Samenvatting
Samenvatting - Supply Chain Management (BT2110)
Summary of all literature and lectures of the course Supply Chain Management
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Voorbeeld 4 van de 81 pagina's
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Voorbeeld van de inhoud
Week 1Chapter 1: introduction to supply chain management
Competition, the introduction of products with shorter life cycles, and the heightened expectations
of customers have forced business enterprises to invest in, and focus attention on, their supply
chains. In a typical supply chain, raw materials are procured and items are produced at one or more
factories, shipped to warehouses for intermediate storage, and then shipped to retailers or
customers. To reduce cost and improve service levels, effective supply chain strategies must take
into account the interactions at the various levels in the supply chain. The supply chain is also
referred to as the logistics network.
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 requirements. SCM takes into consideration every facility that has an
impact on cost and plays a role in making the product conform to customer requirements. The
objective of SCM is to be efficient and cost-effective across the entire system -> material,
transportation, manufacturing and inventory costs. Thus, the emphasis is on taking a systems
approach to supply chain management.
Because SCM revolves around efficient integration of suppliers, manufacturers, warehouses and
stores, it encompasses the firm’s activities at many levels.
What makes SCM difficult? This is related to some of the following observations:
1. Supply chain strategies cannot be determined in isolation. They are directly affected by
another chain that most organizations have, the development chain, that includes the set of
activities associated with new product introduction. At the same time, supply chain
strategies should be aligned with the specific goals of the firm
2. It is challenging to design and operate a supply chain so that total system wide costs are
minimized, and system wide service levels are maintained: the process of finding the best
system wide strategy is known as global optimization
3. Uncertainty and risk are inherent in every supply chain
The development chain is the set of activities and processes associated with new product
introduction. It includes the product design phase, the associated capabilities and knowledge that
need to be developed internally, sourcing decisions, and production plans. Specifically, it includes
decisions such as product architecture: what to make internally and what to buy from outside
suppliers.
The development and supply chains intersect at the production point. The characteristics of and the
decisions made in the development chain have impact on the supply chain.
Finding the best systemwide or globally optimal integrated solution is difficult, because:
1. The supply chain is a complex network of facilities dispersed over a large geography
, 2. Different facilities in the supply chain frequently have different, conflicting objectives
3. The supply chain is a dynamic system that evolves over time: demand and supplier
capabilities change as well as supply chain relationships
4. System variations over time: varying demand and cost parameters
Global optimization is even more difficult as supply chains need to be designed for, and operated in,
uncertain environments -> large risks. A variety of factors distribute to this:
1. Matching supply and demand is a major challenge: manufacturers have to commit to specific
production levels -> financial and supply risks
2. Inventory and back-order levels fluctuate considerably across the supply chain, even when
customer demand for specific products does not vary greatly
3. Forecasting does not solve the problem: it is impossible to predict the precise demand for a
specific item
4. Demand is not the only source of uncertainty: delivery lead times, manufacturing yields,
transportation times, and component availability
5. Recent trends such as lean manufacturing, outsourcing, and offshoring that focus on cost
reduction increase risks significantly
An important building block in effective supply chain strategies is strategic partnerships between
suppliers and buyers, partnerships that can help both parties reduce their costs. At the same time,
many supply chain partners engage in information sharing so that manufacturers are able to use
retailers’ up-to-date sales data to better predict demand and reduce lead times. This also allows
manufacturers to control the variability in supply chains.
Industry recognized that trends, including outsourcing, offshoring, lean manufacturing, and
just-in-time, that focus on reducing manufacturing and supply chain costs significantly increase the
level of risk in the supply chain. A number of approaches have been applied by industry to manage
risk in their supply chains:
1. Building redundancy into the supply chain so that if one portion fails, the supply chain can
still satisfy demand
2. Using information to better sense and respond to disruptive events
3. Incorporating flexibility into supply contracts to better match supply and demand
4. Improving supply chain processes by including risk assessment measures
Firms that want to adopt successful SCM have to possess three critical abilities:
1. The ability to match supply chain strategies with product characteristics: intersection
between development chain and supply chain
2. The ability to replace traditional supply chain strategies, in which each facility or party in the
chain makes decisions with little regard to their impact on other supply chain partners, by
those that yield a globally optimized supply chain
3. The ability to effectively manage uncertainty and risk
The strategic level deals with decisions that have a long-lasting effect on the firm: decisions
regarding product design, what to make internally and what to outsource, supplier selection,
,strategic partnering, decisions on warehouses and manufacturing plants and the flow of material
through the logistics network.
The tactical level includes decisions that are typically updated anywhere between once every
quarter and once every year: purchasing and production decisions, inventory policies, and
transportation strategies.
The operational level refers to day-to-day decisions such as scheduling, lead time quotations,
routing and truck loading.
Lecture 1
The upstream side of a supply chain consists of the suppliers, while the downstream side means
the customers. A more realistic supply chain consists of a company with a raw materials
warehouse, a processing facility and a finished products warehouse. Additionally, it can have
multiple suppliers and multiple retailers.
The objectives of supply chain management is to reduce the costs (cost optimization) and to satisfy
all demand (service level optimization). These two objectives are conflicting, so there is a trade-off:
low costs and high service levels -> we need a strategy to balance this tradeoff, which is the aim of
SCM.
Supply chain management is a set of approaches to efficiently integrate suppliers, manufacturers,
etc., so that the 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
requirements.
Two different kinds of products can be distinguished using their nature of demand: functional or
innovative. Functional products have stable, predictable demand, a long life cycle and competition
thus low profit margins -> staples. Innovative products have unpredictable demand, high profit
margins, short life cycle (few months) and great variety -> fashion, Nespresso, Apple.
There are two distinct functions of a supply chain:
1. Physical function: conversion of raw materials in the finished good and to transport this
good to the final customer
2. Market mediation function: ensuring that the variety of products reaching the marketplace
matches what customers want to buy
, Physical costs are costs of production, transportation and inventory. Market mediation costs arise
when supply exceeds demand or when supply falls short on demand. These last costs are high
with high-profit margin products.
Fisher defines two different supply chains:
1. Efficient: focusing on the physical function
2. Responsive: focusing on the market mediation function
Mismatches cause problems.
There is no one-fits-all solution when balancing cost and service. Making supply chains right,
would create competitive advantage.
There are three key observations in supply chains:
1. Interaction between supply chain and development chain
2. Coordination across companies / global optimization
3. Uncertainty and risk
In the product development phase, we have the so-called development chain: the set of activities
and processes associated with new product introduction. This includes product design phase and
research, associated capabilities and knowledge, sourcing decisions, and production plans.
Supply chains and development chains interact at the production point.
Information sharing is a crucial point in globally optimizing the supply chain. With a globally
optimizing supply chain, we mean that companies not only need to look at their internal supply
chain, but they also need to share information and coordinate it across multiple companies.
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