What is supply chain? A connected set of activities concerned with planning, coordinating and controlling materials, parts, and finished goods from supplier to customer. It is concerned with two distinct flows (material and information) through the organization.
What does it mean to manage a supply chain? The supply chain needs to be managed as a single entity. Strategic management: design of the supply chain itself; Tactical management: establishing contracts (incentives and penalties) between interacting partners in the supply chain.
Manufacturer Raw materials supplier Equipment supplier Regional Warehouse of the manufacturer Regional Warehouse of the Supermarket Local Supermarket Household Baby: The Ultimate Consumer Flow of materials Flow of information Supply Chain for Diapers
Component Suppliers P C Manufacturer P C Warehouse P C Store Consumer Old-fashioned Supply Chain for PCs
Component Supplier Manufacturer Consumer Modern Supply Chain for PCs
Proposed Supply Chain at Dell Printer Supplier Monitor Supplier Sub- component Supplier Dell Assembly Plant Customer Material Flow Information Flow
Issues in SCM What items to stock, and where to stock them. For each item: how much to order, and when to order. Supply contracts. Information sharing. Global operations.
Why hold inventory? Uncertainty in demand, supply, lead times Price fluctuations Customer goodwill (Stock-out costs) Reduce ordering/set-up costs
Why not hold unlimited amount of inventory? Storage costs Capital costs Spoilage and pilferage Insurance and taxes
Supply Contracts Quantity discounts Product bundling Return of unsold goods Order filling strategies Lead time guaranties Quantity/quality guaranties
Information Sharing Who has the demand information? Who has the cost information? Who has the production information?
Global operations International laws Exchange rate fluctuations Larger lead times Social Issues