Introduction

Introduction
Supply chain
Involves all parties involved directly or indirectly in
fulfilling a customer request
Dynamic, constant flow of information, product and
funds
Supply web / supply network
Three principal streams:
Sourcing, procurement and supply management
Materials management
Logistics and distribution
Evolution of supply chain management
The first revolution (1910-1920): The Ford revolution
Ford owned every part of the chain right from timber to the rails,
highly integrated firm
Highly efficient but inflexible chain- could not handle wide variety of
products
Chain required long set-up timings, thus high inventory

The second revolution (1960-1970): The Toyota Supply Chain

Wider product variety, less inventory
Toyota- sourced components from large number of suppliers, Kieretsu
system interlocking relationship
Lean production system
Rigidity permanent relationship with suppliers
 The third revolution (1995-2000): The Dell
supply chain
Increased use of IT
Integrate suppliers through IT even for medium
term loosely held relationship
Wide variety of customization in products
 Conflicting Objectives in the Supply Chain

1. Purchasing
Stable volume requirements
Flexible delivery time
Little variation in mix
Large quantities
2. Manufacturing
Long run production
High quality
High productivity
Low production cost
3. Warehousing
Low inventory
Reduced transportation costs
Quick replenishment capability
4. Customers
Short order lead time
High in stock
Enormous variety of products
Low prices
 Objective of supply chain
Supply chain surplus = customer value SC
cost
Customer surplus
Supply chain profitability = SC revenue- cost
 Decision phases in supply chain
Supply chain strategy or design
Strategic decision: long term
Make vs buy
Location and capacities of production units and warehouses
Mode of transportation
Type of information system
Supply chain planning
Time frame: quarter to a year
Which markets to be supplied from which locations
Subcontracting of manufacturing
Inventory policies
Supply chain operations
Weekly or daily
Handle incoming orders in best possible manner
Allocate inventory and production to individual orders
 Process views of supply chain
Cycle view
Push-pull view
Push vs. Pull processes
Butterscotch mousse cake

Standard Pizza

Choice of
toppings and
choice of crust
Push vs. pull processes
Cycle view
Sub processes in each supply chain
process cycle
 Key observations
Not every supply chain will have all for cycles
clearly separated
Important differences among cycles:
In customer order cycle demand is external and
thus uncertain, however in all other cycles
demand can be projected based on policies
followed at each stage
Scale of order is small in customer order cycle in
comparison to all other cycles
Push/pull view and cycle view
Supply chain macro processes
 Order deliver lead time
Customer
Order penetration point order
(decoupling point)
Order delivery lead time

Source Make Assembly Delivery

components

Supply chain lead time

Ideally for a firm order delivery lead time >

supply chain lead time
 Make to stock (MTS)
Custome
r order

Source Make Assembly Delivery

components

E.g. consumer products

 Make to order (MTO)

Customer
order
Source Make Assembly Delivery
components

E.g. equipment manufacturers

 Configure to order (CTO)/ Build to
order (BTO)/ Assemble to order (ATO)

Custome
r order

Source Make Assembly Delivery

components

E.g. pizza home delivery business

Most computer firms operate in MTS model, while
Dell operates in CTO model
Push of activities before customer order, pull of
activities after customer order- push pull boundary
If a variety explosion takes place for an MTS firm,
then what should it do?
 Key terms
Focal firm
Provides identity to the products
E.g. Nike

Reverse supply chain management

Product moves back from end customer to the
manufacturer
E.g. packaging material bottles in which coke is sold
New product return
End of life product return green supply chain
Innovative / functional
ABC categorization

SEGMENTATION IN SUPPLY CHAIN

ABC analysis