Objective of a Supply Chain
• Maximise overall profit
– Revenue generated from customer - costs
incurred along the entire chain
(e.g. manufacturing / storing / distributing the
• When is Supply chain effective?
– Manage Product, Information and Fund flow
Simple Product Supply ChainSimple Product Supply Chain
Supply Chain: A sequence of activities
And organizations involved in producing
And delivering a good or service
Stage of Production Value
Farmer produces and harvests wheat $0.15 $0.15
Wheat transported to mill $0.08 $0.23
Mill produces flour $0.15 $0.38
Flour transported to baker $0.08 $0.46
Baker produces bread $0.54 $1.00
Bread transported to grocery store $0.08 $1.08
Grocery store displays and sells bread $0.21 $1.29
Total Value-Added $1.29
A Supply Chain for BreadA Supply Chain for Bread
So, what is SCM?
• Objective is to be able to have the right products
in the right quantities (at the right place) at the
right moment at minimal cost.
• Little or no communication between supply
• Delay times between order processing,
demand, and receipt of products.
• Over reacting to the backlog orders.
• Inaccurate demand forecasts.
• Steps taken to move and store a product
• Design Options
– Manufacturer storage with direct shipping
– Manufacturer storage with direct shipping and
• Logistics is the management of the flow of
goods, information and other resources,
including energy and people, between the point
of origin and the point of consumption
• Logistics involves the integration of information,
transportation, inventory, warehousing, material-
handling, and packaging, and occasionally
• Logistics is a channel of the supply chain which
adds the value of time and place utility.