The document provides an introduction to supply chain management, outlining its definition as the design and management of processes across organizational boundaries to meet customer needs. It highlights the shift from vertically integrated firms to a collaborative approach involving multiple specialized suppliers and customers, emphasizing the importance of information flow and integration in maximizing supply chain profitability. Additionally, an example of Apple's iPod illustrates the interconnectedness of various suppliers and manufacturers within a supply chain.

1. Introduction to
Supply Chain
Management
BY: DRL

2. Learning Objectives
You should be able to:
 Describe a supply chain and define supply chain
management.
 Describe the objectives and elements of supply chain
management.

3. Definition
The design and management of seamless, value-added processes across
organizational boundaries to meet the real needs of the end customer
Institute for Supply Management
Managing supply and demand, sourcing raw materials and parts, manufacturing and
assembly, warehousing and inventory tracking, order entry and order management,
distribution across all channels, and delivery to the customer
The Supply Chain Council
The planning and management of all activities involved in sourcing and procurement,
conversion, and all logistics management activities … also includes coordination
with channel partners, which can be suppliers, intermediaries, third party service
providers, and customers.
Council of Supply Chain Management Professionals
Source: Principles of Supply Chain Management: : A Balanced Approach by Wisner Tan Leong

4. Definition (Cont.)
 Old paradigm - Firm gained synergy as a vertically integrated firm encompassing
the ownership and coordination of several supply chain activities. Organizational
cultures emphasized short-term, company focused performance.
 New paradigm - Firm in a supply chain focuses activities in its area of
specialization and enters into voluntary and trust-based relationships with
supplier and customer firms.
 All participants in the supply chain benefit.
 Boundaries are dynamic and extend from “the firm’s suppliers’ suppliers to
its customers’ customers (i.e., second tier suppliers and customers).”
 Supply chains now deal with reverse logistics to handle returned products,
warranty repairs, and recycling.
Source: Principles of Supply Chain Management: : A Balanced Approach by Wisner Tan Leong

5. Summary of Definition
The design and management of seamless, value-added processes
across organizational boundaries to meet the real needs of the end
customer
Institute for Supply Management
 Which not only cut across organizational boundaries but also must
be tightly integrated
 To be integrated, the processes must be appropriately designed
and systematically managed to allow information to flow and be
deployed within and across them.
Source: Operations Management by Roger Schroeder, Susan Goldstein, M Jonny Rungtusanathan

6. Upstream or backward materials & information flow
Downstream or forward materials & information flow
Physical Distribution
Physical Supply
1st
-Tier
Suppliers
2nd
-Tier
Suppliers
Flow of materials from
upstream nodes into Z
Flow of materials from Z through
downstream process toward the
end customers

7. What is a Supply Chain?
A supply chain consists of the flow of products and services from:
 Raw materials manufacturers
 Component and intermediate manufacturers
 Final product manufacturers
 Wholesalers and distributors and
 Retailers
Connected by transportation and storage activities, and Integrated through information, planning, and
integration activities..
Many large firms are moving away from in-house Vertically Integrated structures to Supply Chain
Management
Set of entities and relationships that cumulatively define materials and information flows both
downstream toward the customer and upstream toward the very first supplier.
Source: Operations Management by Roger Schroeder, Susan Goldstein, M Jonny Rungtusanathan

8. Example: Apple’s iPod
Many high-tech consumer products are not manufactured by the companies whose
brands they carry but are instead manufactured by a host of other companies that act as 1st
-tier,
2nd
-tier, and perhaps 3rd
-tier suppliers to the branding companies. The iPod, the portable digital
audio player, marketed by Apple Inc. is a perfect example.
The product idea originated with Apple Inc. The manufacturing of the product itself is
outsourced to Inventec, based in Taipei, Taiwan. Inventec in turn sources the necessary parts
from many other suppliers (Toshiba, Synaptics, etc.) to assemble the iPod on behalf of Apple Inc.
One part critical to the operations of the iPod is the computer chip responsible for
controlling the various functions. For these computer chips, Inventec and Apple work jointly to
select PortalPlayer, based in San Jose, California, to design the computer chip according to
specifications from Apple Inc. The design then turned over to be produced by eSilicon
Corporation, headquartered in Sunnyvale, California. eSilicon in turn contracts with TSMC or
Taiwan Semiconductor Manufacturing Company, Ltd., to actually manufacture the computer chips,
which, once fabricated, are shipped to Inventec. Completed iPods are then shipped to Apple Inc.
for subsequent distribution.

9. Objective of a Supply Chain
 MAXIMIZE THE OVERALL VALUE GENERATED
VALUE– is the difference of the final product worth to customer between the costs the
supply chain incurs in filling customers’ request
Supply Chain Profitability or Supply Chain Surplus – is the difference between
revenue generated from the customer and the overall cost across the supply chain
Therefore, supply chain’s success is measured in terms of
supply chain profitability.
Source: Operations Management by Roger Schroeder, Susan Goldstein, M Jonny Rungtusanathan

10. SHORT QUIZ
1.) Discuss the goal of a supply chain
and explain the impact of supply chain
decisions on the success of a firm.
2.) Draw the supply chain for Apple
iPod from the first source of raw
materials to final customer.

11. ANSWERS
1.) Discuss the goal of a supply chain and explain the impact of supply chain decisions
on the success of a firm.
The goal of a supply chain should be to maximize overall supply chain
profitability. Supply chain profitability is the difference between the revenue
generated from the customer and the total cost incurred across all stages of the
supply chain. Supply chain decisions have a large impact on the success or 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 low
cost.
2.) Draw the supply chain for Apple iPod from the first source of raw materials to
final customer.

12. Answer in #2:
APPLE INC.
INVENTEC
TOSHIBA
PORTAL
PLAYER
SYNAPTICS
ESILICON TSMC
E
N
D
C
U
S
T
O
M
E
R
S
3rd
-tier 2nd
-tier 1st
-tier End
Manufacturer
Wholesaler
/Retailer

13. Check-up Quiz 1:
1. The design and management of seamless, value-added processes
across organizational boundaries to meet the real needs of the end
customer.
2. The old paradigm where firm encompassing the ownership and
coordination of several supply chain activities.
3. – 7. The five components or composition of a supply chain?
8. It is the difference of the final product worth to customer between
the costs the supply chain incurs in filling customers’ request.
9. The other term for physical distribution.
10. The supply chain success is measured by _____________.