1. Understanding the supply chain
What is a supply chain?
All the stages involved, directly or indirectly, in fulfilling a customer request
è As weak as the weakest link
è Depends on product
è Integration of suppliers, factories, warehouses and stores
è Minimize total system cost
è Supply network would be a better name
è The customer is an integral part of the supply chain
è The movement of products is essential, but it also includes movement of information
and funds in both directions.
è Not all stages are present in every supply chain
Objective of a supply chain
è Maximize overall value created
è Measured with supply chain profitability
è SC success à measured by total SC profitability (not sum of individual profits)
A. SUPPLY CHAIN MANAGEMENT
Supply Chain Management is concerned with the efficient integration of suppliers, factories,
warehouses and stores so that merchandise is produced and distributed in the right
quantities, to the right locations and the right time, and so as to minimize total system cost
subject to satisfying service requirements.
Supply chain management looks at the problem of managing the flow of goods in an
integrated manner (maximize overall value).
• One source of revenue: the final customers
• Multiple sources of cost: all the different flows
4 trade-off, 4 different parts of a company
Purchasing Warehousing
• Stable volume requirements • Low inventory
• Flexible delivery time • Low transportation costs
• Little variation in mix • Quick replenishment
• Large quantities
Manufacturing Sales
• Long run production • Short order lead time
• High quality • Large inventories
• Low production costs • Enormous variety of products
• Low prices
,As a decision-maker, you need to deal with:
• A sales department who wants cheap, and infinite, inventory of products available
immediately from the warehouse.
• The warehouse, who wants as little inventory as possible, replenished almost
immediately by manufacturing.
• Manufacturing, who wants to produce in long runs (long LT), altering designs and
materials to achieve lower costs and higher quality.
• Procurement, who want stability from a manufacturing and require fast lead times
from the suppliers.
,Decision phase of a supply chain
Supply chain strategy or design
• Long-term, expensive, and difficult to reverse
• Must take uncertainty into account
• Decisions about the structure of the supply chain
• What processes will each stage perform?
- Inhouse vs. outsourcing
- Facility location and capacity
- Where to produce and store
- Transportation modes
- IT systems
Supply chain tactical planning
• Constrained by the strategic decisions
• Input: medium-term demand forecast
• Goal: exploit flexibility to optimize performance
• Policies for mid-term operations
- Which markets from which location?
- Subcontracting part of our manufacturing?
- Inventory policy? Planned buildup?
- Marketing promotions?
Supply chain operations
• Constrained by the tactical decisions
• Input: actual customer orders
• Goal: implement the policies as effectively as you can
• Policies for short-term operations
- Almost no uncertainty
- Allocate orders
- Set due dates
- Generate picking lists, etc.
, B. PROCESS VIEWS OF A SUPPLY CHAIN
2 Ways of visualizing the processes
1. Cycle view Divide the SC in cycles at the interface of each successive pair of
stages
2. 1. Push/pull Processes are divided into 2 categories, depending on whether
view. (most Ø they are a response to a customer order (pull)
useful) Ø or in anticipation of a customer order (push)
1. Cycle view of a supply chain
à Clearly defines the processes and their owner
à useful when considering operational decisions (dit type beslissingen bekijken we niet)
What is a supply chain?
All the stages involved, directly or indirectly, in fulfilling a customer request
è As weak as the weakest link
è Depends on product
è Integration of suppliers, factories, warehouses and stores
è Minimize total system cost
è Supply network would be a better name
è The customer is an integral part of the supply chain
è The movement of products is essential, but it also includes movement of information
and funds in both directions.
è Not all stages are present in every supply chain
Objective of a supply chain
è Maximize overall value created
è Measured with supply chain profitability
è SC success à measured by total SC profitability (not sum of individual profits)
A. SUPPLY CHAIN MANAGEMENT
Supply Chain Management is concerned with the efficient integration of suppliers, factories,
warehouses and stores so that merchandise is produced and distributed in the right
quantities, to the right locations and the right time, and so as to minimize total system cost
subject to satisfying service requirements.
Supply chain management looks at the problem of managing the flow of goods in an
integrated manner (maximize overall value).
• One source of revenue: the final customers
• Multiple sources of cost: all the different flows
4 trade-off, 4 different parts of a company
Purchasing Warehousing
• Stable volume requirements • Low inventory
• Flexible delivery time • Low transportation costs
• Little variation in mix • Quick replenishment
• Large quantities
Manufacturing Sales
• Long run production • Short order lead time
• High quality • Large inventories
• Low production costs • Enormous variety of products
• Low prices
,As a decision-maker, you need to deal with:
• A sales department who wants cheap, and infinite, inventory of products available
immediately from the warehouse.
• The warehouse, who wants as little inventory as possible, replenished almost
immediately by manufacturing.
• Manufacturing, who wants to produce in long runs (long LT), altering designs and
materials to achieve lower costs and higher quality.
• Procurement, who want stability from a manufacturing and require fast lead times
from the suppliers.
,Decision phase of a supply chain
Supply chain strategy or design
• Long-term, expensive, and difficult to reverse
• Must take uncertainty into account
• Decisions about the structure of the supply chain
• What processes will each stage perform?
- Inhouse vs. outsourcing
- Facility location and capacity
- Where to produce and store
- Transportation modes
- IT systems
Supply chain tactical planning
• Constrained by the strategic decisions
• Input: medium-term demand forecast
• Goal: exploit flexibility to optimize performance
• Policies for mid-term operations
- Which markets from which location?
- Subcontracting part of our manufacturing?
- Inventory policy? Planned buildup?
- Marketing promotions?
Supply chain operations
• Constrained by the tactical decisions
• Input: actual customer orders
• Goal: implement the policies as effectively as you can
• Policies for short-term operations
- Almost no uncertainty
- Allocate orders
- Set due dates
- Generate picking lists, etc.
, B. PROCESS VIEWS OF A SUPPLY CHAIN
2 Ways of visualizing the processes
1. Cycle view Divide the SC in cycles at the interface of each successive pair of
stages
2. 1. Push/pull Processes are divided into 2 categories, depending on whether
view. (most Ø they are a response to a customer order (pull)
useful) Ø or in anticipation of a customer order (push)
1. Cycle view of a supply chain
à Clearly defines the processes and their owner
à useful when considering operational decisions (dit type beslissingen bekijken we niet)
