CHAPTER 1

INTRODUCTION;

Supply Chain Management:

Defining Supply Chain:

There are as many different definitions as many of those who cared to write about it based on that, the author would like to offer his
definition of SC here and SCM in the next section.

Figure 1. The basic Supply Chain model

In order to answer this question, one needs to understand the four intrinsic flows of a supply chain.
Material Flow:

Information Flow:
Finance Flow:
Commercial flow:
Customer Orientation:

Defining Supply Chain Management

It is so widely known and widely practiced in almost all businesses. As an attempt, the author proffers the following
definition:
 Figure 2. Supply Chain Management conceptual model

• Supply Chain Configuration

• Supply Chain Relationship
• Supply Chain Coordination

Development Trends
• From functional to process perspective.
• From operational to strategic viewpoint.
• From single enterprise to extended enterprise.
• From transactional to relationship based engagement.

• From local to regional, and from regional to global.

 Chapter 3 Headings:

Figure 4. The extent of vertical integration

 Figure 5. Outsourcing vs. off-shoring

Figure 6. The logic decision tool for out sourcing (adopted from Nigel Slack 2005)
Fundamentals of Supply Chain Lean Supply Management
Management

Figure 7. the matrix decision tool for outsourcing (from Abbetti 1997Fast-track your career

Figure 8. factors influence the operational location decisions.

Figure 9. Supply chain total cost

Download free ebooks at bookboon.com

6
Fundamentals of Supply Chain Lean Supply Management
Management

Figure 10. the weighted scoring method. (source: Slack et.al. 2006)

Period 1 Period 2 Period 3

Retail Sales +10% -10% +10%

Distribution Orders from Retail +17% -21% +32%

Factory Orders from Distributor +30% -40% +48%

Manufacturing Orders from +45% -66% +80%

Factory
Factory output +39% -60% +72

Figure 11, Example of bullwhip effect

Download free ebooks at bookboon.com

7
Fundamentals of Supply Chain Lean Supply Management
Management

Lean Supply Management

Sign of the Lean Manufacturing
Lean Supply Principles:

Figure 14. Mass supply chain structure.

Figure 15. Lean supply chain structure.

Download free ebooks at bookboon.com

8
Fundamentals of Supply Chain Lean Supply Management
Management
1) Supply from a smaller 1st-tier supply base:
2) Develop appropriate usually close partnership:
3) Supplier selection based on performance:
4) Single or dual sourcing only:

Download free ebooks at bookboon.com

9
Fundamentals of Supply Chain Agile Supply
Management Management
5) “Market price minus” rather than “Supplier cost plus”:
6) Early and close engagement with suppliers for NPI:
7) Synchronized flexible capacity:
8) Just-in-time delivery:
9) Incentive and reward alignment:
10)Willingness to share a substantial part of its proprietary information:

Focusing on Cost-to-Serve:

Toyota’s three original criteria for value adding activities are:

1) There must be physical changes

2) It must be concerned by the customer
3) It must be right first time

Drivers for Lean Supply Chain:

Driver 1: Waste Reduction
Driver 2: Demand Management

Download free ebooks at bookboon.com

10
Fundamentals of Supply Chain Agile Supply
Management Management

Agile Supply Management:

Agile Supply Chain Concept

Figure 25, Volume and variety observation.

Figure 26. Demand characteristics observation

Table 1. Comparison of lean supply with agile supply

Download free ebooks at bookboon.com

11
Fundamentals of Supply Chain Agile Supply
Management Management

Distinguishing Attributes Lean Supply Agile Supply

Typical products Commodities Fashion goods

Market place demand Predictable Volatile

Product variety Low High

Product life cycle Long Short

Customer drivers Cost Availability

Profit margin Low High

Dominant cost Physical cost Marketability cost

Stock-out penalties Long-term contractual Immediate and volatile

Purchasing policy Buy materials Assign capacity

Information enrichment Highly desirable Obligatory

Forecasting mechanism Algorithmic consultative

Download free ebooks at bookboon.com

12
Fundamentals of Supply Chain Agile Supply
Management Management

Figure 27. Agile supply chain framework (adopted from Harrison 2005)

Agile supply chain is about virtual integration

Agile supply chain relies on market sensitivity

Agile supply chain needs improved process integration

Agile supply chain is often dynamic network based

Competing on Responsiveness

How to create the structured supply chain responsiveness?

Download free ebooks at bookboon.com

13
Fundamentals of Supply Chain Agile Supply
Management Management

Figure 28. Supply chain order de-coupling point

 The postponement strategy is aiming to achieve market responsiveness in terms of producing the right variety
and right product portfolio at the right quantity, but do it efficiently at a mass production price.

Figure 29. Postponement strategy (source: Christopher, 2005)

Download free ebooks at bookboon.com

14
Fundamentals of Supply Chain Agile Supply
Management Management

Getting Right from Within

Structure Change

Process Change
IT Systems

Key Performance Indicators

Download free ebooks at bookboon.com

15