Supply Chain Management: An Introduction

Typical Supply Chains Purchasing Production Distribution ReceivingStorageOperationsStorage

Stages of Detergent Supply Chain P&G or others manufacturer Martin’s or third party Martin’s Supermarket Customer wants detergent and goes to Martin’s Plastic Producer Tenneco Packaging Chemical manufacturer (e.g., Oil Co.) Paper Manufacturer Timber Industry Chemical manufacturer (e.g., Oil Co.)

Source Flow of material + Flow of ownership Flow of information + Flow of money Customer Supplier 1Dealer 1 Supplier 2Dealer 2 Company Supply Chain System

Supply Chain Flows Capacity, promotion plans, delivery schedules Raw materials, in-process products, finished goods Credits, consignment, payment terms, invoices Sales, orders, inventory, quality, promotion plans Returns, repairs, servicing, recycling, disposal Payments, consignment SuppliersCustomersManufacturerDistributorResellers Information Material Finance Information Material Finance

Customer purchases online from Dell Computer Pricing Return to website & check the status of order Availability Customer orders through Dell website Customer orders taken by Dell assembly plant Dell suppliers Dell suppliers’ suppliers Variety Availability Payment Information

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Supply Chain Dynamics Bullwhip effect – Upstream members must react to the demand – Slightest change in customer demand can ripple through the entire chain

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Supply Chain Dynamics Consumers’ daily demands Retailers’ daily orders to manufacturer Manufacturer’s weekly orders to package supplier Package supplier’s weekly orders to cardboard supplier 9,000 7,000 5,000 3,000 0 Order quantity Month of April Day 1Day 30Day 1Day 30Day 1Day 30Day 1Day 30 Figure 10.2 – Supply Chain Dynamics for Facial Tissue

Ways to Reduce Bullwhip Effect Good Demand forecasting Information sharing Coordination