Understanding the Supply Chain

COSC 643

Sungchul Hong
 What is a supply chain?
• A supply chain consists of all stages
involved, directly or indirectly, in fulfilling
a customer request.
• The supply chain not only includes the
manufacturer and suppliers, but also
transporters warehouses, retailers, and
customers themselves.
 What is a supply chain?
• A supply chain is dynamic and involves the
constant flow of information, production
and funds between different stages.
• Each stage of the supply chain performs
different processes and interacts with other
stages of the supply chain.
 What is a supply chain?
• A typical supply chain may involve a
variety of stages.
– Customers
– Retailers
– Wholesalers/distributors
– Manufacturers
– Component/raw material suppliers.
Stages of a Detergent Supply Chain
Supply Chain Stages
The Objective of a Supply Chain

• The objective of every supply chain is to

maximize the overall value generated.
• The value a supply chain generates is the
difference between what the final product is
worth to the customer and the effort the
supply chain expends in filling the
customer’s request.
 Supply Chain Profitability
• Supply chain profitability is the total profit
to be shared across all supply chain stages.
The higher the supply chain profitability,
the more successful the supply chain.
 Supply Chain Management
• Supply chain management involves the
management of flows between and among
stages in a supply chain to maximize total
profitability.
 Decision Phases in a Supply
Chain
• Supply chain strategy or design.
– How to structure the supply chain.
– Location, capacities of production, and warehousing
facilities.
• Supply chain planning
– Companies define a set of operating policies that
govern short-term operations.
– Forecast market, inventories, subcontracting of
manufacturing.
• Supply chain operation 
 Supply Chain Operation
• Make decisions regarding individual
customer orders.
• Firms allocate individual orders to
inventory or production
• Shipments, delivery schedules of trucks.
Process View of a Supply Chain
• A supply chain is a sequence of processes
and flows that take place within and
between different supply chain stages and
combine to fill a customer need for a
product.
• Cycle view
• Push/Pull view
 Cycle view
• The processes in a supply chain are divided
into a series of cycles, each performed at
the interface between two successive stages
of a supply chain.
Supply Chain Process Cycle
 Cycle View of Supply Chain
Process
  Customer order cycle
  Replenishment cycle (at retailer/distributor)
 Manufacturing cycle (distributor/manufacturer)
  Procurement cycle (manufacturer/supplier )
Customer Order Cycle
Replenishment Cycle
Manufacturing Cycle
Procurement Cycle
 Push/Pull View
• The processes in a supply chain are divided into
two categories depending on whether they are
executed in response to a customer order or in
anticipation of customer orders.
• Pull processes are initiated by a customer order,
and push processes are initiated and performed in
anticipation of customer orders.
Push/Pull View of Supply Chain
Processes
• The push/pull boundary in a supply chain
separates push processes from pull
processes.
Push/Pull Process for the L.L. Bean Supply Chain
Cycles in
Dell Supply
Chain

Push/Pull
Process for
Dell Supply
Chain
The Importance of Supply Chain
Flows
• There is a close connection between the design
and management of supply chain flows and the
success of a supply chain.
• e.g.) Dell has only 10 days of inventory contrast to
other pc makers of 80 to 100 days. The success of
the Dell supply chain is facilitated by
sophisticated information exchange. (customized
web pages)
• Outsourcing
Dell Supply Chain Stages
 Examples of Supply Chains
• Micron Electronics Inc. (A direct sales Manufacturer)
– Why has assembly of certain PCs been outsourced? What
characterizes PCs or orders that have been outsourced?
– Why does Micron have only one manufacturing site?
– Why are individual orders shipped using FedEx and large
corporate orders shipped using LTL?
– Why are individual orders merged in transit rather than at
the assembly site itself?
– How much inventor of components and finished products
is maintained?
 Examples of Supply Chains
• 7-Eleven ( A Convenience Store) (Japan)
– One of the company’s objectives is to micro-
match supply and demand by location, season,
and time of day.
– Fresh food and distribution center.
• Toyota (A Global Auto Manufacturer)
– Global production and distribution network.
 Examples of Supply Chains
• Amazon.com (An E-Business)
– Why is Amazon.com building more warehouses as it
grows? How many warehouses should it have, and where
should they be located?
– What advantages does selling books via the Internet provide
over a traditional bookstore? Are there any disadvantages to
selling via the Internet?
– Why does Amazon.com stock best-sellers while buying
other titles from distributors?
– Des the Internet channel provide greater value to a
bookseller like Borders with retail outlets or to an e-
business like Amazon.com?