March 27, 2013

Understanding the Supply Chain - Review Notes


Supply chain

A supply chain consists of all stages involed directly, or indirectly, in fulfilling a customer request for a product in an economy. Thus it includes customers who give the requests, transporters, retailers, wholesalers, warehoues, manufacturers, and component, service as well as raw material suppliers.
Within an organization there is a supply chain that includes all functions involved a filling a customer request as well as the order. The functions carried out within an organization include marketing, new product development, operations, distribution, finance and customer service.

In a supply chain there is constant flow of information, product and funds between stages. Usually supply chain is imagined as product moving from suppliers to manufacturers and from there to wholesalers and retailers and then further to customers. But supply chains have two way movements and also involve movement of information and fund apart from the product.

Customer is an integral part of the supply chain and the primary purpose of a supply chain is satisfying customer needs and generating profit for itself in the process.

The routine supply chain activities begin with a customer order and end when a satisfied customer has paid for his purchase.

In a supply chain, number of customers are there, number of retailers are there, number of transporters are there and number of manufacturing plants can be there. Hence a supply chain is actually a network or a web. Hence supply network and supply web also describe a supply chain.

The objective of every supply chain is to maximize the overall value generated. Supply chain management involves the management of flows between and among stages in a supply chain to maximize total profitability.

Decision Phases in a Supply Chain

Supply Chain Design, Plan and Operation are identified as three significant decision phases by Chopra and Meindl.

Supply Chain Design: Supply chain strategy is another word used for this phase. Supply chain design decisions or strategy decisions include products to be manufactured, location and capacities of manufacturing plants and warehouses, modes of trasport to be utilized and information system to be utilized.

Supply Chain Planning: Planning, typically done for an year, establishes parameters within which a supply chain will function over a specified period of time.

Supply Chain Operation: In this phase the time horizons are small, monthly, weekly and daily. The decisions driven by customer order and are related to invidual customer orders. There are also decision related to individual production facilities, warehouses and transporters.

Process Views of a Supply Chain

There are two views.

1. Cycle view

In cycle view, the supply chain processes are divided into cycles that are performed at the interface between two successive stages of a supply chain and one describes the following cycles.

Customer order cycle
Replenishment cycle
Manufacturing cycle
Procurement cycle

A. Customer order cycle

Normally occurs at the retailer place between the customer and the retailer.

Activities involved
Customer arrival, Customer order entry, Customer order fulfilment, Customer order receiving, Customer funds payment

B. Replenishment cycles

Normally thought to occur at the retailer/wholesaler or distributor interface.

Activities involved
Retai order trigger, Retail order entry, Retail order fulfilment, Retail order receiving, Funds payment

C. Manufacturing cycle

Normally thought to occur at the wholer/manufacturer interface. Depending on the number of channels in the distribution channel it can occur at customer - manufacturer, or retailer - manufacturer also.

Activities involved

Order arrival, Production scheduling, Manufacturign and shipping, Receiving by the person ordered, Funds payment

D. Procurement cycle

Occurs at the manufacturer/supplier interface

2. Push/Pull View

In this view, pull processes and push processes are categorized and identified in the supply chain. Each supply chain will have some pull processes and push processes. The activities initiated by customers' orders form pull process activities. The activities initiated and carried out in anticipation of customer demand are push process activities.

Importance of Supply Chain Flows

Flow of information, material and product and cash are important for supply chain functioning and fulfilment of its objectives.

Information is key to produce as per customers' order and also to forecast in case of made-to-stock supply chains.

Supply Design, Planning and Operation Related Questions. One will find answers to these questions in various chapters of the Supply Chain Management Book which we are summarising chapter-wise.

1. Why a company outsources some assembly activities and does some within its assembly plant? What characteristics of the product or order characterize outsourced activities?
2. When does a company have only one manufacturing location for the entire country or world? When does it have multiple plants?
3. Why certain orders are despatched via couriers for overnight delivery or one day delivery and why certain other orders are sent via trucks on full load or part load basis?
4. How inventories are determined for components and finished goods?

Reference
Sunil Chopra and Peter Meindl, Supply Chain Management: Strategy, Planning and Operations, Prentice Hall, 2001.



Full Chapter - WSC Book - Supply Chain Management - An Evolutionary View

Originally posted at
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Updated on 27.3.2013


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Supply chain management - Detailed Introduction

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