• A supply chain consists of al parties involved

directly and indirectly in fulfilling a

customer request
• SCM not only includes manufacturer and
suppliers but also transporters , warehouses
, retailers and even customers .
• Ex : Purchase a new car – the scm begins
with the customer and his need for the car
• Customer -Dealer – Assembly point – Trucks –
Tier 1 and 2 Supplier
• SCM is dynamic and involves the constant flow
of information , products and funds among
different stages.
• Dealer ( product , price and information ) –
customer ( transfer money to dealer) – dealer
( sales data and replenishment orders to
assembly plant ) – cars back to dealers
• Amazon Model
• SCM involve a variety of stages including
customers , retailers , wholesalers , distributors ,
manufacturers and suppliers .
• Integral part of any supply chain is customer
• Primary purpose of scm is to satisfy customer
need and generate profit
• The goal ofdesigning a supply chain is to structure
the three flows in a way that meets customer
needs in a cost efefctive manner.
• Ex – Apple - standard products are kept in stores
. Customised produsts delay
 Principal Streams of SCM
• Sourcing , procurement and supply
management ( sourcing , supply side
management , inbound logistics , supplier
relationship management )
• Materials management ( forecasting ,
inventory management , stores
management , warehousing , stock
keeping ,scheduling )
• Logistics and distribution
 The objective of a supply chain
• To maximize the net value generated.
The net value a supply chain generates is
the difference between what the value of
the final product is to the customer and
the costs the entire supply chain incurs in
filling the customers request
• Supply chain surplus = customer value –
supply chain cost
• The value of the final product may vary for to each
customer and can be estimated by the maximum
amount the customer is willing to pay for it.
• The difference between the value of the product and
its price remains with the customer as customer
surplus . The rest of the supply chain surplus
becomes supply chain profitability.( the difference
between the revenue generated from the customer
and the overall cost across the supply chain)
• The success of a supply chain in terms of supply chain
surplus , the source of value , revenue and cost. The
source of revenue is customer
 Decision phases in supply chain
1. Supply chain strategy or design
2. Supply chain planning
3. Supply chain operations
 Supply chain strategy or design

• How configuration will be ?

• How resources will be allotted ?
• What process each stage will perform ?
• Location and capacities of production
• Warehousing facilities
• Type of information system to be used
• Ex Hyundai – 2008 second plant – supply chain
configuration supports the strategy objective to
increase the supply chain surplus. 2015 largest
exporter of small cars in India.
 Supply chain planning
• The goal of planning is to maximize the supply
chain surplus
• Planning phase – forecast for the coming year
demands , cost and prices in different markets .
• Which market will be served from which location
, subcontracting of manufacturing
• Inventory policies to be followed
• Timing and size of the marketing and price
promotions
• Ex Hyundai – from each plant target production
quantities and planning includes uncertainty in
demand , exchange rates ,and competition
 Supply chain operations
• Handle incoming customer orders in the
best possible manner
• Allocate inventory to individual order ,
set a date which an order is to be filled,
allocate warehouse , shipping mode , set
delivery schedule of trucks , place
replenishment orders
Process views of a supply chain