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Summary Supply chain management
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Summary of the lectures of supply chain management supplemented with concepts from the handbook.
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Supply chain management1 Introduction to supply chain management
1. Supply chain & supply chain management
2. SCM: key observations
3. SCOR and SC strategy
4. SCM concepts
Supply chain & supply chain management
Supply chain: definition
The supply chain consists of suppliers, manufacturing centers, warehouses, distribution centers and
retail outlets, as well as raw materials, work-in process inventory and finished products that flow
between the facilities.
Suppy chain geeft weer hoe organisaties met elkaar gelinkt zijn.
Supply chain management: definition
Supply chain management is:
- A set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and
stores, so that merchandise is produced and distributed at the right quantities, to the right
locations, and at the right time
- In order to minimize system wide costs while satisfying service level
Supply chain management is:
1
, - The process of designing, developing, optimizing and managing the internal and external
components of the supply system including material supply, the transformation of material and
distribution of finished products or services to customers.
- Consistent with overall objectives and strategies of the company
Supply chain: goods
The supply chain of products/services is defined by the following elements:
- Suppliers delivering IN-flows: raw materials, intermediates, finished goods
- Markets consuming OUT-flows: intermediates, finished goods
- Assets adding value through the supply chain (~ value chain): production, inventory,
transport
Supply chain: flows
- Material flow:
o Raw material, intermediates, finished goods
o Stored product (SKU), delivered goods
- Information flow:
o Forecast, customer order
o Production order, purchase order, transport order
- Financial flow: cash flow, flow of money
o Purchase, invoice, payment (procure-to-pay)
o Order, invoice, receive payment (order-to-cash)
SCM: an integrated framework
Supply chain management is an integrated framework for:
- Managing all supply chain elements
- Providing information transparency through the supply chain
- Designing, planning and controlling business processes within the supply chain
In order to:
- Provide fast, flexible and reliable responses to market requirements
- Support financial, quality and service objectives of the business
- To drive continuous improvement
- Produce better results than a mere optimization of functional parts on their own
2
,SCM = teamwork
SCM affect the following functional departments:
- Within the company (~ operations management)
o Finance
o Marketing and sales
o Research and development
o Supply chain management/operations
§ Supply chain management
§ Manufacturing/production
§ Inventory and demand management
§ Transportation and distribution
§ Purchasing
§ Planning
§ Customer service
o Human resource
- Outside the company: your partners in the other organizations of your SC network.
SCM: business drivers and challenges
SCM: key observations
- The supply chain strategy should be in line with the company strategy, and directly linked to
the product development chain (includes the set of activities associated with new product
introduction).
- The challenge is to minimize costs and maximize service levels over the entire SC system:
global optimization
- Uncertainty and risk are inherent in every SC: costumer demand can never be forecasted
exactly, travel times will never be certain, … New trends including outsourcing, offshoring and
lean manufacturing that focus on reducing supply chain costs, significantly increase the level
of risk in the supply chain.
3
, Development chain set of activities and processes associated with new product introduction
- Development chain and supply chain intersect at the production point
- The supply chain for new products should be designed/taken into account in an early stage
- Additional chain intersections:
o Reverse logistics
o Spare parts
Global optimization minimize costs and maximize service levels over the entire sC system
- The SC is a complex network, geographically dispersed
- Different facilities in the SC have conflicting objectives:
o Flexibility vs stability
o Inventory vs transportation costs
- The SC is a dynamic system evolving over time:
o Customer demand varies
o Supplier capabilities vary
o Variations over time in power and relationships
- System variations over time: economical changes, trends, seasonal effects
Uncertainty and risk
Uncertainty and risk are inherent in every SC:
- Matching supply and demand is difficult
- Inventory and back-order levels fluctuate in the SC
o Back-order: order to be fulfilled, not necessarily too late
- Forecasting doesn’t solve the problem
- Demand is not the only source of uncertainty: delivery lead times, manufacturing yields,
transportation time and component availability
- Recent trends that focus on cost reduction increase risks significantly (lean production, off-
shoring, outsourcing)
SCOR and SC strategy
SCOR: Supply Chain Operations Reference model
SCOR model het is een cross-industry, standaard diagnostisch tool voor SCM. Het model is
afkomstig uit de industrie.
SCOR onderscheidt verschillende hoofdprocessen in SCM:
- Source – Make – Deliver – (Return): materiaalstromen
- Plan: informatie- en coördinatiestroom
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