You are on page 1of 28



deliver. Distribution of products to customers and their “ downstream ”customers at all levels. A network of facilities including: Material flow from suppliers and their “ upstream ” suppliers at all levels. and service products. produce. Transformation of materials into semi-finished and finished products ( internal process ).What is supply chain ?       All activities associated with the flow and transformation of goods from raw materials to end users. The term supply chain refers to the entire network of companies that work together to design. .



Information: Orders. capital . •Downstream Material: Products. Parts Information: Capacity. information . Delivery Schedules Finance: Invoices. Credit Terms •Upstream Material: Returns. After-sales services. Point-of-sale Data Finance: Payments . Repairs. Pricing.Three flows in SC •There are three kinds of flows in a supply chain: material .


upstream units employ BTS. Demand forecasting can be done via a variety of sophisticated techniques (some from the Operations Research area and some using Data Mining).  The Push-Pull Point: In many supply chains. while downstream units employ BTO strategies. Pull in supply chains Push or Building-to-stock(BTS): Producing stock on the basis of anticipated demand.  Optimally locating the Push-Pull point is a key determinant of supply chain performance.SUPPLY CHAIN MANAGEMENT  Push vs. The point in the supply chain where the switch-over (from BTS to BTO) occurs is called the Push-Pull point.  Pull or Building-to-order(BTO): Producing stock in response to actual demand (firm orders). .

SUPPLY CHAIN MANAGEMENT  Supply Chain Management (SCM) A set of processes and sub-processes which attempt to implement and optimize the functions. people. warehousing. packaging. Effective flow of information through the supply chain. Activities: Purchasing. checking.     . etc. delivery. connected entities. procedures. Supply chain optimization. Establishment of long-term relationships with suppliers (supply alliances) and distributors. and interacting elements of a supply chain.  Involves:  Organizations.

Key Business areas        Enterprise performance Customer service Order management Demand planning Warehouse distribution Partnerships Supplier/supply base management .

Benefits of SCM      Reduce uncertainty along the chain Proper inventory levels in the chain Minimize delays Eliminate rush (unplanned) activities Provide good customer service .

distribution etc. Expensive Inventories Lack of partners’ coordination Uncertainties in deliveries Poor demand forecast Interference with production Poor quality .Problems along the supply chain       Delays in production.

politics . translations.Global supply chain     Can be very long Possible cross-border problems Need information technology support for: communication and collaboration Possible delays due to: customs. tax.

They diagnose problems. . conduct disaster relief operations.Importance of SCM •Supply chain management is essential to company success and customer satisfaction. •Whether dealing with day-to-day product flows or dealing with an unexpected natural disaster. creatively work around disruptions. SCM knowledge and capabilities can be used to support medical missions. supply chain experts roll up their sleeves and get busy. and handle other types of emergencies. Did you know that SCM also plays a critical role in society? It's absolutely true. SCM also plays a role in cultural evolution and helps improve our quality of life. and figure out how to move essential products to people in need as efficiently as possible.

the Indian airforce and other government organisations provided food and medical supplies. Business and consumers are able to obtain these goods quickly. SCM within a well-functioning society creates jobs. . decreases pollution. decreases energy use and increases the standard of living. a large railroad network. resulting in economic growth.Importance of SC in society  Supply chain management is necessary to the foundation and infrastructure within societies. Two examples of the effect of SCM within societies include:  2013 North India floods:In 2013. a cloudburst on the North Indian state of Uttarakhand caused devastating floods and landslides .  Foundation for Economic Growth:A society with a highly developed supply chain infrastructure that includes interstate highways. leaving residents without access to food or clean water. As a result. ports and airports is able to trade many goods at low cost.


 Improves Bottom Line SCM has a tremendous impact on the bottom line. warehouses and transportation vehicles in the supply chain. the impact that SCM has on business is significant and exponential. Two of the main ways SCM affects business include:  Boosts Customer Service SCM impacts customer service by making sure the right product assortment and quantity are delivered in a timely fashion. profits will also be received quickly.Importance of SC in Business  Clearly. those products must be available in the location that customers expect. Customers should also receive quality after-sale customer support. Additionally. Firms value supply chain managers because they decrease the use of large fixed assets such as plants. . Also. cash flow is increased because if delivery of the product can be expedited.


how can we reduce it?  How good is our forecasting method? .Key issues in supply chain management include › Distribution network configuration     How many warehouses do we need? Where should these warehouses be located? What should the production levels be at each of our plants? What should the transportation flows be between plants and warehouses? › Inventory control  Why are we holding inventory? Uncertainty in customer demand? Uncertainty in the supply process? Some other reason?  If the problem is uncertainty.

› Distribution strategies  Direct shipping to customers?  Classical distribution in which inventory is held in warehouses and then shipped as needed?  Cross-docking in which transshipment points are used to take stock from suppliers’ deliveries and immediately distribute to point of usage? › Supply chain integration and strategic partnering     Should information be shared with supply chain partners? What information should be shared? With what partners should information be shared? What are the benefits to be gained? .

.Bullwhip Effect The bullwhip effect is the uncertainty caused from distorted information flowing up and down the supply chain.


Firms that depend on suppliers upstream or distributors and retailers downstream may be at risk. .Who is affected?    Nearly all industries are affected! Firms that experience large variations in demand are at risk.



Results of the bullwhip effect continued.     Lost customer service Lengthened lead time Lost sales Unnecessary adjusted capacity .

Causes of the bullwhip effect      Un-forecasted sales promotions Sales incentives Lack of customer confidence Customers turning back sales orders Freight incentives .