Supply Chain Management
Lecture 1
What is a supply chain?
Supplier -> your company -> customer
Een systeem van organisaties, bedrijven, activiteiten, informatie en middelen dat zich
bezighoudt met het aanbieden van een product of dienst aan de klant. Vroeger focuste de
logistiek manager zich op transport, opslag en vervoer. Nu is het veel breder: volledig supply
chain nodig om bedrijfsdoelstelling te halen. Een Supply chain bestaat uit heel veel bedrijven.
A more realistic supply chain:
Definition of supply chain management:
“SCM is a set of approaches to efficiently integrate suppliers, manufacturer, so that the
merchandise is produced and distributed at the right quantities, to the right locations, and at
the right time, in order to minimize systemwide costs while satisfying service level
requirements.”
Two different kind of products
Nature of demand: functional OR innovative
Functional: staples
• Stable, predictable demand
• Long life cycle
• Competition thus low profit margins
Innovative: fashion, B&J, Nespresso, Apple
• Unpredictable demand
• High profit margins
• Short life cycle (few months), great variety
Functions and kinds of supply chain
Two distinct functions of a SC:
• Physical function <- focus of efficient SC
1
, • Market mediation function <- focus on responsive SC
Different kind of SC (Fisher’s strategies):
• Efficient (kostenbesparing)
• Responsive (bij elkaar brengen vraag en aanbod)
Mismatch causes problems
Examples of balancing cost and service
Five ways to compete the market:
Customer Value Proposition Example Operations strategy
High fashion content at a Zara Speed to market
reasonable price
Customer experience Dell Direct Responsiveness trough
configure-to-order
Product innovation Apple Efficiency through
outsourced manufacturing
and logistics
Everyday low pricing Wal-Mart Cost efficiency
Product selection and Amazon Efficient and reliable order
availability fulfilment
Important observations in supply chains
Interaction between supply chain and development chain
The development chain:
Set of activities and processes associated with new product introduction. Includes:
• Product design phase & research
• Associated capabilities and knowledge
• Sourcing decision
• Production plans
Coordination across companies / Global optimization
Information sharing
2
,What kind of extra cost is incurred?
Other possible consequences?
So called bullwhip effect.
Coordination also means information sharing, but it is more:
Coordination = integration.
Information sharing and cooperation
Global optimization vs. local optimization
That is why supply chains cannot be introduced without immediately stressing the importance
of integration. Indeed: no success possible without integration.
Complexity and coordination
3
, How many countries does it take to produce a coat?
Avoid conflicting strategies. Suppliers seek a long commitment to large quantities with
flexible delivery times.
Manufacturers need to adapt to changing customer demand (fashion trends)
• Even if longer production run would be more profitable (why?)
Supplier seek a long commitment to large quantities with flexible delivery times.
Warehouses and distribution centre’s aim to reduce inventory.
Uncertainty and risk
Most important uncertainty is demand. Forecasting alone is not a solution. Demand is not the
only source - lead time. Recent trends make things more uncertain:
• Lean manufacturing
• Outsourcing (item uit het buitenland word gehaald)
• Offshoring (waar de activiteit wordt uitgevoerd)
Natural disasters: earthquake, hurricane, tsunami
Politics: strikes, trade sanctions (embargo)
Key issues in supply chains:
• Inventory control
• Network configuration
• Production sourcing
• Supply contracts
• Distribution strategies
• Product design
• Supply chain integration & partnering
Forecasting
4
Lecture 1
What is a supply chain?
Supplier -> your company -> customer
Een systeem van organisaties, bedrijven, activiteiten, informatie en middelen dat zich
bezighoudt met het aanbieden van een product of dienst aan de klant. Vroeger focuste de
logistiek manager zich op transport, opslag en vervoer. Nu is het veel breder: volledig supply
chain nodig om bedrijfsdoelstelling te halen. Een Supply chain bestaat uit heel veel bedrijven.
A more realistic supply chain:
Definition of supply chain management:
“SCM is a set of approaches to efficiently integrate suppliers, manufacturer, so that the
merchandise is produced and distributed at the right quantities, to the right locations, and at
the right time, in order to minimize systemwide costs while satisfying service level
requirements.”
Two different kind of products
Nature of demand: functional OR innovative
Functional: staples
• Stable, predictable demand
• Long life cycle
• Competition thus low profit margins
Innovative: fashion, B&J, Nespresso, Apple
• Unpredictable demand
• High profit margins
• Short life cycle (few months), great variety
Functions and kinds of supply chain
Two distinct functions of a SC:
• Physical function <- focus of efficient SC
1
, • Market mediation function <- focus on responsive SC
Different kind of SC (Fisher’s strategies):
• Efficient (kostenbesparing)
• Responsive (bij elkaar brengen vraag en aanbod)
Mismatch causes problems
Examples of balancing cost and service
Five ways to compete the market:
Customer Value Proposition Example Operations strategy
High fashion content at a Zara Speed to market
reasonable price
Customer experience Dell Direct Responsiveness trough
configure-to-order
Product innovation Apple Efficiency through
outsourced manufacturing
and logistics
Everyday low pricing Wal-Mart Cost efficiency
Product selection and Amazon Efficient and reliable order
availability fulfilment
Important observations in supply chains
Interaction between supply chain and development chain
The development chain:
Set of activities and processes associated with new product introduction. Includes:
• Product design phase & research
• Associated capabilities and knowledge
• Sourcing decision
• Production plans
Coordination across companies / Global optimization
Information sharing
2
,What kind of extra cost is incurred?
Other possible consequences?
So called bullwhip effect.
Coordination also means information sharing, but it is more:
Coordination = integration.
Information sharing and cooperation
Global optimization vs. local optimization
That is why supply chains cannot be introduced without immediately stressing the importance
of integration. Indeed: no success possible without integration.
Complexity and coordination
3
, How many countries does it take to produce a coat?
Avoid conflicting strategies. Suppliers seek a long commitment to large quantities with
flexible delivery times.
Manufacturers need to adapt to changing customer demand (fashion trends)
• Even if longer production run would be more profitable (why?)
Supplier seek a long commitment to large quantities with flexible delivery times.
Warehouses and distribution centre’s aim to reduce inventory.
Uncertainty and risk
Most important uncertainty is demand. Forecasting alone is not a solution. Demand is not the
only source - lead time. Recent trends make things more uncertain:
• Lean manufacturing
• Outsourcing (item uit het buitenland word gehaald)
• Offshoring (waar de activiteit wordt uitgevoerd)
Natural disasters: earthquake, hurricane, tsunami
Politics: strikes, trade sanctions (embargo)
Key issues in supply chains:
• Inventory control
• Network configuration
• Production sourcing
• Supply contracts
• Distribution strategies
• Product design
• Supply chain integration & partnering
Forecasting
4
