answer… Profit increase = new sales X . what sales increase would be required? At the existing 8% profit margin.500 / $5.8% is required to match the profit increase generated by a 5% reduction in materials cost .437..000.If the same profit increase were to be generated by increasing sales.000 = new sales X .437.500 therefore….08 $115.8% or a sales increase of 28.000) X 100 = 28.
Decision Phases of a Supply Chain • Supply chain strategy or design • Supply chain planning • Supply chain operation .
Push/Pull View of Supply Chains Processes are divided into two categories. Manufacturing and Replenishment cycles Customer Order Cycle PUSH PROCESSES: executed in anticipation of a customer order PULL PROCESSES: executed in response to a customer order Customer Order Arrives . pull or push Procurement.
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: execution is initiated in response to a customer order (reactive) • Push: execution is initiated in anticipation of customer orders (speculative) • Push/pull boundary separates push processes from pull processes .
6) – Dell (Figures 1.7) • The relative proportion of push and pull processes can have an impact on supply chain performance . Bean (Figure 1.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 views – L.L.
com How do these supply chains differ in terms of their design? Where are the push/pull interfaces? How does the location of these interfaces affect their design? .Examples of Supply Chains • Gateway • Zara • WW Grainger and McMaster-Carr: MRO suppliers* • Toyota • Amazon.