Global supply chain management - Chapter revision
Chapter 1
Understanding the supply chain
Supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request.
The primary purpose of SC is to satisfy customer needs and, in the process, generate profit for
itself. Most SCs are networks. To describe the structure or the SC, we use supply network or supply web.
Supply chain is dynamic and includes three flows;
1. Flow of production
2. Flow of products
3. Flow of funds
Most supply chains are actually networks; supply web to describe the structure of most supply chains.
May typically include;
- Customers
- Retailers
- wholesalers/distributors
- Manufacturers
- component/raw material suppliers
Supply chain surplus; the value a supply chain generates is the difference between what the value of the
final product is to the customer and the costs the entire supply chain incurs in filling the customers
request.
Supply chain surplus = customer value - supply chain cost
The value of the final product may vary for each customer and can be estimated by the max amount the
customer is willing to pay for it. The difference between the value of the product and its price remains
with the customer as consumer surplus. The rest of the supply chain surplus becomes supply chain
profitability, the difference between the revenue generated from the customer and the overall cost across
the supply chain.
Supply chain profit = price - SC cost
All flows of information, product or funds generate costs within the SC, thus, the appropriate
management of these flows is a key to SC success. Effective SC management involves the management of
supply chain assets and product, information, and fund flows to grow the total supply chain surplus. A
growth in supply chain surplus increases the size of the total pie, allowing contributing members of the
supply chain to benefit.
, There is a close connection between the design and management of SC flows and the success of a
SC. A failure to adapt SC to a changing environment can significantly hurt performance. SC design,
planning. and operation decisions play a significant role in the success or failure of a firm. To stay
competitive, SC must adapt to changing technology and customer expectations.
Decisions phases in a supply chain;
1. Supply chain strategy or design; how to structure the SC over the next several years.
a. Whether to outsource/perform SC function in-house
b. The location and capacities of production and warehousing facilities
c. The products to be manufactured or stored at various locations
d. The modes of transportation to be made available along different shipping legs
e. The type of information system to be used.
2. Supply chain planning; decisions over the next quarter or year. Goal is to maximize the SC
surplus over the planning horizon.
a. In planning decisions demand uncertainty, exchange rates, competition must be
considered.
i. Making decisions regarding which markets will be supplied from which locations
ii. The subcontracting of manufacturing
iii. The inventory policies to be followed
iv. The timing and size of marketing and price promotion
3. Supply chain operation; daily or weekly decisions. Supply chain configuration is fixed and
operation policies are determined.
a. Allocating inventory or production to individual orders
b. Set a date by which an order is to be filled
c. Generate pick lists at a warehouse
d. Allocate an order to a particular shipping mode and shipment
e. Set delivery schedules of trucks
f. Place replenishment orders
Supply chain decision phases may be categorized as design, planning, or operational, depending on the
time frame during which the decisions made apply. Design decisions constrain or enable good planning,
which in turn constrains or enables effective operation.
Process views of a supply chain;
1. Cycle view; the processes in a supply chain are divided into a series of cycles, each performed at
the interface between two successive stages of the supply chain.
2. Push/pull view; the processes in a supply chain are
divided into two categories, depending on whether
they are executed in response to a customer order or
in anticipation of customer orders. Pull processes are
initiated by a customer order, whereas push processes
are initiated and performed in anticipation of
customer orders.
,Cycle view of supply chain processes;
- Customer order cycle
- Replenishment cycle
- Manufacturing cycle
- Procurement cycle
Each cycle occurs at the interface between two successive stages
of the supply chain.
Each cycle consists of six subprocesses. Each cycle starts with
the supplier marketing the product to customers.
The sub processes can be linked to the source, make, deliver, and return processes in the supply chain
operations reference (SCOR) model.
The SCOR model provides a description of supply chain processes, a framework for relationships
between these processes, and a set of metrics to measure process performance.
Within each cycle, the goal of the buyer is to ensure product availability and to achieve
economies of scale in ordering. The supplier then works to fill the order on time and improve efficiency
and accuracy of the order fulfillment process. The buyer then works to reduce the cost of the receiving
process.
The goal of the buyer is to ensure product availability and to achieve economies of scale when ordering.
The supplier attempts to forecast customer orders and reduce the cost of receiving the order. The supplier
then works to fill the order on time and improve the efficiency and accuracy of the order fulfillment
process. The buyer works to reduce the cost of the receiving process. Reverse flows are managed to
reduce costs and meet environmental objectives.
In the customer order cycle, demand is uncertain because it is external to the SC.
Supply chain macro processes in a firm;
1. Customer relationship management (CRM); all processes at the interface between the firm and its
customers
a. The CRM macro process aims to generate customer demand and facilitate the placement
and tracking of orders.
2. Internal supply chain management (ISCM); all processes that are internal to the firm
a. Aims to fulfill demand generated by the CRM process in a timely manner and at the
lowest possible cost.
3. Supplier relationship management (SRM); all processes at the interface between the firm and its
suppliers
, a. Aims to arrange for and manage supply sources for various goods and services.
Within a firm, all supply chain activities belong to one of three macro processes; CRM, ISCM, SRM.
integration among the three macro processes is crucial for successful supply chain management.
These three macro processes manage the flow of information, product, and funds required to
generate, receive, and fulfill a customer request.
Supplier Firm Customer
SRM ISCM CRM
- Souce - Strategic planning - Market
- Negotiate - Demand planning - Price
- Buy - Supply planning - Sell
- Design collaboration - Fulfillment - Call center
- Supply collaboration - Field service - Order management
Lack of integration between these processes hurts the supply chains ability to match supply and demand
effectively = dissatisfied customers and high costs.
Chapter 2
Achieving strategic fit and scope
Competitive strategy; relative to its competitors, the set of customer needs that it seeks to satisfy through
its products and services. Based on how the customer prioritizes product cost, delivery time, variety, and
quality. Competitive strategy targets one or more customer segments and aims to provide products and
services that satisfy these customers’ needs.
To execute a company's competitive strategy all these functions play a role, and each must
develop its own strategy. Strategy refers to what each process or function will try to do particularly well.
The relationship between the competitive strategy and the supply change strategies, we have the value of
a company;
a. The value chain begins with new product development, creating specifications for the
product.
b. Market and sales generate demand by the public and the customer priorities that the
products and service will satisfy.
c. Marketing also brings customer input back to new product development.
d. Operations transforms inputs to outputs to create the product according to new product
specifications
e. Distribution either takes the product to the customer or brings the customer to the
product.
f. Service responds to customer requests during or after the sale.
The core processes must be performed for a successful sale. To execute competitive strategy, all these
functions play a role, and each must develop its own strategy;
