Supply chain management:
Chapter 1: understanding the supply chain
What is a supply chain?
Supply chain = all stages involved, directly or indirectly, in fulfilling a customer request.
• This includes manufacturers, suppliers, transporters, warehouses, retailers, and customers.
• Within each company, SC includes all functions in fulfilling a customer request (product
development, marketing, operations, distribution, finance, customer service)
• Traditional SC scheme:
supplier => manufacturer => distribution centre (warehouse) => retailer => consumer
tussen deze fase zit ook al het transport mee opgenomen (de pijlen eigenlijk)
Example of fast moving consumer goods (detergent):
• Past goed in het algemeen schema
• First tier: leveren rechtstreeks aan de manufacturer
• Second tier: leveren aan suppliers die rechtstreeks aan de manufacturer leveren
Example of Assemble To Order supply chain (Dell computers)
• Wanneer er geen orders zijn wordt er niks geproduceerd
• Enkel optie om online te bestellen en dan componenten te kiezen die je in je pc wilt
• Geen DC’s en retailers in deze SC
Important:
, • Customer is integral part of SC: doel van SC is om customer’s noden te vervullen + het
genereren van winst voor de SC gedurende het process.
• SC includes movement of product from suppliers to manufacturer and so on, but also
movements of information, funds and products in both directions
• More accurate term: supply network or supply web
• All stages may not be present in all SC’s (eg. ATO SC’s)
Flows in a supply chain:
Ook informatie, fondsen etc kunnen flows
zijn in de SC. Al deze flows moeten
gemanaged worden.
Objective of a SC:
• Maximize overall value created
SC value = difference between what the final product is worth to the customer and the effort
the SC expends in filling the customer request
• Value is correlated to the SC profitability or SC surplus (= difference between revenue
generated from the customer and the overall cost across the supply chain)
SC profitability = total profit to be shared across all stages of the supply chain
!!! SC success should be measured by total SC profitability, not profit at an individual stage
• SC profit = final sales price of product – all the costs needed to get the product to the final
customer
• If all the players of the SC would work together the could realise a larger profit instead of
being selfish and only looking at their own profit. BUT most of the time no trust amongst the
players, which causes no information sharing => lower level of coordination
What is supply chain management?
SC management = managing supply chain flows and assets, to maximize the SC surplus.
• Each SC only one revenue source = the customer
• Sources of SC costs: flows of information, products, or funds between the stages
3 phases in a SC: design, planning and operation. There is a close connection between these phases
and the success of the SC.
Decision phases of a SC:
,SC strategy or design:
• Decisions about the structure of the SC and what processes each stage will perform
• Strategic SC decisions: functions to be outsourced or not, locations and capacities of
facilities, products to be made or stored at locations, modes of transportation, information
systems.
• SC design must support strategic objectives.
• The decisions are long-term and expensive to reverse. Market uncertainty needs to be take
into account.
SC planning:
• Definition of a set of policies that govern mid-term operations (timeframe = a quarter to a
year)
• Questions to ask in this phase: which markets will be supplied from which locations,
subcontract part of our manufacturing or not, which inventory policies, …
• Goal = exploit flexibility to optimize performance.
Supply configuration is fixed from previous phase: poses constraints to the planning activity
• Starts with a forecast of demand in the coming year
SC operation:
• Decisions regarding individual customer orders (time horizon = short term, weekly or daily)
Allocate orders to inventory or production, set order due dates, generate pick lists at
warehouses, …
• Goal = implement the operating policies as effectively as possible.
SC configuration is fixed and operating policies are determined.
• Much less uncertainty !
Process views of a supply chain:
Cycle view: processes in a SC are divided into a series of cycles, each performed at the interface
between two successive SC stages.
• Used to inform your SC processes about
each other
• Upstream = from customer to supplier
• Downstream = from supplier to customer
• Clearly defines processes involved and the
owners of each process
• !! Is useful when considering operational
decisions (eg. When setting up information
systems to support operations)
• Each cycle consists of six subprocesses
, Push/pull view: processes in a supply chain are divided into two categories depending on whether
they are executed in response to a customer order (pull) or in anticipation of a customer order
(push).
• Two categories of processes depending on the timing of their execution relative to customer
demand.
Pull: execution is initiated in response to a customer order (reactive)
Push: execution is initiated in anticipation of customer orders (speculative: based on
forecasts)
• Push/pull boundary (inventory/order interface) separates push processes from pull
processes.
• Useful in considering strategic decisions relating to SC design: where to locate push/pull
boundary?
Link with product volume/ product variety
Impact on desired flexibility of the processes used
• The relative proportion of push and pull processes can have an impact on SC performance
Alles buiten de customer order cycle is
gedaan in push mode dus obv forecasts.
Hierdoor kunnen wij alles aankopen in de
supermarket op eender welk moment door
de stock die wachtende is op de aankoop
(order) van een customer.
Bij Dell is het enige in push mode het
aankopen van de onderdelen voor een pc.
Wat in de stock zit zijn dus sub-assemblies
en components en geen finished goods wat
het een ATO maakt.
!!! Graph on next page:
• Het verschil in deze push en pull keuzes moeten logisch gemaakt worden, en dus langs de 45
graden lijn liggen
• Variety is vaak gelinkt ook aan volume, als er weinig variëteit is is er meestal een groot
volume ervan beschikbaar
• MTO vraagt heel veel tijd ipv ATO
• Bij MTO zijn de raw materials de stock
