SUPPLY CHAIN MANAGEMENT
Chapter 1: Introduction to SC management
• Supply chain & Supply Chain Management
• SCM Key observations
• SCOR and SC strategy
• SCM Planning framework
SCM: definition
Supply Chain Management is
• a set of approaches utilized to efficiently minimize system wide costs while satisfying
service level requirements [SKS].
Supply Chain: goods & flows
SCM = an integrated framework
• for managing supply chain & Designing, Planning and Controlling business processes
within the supply chain
• goal: Support FINANCIAL, QUALITY and SERVICE objectives of the business
SCM = Teamwork: SCM affects ALL functional departments!
SCM: Business Drivers & Challenges
Customer requirements Globalization Economy
- Sustainable processes!
The Supply Chain anno 2020
21st Century
• Industrial organizations increasingly rely on effective supply chains to successfully
compete in the global market and networked economy
• Trend towards circular supply chains, waste recuperation, energy recuperation
,20th Century best practices
• Just-In-Time, Lean Management, Agile Manufacturing
• Demand driven SC’s
Customer Order Decoupling point (CODC)
• Divides material flow in 2 parts
• Material flow based on customer orders
• Material flow based on demand planning (forecast)
• Latest important inventory point, defined by strategy and constraints
Production environment & (C)ODP
Triple Bottom Line (people, planet, profit)
• companies should commit to focusing as much on
social and environmental concerns as they do on profits
SCM – Key Observations [SKS]
1. The Supply Chain Strategy should be in line with the Company Strategy, and, directly
linked to the (product) Development Chain
2. The challenge is to minimize costs and maximize service levels over the entire SC system
Global Optimization
3. Uncertainty and Risk are inherent in every SC
SCM observ. 1: Development Chain (NPI = new product introduction)
• Development Chain = Set of activities and processes
associated with new product introduction (NPI)
• The Development chain and Supply chain intersect at the production point
SCM observ. 2: Global Optimization
• Minimize costs and maximize service levels over the entire SC system
• The SC is a complex network, geographically dispersed
• The SC is a dynamic system evolving over time
- customer demand varies, supplier capabilities vary,…
,SCM observ. 3: uncertainty & risk
• Uncertainty and risk are inherent in every SC
• Matching supply and demand is difficult
• Forecasting doesn’t solve the problem
• Recent trends that focus on cost reduction increase risks significantly (e.g., lean
production/off-shoring/outsourcing)
SCOR and SC strategy:
SCOR: SC Operations Reference model
• SCOR distinguishes as main SC Processes
• Source - Make - Deliver - (Return): material flows
• Plan process : information and coordination flow
SCOR: scope
• SCOR spans:
- All supplier / customer interactions, all physical material & market interactions
• SCOR does not include:
- sales administration, technology development, product & process design
DCOR : Design Chain Operations Model
Product and process design and development processes
CCOR : Customer Chain Operations Model
Sales administration processes
Supply chain performance attributes
• Reliability
• Responsiveness: The velocity at which a supply chain
delivers products to the customer
• Flexibility: responding to marketplace changes
• Cost effectiveness: ability to manage the costs of the
• Asset efficiency: effectiveness of managing fixed
assets and working capital
, Supply chain performance: service strategy
Dominate on service
1. Reliability
• Perfect order fulfillment
• Fill rate
2. Responsiveness
• Order fulfillment lead-time
e.g. e-commerce (products), hospitals (core services)
Supply chain performance: price strategy
Dominate on price
1. Cost effectiveness
• Cost of goods sold
• Total supply chain cost
2. Asset efficiency
• Cash-to-cash cycle time
• Inventory days of supply
e.g. low cost retailers (products), hospitals (products)
Supply chain performance: product strategy
Dominate on product
1. Flexibility
• Supply chain response time
• Production flexibility
2. Responsiveness
• Order fulfillment lead-time
e.g. fashion industry (products),hospitals (core
products)
SC Planning framework
SC management levels:
- STRATEGIC
• Decisions for next 5 à 10
years
• Investments, acquisitions,
markets, product gamma,
technology, R&D
- TACTICAL
• Decisions for next 3 à 18
months
• Financial budgets, targets
for production, sales &
inventory
Chapter 1: Introduction to SC management
• Supply chain & Supply Chain Management
• SCM Key observations
• SCOR and SC strategy
• SCM Planning framework
SCM: definition
Supply Chain Management is
• a set of approaches utilized to efficiently minimize system wide costs while satisfying
service level requirements [SKS].
Supply Chain: goods & flows
SCM = an integrated framework
• for managing supply chain & Designing, Planning and Controlling business processes
within the supply chain
• goal: Support FINANCIAL, QUALITY and SERVICE objectives of the business
SCM = Teamwork: SCM affects ALL functional departments!
SCM: Business Drivers & Challenges
Customer requirements Globalization Economy
- Sustainable processes!
The Supply Chain anno 2020
21st Century
• Industrial organizations increasingly rely on effective supply chains to successfully
compete in the global market and networked economy
• Trend towards circular supply chains, waste recuperation, energy recuperation
,20th Century best practices
• Just-In-Time, Lean Management, Agile Manufacturing
• Demand driven SC’s
Customer Order Decoupling point (CODC)
• Divides material flow in 2 parts
• Material flow based on customer orders
• Material flow based on demand planning (forecast)
• Latest important inventory point, defined by strategy and constraints
Production environment & (C)ODP
Triple Bottom Line (people, planet, profit)
• companies should commit to focusing as much on
social and environmental concerns as they do on profits
SCM – Key Observations [SKS]
1. The Supply Chain Strategy should be in line with the Company Strategy, and, directly
linked to the (product) Development Chain
2. The challenge is to minimize costs and maximize service levels over the entire SC system
Global Optimization
3. Uncertainty and Risk are inherent in every SC
SCM observ. 1: Development Chain (NPI = new product introduction)
• Development Chain = Set of activities and processes
associated with new product introduction (NPI)
• The Development chain and Supply chain intersect at the production point
SCM observ. 2: Global Optimization
• Minimize costs and maximize service levels over the entire SC system
• The SC is a complex network, geographically dispersed
• The SC is a dynamic system evolving over time
- customer demand varies, supplier capabilities vary,…
,SCM observ. 3: uncertainty & risk
• Uncertainty and risk are inherent in every SC
• Matching supply and demand is difficult
• Forecasting doesn’t solve the problem
• Recent trends that focus on cost reduction increase risks significantly (e.g., lean
production/off-shoring/outsourcing)
SCOR and SC strategy:
SCOR: SC Operations Reference model
• SCOR distinguishes as main SC Processes
• Source - Make - Deliver - (Return): material flows
• Plan process : information and coordination flow
SCOR: scope
• SCOR spans:
- All supplier / customer interactions, all physical material & market interactions
• SCOR does not include:
- sales administration, technology development, product & process design
DCOR : Design Chain Operations Model
Product and process design and development processes
CCOR : Customer Chain Operations Model
Sales administration processes
Supply chain performance attributes
• Reliability
• Responsiveness: The velocity at which a supply chain
delivers products to the customer
• Flexibility: responding to marketplace changes
• Cost effectiveness: ability to manage the costs of the
• Asset efficiency: effectiveness of managing fixed
assets and working capital
, Supply chain performance: service strategy
Dominate on service
1. Reliability
• Perfect order fulfillment
• Fill rate
2. Responsiveness
• Order fulfillment lead-time
e.g. e-commerce (products), hospitals (core services)
Supply chain performance: price strategy
Dominate on price
1. Cost effectiveness
• Cost of goods sold
• Total supply chain cost
2. Asset efficiency
• Cash-to-cash cycle time
• Inventory days of supply
e.g. low cost retailers (products), hospitals (products)
Supply chain performance: product strategy
Dominate on product
1. Flexibility
• Supply chain response time
• Production flexibility
2. Responsiveness
• Order fulfillment lead-time
e.g. fashion industry (products),hospitals (core
products)
SC Planning framework
SC management levels:
- STRATEGIC
• Decisions for next 5 à 10
years
• Investments, acquisitions,
markets, product gamma,
technology, R&D
- TACTICAL
• Decisions for next 3 à 18
months
• Financial budgets, targets
for production, sales &
inventory
