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Introduction to Supply Chain Management

William McLaury
Associate Professor of Professional Practice
Director, SCM Undergraduate Program – New Brunswick
Department of Supply Chain Management
Rutgers Business School
100 Rockafeller Road, Rm. 3134, Piscataway, NJ 08854
Tel: 848-445-9217 | Email: [email protected]
Website: http://www.business.rutgers.edu/faculty/william-mclaury
What is a Supply Chain?
 Any organization, anywhere in the world, offering a
product or a service, has a supply chain.
 Products and Services are created from materials,
equipment, labor, time, money, and other resources.
- Producing and delivering products and services requires
suppliers, manufacturers, and customers; all of which make up
a supply chain.

 Supply chains can be very simple or very complex.

 Supply chains exist in organizations that are:
– Large or Small (i.e., a multinational corporation or a “mom & pop shop” on the local corner)
– Public or Private (i.e., a publically traded company or a privately held company)
– For-Profit or Not-for-Profit (i.e., a commercial business, government or a charitable institution)
2
Structure of a Supply Chain
Suppliers Manufacturer Customers
Finished Finished
Raw Material Product Wholesaler &
Intermediate Manufacturer Retail
Material or Distributor Consumers
Suppliers Customers
Suppliers Service Insourced Customers
and/or
Suppliers Outsourced

External Sources of Supply Distribution Channels

Facilitated through the use of Logistics

Warehousing Truck Rail Air Water Pipeline

Inbound Transportation Outbound Transportation

A supply chain consists of the flow of materials and products. . .

From SUPPLIERS To MANUFACTURERS To CUSTOMERS

Each of these are “Links” in the supply chain

3
Supply Chain Flow
Suppliers Manufacturer Customers
Finished Finished
Raw Material Product Wholesaler &
Intermediate Manufacturer Retail
Material or Distributor Consumers
Suppliers Customers
Suppliers Service Insourced Customers
and/or
Suppliers Outsourced

External Sources of Supply Distribution Channels

Facilitated through the use of Logistics

Warehousing Truck Rail Air Water Pipeline

Inbound Transportation Outbound Transportation

Product & Service Flow

Information Flow
(requirements, orders, confirmations, shipping notices, invoices, etc.)

Payment Flow

Returns Flow 4
 Supply Chain Partners – Tiers 1 through n
Suppliers Manufacturer Customers
Tier 3 Tier 2 Tier 1 Tier 1 Tier 2 Tier 3
Finished

Tier n
Tier n

Raw Material
Finished Wholesaler
Intermediate & Retail
Material or Product Consumers
Suppliers Distributor Customers
Suppliers Service Manufacturer Customers
Suppliers

Some Suppliers and Customers can be both Tier 1 and Tier 2

Tier 1 If they supply products and services directly and indirectly Tier 1

Tier 1 = Supplier With whom you have a direct relationship Tier 1 = Customer
Tier 2 = Supplier Tier 2 = Customer
Tier 3 = Supplier With whom you have an indirect relationship Tier 3 = Customer
Tier n = Suppliers Tier n = Customers

It is important to identify your Tier 1 Suppliers and Customers because these

are the partners with whom you will want to prioritize building a relationship
5
Relationship between Links in the Supply Chain

Suppliers Manufacturer Customers

Customer’s Customers
Supplier’s Suppliers

Customer Customer Customer

Procurement Procurement Procurement Procurement
Distribution Distribution Distribution Distribution
Supplier Supplier Supplier

Inbound Outbound Inbound Outbound Inbound Outbound

Transportation Transportation Transportation Transportation Transportation Transportation

Every link (i.e., company) in the Supply Chain

is both a

Customer of their Suppliers and a Supplier to their Customers

6
Your Connection to Supply Chains

Supply chains are everywhere.

From the biggest company in the world to running your household.
We all have supply chain experience even if we don’t know it.
EverythingSupplyChain.com

Everyone viewing this video is part of multiple

supply chains; whether you are aware of it or not.
 Maybe you or someone in your family works for a
supplier, or a manufacturer, or a service provider . . .
 You are certainly on the demand side as a customer.
Supply Chain is like nature, it is all around us.
Dave Waters, Director, International Facilities & Logistics at Steris Corporation

7
Every product that you buy has a supply chain
 Fast food Let’s look at a simple Example
 Candy Bar What is your favorite Candy Bar?
 Laptop computers

 Soda Pop

 Coffee drinks

 Clothes / Shoes

 Automobiles
Do you know what goes
 Cell phones into making it?
8
 Candy Bar Supply Chain (Simplified)
Suppliers Manufacturer Customers
Sugarcan
Sugar
e

Feores Brazil Group Domino

Dairy Farmers of America Milk

The Hershey Company You and me

Walmart
Royal Wholesale Candy Target, etc.
Chocolate

Consumers
Wholesalers
Cocoa Candy Bar Retailers
Archer Daniels Midland and
Beans Manufacturer (Stores)
Distributors
Cocoa
Gerkens Cacao
Butter

Amusement Parks
Candy Shops
American Lecithin Company Lecithin
Convenience Stores
Food & Beverage Distributors
Braskem Reynolds Group
Mass Merchandisers
Movie Theaters
Polypropylene
and Ink
Packaging On-line Retailers
Vending Machine Companies 9
Supply Chain Disruption
Suppliers Manufacturer Customers
Sugarcan
Sugar
e
What happens if there is an
unexpected shortage of
Milk
Cocoa Beans ???

Chocolate

Consumers
Wholesalers
Cocoa Supply Candy Bar Retailers
Disruption and
Beans Manufacturer (Stores)
Distributors
Cocoa
Butter

Lecithin

Polypropylene
and Ink
Packaging
10
Supply Chain Disruption
Suppliers Manufacturer Customers
Sugarcan
Sugar
e
Suddenly, you cannot get the
Chocolate and Cocoa Butter
Milk
that you need to make your
Candy Bars
Chocolate

Consumers
Wholesalers
Cocoa Supply Candy Bar Retailers
Disruption and
Beans Manufacturer Distributors
(Stores)
Cocoa
Butter

Meanwhile . . .
Lecithin you probably placed orders with your
other suppliers and they will continue
Polypropylene to ship their products to you
and Ink
Packaging
11
Supply Chain Disruption
Suppliers Manufacturer Customers
Sugarcan
Sugar
e
Candy Bar production will
be forced to stop
Milk
and your inventory of the other
materials will start to build up
Chocolate

Consumers
Wholesalers
Cocoa Supply Candy Bar Retailers
Disruption and
Beans Manufacturer (Stores)
Distributors
Cocoa
Butter

Your customers still have

Lecithin
inventory of candy bars that they
previously purchased from you
Polypropylene
Packaging
which they can continue to sell
and Ink
12
Supply Chain Disruption
Suppliers Manufacturer Customers
Sugarcane Sugar

You are forced to cancel your orders

Milk
for materials from all your suppliers
until Cocoa Beans are available again

Chocolate

Consumers
Wholesalers
Cocoa Supply Candy Bar Retailers
Disruption and
Beans Manufacturer (Stores)
Distributors
Cocoa
Butter

Lecithin
The disruption
Polypropylene
impacts all suppliers
and Ink
Packaging
13
Supply Chain Disruption
Suppliers Manufacturer Customers
Sugarcane Sugar
Your customers sell out all
remaining inventory of candy
Milk bars which creates a
TOTAL MARKET STOCKOUT

Chocolate

Consumers
Wholesalers
Cocoa Supply Candy Bar Retailers
Disruption and
Beans Manufacturer (Stores)
Distributors
Cocoa
Butter

Lecithin
The disruption impacts
Polypropylene
Packaging
all customers
and Ink
14
Candy Bar Supply Chain (Simplified)
Suppliers Manufacturer Customers
Sugarcan
Sugar
e
All supply chain links are
interconnected and a disruption
Milk
with one will likely impact all

Chocolate

Consumers
Wholesalers
Cocoa Candy Bar Retailers
and
Beans Manufacturer (Stores)
Distributors
Cocoa
Butter

Lecithin
A supply chain is only as
strong as its weakest link
Polypropylene
and Ink
Packaging
15
Supply Chain Discussion

Watch the following video carefully [as it goes by quickly]

 Think about the images you are seeing in the video

Video: “Boiling an egg isn’t as simple as just boiling an egg”

https://www.youtube.com/embed/WrH19H-J4pU
(1 minute)

Why is boiling an egg not just as simple as boiling an egg?

• Did you see any elements of a “supply chain”?
What were they?
16
 Start
Supply Chain Management Fill-in-the-Blanks

The first step in understanding the supply chain

is to visualize the ________________from
beginning to end

Let’s look at a few

examples of supply
chains for some
familiar products.

17
EXAMPLE: Each node/link in this supply chain
Fresh Produce Supply Chain may be a separate independent firm

18
EXAMPLE: Inbound
Pharmaceutical Supply Chain Outbound

19
EXAMPLE: Main Supply Chain Flow:
Food Supply Chain Farmer  Food Manufacturer  Food Retailer  Consumer

COMPLEX
SUPPLY
CHAIN

Between the main supply chain flow

elements, there are many additional
partners and steps in the supply chain
20
21
22
23
24
26
Supply Chain Video Examples

https://www.youtube.com/watch?v=UBSOiHUctrY
(2.5 minutes)

https://www.youtube.com/watch?v=ElYNhGbOTOQ
(2 minutes)

27
 Now that you
SUPPLIER

MANUFACTURER know what a

Supply Chain is?
CUSTOMER

CUSTOMER

What is
MANUFACTURER Supply Chain
SUPPLIER
Management?
What is Supply Chain Management?

You may think of supply chain management as simply

managing the steps involved in the production of a product

Materials (ingredients) Manufacture or Assemble Finished Product

+ =
. . . you buy some materials, and manufacture or
assemble them step-by-step into a product, that you then
sell to a customer . . .
29
What is Supply Chain Management? (continued)
but Supply Chain Management is actually much more than that . . .

It is the ___________of the _______of otherwise ___________

______________who are creating a desired product or service,
and then moving it through the supply chain out to customers,
when and where the customer wants it.

Supply Chain Management is the way business gets done

It is the execution process of any business 30
Supply Chain Management is Based on Two Ideas
1. Every product that reaches an end user represents the cumulative
effort of multiple organizations.
These organizations are collectively known as the supply chain.

2. Most organizations have only paid attention to what was

happening within their own “four walls.”
Few businesses understood and managed the entire chain of
activities that ultimately delivered products to the final customer.
The result was disjointed and ineffective supply chains.

Supply Chain Management represents the active management

of supply chain activities to maximize customer value and
achieve a sustainable competitive advantage.
31
The Value of Supply Chain Management

Supply Chain Management creates _____by managing

the processes of all of those independent trading
partners . . .

. . . so that they can __________with one another in

an efficient, effective, and cost conscious way.
32
The Goals of Supply Chain Management

1. ________________________(i.e., Customer Satisfaction)

What does this mean? Getting the products and services that customers
want to them, when and where they want them, at the lowest possible cost

** while simultaneously **

2. ________________and _________________(i.e., costs)

What does this mean? Achieving #1 above while keeping your inventory as
low as possible and also keeping your costs as low as possible.

The two main reasons that companies implement

Supply Chain Management are to:
1. Achieve cost savings 2. Better coordinate resources
33
Video Introduction

“What is Supply Chain Management”

ASU Video Series (8 minutes)

34
Supply Chains in the Service Industry

It is not just products . . . services have a supply chain as well.

Service firms offer

________________,
meaning products
that cannot be
physically touched.

What customers are actually paying for in the service industry is the
_____and the __________________of the service provider.

The service supply chain is more about managing the relationships

between the trading partners than it is about managing the chain of
supply.
35
Supply Chains in the Service Industry (continued)
 Customers are also much ___________________in the delivery of
services than they are in the supply of a physical product.
 While the service itself is not tangible, ______________________
__________________________________________.

 You must “supply” your ____for

automotive repair service

 You must “supply” your _______for

dry cleaning service

 You must “supply” your ___________for

tax preparation service
36
Supply Chains in the Service Industry (continued)
EXAMPLES

has multiple supply chains, including the supply chain

that produces the student talent (i.e., our products) that we create through our
educational programs, who are then acquired by companies (i.e., our customers)
to fill their human resource needs.
Consulting Companies, Financial Institutions, Insurance Companies, etc. also
have a supply chain. They create and deliver advisory services, accounting, tax
and insurance services (i.e., their products) through their human resource talent
and expertise, to a wide range of clients (i.e. their customers) in a multitude of
industries domestically and internationally.
— Other service products include such things as healthcare, entertainment,
training/education, transportation, warehousing, and repair shops to name just a
few. Each of these also have a supply chain.

37
Supply Chains in the Service Industry (continued)
Service products cannot generally be produced in ________or
_____________.
Services are typically __________________________________, and
in almost every service offering, the service cannot start until the
customer arrives and actively participates.
Many services require the use of __________________which are
tangible elements that are used along with the service provided.
Banks Hospitals Restaurants
Examples:
Cash & Coins Pharmaceuticals Food
Office Supplies Medical Supplies Kitchen
Equipment
Computers Medical Tables & Chairs
Equipment
Records Office Furniture Cutlery
These items need to be purchased, transported, received, and
warehoused in order to provide the service activity, and each has a
supply chain.
38
Supply Chain – SCOR Model

Suppliers Manufacturer Customers

(External) (Internal) (External)

PLAN PLAN PLAN

SOURCE MAKE DELIVER SOURCE MAKE DELIVER SOURCE MAKE DELIVER

(RETURN) (RETURN) (RETURN)

Supply chains are enabled through various types of processes and technologies.

Next let’s look at how the supply

chain is integrated from end-to-end
39
Supply Chain – SCOR Model

Suppliers Manufacturer Customers

(External) (Internal) (External)

PLAN PLAN PLAN

SOURCE MAKE DELIVER SOURCE MAKE DELIVER SOURCE MAKE DELIVER

(RETURN) (RETURN) (RETURN)

Supply chains are enabled through various types of processes and technologies.

Each trading partner has to PLAN, SOURCE, MAKE, and

DELIVER their part of the supply in order to satisfy the
underlying demand for the product or service.
Supply Chain Management facilitates that process
40
 End-to-End Supply Chain Management
Supply Chain Operations Research (SCOR) Model Source: SCOR Model

 Supply chains are generally described as _______________________, i.e., from your

suppliers-suppliers on one end, through your internal operations, and out to your
customers-customers on the other end.

 All supply chains follow the basic model

ENABLE

Customer’s Customer
Supplier’s Supplier

Supply chains are enabled through various types of processes and technologies.
41
SCOR Model: PLAN

Customer’s Customers
Suppliers Manufacturer Customers
Supplier’s Suppliers

(External) (Internal) (External)

PLAN PLAN PLAN

SOURC DELIVE SOURC DELIVE SOURC DELIVE

MAKE R MAKE R MAKE R
E (RETURN)
E (RETURN)
E (RETURN)

 Planning establishes the __________within which the supply chain will operate.
 Companies need a strategy for managing all of the resources necessary to
address how a product or service will be created and delivered to meet the
needs of their customers.
 Planning includes the determination of marketing and distribution channels,
promotions, quantities, timing, inventory and replenishment policies, and
production policies.
42
SCOR Model: SOURCE

Customer’s Customers
Suppliers Manufacturer Customers
Supplier’s Suppliers

(External) (Internal) (External)

PLAN PLAN PLAN

SOURC DELIVE SOURC DELIVE SOURC DELIVE

MAKE R MAKE R MAKE R
E (RETURN)
E (RETURN)
E (RETURN)

 Sourcing is the process of _____________________that provide the materials

and services needed for the supply chain to deliver the finished product(s)
desired by the customer(s).
 This phase involves not only identifying reliable suppliers but also building a
strong relationship with those suppliers.
 Supply chain managers must also develop pricing, shipping, delivery, and
payment processes with suppliers and create metrics for monitoring and
improving the performance
43
SCOR Model: MAKE

Customer’s Customers
Suppliers Manufacturer Customers
Supplier’s Suppliers

(External) (Internal) (External)

PLAN PLAN PLAN

SOURC DELIVE SOURC DELIVE SOURC DELIVE

MAKE R MAKE R MAKE R
E (RETURN)
E (RETURN)
E (RETURN)

 Make or manufacturing is the series of operations performed to convert

________________________.
 Finished product is manufactured, tested, packaged, and scheduled for delivery.
 Quality management is an important aspect of the manufacturing process.
 This is the most metric-intensive portion of the supply chain, where companies
are able to measure quality levels, production output, and worker productivity.
44
SCOR Model: DELIVER

Customer’s Customers
Suppliers Manufacturer Customers
Supplier’s Suppliers

(External) (Internal) (External)

PLAN PLAN PLAN

SOURC DELIVE SOURC DELIVE SOURC DELIVE

MAKE R MAKE R MAKE R
E (RETURN)
E (RETURN)
E (RETURN)

 Deliver, also known as the _________phase, this is the part of supply chain
management that oversees the planning and execution of the ______________
______ and related information between various points in the supply chain to
meet customer requirements.
 Where companies coordinate the receipt of orders from customers, develop a
network of warehouses, pick carriers to transport products to customers, and
set up an invoicing system to receive payments, among other aspects.
45
SCOR Model: RETURN

Customer’s Customers
Suppliers Manufacturer Customers
Supplier’s Suppliers

(External) (Internal) (External)

PLAN PLAN PLAN

SOURC DELIVE SOURC DELIVE SOURC DELIVE

MAKE R MAKE R MAKE R
E (RETURN)
E (RETURN)
E (RETURN)

 Return, also known as _______________, this is the part of supply chain

management that deals with planning and controlling the process of ______
_______specifically from the point of consumption _____________________
for repair, reclamation, remanufacture, recycling, or disposal.
 As this process quite literally goes against the normal outbound flow of
products to the market, supply chain managers have to create a responsive and
flexible network for receiving defective and excess products back from their
customers, and also supporting customers who have questions and problems
46
SCOR Model: ENABLE
 An additional aspect of the model is referred to as “Enable.”
 Enabling processes _________a company’s ability to ______________________
and are spread throughout every stage.
- In other words, we want to enable our capabilities as we plan, source, make, and deliver (and
return).

 This is not a stage that occurs sequentially after all of the others.
 Enabling processes include elements such as
- Supply Chain Systems and Network Operations
- Systems Configuration Control
- Interfaces
- Gateways
- Database Administration
- Electronic Data Interchange (EDI)
- Telecommunications Services
- Performance Measurement
- Contract Management
- Business Rules
- Standards
- Training and Education
ENABLE 47
 Course Alignment with the SCOR Model
These are the chapters in this course that we will follow in sequence aligned to the SCOR Model
Deliver
Plan Source Make Enable
Return (Not covered in this class)

1 5 8 9 13
Logistics:
Introduction to Purchasing Operations Warehousing, Project
Supply Chain Management
Management Management (with Lean & Six Sigma)
Transportation, & Management
Reverse Logistics

2 6 10 14
Global
Forecasting & Strategic Supply Chain Risk
Demand Planning Sourcing Logistics & and Resiliency
International Trade

3 7 11 15
Supplier Customer
Supply Chain Relationship Relationship Performance
Planning Measurement
Management Management

4 12 16
Inventory Supply Chain Supply Chain
Management in the
Management Service Industry Integration

48
Origins and Evolution of Supply Chain Management

1950’s & 1960’s

Supply chain management goes back to the 1950’s when the
discipline was limited to Materials Management and Logistics.
 U.S. manufacturers maintained large material inventories to keep production
running.
- The goal was to produce as quickly as possible at the lowest possible cost.
 Manufactures were __________________on maximizing their own internal
operations.
- Their focus was on _______________techniques as their principal _____________
and _______________________strategies

External collaboration and

partnerships were virtually
nonexistent.
49
Origins and Evolution of Supply Chain Management

1950’s & 1960’s (continued)

The advantages and drawbacks of this internal focus were:

___________:
 Higher output and more productivity
 Reduced cycle times (i.e., producing faster)
 Lower in-process inventories

_________:
 High investment in facilities and
equipment
 Production throughput limited by
the slowest operation
 The breakdown of one machine will
stop an entire production line.
50
Origins and Evolution of Supply Chain Management

1970’s & 1980’s

Introduction of new computer technologies lead to development of
newer and better planning techniques.
 Production Planning: a process to determine the overall level of
___________________________________________________while meeting
the company’s profitability objectives.

 Material Requirements Planning: a time-phased method

of determining __________________________________
__________________ to support the production plan.

 Manufacturing Resource Planning: a method for the

effective _____________________________________
___________through business planning, production
planning, master production scheduling, material
requirements planning, capacity requirements planning,
and the execution support systems all linked together.
51
Origins and Evolution of Supply Chain Management

1970’s & 1980’s (continued)

Instead of focusing only internally,
companies started to look beyond their
“four walls” and incorporate their ______
__________________________________
___________________.
External Collaboration

Intense global competition led U.S. manufacturers to adopt:

Supply Chain Management (SCM) - In the early 1980s, the term
Supply Chain Management was coined by Dr. Wolfgang Partsch
and his team at Booz, Allen & Hamilton
52
Origins and Evolution of Supply Chain Management

1990’s & 2000’s

Introduction of new concepts, methodologies, and processes to
enhance planning and control of the supply chain.

Just-in-Time (JIT) is a philosophy of manufacturing based on the

planned _______________________and ______________________
______________________.

Total Quality Management (TQM) is a management approach to

long-term success through customer satisfaction based on the
participation of all members of an organization in ____________
______________________________________________________.
Everyone in the organization has to take ownership for quality.

53
Origins and Evolution of Supply Chain Management

1990’s & 2000’s (continued)

Business Process Reengineering (BPR) is a procedure that involves the
fundamental rethinking and radical _______________________
____________________ to achieve dramatic organizational
improvements in such critical measures of performance as cost,
quality, service, and speed.

Collaborative Planning, Forecasting and Replenishment (CPFR) is a

process whereby supply chain trading partners can _____________
__________________ from production and delivery of raw materials
to production and delivery of final product to end customers.

Sales and Operations Planning (S&OP) is a process to develop tactical

plans that provide management the ability to ___________________
_______ to achieve a competitive advantage by integrating customer-
focused marketing plans with the management of the supply chain. 54
Origins and Evolution of Supply Chain Management

2010’s and Beyond

Companies are focusing on ________________________________,
and outsourcing those things that are not their core competencies
to use the expertise of their trading partners
 Old paradigm – Company’s gained synergy through vertical integration
encompassing the ownership and coordination of all supply chain activities.
– Emphasis was on short-term, company focused performance.
 New paradigm – Company’s are focusing on their area of specialization and
entering into voluntary, trust-based relationships, with their suppliers and
customers by ______________________________.
– All participants in the supply chain benefit.
– Boundaries are dynamic and extend from “the company’s suppliers’
suppliers to its customers’ customers (i.e., “end-to-end”)
55
Origins and Evolution of Supply Chain Management

2010’s and Beyond (continued)

Companies will also continue to focus on:
 Building strategic partnerships
 Corporate Social Responsibility (CSR)
 Supply chain sustainability
 Risk and opportunity management
 Accelerated pace of change driven by the __________________
 Improving supply chain capabilities
 Adapting to emerging technologies; becoming technology-centric
 Increased use of third-party logistics (3PL) service providers
 Using new methods of transportation to facilitate rapid response

56
Logistics –vs– Supply Chain Management
The terms Logistics and Supply Chain Management are often
confused or used synonymously.
Logistics:
 is just one (albeit vital) component of Supply Chain Management.
 refers to activities that occur within the _____________________________
__________.
 focuses on moving a product or material in the most efficient way so it arrives
______________________________.
 traditionally involves activities such as:
• Inventory Management
• Warehousing (material handling and storage)
• Distribution (order fulfillment, pick, pack & ship)
• Transportation and Delivery
57
Logistics –vs– Supply Chain Management (continued)
Supply Chain Management:
 refers to a _______________________________that work together and
coordinate their actions to deliver a product(s) or service(s) to the market for
the benefit of all companies in the network (i.e., collaboration and coordination).
 involves a ______________________________, such as:
• strategic sourcing of raw materials
• procuring the best prices on goods and materials
• coordinating supply chain visibility across the supply chain network, etc.
 incorporates all the traditional logistics activities but also includes aspects of:
• Marketing
• New Product Development
• Finance
• Customer Service (order-to-cash process)
58
The Foundations of Supply Chain Management
 Forecasting and Demand Planning
______________________  Planning Systems
Managing internal resources  Inventory Management
 Process Management

______________________  Purchasing Management

Managing all of the supplies and suppliers  Strategic Sourcing
that are needed to run the business  Supplier Relationship Management

______________________ 

Warehousing & Distribution
Transportation
Managing all of the movement and storage of  International Trade Management
products and materials within the supply  Customer Relationship Management
chain, whether the flow is forward or reverse  Service Response Logistics

______________________  Enabling Systems

Managing all of the enabling systems  Supply Chain Risk and Security Management
necessary to facilitate the complete  Performance Measurement
integration of the operations, supply, and  Project Management
logistics functions outlined above

59
Operations Management Elements
 Forecasting & Demand Planning – the process of forecasting the
demand for a product or service so it can be produced and
delivered more efficiently and ______________________.

 Planning Systems – the process and tools used to manage a

__________________to achieve the company’s goals.

 Inventory Management – the activities and techniques used to

plan and control the __________________needed to support
production.

 Process Management – using _________________

to improve the flow of materials and eliminate
waste in the process, and using _________to
improve quality compliance across all suppliers
(internal and external)
60
Supply Management Elements
 Purchasing – responsibility for __________________________
__________________ that the company needs to provide their
products and services to the market.

 Strategic Sourcing- a comprehensive approach for locating and

sourcing _____________________________. Includes a focus on
developing long term relationships.

 Supplier Relationship Management

a comprehensive approach to ______
________________________________
with the key organizations that supply
the materials and services that the
company needs.
61
Logistics Management Elements
 Warehousing – the activities related to _________, ______, and ______
materials to and from production or distribution locations.
 Distribution – the activities associated with the ____________________
____________ from the manufacturer to the customer.
 Transportation – planning, scheduling and controlling activities related to
mode, carrier, and ______________________into and out of a company.
 International Trade Management – the exchange of goods and services
_________________________or territories.
 Customer Relationship Management – strategies to ensure deliveries,
resolve complaints, _______________________, and determine service
requirements.
 Service Response Logistics – the management and coordination of the
company’s activities that occur _______________________________.
Integration Elements
 Enabling Systems – all of the systems, processes
and tools that _________________a company’s
ability to manage the supply chain.

 Supply Chain Risk and Security Management – the series of strategies

and activities for continuously ______________and ______________
______________________ to reduce vulnerabilities and ensure
business continuity.

 Performance Measurement - the system for collecting,

measuring, and comparing a ____________________for a
specific criterion for an operation, item, service, business, etc.

 Project Management – the use of skills and knowledge in coordinating,

organizing, planning, scheduling, directing, controlling, monitoring, and
evaluating prescribed activities to ensure that the _______________of
a project _____________. 63
2 Basic Supply Chain Capability Models
______________ ________________
The supply chain is configured to The supply chain is configured to be fast
produce a large volume of product, as and flexible to respond quickly to
quickly as possible, and at the lowest dynamic market demand and new
possible cost. Characterized by: product launches. Characterized by:
 Predictable supply  Need flexible capacity (volume)
 Highly utilized capacity  Minimize lead time
 Low cost production  Inventory of parts
 High inventory turns  Minimal stock outs

Ideal for _________________: Ideal for ________________:

 Common products that people buy  Rapidly changing
anywhere and everywhere
 Very short life-cycle products
 Lots of suppliers / competition
 Great variety
 Don’t change much over time
 Stable predictable demand  Very unpredictable demand
64
Push Business Model (used for 95% of products)

______________: Producing finished products on the basis of anticipated demand

before receipt of an actual customer order.

Create Buy the Manufacture Receive Deliver

Create Sell Products
Supply Necessary Products Customer Products to
Forecast to Customers
Plan Materials (and hold) Orders Customers

_________________:
 Product is immediately available to ship to customers on demand from the
inventory created on basis of the forecast.
 Manufacturers can better plan the utilization of resources.
 Opportunities to take advantage of economies of scale and reduce costs.
_________________:
 High inventories (and money tied up in inventory).
 Heavily dependent on accurate forecasting.
 Forecasting errors create inefficiencies, additional cost, and can lead to
inventory shortages or excesses and obsolescence. 65
Pull Business Model (used for only 5% of products)

Make-to-Order: Producing finished products in response to actual demand, i.e.,

only after an actual customer order is received.

Receive Create Buy the Deliver

Sell Products Manufacture
Customer Supply Necessary Products to
to Customers Products
Orders Plan Materials Customers

_________________:
 High levels of customer service and opportunities for customization.
 Reduce dependency on forecasting.
 Very low inventories.
_________________:
 Every customer order is basically a rush order.
 Manufacturing problems and resource issues will have an immediate impact
on throughput and customer satisfaction.
 Reduced ability to take advantage of economies of scale.
66
 Supply Chain Planning Diagram
A major principle of supply chain management is the use of a
___________and __________approach to managing the supply chain.

Long Range
“Strategic”
A hierarchy of
planning processes
executed in
Intermediate
Range
sequence to
“Tactical” produce the right
product at the right
time to satisfy
customer demand
Short Range
“Operational”

67
Supply Chain Planning and Control
World class ________________begins with effective supply chain
planning and control techniques which:  provide a ___________
__________ used to run
the business.
 generate _________
____________in customer
service, productivity,
inventory, and costs.

Measures of Success
(Examples)
 Customer Service
> 99% Line Item Fill Rate
 Demand Plan Conformance
> 80% Forecast Accuracy
 Supply Plan Conformance
> 95% On-Time Delivery
 Inventory Plan Conformance
< 4.0 Month on Hand Total Inv.
 Cost of Goods Sold (COGS)
< 15% Cost of Goods Sold
68
Basic Supply Chain Planning & Execution

Planning & Procurement Process

Aggregate Detailed
Sales Demand Production Procurement Su
Forecasting and Supply Planning & Planning p
rs pl
Planning Scheduling i e
Forecast Accuracy

Demand Accuracy

Conformance to

Performance
Delivery
Key

Plan
Performance
Indicator(s)

plie
Delivery of Delivery of u prs
Delivery of Production and S
Finished Goods Materials
Finished Goods Packaging of
to Distribution and Services
To Customers Finished Goods
Channel(s) to Production

Execution & Order Fulfillment Process

69
Supply Chain Management Challenge
Maintaining the Balance Between
Demand and Supply
DEVELOPMENT
TRAINING and

R&D TRANSPORTATION

CONTROL
QUALITY

LEAD TIME
REQUIREMENTS SUPPLIERS and
SPARE / REPLACEMENT MATERIALS
PARTS DEMAND LABOR
SCHEDULED WAREHOUSE
MAINTENANCE

MONEY
SAFETY
STOCK
STORAGE SPACE
INTERNAL CUSTOMER PRODUCTION and
REQUIREMENTS INVENTORY
EXTERNAL CUSTOMER REQUIREMENTS FACILITIES and EQUIPMENT

DEMAND Customer SUPPLY

Service

INVENTORY FLEXIBILITY
“SHOCK ABSORBER”
Supply Chain “SHOCK ABSORBER”

Inventory Investment Management Operating Expenses

(Working Capital) (Cost of Goods Sold)
70
Benefits of Supply Chain Management
 Improved customer service
 Increased revenue Value
for both
 Lower costs internal
 Better asset utilization and
external
 Adds customer value / retain customers customers
 Minimize delays / shorter lead-times
 Elimination of rush (unplanned) activities
 Reduced uncertainty throughout the supply chain
 Lower inventory levels throughout the supply chain
 Ability to effectively respond to disruptions and conflicts
71
What's Next for Supply Chain Management?
As the supply chain continues to evolve, it's critical for
companies to ____________________________________
________________
 The _____________in the supply chain
continues to accelerate, and it's only
going to get faster.

 With the ____________________,

things are moving at internet speed in
both the B2C and B2B markets.

 Supply Chain Management has transformed from an often-

overlooked cost center into a vital segment of operations that
can be turned into a ____________________.
72
What's Next for Supply Chain Management?
The supply chain is more volatile and complex than ever before.

 Consumers are increasingly price sensitive and less brand-loyal.

Companies will need to be more flexible and responsive to
customer needs, necessitating closer integration and
collaboration.

 New __________________offer the opportunity to reduce this

complexity, transforming the supply chain from technology-
enabled to technology-centric.

 Companies will continue to concern

themselves with ongoing trends in the
areas of Artificial Intelligence (AI), the
Internet of Things (IoT) and Blockchain.
73
What's Next for Supply Chain Management?
Chances are, the big picture will look similar to today's supply chain,
but the details of how things get done _______________________.

 There won't be any excuse for not having real-time inventory

and fulfillment information.

 Drones may be taking inventory in warehouses, and trucks may

be self-driving to their destination, but it still comes down to
getting the right product to the right place at the right time.

 Companies will have more options when it comes to warehouse

management technology in the form of both WMS solutions
and automated robots.

 Logistics labor shortages will continue through 2020 and

beyond. ________________________due to demand.
74
What's Next for Supply Chain Management?
Transportation is an area with growing labor shortages due to the
rapid growth in online shopping creating strong demand for delivery
drivers.
 The industry is facing a record shortage with an estimated 50,000
more drivers needed to meet demand.
 The lack of available drivers is rippling through the supply chain,
causing a ____________________that is ________________and
prompting some companies to increase prices by as much as 20%.
 Driverless trucks are one proposed
long-term solution to the problem,
but there are more practical solutions:

 Increased Pay
 Flexible Schedules 75
What's Next for Supply Chain Management?
Warehouse operations are finding it increasingly difficult to fill open
warehouse jobs due to the fulfillment demands of the e-commerce
boom.
 The highly variable characteristics of today's e-commerce industry
are causing retailers and distributors to seek out more adaptable
and scalable solutions.
 Warehouses are increasing adoption of automation such as
_____________________________to meet the requirements of
direct-to-consumer fulfillment.
 Warehouse automation is only a part of
the solution to a company's fulfilment
needs. It can only mitigate, not solve,
the labor imbalance as companies
simply cannot retool quickly enough.
76
End of Chapter Quiz (in Mobius)

77