CHAPTER 2
KEY DRIVERS AND
STRUCTURE OF THE
SUPPLY CHAIN
Nguyen Thi Thuy Hanh, PhD
Faculty of Information Systems
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Q&A
1. What questions should companies answer before
production?
OBJECTIVES
❑ Listing key drivers of supply chains.
❑ Describe each driver and relationship between them.
❑ Describe supply chain structure
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CONTENTS
Key drivers of supply chains
Supply chain structure
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I- KEY DRIVER OF SUPPLY CHAIN
Responsiveness
Efficiency
Trade-off
Source: Michael Hugos, Essentials of SC
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PRODUCTION
❑Production: capacity of a supply chain to make and store
❑Facilities of production are factories and warehouses.
1. Analyze responsiveness versus efficiency trade-off here?
Factory Warehouse
Stock Keeping
Product Focus Unit (SKU)
Storage
Functional Job Lot
Focus Storage
Crossdocking
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Factory
1. Product Focus—performs the range of different operations
required to make a given product line
2. Functional Focus—performing just a few operations such as
only making a select group of parts or only doing assembly.
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Warehouse
1. Stock Keeping Unit (SKU) Storage—all of a given type of product is
stored together
2. Job Lot Storage—all the different products related to the needs of a
certain type of customer or related to the needs of a particular job are
stored together.
3. Crossdocking—product from incoming trucks broken down into
smaller lots then recombined according to the needs of the day and
quickly loaded onto outbound trucks destinations.
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INVENTORY
❑ Inventory includes everything from raw material to work in process to finished goods that are held by
the manufacturers, distributors, and retailers in a supply chain
1. Analyze responsiveness versus efficiency tradeoff here?
• amount of inventory • against uncertainty • anticipation of
needed to satisfy predictable increases
demand for the in demand that occur
product in the period at certain times of the
yea
Seasonal
Cycle Inventory Safety Inventory
Inventory
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LOCATION
Location: geographical site of supply chain facilities
1. Analyze responsiveness versus efficiency tradeoff here?
2. Which factors does manager need to consider when making location decision?
Cost of
Cost of labor Labor skills
facilities
Infrastructure
Taxes
condition
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TRANSPORTATION
Transportation: movement of everything from raw material to finished goods between different
facilities in a supply chain
1. Analyze responsiveness versus efficiency tradeoff here?
Modes of transport
Electronic
Ship Rail Pipelines Truck airplanes
transport
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INFORMATION
Information: connection between all of the activities and operations in a supply chain
• decide on weekly production schedules, inventory levels,
Coordinating daily
transportation routes, and stocking locations.
activities
Forecasting and • anticipate and meet future demands for tactical and
planning strategic desicions
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Three Steps to Align Supply Chain and Business Strategy
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II-SUPPLY CHAIN STRUCTURE
Source: Michael Hugos, Essentials of SC
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II-SUPPLY CHAIN STRUCTURE
Source: Michael Hugos, Essentials of SC
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II-SUPPLY CHAIN STRUCTURE
Participants in the Supply Chain
Producer
Producers or manufacturers are organizations that make a product.
Companies are producers of raw materials and companies that are producers of
finished goods
Distributors (wholesalers)
companies that take inventory in bulk from producers and deliver a bundle of
related product lines to customers.
Retailers
Retailers stock inventory and sell in smaller quantities to the general public.
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II-SUPPLY CHAIN STRUCTURE
Participants in the Supply Chain
Consumer
Customers or consumers are any organization that purchases and uses a product.
Service provider
These are organizations that provide services to producers, distributors, retailers,
and customers.
For example: providers of transportation services and warehousing; Financial
services.