Supply Chain Management D0R17a AJ 2025-2026
Chapter 1: Understanding the Supply Chain (Part I)
What’s different now?
A company is one little part of a huge network of companies that are interrelated
= supply chain
- How do different companies coordinate their inventory management?
- How do huge companies optimize the SC network?
Limit to how much efficiency can be gained by optimizing local processes
SC will be as weak as the weakest link
What is a supply chain?
= all the stages involved, directly or indirectly, in fulfilling a customer request
- Demand = what drives a SC
Supply Chain Management
- Efficient integration of suppliers, factories, warehouses and stores
- Products produced and distributed in the right quantities, right locations
and at the right time
- Minimize total system cost (not only monetary also sustainability etc.)
- Satisfying service requirements
SCM looks at the problem of managing the flow of goods in an integrated
manner
o Flow of money
o Flow of information
From a different perspective…
“C-level managers care about the SC, because it allows them to make more
money”
SCM is about trade-offs
Purchasing Warehousing
Stable volume requirements Low inventory (capacity, costly)
Flexible delivery time Low transportation costs
Little variation in mix Quick replenishment (low order
Large quantities (discount) quantities)
Manufacturing Sales
Long run production Short order lead time
High quality Large inventories
High productivity Enormous variety of products
Low production cost Low prices
The goal is to find the optimal trade-off
A decision-maker needs to deal with:
- Sales department
o Cheap, infinite inventory of products
o Available immediately from the warehouse
- Warehouse
o As little inventory as possible
o Replenished almost immediately
- Manufacturing
o Produce in long runs (long LT)
1
,Supply Chain Management D0R17a AJ 2025-2026
o Altering designs/materials lower costs, higher quality
- Procurement
o Stability from manufacturing
o Require fast LT from suppliers
SCM is everywhere
Example: tea farming
- International SC
- Many types: each a different production process
Supply network would be a better name
- Customer = integral part of the SC
- Movement of products
- Movement of information and funds (€) in both directions
- Not all stages are present in every SC
Objective of a supply chain
- Maximize overall value created
- Measured with SC profitability
o Revenue from the customer – total cost
- SC success measured by total SC profitability (not sum of individual
profits)
SCM
- Manage SC flows and assets to maximize SC surplus
- One source of revenue: final customer
- Multiple sources of cost: all different flows
- Connection between design, planning and operation of a SC and its
success (alignment)
Decision phases of a supply chain
SC strategy and design f.e. opening a new factory
- Long-term, expensive, difficult to reverse
- High uncertainty
- Decisions about structure of the SC
- Each stage
o Inhouse vs outsourcing
o Facility location and capacity
o Where to produce and store
o Transportation modes
o IT systems
2
,Supply Chain Management D0R17a AJ 2025-2026
SC tactical planning f.e. production plan next
6 months
- Constrained by strategic decisions
- Input: medium-term demand forecast
- Goal: exploit flexibility to optimize performance
- Policies for mid-term operations
o Which markets from which location?
o Subcontracting part of our manufacturing?
o Inventory policy? Planned buildup?
o Marketing promotions?
SC operations f.e. daily production
- Constrained by tactical decisions
- Input: actual customer orders
- Goal: implement the policies as effectively as you can
- Policies for short-term operations
o Almost no uncertainty
o Allocate orders
o Set due dates
o Generate picking lists, etc.
Process views of a supply chain
Cycle view
Divide the SC in cycles at the interface of each successive pair of stages
4 key
relationships/cycles
Each have the same
structure
- Each cycle happens
between two stages
- 6 subprocesses per cycle
Lead
time
Advantages
- Clearly defines the processes and their owner
3
, Supply Chain Management D0R17a AJ 2025-2026
- Useful when considering operational decisions
Push/pull view
Processes are divided into 2 categories
- Response to a customer order (pull)
- Anticipation of a customer order (push)
Customer lead
time
CODP
Customer Order
Decoupling Point
1. Make to order (pure pull) (CODP at the beginning)
+ very customizable products
- entire production process = lead time
f.e. handmade violin
2. Make to stock (pure push) (no CODP)
+ lead time is zero
f.e. tea in the store
3. Assemble to order (in the middle)
Push until a certain point (basic product) CODP pull (customize
further)
f.e. laptops online
Strategic design decisions: where to locate CODP?
- Link with volume and product variety
- Determines lead times
- Impact on SC performance
Flexibility vs variety
MTS: make to stock
ATO: assemble to order
Only start when there is a MTO: make to order
customer and everything is ETO: engineer to stock
sure
4
Chapter 1: Understanding the Supply Chain (Part I)
What’s different now?
A company is one little part of a huge network of companies that are interrelated
= supply chain
- How do different companies coordinate their inventory management?
- How do huge companies optimize the SC network?
Limit to how much efficiency can be gained by optimizing local processes
SC will be as weak as the weakest link
What is a supply chain?
= all the stages involved, directly or indirectly, in fulfilling a customer request
- Demand = what drives a SC
Supply Chain Management
- Efficient integration of suppliers, factories, warehouses and stores
- Products produced and distributed in the right quantities, right locations
and at the right time
- Minimize total system cost (not only monetary also sustainability etc.)
- Satisfying service requirements
SCM looks at the problem of managing the flow of goods in an integrated
manner
o Flow of money
o Flow of information
From a different perspective…
“C-level managers care about the SC, because it allows them to make more
money”
SCM is about trade-offs
Purchasing Warehousing
Stable volume requirements Low inventory (capacity, costly)
Flexible delivery time Low transportation costs
Little variation in mix Quick replenishment (low order
Large quantities (discount) quantities)
Manufacturing Sales
Long run production Short order lead time
High quality Large inventories
High productivity Enormous variety of products
Low production cost Low prices
The goal is to find the optimal trade-off
A decision-maker needs to deal with:
- Sales department
o Cheap, infinite inventory of products
o Available immediately from the warehouse
- Warehouse
o As little inventory as possible
o Replenished almost immediately
- Manufacturing
o Produce in long runs (long LT)
1
,Supply Chain Management D0R17a AJ 2025-2026
o Altering designs/materials lower costs, higher quality
- Procurement
o Stability from manufacturing
o Require fast LT from suppliers
SCM is everywhere
Example: tea farming
- International SC
- Many types: each a different production process
Supply network would be a better name
- Customer = integral part of the SC
- Movement of products
- Movement of information and funds (€) in both directions
- Not all stages are present in every SC
Objective of a supply chain
- Maximize overall value created
- Measured with SC profitability
o Revenue from the customer – total cost
- SC success measured by total SC profitability (not sum of individual
profits)
SCM
- Manage SC flows and assets to maximize SC surplus
- One source of revenue: final customer
- Multiple sources of cost: all different flows
- Connection between design, planning and operation of a SC and its
success (alignment)
Decision phases of a supply chain
SC strategy and design f.e. opening a new factory
- Long-term, expensive, difficult to reverse
- High uncertainty
- Decisions about structure of the SC
- Each stage
o Inhouse vs outsourcing
o Facility location and capacity
o Where to produce and store
o Transportation modes
o IT systems
2
,Supply Chain Management D0R17a AJ 2025-2026
SC tactical planning f.e. production plan next
6 months
- Constrained by strategic decisions
- Input: medium-term demand forecast
- Goal: exploit flexibility to optimize performance
- Policies for mid-term operations
o Which markets from which location?
o Subcontracting part of our manufacturing?
o Inventory policy? Planned buildup?
o Marketing promotions?
SC operations f.e. daily production
- Constrained by tactical decisions
- Input: actual customer orders
- Goal: implement the policies as effectively as you can
- Policies for short-term operations
o Almost no uncertainty
o Allocate orders
o Set due dates
o Generate picking lists, etc.
Process views of a supply chain
Cycle view
Divide the SC in cycles at the interface of each successive pair of stages
4 key
relationships/cycles
Each have the same
structure
- Each cycle happens
between two stages
- 6 subprocesses per cycle
Lead
time
Advantages
- Clearly defines the processes and their owner
3
, Supply Chain Management D0R17a AJ 2025-2026
- Useful when considering operational decisions
Push/pull view
Processes are divided into 2 categories
- Response to a customer order (pull)
- Anticipation of a customer order (push)
Customer lead
time
CODP
Customer Order
Decoupling Point
1. Make to order (pure pull) (CODP at the beginning)
+ very customizable products
- entire production process = lead time
f.e. handmade violin
2. Make to stock (pure push) (no CODP)
+ lead time is zero
f.e. tea in the store
3. Assemble to order (in the middle)
Push until a certain point (basic product) CODP pull (customize
further)
f.e. laptops online
Strategic design decisions: where to locate CODP?
- Link with volume and product variety
- Determines lead times
- Impact on SC performance
Flexibility vs variety
MTS: make to stock
ATO: assemble to order
Only start when there is a MTO: make to order
customer and everything is ETO: engineer to stock
sure
4
