PROCESS VIEW OF SUPPLY CHAIN

Customer Order Cycle

This cycle takes place at the customer and retailer interface. It includes sub cycles such as customer
arrival (at retail shop or supermarket), customer order entry (that is ordering what they want),
customer order fulfilment (done by the retailer) and customer order receiving (that is, the customer
receives what he/she ordered). In this cycle, demand is external to the supply chain and uncertain.

PULL PUSH BASED SUPPLY CHAIN STRATEGY

According to the Push/Pull view, all the processes in the supply chain fall into any one of the two
categories based on their execution timing related to customer demand.
• Pull Processes: They are also known as 'reactive processes' as they respond to customer's demand.
• Push Processes: They are also known as 'speculative processes' as they respond to forecasted demand
rather than actual demand.
Push Based Supply Chain Strategy

In this strategy the material is pushed to the supply chain from the initial raw material end to the
customer end on the basis of the demand forecasts. At the end of the supply chain, the finished goods
await customers’ orders. Push process operate in an uncertain environment in which customer demand
is not yet known.

Pull Based Supply Chain Strategy

In this strategy a customer order pulls material into the supply chain. Pull Process operate in an
environment in which customer demand is known. Initially most of the organizations were following
Push system but in the last two decades pull system is pushing the push system.

Facilities
As already mentioned, facilities are the answers to the questions of ‘where in the supply chain?’ These
are the locations from where or to where the inventory is transported. Therefore, design decisions of
facilities such as location, capacity, role and flexibility are major influencers of supply chain
performance. For example, if the number of distribution outlets is more nearer to the customers, it
may increase the responsiveness as customer service level is high but there is a reduction in efficiency
due to increase in the cost. Fewer warehouses may increase the efficiency as the overall cost is
reduced but that will reduce the responsiveness
Inventory
The mismatch between supply and demand creates inventory. Most of the times inventory is necessary
because producing in lots is beneficial to a manufacturer and keeping the stocks in excess is important
for a retailer to meet the demand. As already discussed, inventory is kept throughout the supply chain
in the form of raw materials, work in process and finished goods. It is the major source of cost in a
supply chain but it has a major impact on responsiveness. If a firm’s competitive strategy is achieving
a very high level of responsiveness, then a large amount of inventory to be located nearer to the
customer. If a company wants to be a low-cost producer, then it can become more efficient by
reducing inventory with the help of centralised stock
Transportation
Movement of goods/services throughout the supply chain is done by transportation. The decisions
related to mode and speed of transportation have a major influence on responsiveness to the customer
and efficiency. High-speed transportation may lead to higher responsiveness with a trade-off of
efficiency due to increase in cost. The other way, low-speed transportation may lead to the higher
efficiency with a trade-off of low responsiveness.
Transportation decisions are mainly based on the firm’s competitive strategy. If competitive strategy
targets customers who expect a high level of responsiveness and willing to pay for it, then
transportation is used as a key driver to make the supply chain more responsive A simple example is a
difference between the courier service and registered post. Though the registered post is charging less
compared to courier service, group of people prefer courier rather than register post because of its
faster service.
Information
Information is one of the most important cross-functional drivers of the supply chain. It serves as a
link between various stages of a supply chain. It ensures the happening of daily operations of various
stages and coordinates the various activities of a supply chain to maximise its overall profitability.
Generally, companies invest more in information to respond quickly to their customers. Growth in
information technology is an evidence for the importance of information as a driver in improving
firm’s performance.

Achieving trade-off between customer service and cost

Increase in the number of facilities, decentralised location of facilities and flexible type of
facilities leads to improvement in customer service with a trade-off of high facility and
inventory cost. The basic trade-off for transportation is between the cost (efficiency) and speed
(responsiveness) of the transportation. information is capable of simultaneously improving
responsiveness and efficiency of the supply chain provided the information should be appropriate and
accurate. At the same time, it makes the supply chain capable of meeting the customer requirements
on time, which makes it more responsive towards the customers.