scm chapter 1

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PowerPoint presentation to accompany Chopra and Meindl Supply Chain Management, 5e

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Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .

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Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall .

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Understanding the

Supply Chain

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Learning Objectives

1. Discuss the goal of a supply chain and e plainthe i!pact of supply chain decisions on thesuccess of a fir!.

2. "dentify the three #ey supply chain decisionphases and e plain the significance of eachone.

$. Describe the cycle and push%pull vie&s of asupply chain.

'. Classify the supply chain !acro processes in afir!.


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(hat is a Supply Chain)

* +ll stages involved, directly or indirectly, infulfilling a custo!er re uest

* "ncludes !anufacturers, suppliers, transporters,&arehouses, retailers, and custo!ers

* (ithin each co!pany, the supply chain includesall functions involved in fulfilling a custo!erre uest product develop!ent, !ar#eting,operations, distribution, finance, custo!erservice/


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* Custo!er is an integral part of the supply chain* "ncludes !ove!ent of products fro! suppliers to

!anufacturers to distributors and infor!ation,funds, and products in both directions* +ll stages !ay not be present in all supply

chains e.g., no retailer or distributor for Dell/


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igure 1-1


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lo&s in a Supply Chain

igure 1-2


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4he Objective of a Supply Chain

*5a i!i6e overall value created

Supply Chain Surplus Custo!er "alue # Supply Chain Cost


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* 8 a!ple9 a custo!er purchases a &irelessrouter fro! :est :uy for ; < revenue/* Supply chain incurs costs infor!ation, storage,

transportation, co!ponents, asse!bly, etc./* Difference bet&een ; < and the su! of all of

these costs is the supply chain profit* Supply chain profitability is total profit to be

shared across all stages of the supply chain* Success should be !easured by total supplychain profitability, not profits at an individualstage


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*Custo!er the only source of revenue*Sources of cost include flo&s of

infor!ation, products, or funds bet&eenstages of the supply chain

*8ffective supply chain !anage!ent is the!anage!ent of flo&s bet&een and a!ongsupply chain stages to !a i!i6e totalsupply chain surplus


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"!portance ofSupply Chain Decisions

* (al-5art, ;1 billion sales in 1=7< to ;'



Decision @hases of a Supply Chain

*Supply chain strategy or design A Bo& to structure the supply chain over the

ne t several years

*Supply chain planning A Decisions over the ne t uarter or year

*Supply chain operation A Daily or &ee#ly operational decisions



Supply Chain Strategy or Design

* Decisions about the structure of the supply chainand &hat processes each stage &ill perfor!* Strategic supply chain decisions

A Locations and capacities of facilities A @roducts to be !ade or stored at various locations A 5odes of transportation A "nfor!ation syste!s

*Supply chain design !ust support strategicobjectives

* Supply chain design decisions are long-ter! ande pensive to reverse A !ust ta#e into account

!ar#et uncertainty


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Supply Chain @lanning

*Definition of a set of policies that governshort-ter! operations

*Starts &ith a forecast of de!and in theco!ing year


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Supply Chain @lanning

* @lanning decisions9 A (hich !ar#ets &ill be supplied fro! &hich locations A @lanned buildup of inventories

A Subcontracting, bac#up locations A "nventory policies A 4i!ing and si6e of !ar#et pro!otions

*5ust consider in planning decisions de!anduncertainty, e change rates, co!petition overthe ti!e hori6on



Supply Chain Operation

* 4i!e hori6on is &ee#ly or daily* Decisions regarding individual custo!er orders* Supply chain configuration is fi ed and operating

policies are deter!ined* oal is to i!ple!ent the operating policies as

effectively as possible* +llocate orders to inventory or production, set

order due dates, generate pic# lists at a&arehouse, allocate an order to a particularship!ent, set delivery schedules, placereplenish!ent orders

* 5uch less uncertainty short ti!e hori6on/



@rocess ie& of a Supply Chain

* Cycle "ie$ 9 processes in a supply chain aredivided into a series of cycles, each perfor!edat the interfaces bet&een t&o successive supply

chain stages* Push%Pull "ie$ 9 processes in a supply chain aredivided into t&o categories depending on&hether they are e ecuted in response to acusto!er order pull / or in anticipation of acusto!er order push /



Cycle ie&

of SupplyChain@rocesses

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Cycle ie& ofSupply Chain @rocesses

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@ush%@ull ie& of Supply Chains

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@ush%@ull ie& ofSupply Chain @rocesses

* Supply chain processes fall into one of t&ocategories depending on the ti!ing of theire ecution relative to custo!er de!and

* @ull9 e ecution is initiated in response to acusto!er order reactive/

* @ush9 e ecution is initiated in anticipation ofcusto!er orders speculative/* @ush%pull boundary separates push processesfro! pull processes



@ush%@ull ie& ofSupply Chain @rocesses

* Useful in considering strategic decisions relatingto supply chain design A !ore global vie& ofho& supply chain processes relate to custo!er

orders* Can co!bine the push%pull and cycle vie&s

A L.L. :ean A Dell

* 4he relative proportion of push and pullprocesses can have an i!pact on supply chainperfor!ance



@ush%@ull ie& of A L.L. :ean

igure 1-


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Supply Chain 5acro @rocesses

*Supply chain processes discussed in thet&o vie&s can be classified into A Custo!er Eelationship 5anage!ent CE5/

A "nternal Supply Chain 5anage!ent "SC5/ A Supplier Eelationship 5anage!ent SE5/

*"ntegration a!ong the above three !acroprocesses is critical for effective andsuccessful supply chain !anage!ent



Supply Chain 5acro @rocesses

igure 1-7



8 a!ples of Supply Chains

* ate&ay and +pple*Fara

*(.(. rainger and 5c5aster-Carr *4oyota* +!a6on


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ate&ay and +pple1. (hy did ate&ay choose not to carry any finished-product

inventory at its retail stores) (hy did +pple choose to carryinventory at its stores)

2. Should a fir! &ith an invest!ent in retail stores carry anyfinished-goods inventory) (hat are the characteristics ofproducts that are !ost suitable to be carried in finished-goodsinventory) (hat characteri6es products that are best!anufactured to order)

$. Bo& does product variety affect the level of inventory a retailstore !ust carry)

'. "s a direct selling supply chain &ithout retail stores al&ays lesse pensive than a supply chain &ith retail stores)0. (hat factors e plain the success of +pple retail and the failure

of ate&ay country stores)


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Fara1. (hat advantage does Fara gain against the co!petition by havinga very responsive supply chain)2. (hy has "ndite chosen to have both in-house !anufacturing and

outsourced !anufacturing) (hy has "ndite !aintained!anufacturing capacity in 8urope even though !anufacturing in

+sia is !uch cheaper)$. (hy does Fara source products &ith uncertain de!and fro! local

!anufacturers and products &ith predictable de!and fro! +sian!anufacturers)

'. (hat advantage does Fara gain fro! replenishing its stores

!ultiple ti!es a &ee# co!pared to a less fre uent schedule) Bo&does the fre uency of replenish!ent affect the design of itsdistribution syste!)

0. Do you thin# FaraGs responsive replenish!ent infrastructure isbetter suited for online sales or retail sales)


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(.(. rainger and 5c5aster-Carr 1. Bo& !any DCs should be built and &here should they be located)2. Bo& should product stoc#ing be !anaged at the DCs) Should all DCs carry

all products)$. (hat products should be carried in inventory and &hat products should be

left &ith the supplier to be shipped directly in response to a custo!er order)

'. (hat products should (.(. rainger carry at a store)0. Bo& should !ar#ets be allocated to DCs in ter!s of order fulfill!ent) (hat

should be done if an order cannot be co!pletely filled fro! a DC) Shouldthere be specified bac#up locations) Bo& should they be selected)

. Bo& should replenish!ent of inventory be !anaged at the various stoc#inglocations)

3. Bo& should (eb orders be handled relative to the e isting business) "s itbetter to integrate the (eb business &ith the e isting business or to set upseparate distribution)

7. (hat transportation !odes should be used for order fulfill!ent and stoc#replenish!ent)


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4oyota

1. (here should plants be located, &hat degreeof fle ibility should each have, and &hatcapacity should each have)

2. Should plants be able to produce for all!ar#ets)$. Bo& should !ar#ets be allocated to plants)'. (hat #ind of fle ibility should be built into the

distribution syste!)0. Bo& should this fle ible invest!ent be valued). (hat actions !ay be ta#en during product

design to facilitate this fle ibility)


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+!a6on.co!1. (hy is +!a6on building !ore &arehouses as it gro&s) Bo& !any

&arehouses should it have and &here should they be located)2. (hat advantages does selling boo#s via the "nternet provide over a

traditional boo#store) +re there any disadvantages to selling via the"nternet)

$. Should +!a6on stoc# every product it sells)'. (hat advantage can bric#s-and-!ortar players derive fro! setting

up an online channel) Bo& should they use the t&o channels togain !a i!u! advantage)

0. (hat advantages%disadvantages does the online channel enjoy inthe sale of shoes diapers/ relative to a retail store)

. or &hat products does the online channel offer the greateradvantage relative to retail stores) (hat characteri6es theseproducts)


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