LECTURE NR. 1
Supply Chain
What it supply chain?
o It is dynamic
o Set of companies’ organizations that work together
o A set of organizations
o They are connected
o Because it is a process where they have to coorperate
o Includes constant flow and movement of information, goods, and funds
o Customers!
o All stages may not be present in all chains (e.g., no retailer or distributor they sell the
product directly to the customer)
What is supply chain management?
o A set of approaches, techniques, and tools
o Integrate and/or coordinate suppliers, manufacturers, warehouses, and stores
o To guarantee the customer’s satisfaction (if the customer is satisfied you are doing good
business)
Customer’s satisfaction
o When you make a promise to a customer it’s very difficult to repair it if you fuck it up
Flows in supply chain
Example:
, DELL supply chain
Objective of a supply chain
SC surplus, consumer value, price, consumer surplus,
Example: a customer purchases a wireless router from best buy for 60$ (revebue)
Supply chain incurs costs (information, storage, transportation, components, assembly, etc.)
difference between 60$ and the sum of all these costs is the supply chain profit
supply chain profitability is total profit to be shared across all stages of the SC
success should be measured by total supply chain profitability, not profits at an individual stage
in service sector the story is different (health care systems)
Decision phases in a supply chain
o Supply chain strategy or design
how to structure the supply chain over the next several years
o Supply chain planning
decisions over the next quarter or year
o Supply chain operation
daily or weekly operational decisions
, SC Decision: strategy or design
Strategic supply chain decisions:
o Whether to outsource or perform in-house operation,
o Locations and capacities of facilities,
o Products to be made or stored at various locations
o Modes of transportation
o Information systems
supply chain design decisions are long-term and expensive to reverse; must take into account
market uncertainty
Planning decisions:
o The goal is to maximize the supply chain surplus over the planning horizon
o Which markets will be supplied from which locations?
o Subcontracting, backup locations
o Inventory policies
o Timing and size of market promotions
In planning decisions demand uncertainty, exchange rates, competition over the time horizon
must be considered
SC Decision: operation
o Time horizon is weekly or daily
o Supply chain configuration is fixed, and operating policies are determined
o Operation decisions:
allocate orders to inventory or production
set delivery schedules
Much less uncertainty (short time horizon).
Process views of a supply chain
o Spply chain is a sequence of processes
Cycle view
Push/Pull view
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