Chapter 1
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Understanding the Supply Chain
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Learning Objectives
• Discuss the goal of a supply chain, and explainthe impact
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of supply chain decisions on the success of a firm.
• Identify the three keysupply chain decision phases, and
explain the significance of each one.
• Describe the cycle and push/pull views of a supply chain.
• Classify the supply chain macro processes in a firm.
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
What is a Supply Chain?
• All stages involved, directly or indirectly, in fulfilling a
customer request.
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• Includes manufacturers, suppliers, transporters,
warehouses, retailers, and customers.
• Within each company, the supply chain includes all
functions involved in fulfilling a customer request
(product development, marketing, operations,
distribution, finance, customer service).
Contd…
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
What is a Supply Chain?
• Customer is an integral part of the supply chain.
• Includes movement of products from suppliers to manufacturers to
distributors, and information, funds, and products in both directions.
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• May be more accurate to use the term “supply network” or “supply
web”.
• Typicalsupply chain stages: customers, retailers, distributors,
manufacturers, suppliers.
• All stages may not be present in all supply chains (e.g., no retailer or
distributor for Dell).
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Flows in a Supply Chain
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Figure 1-2
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
The Objective of a Supply Chain
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• Customer is the only source of revenue.
• Sources of cost includes flows of
information, products, or funds between
stages of the supply chain.
. There are mainly two objectives of Supply Chain
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
The Objective of a Supply Chain
. Maximize the value of supply chain surplus
Supply chain surplus = Customer value – Supply chain cost
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• Example: A customer purchases a wireless router from Best Buy
for 60 tk (revenue).
• Supply chain incurs costs 20 tk
(information,storage,transportation,components, assembly, etc.).
• Difference between 60 tk and the sum of all of these costs is the
supply chain profit.
Contd…
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
The Objective of a Supply Chain
• Effective supply chain management is the management of
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flows between and among supply chain stages to maximize total
supply chain surplus.
• Effective Fund Management that means effective money
management
• Effective Information Management I have to use a perfect use
of Information . True and on time information .
• Effective Product/service Management
• Effective HR Management
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Importance of Supply Chain Decisions
• Profitability
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• Growth
• Competitiveness
• Sustainability
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Decision Phases of a Supply Chain
Supply chain strategy or design
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•
How to structure the supply chain over the next several years
• Supply chain planning
Decisions over the next quarter or year
• Supply chain operation
Daily or weekly operational decisions
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Supply Chain Strategy or Design
• Decisions about the structure of the supply chain and what
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processes each stage will perform.
• Strategic supply chain decisions
Locations and capacities of facilities
Products to be made or stored at various locations
Modes of transportation
Information systems.
• Supply chain design must support strategic objectives.
• Supply chain design decisions are long-term and expensive to
reverse—must take into account market uncertainty.
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Supply Chain Planning
• Definition of a set of policies that govern short-term operations.
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• Fixed by the supply configuration from previous phase.
• Starts with a forecast of demand in the coming year
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Supply Chain Planning
Planning decisions:
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•
Which markets will be supplied from which locations
Planned buildup of inventories
Subcontracting, backup locations
Inventory policies
Timing and size of market promotions
• Must consider in planning decisions—demand uncertainty,
exchange rates, competition over the time horizon
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Supply Chain Operation
• Time horizon is weekly or daily.
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• Decisions regarding individual customer orders.
• Supply chain configuration is fixed and policies
operating are
determined.
• Goal is to implement the operating policies as effectively as
possible.
• Allocate orders to inventory or production, set order due dates,
generate pick lists at a warehouse, allocate an order to a particular
shipment, set delivery schedules, place replenishment orders.
• Much less uncertainty (short time horizon).
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Process View of a Supply Chain
• Cycle view: processes in a supply chain are divided into a series
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of cycles, each performed at the interfaces between two successive
supply chain stages.
• Push/Pull view: processes in a supply chain are divided into two
categories depending on whether they are executed in response to
a customer order (pull) or in anticipation of a customer order
(push).
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Supply Chain Macro Processes
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• Supply chain processes discussed in the two views canbe
classified into:
Customer Relationship Management (CRM)
Internal Supply Chain Management (ISCM)
Supplier Relationship Management (SRM)
• Integration among the above three macro processes is critical for
effective and successful supply chain management.
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Supply Chain Macro Processes
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Figure 1-8
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Summary of Learning Objectives
• Discuss the goal of a supply chain and explainthe
Copyright © 2013 Dorling Kindersley (India) Pvt. Ltd.
impact of
supply chain decisions on the success of a firm.
• Identify the three key supply chain decision phases and explain
the significance of each one.
• Describe the cycle and push/pull views of a supply chain.
• Classify the supply chain macro processes in a firm.
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
