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Chapter 1 - Basic Concepts
Chapter 1 - Basic Concepts
Responsiveness
Flexibility
Cost
Asset Management
Quality
Increased Sales:
• Faster to Market
• Improved Quality
• Pricing Flexibility
• Innovation
Lower Total Cost:
• 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
Labor Sales
$700,000 $5,000,000 Net income
$400,000
What if we
Operating cost elements
(13.0%)
Inventories
$500,000 Sales
$5,000,000
($475,000) Current assets Asset turnover
Assets
Customer
Customer Order Cycle
Retailer
Replenishment Cycle
Distributor
Manufacturing Cycle
Manufacturer
Procurement Cycle
Supplier
Push/Pull View of Supply
Chains
Processes are divided into two categories,
pull or push
Procurement, Customer Order
Manufacturing and Cycle
Replenishment cycles
Customer
Order Arrives
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
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. Bean (Figure 1.6)
– Dell (Figures 1.7)
• The relative proportion of push and pull
processes can have an impact on supply
chain performance
Supply Chain Macro Processes
• Customer Relationship Management (CRM)
focuses on the interface between the firm and its
customers
• Internal Supply Chain Management (ISCM)
focuses on all processes internal to the firm
• Supplier Relationship Management (SRM)
focuses on the interface between the firm and its
suppliers
• See Figure 1.8, p. 15.
Examples of Supply Chains
• Gateway
• Zara
• WW Grainger and McMaster-Carr: MRO suppliers*
• Toyota
• Amazon.com