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UnderstandingtheSupplyChain 1 LearningObjectives Discussthegoalofasupplychainandexplaintheimpactofsupplychaindecisionsonthesuccessofafirm Identifythethreekeysupplychaindecisionphasesandexplainthesignificanceofeachone Describethecycleandpush pullviewsofasupplychain Classifythesupplychainmacroprocessesinafirm WhatisaSupplyChain Allstagesinvolved directlyorindirectly infulfillingacustomerrequestIncludesmanufacturers suppliers transporters warehouses retailers andcustomersWithineachcompany thesupplychainincludesallfunctionsinvolvedinfulfillingacustomerrequest productdevelopment marketing operations distribution finance customerservice WhatisaSupplyChain CustomerisanintegralpartofthesupplychainIncludesmovementofproductsfromsupplierstomanufacturerstodistributorsandinformation funds andproductsinbothdirectionsMaybemoreaccuratetousetheterm supplynetwork or supplyweb Typicalsupplychainstages customers retailers distributors manufacturers suppliersAllstagesmaynotbepresentinallsupplychains e g noretailerordistributorforDell WhatisaSupplyChain Figure1 1 FlowsinaSupplyChain Figure1 2 TheObjectiveofaSupplyChain Maximizeoverallvaluecreated SupplyChainSurplus CustomerValue SupplyChainCost TheObjectiveofaSupplyChain Example acustomerpurchasessomethingfor 60 revenue Supplychainincurscosts information storage transportation components assembly etc Differencebetween 60andthesumofallofthesecostsisthesupplychainprofitSupplychainprofitabilityistotalprofittobesharedacrossallstagesofthesupplychainSuccessshouldbemeasuredbytotalsupplychainprofitability notprofitsatanindividualstage ImportanceofSupplyChainDecisions Wal Mart 1billionsalesin1980to 408billionin2010Seven ElevenJapan 1billionsalesin1974to 3trillionin2009Dell 56billionin2006 adoptednewsupplychainstrategies DecisionPhasesofaSupplyChain SupplychainstrategyordesignHowtostructurethesupplychainoverthenextseveralyearsSupplychainplanningDecisionsoverthenextquarteroryearSupplychainoperationDailyorweeklyoperationaldecisions SupplyChainStrategyorDesign DecisionsaboutthestructureofthesupplychainandwhatprocesseseachstagewillperformStrategicsupplychaindecisionsLocationsandcapacitiesoffacilitiesProductstobemadeorstoredatvariouslocationsModesoftransportationInformationsystemsSupplychaindesignmustsupportstrategicobjectivesSupplychaindesigndecisionsarelong termandexpensivetoreverse musttakeintoaccountmarketuncertainty SupplyChainPlanning Definitionofasetofpoliciesthatgovernshort termoperationsFixedbythesupplyconfigurationfrompreviousphaseStartswithaforecastofdemandinthecomingyear SupplyChainPlanning Planningdecisions WhichmarketswillbesuppliedfromwhichlocationsPlannedbuildupofinventoriesSubcontracting backuplocationsInventorypoliciesTimingandsizeofmarketpromotionsMustconsiderinplanningdecisionsdemanduncertainty exchangerates competitionoverthetimehorizon SupplyChainOperation TimehorizonisweeklyordailyDecisionsregardingindividualcustomerordersSupplychainconfigurationisfixedandoperatingpoliciesaredeterminedGoalistoimplementtheoperatingpoliciesaseffectivelyaspossibleAllocateorderstoinventoryorproduction setorderduedates generatepicklistsatawarehouse allocateanordertoaparticularshipment setdeliveryschedules placereplenishmentordersMuchlessuncertainty shorttimehorizon ProcessViewofaSupplyChain CycleView processesinasupplychainaredividedintoaseriesofcycles eachperformedattheinterfacesbetweentwosuccessivesupplychainstagesPush PullView processesinasupplychainaredividedintotwocategoriesdependingonwhethertheyareexecutedinresponsetoacustomerorder pull orinanticipationofacustomerorder push CycleViewofSupplyChainProcesses Figure1 3 CycleViewofSupplyChainProcesses Figure1 4 Push PullViewofSupplyChains Figure1 5 Push PullViewofSupplyChainProcesses SupplychainprocessesfallintooneoftwocategoriesdependingonthetimingoftheirexecutionrelativetocustomerdemandPull executionisinitiatedinresponsetoacustomerorder reactive Push executionisinitiatedinanticipationofcustomerorders speculative Push pullboundaryseparatespushprocessesfrompullprocesses Push PullViewofSupplyChainProcesses Usefulinconsideringstrategicdecisionsrelatingtosupplychaindesign moreglobalviewofhowsupplychainprocessesrelatetocustomerordersCancombinethepush pullandcycleviewsL L BeanDellTherelativeproportionofpushandpullprocessescanhaveanimpactonsupplychainperformance Push PullViewof L L Bean Figure1 6 Push PullView Dell Figure1 7 SupplyChainMacroProcesses SupplychainprocessesdiscussedinthetwoviewscanbeclassifiedintoCustomerRelationshipManagement CRM InternalSupplyChainManagement ISCM SupplierRelationshipManagement SRM Integrationamongtheabovethreemacroprocessesiscriticalforeffectiveandsuccessfulsupplychainmanagement SupplyChainMacroProcesses Figure1 8 ExamplesofSupplyChains GatewayandAppleZaraW W GraingerandMcMaster CarrToyotaAmazon GatewayandApple WhydidGatewaychoosenottocarryanyfinished productinventoryatitsretailstores WhydidApplechoosetocarryinventoryatitsstores Shouldafirmwithaninvestmentinretailstorescarryanyfinished goodsinventory Whatarethecharacteristicsofproductsthataremostsuitabletobecarriedinfinished goodsinventory Whatcharacterizesproductsthatarebestmanufacturedtoorder Howdoesproductvarietyaffectthelevelofinventoryaretailstoremustcarry Isadirectsellingsupplychainwithoutretailstoresalwayslessexpensivethanasupplychainwithretailstores WhatfactorsexplainthesuccessofAppleretailandthefailureofGatewaycountrystores Zara WhatadvantagedoesZaragainagainstthecompetitionbyhavingaveryresponsivesupplychain WhyhasInditexchosentohavebothin housemanufacturingandoutsourcedmanufacturing WhyhasInditexmaintainedmanufacturingcapacityinEuropeeventhoughmanufacturinginAsiaismuchcheaper WhydoesZarasourceproductswithuncertaindemandfromlocalmanufacturersandproductswithpredictabledemandfromAsianmanufacturers WhatadvantagedoesZaragainfromreplenishingitsstoresmultipletimesaweekcomparedtoalessfrequentschedule Howdoesthefrequencyofreplenishmentaffectthedesignofitsdistributionsystem DoyouthinkZara sresponsivereplenishmentinfrastructureisbettersuitedforonlinesalesorretailsales W W GraingerandMcMaster Carr HowmanyDCsshouldbebuiltandwhereshouldtheybelocated HowshouldproductstockingbemanagedattheDCs ShouldallDCscarryallproducts Whatproductsshouldbecarriedininventoryandwhatproductsshouldbeleftwiththesuppliertobeshippeddirectlyinresponsetoacustomerorder WhatproductsshouldW W Graingercarryatastore HowshouldmarketsbeallocatedtoDCsintermsoforderfulfillment WhatshouldbedoneifanordercannotbecompletelyfilledfromaDC Shouldtherebespecifiedbackuplocations Howshouldtheybeselected Howshouldreplenishmentofinventorybemanagedatthevariousstockinglocations HowshouldWebordersbehandledrelativetotheexistingbusiness IsitbettertointegratetheWebbusinesswiththeexistingbusinessortosetupseparatedistribution Whattransportationmodesshouldbeusedfororderfulfillmentandstockreplenishment Toyota Whereshouldplantsbelocated whatdegreeofflexibilityshouldeachhave andwhatcapacityshouldeachhave Shouldplantsbeabletoproduceforallmarkets Howshouldmarketsbeallocatedtoplants Whatkindofflexibilityshouldbebuiltintothedistributionsystem Howshouldthisflexibleinvestmentbevalued Whatactionsmaybetakenduringproductdesigntofacilitatethisflexibility A WhyisAmazonbuildingmorewarehousesasitgrows Howmanywarehousesshouldithaveandwhereshould
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