Supply chain management: strategy,
planning and operation
Sunil Chopra – seventh edition – Leading supply chain management - MSCLMSC119
Goal of the book: to develop concepts and methodologies that can be used to design supply
chains that effectively meet customer needs while generating supply chain profits.
Table of content
1 – Understanding the supply chain .......................................................................................................................... 2
2 – Achieving strategic fit in a supply chain ............................................................................................................... 8
3 – Supply chain drivers and metrics ........................................................................................................................16
13 – Linking product availability to profits ...............................................................................................................24
16 – Pricing and revenue management in a supply chain..........................................................................................26
17 – Sustainability and the supply chain...................................................................................................................31
A – Information technology in a supply chain...........................................................................................................35
,1 – Understanding the supply chain
Learning objectives/summary each block
1. Goals of a supply chain and the impact of supply chain decisions on the success of a firm
2. The three key supply chain decisions phases and the significance of each one
3. The cycle and push/pull views along with the macro processes of a supply chain
4. Important issues and decisions to be addressed in a supply chain
5. Critical success to the workplace
A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request.
A supply chain consists:
- Manufactures
- Suppliers
- Transports
- Warehouses
- Retailers
- Customers
Receiving and filling a customer request
- New product development
- Marketing
- Operations
- Distribution
- Finance
- Customer service
A supply chain is dynamic and involves the constant flow of information, product, and funds
among different stages.
- Customer is an integral part of any supply chain.
- Three key flows: information, product and funds
- Goal: to structure the three flows in a way that meets customer needs in a cost-effective
manner
Objective of a supply chain: to maximize the net value generated.
- The net value: 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 customer’s request
- Supply chain surplus = customer value – supply chain cost
,Effective supply chain 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
- Focus on design, planning and operation
Frequent replenishment: allows stores to match supply and demand more effectively than the
competition.
LEARNING OBJECTIVE 1: the goal of a supply chain should be to grow overall supply chain surplus.
Supply chain surplus is the difference between the value generated for the customer and the total
cost incurred across all stages of the supply chain. A focus on the supply chain surplus increases
the size of the overall pie for all members of the supply chain. Supply chain decisions have a large
impact on the success of failure of each firm because they significantly influence both the revenue
generated and the cost incurred. Successful supply chains manage flows of product, information
and funds to provide a high level of product availability to the customer while keeping costs low.
Decisions
- Relating to the flow of information, product and funds
- Should be made to raise the supply chain surplus
Decisions categories or phases, depending on the frequency of each decision and the time frame
during which a decision phase has an impact
1. Supply chain strategy or design: a company decides on the structure of the supply chain for
the next several years
2. Supply chain planning: the time frame considered is a quarter to a year.
a. Goal of a planning is to maximize the supply chain surplus that can be generated
over the planning horizon given the constraints established during the strategic or
design phase
3. Supply chain operations: companies make decisions regarding individual customer orders,
time horizon is weekly or daily
a. Goal of supply chain operations is to handle incoming customer orders in the best
possible manner
LEARNING OBJECTIVE 2: supply chain decisions may be characterized as strategic (design),
planning, or operational, depending on the time horizon over which they apply. Strategic decisions
relate to supply chain configuration. These decisions have a long-term impact that last for several
years. Strategic decisions define the constraints for planning decisions, and planning decisions
define the constraints for operational decisions. Planning decisions cover a period of a few months
to a year and include decisions regarding production plans, subcontracting, and promotions over
that period. Operational decisions span from minutes to days and include sequencing production
and filling specific orders.
Processes performed in 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
All supply chain processes can be broken down into the following four
processes:
- Customer order cycle
- Replenishment cycle
- Manufacturing cycle
- Procurement cycle:
Differences
- In the customer order cycle, demand is external to the supply
chain and thus is uncertain. All other cycles, order placement is
uncertain but can be projected based on policies followed by
the particular supply chain stage
- Scale or order
- From customer to supplier, the number of individual orders
declines and the size of each order increases
Six subprocesses of each cycle
This can be linked to source, make, deliver, a return processes in the supply chain operations
reference (SCOR) model.
- 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
With each cycle the goal of the buyer is to ensure product availability for its customers and to
achieve economies of scale in ordering.
All processes in a supply chain fall into one of two categories (push/pull), depending on the timing
of their execution relative to end customer demand.
