Supply Chain Management

SESSION 1
BY
Saad Waqas
Operations & Productivity
 Introduction

What is Supply? ? ? ? ? ? ? ? ? ?
Make (something needed or wanted) available to someone; provide.
Supply is a fundamental economic concept that describes the total amount of a
specific good or service that is available to consumers.

What is Chain? ? ? ? ? ? ? ?
A chain is a serial assembly of connected pieces.

Reference: Principle of Supply Chain Management 5th Edition by Wisner, Tan & Leong
 What is Supply Chain??????

Reference: Principle of Supply Chain Management 5th Edition by Wisner, Tan & Leong
 Basic Supply Chain Model

Reference: Principle of Supply Chain Management 5th Edition by Wisner, Tan & Leong
 Supply Chain Management? ? ? ? ? ? ? ? ? ?

Here are two definitions:

The design and management of seamless, value-added process 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

Reference: Principle of Supply Chain Management 5th Edition by Wisner, Tan & Leong
 Supply Chain Management? ? ? ? ? ? ? ? ? ?

Supply Chain Management is primarily concerned with

the efficient integration of suppliers, factories,
warehouses and stores so that merchandise is produced
and distributed in the right quantities, to the right
locations and at the right time, and so as to minimize
total system cost subject to satisfying customer service
requirements.
Reference: Principle of Supply Chain Management 5th Edition by Wisner, Tan & Leong
Reference: Principle of Supply Chain Management 5th Edition by Wisner, Tan & Leong
 Importance of Supply Chain

 Firms have discovered value-enhancing and Firms with Supply Chain Management:
long term benefits
 Who benefits most? Firms with: Start with key suppliers
 Large inventories Move on to other suppliers, customers,
 Large number of suppliers and shippers
 Complex products Integrate second tier suppliers and
 Customers with large purchasing customers (second tier refers to the
budgets customer’s customers and the supplier’s
suppliers)

Reference: Principle of Supply Chain Management 5th Edition by Wisner, Tan & Leong
 Importance of Supply Chain

Cost savings and better coordination of resources are

reasons to employ Supply Chain Management
 Reduced Bullwhip Effect- the magnified
reduction of safety stock costs based on
coordinated planning and sharing of information
 Process Integration- Interdependent activities can
lead to improved quality, reduced cycle time,
better production methods, etc.

Reference: Principle of Supply Chain Management 5th Edition by Wisner, Tan & Leong
 Benefits of Supply Chain Management

This positively Contributes

Reduces affects inventory to overall
uncertainty levels, cycle increase in
& risks in time, business profitability
the supply processes & &
chain. customer competitive
service. advantage

Reference: Principle of Supply Chain Management 5th Edition by Wisner, Tan & Leong
 The Origin of Supply Chain Management

Reference: Principle of Supply Chain Management 5th Edition by Wisner, Tan & Leong
 Important Elements of Supply Chain
Management

• Long term relationships

• Supplier management- improve performance through
• Supplier evaluation (determining supplier
capabilities)
Purchasing • Supplier certification (third party or internal
Trends certification to assure product quality and service
requirements)
• Strategic partnerships successful and trusting
relationships with top-performing suppliers

Reference: Principle of Supply Chain Management 5th Edition by Wisner, Tan & Leong
 Important Elements of Supply Chain
Management
• Demand management- match demand to available
capacity
• Linking buyers & suppliers via MRP and ERP
systems
Operations • Use JIT to improve the “pull” of materials to reduce
inventory levels
Trends • Employ TQM to improve quality compliance among
suppliers

Reference: Principle of Supply Chain Management 5th Edition by Wisner, Tan & Leong
 Important Elements of Supply Chain
Management

• Transportation management- tradeoff decisions

between cost & timing of delivery/customer service via
trucks, rail, water & air
• Customer relationship management- strategies to
Distribution ensure deliveries, resolve complaints, improve
Trends communications, & determine service requirements
• Network design- creating distribution networks based
on tradeoff decisions between cost & sophistication of
distribution system

Reference: Principle of Supply Chain Management 5th Edition by Wisner, Tan & Leong
 Important Elements of Supply Chain
Management
• Supply Chain Integration- when supply chain
participants work for common goals. Requires intra-firm
functional integration. Based on efforts to change attitudes
& adversarial relationships
• Global Supply Chains- advantages that accrue from
Integration sourcing from larger global market e.g., lower cost &
Trends higher quality suppliers. May involve operating
exposure, which is risk found in foreign settings
• Supply Chain Performance Measurement- Crucial for
firms to know if procedures are working

Reference: Principle of Supply Chain Management 5th Edition by Wisner, Tan & Leong
 Important Definitions

The bullwhip effect on the supply chain occurs when changes in consumer demand causes the
companies in a supply chain to order more goods to meet the new demand. The bullwhip
effect usually flows up the supply chain, starting with the retailer, wholesaler, distributor,
manufacturer and then the raw materials supplier.

Safety stock is an additional quantity of an item held in inventory in order

to reduce the risk that the item will be out of stock

Safety stock inventory, sometimes called buffer stock, is a term used by inventory managers

to describe a level of extra stock that is maintained to mitigate risk of stock outs or (shortfall in
raw material or finished goods) due to uncertainties in supply and demand.

Reference: Principle of Supply Chain Management 5th Edition by Wisner, Tan & Leong
 Important Definitions

Benchmarking: the practice of copying what other business do best; studying how things are
done well in other firms to potentially make use of the same methods.

Business Process Reengineering (BPR): A radical rethinking and redesigning of

business processes that seeks to reduce waste and increase performance. The goal is
to create significant changes through assessment of current process, design of better
processes using modeling techniques, implementation of the new processes, and
continuing performance assessments

Integration: A Shared-process view of the supply chain that spans multiple

departments, processes and software applications for internal users and external
partners.
Reference: Principle of Supply Chain Management 5th Edition by Wisner, Tan & Leong
 Push Vs. Pull Process

Divided in to two categories.. M

M ake to
1. Executed in response to a customer order (Pull process) E ake to Order
ngi
nee Stock
2. Executed in anticipation of customer orders (Push process) r to
Or d
er

Reference: Principle of Supply Chain Management 5th Edition by Wisner, Tan & Leong
 Push Vs. Pull Process

Push
 Execution is performed in anticipation of an order
 Demand is forecasted
 Proactive Process based on projected need/demand

Pull
 Execution is performed in response to an order
 Demand is actual and known with certainty
 Reactive process based on actual need/demand

Reference: Principle of Supply Chain Management 5th Edition by Wisner, Tan & Leong
 SELF TEST

A. What types of organizations would benefit the most from practicing supply chain
management? What sorts of improvement could be expected?
B. What is the difference between an MRP system and ERP system?
C. What role does information play in supply chain management? Support your answer
with an example.
D. What is the triple bottom line.
E. What is demand management and why it is an important part of supply chain
management?
F. What does the term “Third Tier Supply” mean what about “Third Tier Customer”.

Reference: Operations management 12th Edition by Jay Heizer, Barry Render & Chuck Munson
THANK
YOU
 Video Links (if any)

Topic Link
Push Vs. Pull Process https://youtu.be/xaulTiiUhPk

Supply Chain Management (Dr. Shujaat Mubarak) https://www.youtube.com/watch?v=1mSl_ewVBgA