Supply Chain Management
Lecture 1 – Introduction to the course 30 Augustus
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.
The SCM network
The goods – services continuum
Many firms offer a combination of goods and services
- Products are supported by services such as warranties and training
- Services are enhanced through the inclusion of products
Key observations
- Every facility that impacts costs need to be considered
- Suppliers’ suppliers
- Customers’ customers
- Efficiency and cost-effectiveness throughout the system is required
- Increased pressure for sustainability
- Increased risks / disruptions require agility and resilience
, - Multiple levels of activities
- Strategic – tactical – operation
What activities constitute SCM?
Supply chain management: tactical & operation
Supply chains: an evolutionary perspective
In the beginning
,Henry Ford & Fully integrated supply chains
Disintegrated with geographical proximity emergence of the Toyota City concept
- Early supply chains
- Geographical proximity
- Integrated ownership structures
- Why?
- Transportation slow and costly
- Communication and information exchange challenges
Today’s supply chain
, Complexity: The Magnitude
- U.S. companies spend more than $1 trillion in supply-related activities (10-15% of
Gross Domestic Product)
• Transportation 58%
• Inventory 38%
• Management 4%
- A typical box of cereal spends 104 days getting from factory to supermarket
- A typical new car spends 15 days traveling from the factory to the dealership and
stays there for 60 days (USA)
- Food travels 1500 miles between origin and destination in Iowa (USA)
Matching supply and demand
Dealing with uncertainty
- Matching supply and demand is difficult
- Forecasting doesn’t solve the problem
- Multiple, inter-related sources of uncertainty
Assessing risk
- Supply chain risk is the likelihood of a disruption that would impact the ability of a
company to continuously supply products or services
• Supply chain coordination risks are associated with the day-to-day management of
the supply chain
• Disruption risks are caused by natural or manmade disasters
- Risk Management Framework
1. Identify the sources of potential disruptions
2. Assess the potential impact of the risk
3. Develop plans to mitigate the risk
• Contingency planning, insurance, redundancy (e.g., multiple suppliers)
Trends and developments
Goal of supply chain management
Lecture 1 – Introduction to the course 30 Augustus
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.
The SCM network
The goods – services continuum
Many firms offer a combination of goods and services
- Products are supported by services such as warranties and training
- Services are enhanced through the inclusion of products
Key observations
- Every facility that impacts costs need to be considered
- Suppliers’ suppliers
- Customers’ customers
- Efficiency and cost-effectiveness throughout the system is required
- Increased pressure for sustainability
- Increased risks / disruptions require agility and resilience
, - Multiple levels of activities
- Strategic – tactical – operation
What activities constitute SCM?
Supply chain management: tactical & operation
Supply chains: an evolutionary perspective
In the beginning
,Henry Ford & Fully integrated supply chains
Disintegrated with geographical proximity emergence of the Toyota City concept
- Early supply chains
- Geographical proximity
- Integrated ownership structures
- Why?
- Transportation slow and costly
- Communication and information exchange challenges
Today’s supply chain
, Complexity: The Magnitude
- U.S. companies spend more than $1 trillion in supply-related activities (10-15% of
Gross Domestic Product)
• Transportation 58%
• Inventory 38%
• Management 4%
- A typical box of cereal spends 104 days getting from factory to supermarket
- A typical new car spends 15 days traveling from the factory to the dealership and
stays there for 60 days (USA)
- Food travels 1500 miles between origin and destination in Iowa (USA)
Matching supply and demand
Dealing with uncertainty
- Matching supply and demand is difficult
- Forecasting doesn’t solve the problem
- Multiple, inter-related sources of uncertainty
Assessing risk
- Supply chain risk is the likelihood of a disruption that would impact the ability of a
company to continuously supply products or services
• Supply chain coordination risks are associated with the day-to-day management of
the supply chain
• Disruption risks are caused by natural or manmade disasters
- Risk Management Framework
1. Identify the sources of potential disruptions
2. Assess the potential impact of the risk
3. Develop plans to mitigate the risk
• Contingency planning, insurance, redundancy (e.g., multiple suppliers)
Trends and developments
Goal of supply chain management
