Introduction to Supply Chain

Management-1

Prof. Loveraj Takru

 What is a Supply Chain?
• Flow of products and services from / to
– Suppliers
– Raw materials manufacturers
– Intermediate goods manufacturers
– Finished goods manufacturers
– Distributors and wholesalers
– Retailers
– Customers

• Connected through flow of goods, information, and funds

Supplier Manufacturer Distributor Retailer Customer

 What is Supply Chain Management?

Supply chain management involves the management of supply

chain assets and products, information, and fund flows to
maximize total supply chain surplus
 What is Supply Chain Management?

Getting the right things

to the right places

at the right times

for profit
 What is Supply Chain Management?
• “Managing supply and demand, sourcing raw materials and
parts, manufacturing and assembly, warehousing and
inventory tracking, order entry and order management,
distribution across all channels, and delivery to the customer”
– The Supply Chain Council

• “The design and management of seamless, value-added

process across organizational boundaries to meet the real
needs of the end customer”
– Institute for Supply Management
 What is Supply Chain Management?

• “Supply chain management is a set of approaches utilized to

efficiently integrate suppliers, manufacturers, warehouses,
and stores, so that merchandise is produced and distributed at
the right quantities, to the right locations, and at the right time,
in order to minimize system wide costs while satisfying
service level requirements”

– Simchi-Levi et al, 2003

 Evolution of Supply Chain Management

Further
Refinement of
SCM Capabilities

SCM
Formation/
Extensions

JIT, TQM, BPR,

Alliances

Inventory Management/Cost
Optimization

Traditional Mass Manufacturing

1950s 1960s 1970s 1980s 1990s 2000s Beyond

 Evolution of Supply Chain Management
• Mass production era (1900s – 1970s)
– In the early 1900s, Henry Ford created the first moving assembly line
reducing the time to build a Model T from 728 hours to 1.5 hours

• Lean manufacturing era (1970s –1995)

– In the early 1970s, Japanese manufacturers like Toyota changed the rules
of production from mass to lean. Lean manufacturing focuses on
flexibility and quality more than on efficiency and quantity.

• Mass customization era (1995 – 2010)

– Beginning around 1995 and coinciding with the commercial application
of the Internet, manufacturers started to mass-produce customized
products. Henry Ford’s famous statement “You can have any color
Model T as long as it’s black” no longer applies.
 Conflicting objectives across the supply chain

Manufacturer Distributor Retailer Customer

• Large production • Low inventory • Few stores • Convenience

batches • Few DCs • Low inventory • Short lead time
• Little variety • Large variety of
• Close to DCs products
• Large shipments
 Managing a Supply Chain is Not Easy

Information distortion

Supplier Manufacturer Distributor Retailer Customer

Bullwhip effect