Introducing Supply Chain Management

Read:
Key concepts: Chapter 1
•What is a supply chain?

• What is supply chain management?

Read:
• What is logistics? Chapter 1
• What is operations management?

• How does the supply chain affect

competitive advantage ?
Read:
Chapter 1
What is:
- a supply chain?
- supply chain management?
- logistics?
- operations management?
 What is a Supply Chain ?

• Definition of a supply chain:

A network of connected and interdependent organisations

mutually and co-operatively working together to control,
manage and improve the flow of materials and information
from suppliers to end users.1

1. Christopher, M., (2016) Logistics and Supply Chain Management (5th Edition) p 3.
 A Generic Supply Chain
Second tier First tier First tier Second tier End
supplier supplier customer customer user

Supply side Demand side

Purchasing and Physical distribution management

supply management
Logistics
Inventory
management
Supply chain management

Information flow
Physical flow
 What is Supply Chain Management ?

• Definition of Supply chain management:

The management of upstream (supplier end) and

downstream (customer end) relationships with suppliers
and customers in order to deliver superior customer value at
less cost to the supply chain as a whole.2

2. Christopher, M., (2016) Logistics and Supply Chain Management (5th Edition) p 3.
 What is logistics?
• Logistics involves getting, in the right way, the right
product, in the right quantity and right quality, in the right
place at the right time, for the right customer at the right
cost3. (known as the 8R’s)

Operations
Management

Supply Chain
Management

Logistics

3. Mangan et al., (2020) Global Logistics and Supply Chain Management (4th Edition) ch. 1.
 What is Operations Management ?
 Operations Management is about the management of processes and
resources that produce or deliver products and services to customers.

 These processes are:-

 directing (management),
 designing (products, services & processes),
 delivering (planning & control),
 developing (improvement).

 The operations manager will have responsibility for managing

resources involved in these processes:-
 staff,
 facilities (and equipment),
 materials,
 information,
 customers.
 Example - service operation – a lecture4
RESOURCES
staff lecturer

facilities lecture theatre

equipment computer & projector

materials lecture notes

information lecture delivery

customers students

PROCESSES
designing lecture content has been designed by the lecturer or module leader.
delivering a lecture plan is produced before the lecture.
the lecturer must control the delivery.
developing student feedback will enable improvements to be made to the lecture programme.
directing management will determine where and when lectures will be delivered.

4. Illustration produced by Alex Dalzell, Kensington College of Business, London.

 Operations Management can be represented
by an input–transformation–output model5
Materials: possible operation

 transform their physical properties manufacturing

 change their location transportation
 change their possession buying and selling
 store them warehousing

Customers

5. Slack N., Brandon-Jones A., (2018), Essentials of Operations Management, (2nd Ed), London: Pearson.
 Finnforest – Supply Chain Illustration6

Trees Lumber Lumber Lumber Lumber

harvested transported to stored in port transported unloaded at
from forest. Finnish port. warehouse. by ship. English port.

Lumber Timber Fencing, Products Products sold

processed in sold to decking & sheds sold to DIY to
to Timber. manufacturer. produced. outlets. customers.

6. Illustration produced by Alex Dalzell, Kensington College of Business, London.

How does the supply chain affect
competitive advantage ?
 Porter’s Generic Strategies7
Michael Porter7 stated that there are two major strategies to winning business-:
(1) differentiation and (2) cost advantage.

• Differentiation is achieved through providing customers with an offering that they

perceive as having higher value.
• Cost advantage is gained by doing things more economically than the competition.

In the past, the focus for securing differentiation has been product differentiation.
With life cycles now measured in months, sometimes weeks, rather than years the
opportunities to secure sustained benefit through product differentiation is diminishing.
More and more companies are turning to service-based differentiation to secure price
advantage. Even when a product based-strategy prevails the elapsed time for maximising
profit is becoming shorter and more difficult to hit such that a minor disruption to product
availability has a major impact on financial return.

The supply chain has, therefore, become either the driver or critical enabler for
differentiation. The role of the supply chain as a major driver of cost has long been
recognised. It is estimated that the supply chain accounts for up to 70% of a product’s
cost. The supply chain, therefore, offers considerable opportunity for delivering cost
advantage.

7. Porter, M.E. (1980) Competitive Advantage. New York: The Free Press.
 Resilience, Responsiveness & Flexibility
In addition to securing differentiation and cost advantage the role of the supply chain
has taken on two further dimensions arising from the need to ensure resilience8,
responsiveness and flexibility in an increasingly volatile and uncertain world.

Typically, the supply chain accounts for 50% of a company’s assets. Assets, by their
very nature, prescribe a limited range of working patterns and methods, thereby
exposing an organisation to significant changes in market dynamics. The nature and
structure of the asset base, the balance of fixed assets to current assets, the profile of
inventory and cash all influence the resilience of the supply chain and help mitigate risk.

At an operational level, customers are becoming increasingly demanding in terms of

both responsiveness and flexibility, and the design of the supply chain, in terms of
structure, management, systems and processes impacts directly the ability of an
organisation to respond to customer needs.

In summary, the increasing competitive pressure on companies, coupled with the

unprecedented rate of change has elevated the role of the supply chain as one of, if not
the principal, drivers of business performance.

8. Supply chain resilience is the supply chain's ability to be prepared for unexpected risk events, responding and recovering quickly to potential
disruptions to return to its original situation or grow by moving to a new, more desirable state in order to increase customer service, market
share and financial performance..
 The role of Supply Chain managers

When it comes to supply chains, organisations rarely suffer from a shortage of objectives.
In fact, the more common problem is that there are too many objectives leading to greater
complexity: Would you like to:
• Reduce the cost of supply chain operations?
• Accelerate the flow of goods through the chain?
• Increase flexibility to meet changing demand?
• Reduce inventory levels?
• Improve on-time deliveries?

Few managers find themselves able to say "no" to any of these objectives, but inherent
trade-offs exist among them that can't be avoided. Understanding these trade-offs and
striking the right balance among them is the essence of supply chain strategy.
Aligning the supply chain strategy with the business strategy and ensuring it delivers
improved financial performance is the fundamental role of senior supply chain management.
9. Mangan, et al., (2020) Global Logistics and Supply Chain Management (4th Edition) ch 15.
 Preparation for next week …
On Perlego:
Read chapter 3 of GLSCM
Read chapter 6 of LSCM

On Moodle: Read the case study:- Kelloggs