Supply Chain Management SYST 4050 Slides Supply Chain Management Lecture 1 Chapter 1

Announcements Workshop on applying for scholarships SYST 4050 Slides Announcements Workshop on applying for scholarships Jan 19, 10:00am-1:00pm, KOBL 360 Jan 28, 12:00pm-2:00pm, KOBL 360 Signup sheet outside Trep Café Jan 13, 8:00am-1:00pm Jan 14, 8:00am-1:00pm Chapter 1

What is Supply Chain Management? SYST 4050 Slides What is Supply Chain Management? Chapter 1

SYST 4050 Slides What is a Supply Chain? A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request Suppliers, manufacturers, transporters, warehouses, retailers, and customers A supply chain includes all functions involved in receiving and filling a customer request New product development, marketing, operations, distribution, finance, and customer service A supply chain is the entire process of moving a product or service from suppliers to customers Chapter 1

Stages of a Detergent Supply Chain SYST 4050 Slides Stages of a Detergent Supply Chain Timber Company Paper Manufacturer Pactiv Corporation P&G or Other Manufacturer Wal-Mart or Third Party DC Wal-Mart Store Customer Supply chain involves everybody, from the customer all the way to the last supplier The P&G manufacturing plant receives raw material from a variety of suppliers, who may themselves have been supplied by lower-tier suppliers Chemical Manufacturer Plastic Producer Chapter 1

Example: Wal-Mart Procter & Gamble Wal-Mart or third-party SYST 4050 Slides Example: Wal-Mart Wal-Mart or third-party distribution centers Procter & Gamble Customers Request: Buying detergent, clothes, TV, …... Wal-Mart Stores Da-Fa Clothing, Inc. (China) SONY Factory (Malaysia) Fabric Producer Electronics Components Producer Plastic Producer Zipper Producer Plastic Producer Chemical Producer Thread Producer Chapter 1

Example: HP FAT = Final assembly & test SYST 4050 Slides Example: HP USA DCs Suppliers IC Mfg Retailer Customer Europe DCs Suppliers PC Board FAT Retailer Customer Asian DCs Suppliers Subassembly Retailer Customer Suppliers FAT = Final assembly & test IC Mfg = Integrated circuit manufacturing PC Board = Printed circuit board Chapter 1

SYST 4050 Slides Example: Dell Monitors by SONY (Mexico) Keyboards by Acer (Taiwan) Dell Assembly Plant Customers order computers on Dell’s website CPU by Intel (USA) Other components Dell’s direct sales supply chain Dell is significantly revamping its entire supply chain strategy and, in large measure, abandoning its make-to-order model [April, 2008] Chapter 1

Most supply chains are actually supply networks SYST 4050 Slides Supply Chain Stages A typical supply chain involves a variety of stages Supplier Manufacturer Distributor Retailer Customer The term supply chain may imply that only one player is involved at each stage. A manufacturer may receive material from several suppliers and the supply to several distributors, who may supply several retailers. Thus, most supply chains are actually networks Most supply chains are actually supply networks Chapter 1

Material/Product Flow SYST 4050 Slides Supply Chain Flows Value-Added Services Supplier Manufacturer Distributor Retailer Customer Material/Product Flow Funds/Demand Flow Information Flow Returns/Recylcing Chapter 1

SYST 4050 Slides What is a Supply Chain? A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request Suppliers, manufacturers, transporters, warehouses, retailers, and customers A supply chain includes all functions involved in receiving and filling a customer request New product development, marketing, operations, distribution, finance, and customer service A supply chain is the entire process of moving a product or service from suppliers to customers Chapter 1

Supply Chain Cycle Reverse logistics Marketing Customer Product design SYST 4050 Slides Supply Chain Cycle Reverse logistics Marketing Customer Product design What is a logical point to start? Prior to anything being produced it is of the company’s best interest to predict the level of demand (Marketing). By conducting research and forecast demand. Once markets have been identified and demand has been established Specifications are decided (Product design) Raw materials (Suppliers) Supplied for production (Manufacturing) Transport (Logistics) Distribution centers, warehouses, retailers, customers (Customers) Returns and recycling (Reverse logistics) Data and feedback on products Logistics Suppliers Manufacturing Chapter 1

The Objective of a Supply Chain SYST 4050 Slides The Objective of a Supply Chain Supply chain value is the difference between what the final product is worth to the customer and the costs the supply chain incurs in filling the customer’s request Supply chain profitability (or supply chain surplus) is the difference between the revenue generated from the customer and the overall cost across the supply chain Maximize overall value created For most commercial supply chains, value will be strongly correlated with supply chain profitability Chapter 1

The Objective of a Supply Chain SYST 4050 Slides The Objective of a Supply Chain Sources of supply chain revenue: Customer Best Buy receives $60 from a customer for a wireless router Sources of supply chain cost: Flows of information, products, and funds between any pair of stages in the supply chain Difference between $60 and the sum of all costs is the supply chain profit or supply chain surplus Supply chain profitability is the total profit to be shared across all supply chain stages and intermediaries Supply chain success should be measured by total supply chain profitability, not profits at an individual stage Chapter 1

The Importance of Supply Chain Decisions SYST 4050 Slides The Importance of Supply Chain Decisions Supply chain design, planning, and operation play a significant role in the success or failure of a firm Wal-Mart Dell Seven-Eleven Japan Amazon Toyota W.W. Grainger and McMaster-Carr Webvan Snapple W.W. Grainger and McMaster-Carr - Maintenance Repair and Operations (MRO) products Webvan - Online grocery store Snapple - Bottled drinks Chapter 1

Overview Part I Part II Part III Understanding the supply chain SYST 4050 Slides Overview Part I Understanding the supply chain Chapters: 1, 2, 3 Part II Designing the supply chain network Chapters: 4, 5, 6 Part III Planning demand and supply in a supply chain Chapters: 7, 8, 9 Chapter 1

Overview Part IV Part V Part VI SYST 4050 Slides Overview Part IV Planning and managing inventories in a supply chain Chapters: 10, 11, 12 Part V Designing and planning transportation networks Chapter: 13 Part VI Sourcing and pricing decisions in a supply chain Chapters: 14, 15, 16, 17 Chapter 1