Supply Chain Management: Arun Arora

BA ZG621/ MM ZG621/ MBA ZG621 /POM ZG621/QM ZG 621
Supply Chain Management

Lecture- CS 1 , 12th January 2020 ( Sunday )
BITS Pilani
Pilani Campus Arun Arora
Textbook

Sunil Chopra, Peter Meindl and DV Kalra.
Pearson Education. Sixth Edition. 2016.
You need to buy this textbook.
BA ZG621/ MM ZG621/ MBA ZG621 /POM ZG621/ QM ZG621, SCM -12/01/20 . Lecture -1 BITS Pilani, Pilani Campus
Reference books
• Designing and Managing the Supply Chain

David Simchi-Levi, Philip Kaminsky, Edith Simchi Levi and Ravi Shankar.
McGraw-Hill. New Delhi. Third Edition. 2008.
• Supply Chain Logistics Management.

Donald Bowersox, David Closs and M Bixby Cooper
McGraw Hill. New Delhi. Second Edition. 2007.
Evaluation Scheme
No. Name ehaviou Duration

of enance sts, Date,
typesSession,
and
B Typr maint
Weight Day,
co
Time
Maintenance e cing maintenance
1 Budgeting, mpone etnts,
bs, andcost
budgors influen
eting of maintenance
T1- costs,
EC-1
6 Quiz-I jo
and Cost- budg 5% February 01 to 15, 2020
Costing
co offact nce cost Chapter
Control rinciple maintena cot and etary ntrol,control
Preparation 14
Quiz-II Online - 5% March 01 to 15, 2020
Ps ofnance budg ments of
mainte budge comman
ining es,
Aprilidentification
p
Training
Quiz-III (HRD) of 5%sourctraining, T1-
01 to 15, 2020
rofile, jectives, nningd
1 Lab workc 10%and To be announced
esigning training Chapter
7 ob
rogram es,
Ten on ofd ning, benefits of 10 AM
15 –
EC-2 Mid-Semester
PersonnelTest p Closed 2 hours 35% 08/03/2020 (FN)
Maintenance mategorie evaluati
, modes,trai
Syllabus tr 12 Noon
sBookoftra
aining ogrammes
(1-8 sessions) training needs, Pla
pr
Open Review 03/05/2020 (FN) 9 AM –

EC-3 Comprehensive
1
3 hours essio
40%
12 Noon
8 Exam Syllabus S n
Book
(All sessions)
Content Structure
Today’s Lecture
Lecture No Topic Chapter No.
CS-1 Understanding the supply chain 1

CS-2 Supply chain performance: Achieving strategic fit and scope 2
CS-3 Supply chain drivers and metrics 3
CS-3 Designing distribution networks and applications to online sales 4
CS-4 Network design in the supply chain 5
CS-4 Designing global supply chain networks 6
CS-5 Demand forecasting in a supply chain 7
CS-6 Aggregate planning in supply chain 8
CS-6 Sales and operations planning 9
CS-7 Managing Economics of Scale in a Supply Chain: Cycle inventory 11
CS-8 Managing uncertainty in a supply chain: Safety inventory 12
CS-8 Determining Optimum level of Product availability 13
CS-9 Transportation in a supply chain 14
CS-10 Sourcing decisions in a supply chain 15
CS-11 Pricing and revenue management in a supply chain 16
CS-11 Coordination in supply Chain 10
Chapter 1: Understanding the supply
chain
BITS Pilani
Pilani Campus Arun Arora
Topics
1.What is a Supply Chain?

2.Objective of Supply Chain Management
3.Decision phases in a Supply Chain
4.Process views of a Supply Chain
SCM: The Science of

Better, Faster, Cheaper
Learning Objectives
1.1 Discuss the goal of a supply chain and explain the impact of
supply chain decisions on the success of a firm.
1.2 Define the three key supply chain decision phases and explain
the significance of each one.
1.3 Describe the cycle and push/pull views along with the macro
processes of a supply chain.
1.4 Identify important issues and decisions to be addressed in a
supply chain.
SCM: The Science of

Manufacturing companies
 Convert raw materials into products

 Steel into Cars; Fruits into Juices; Cotton into Garments …
 Use machines, facilities, manpower, money and licenses
 Aim to maximise profits
Materials Products
Manufacturer
• Machines, Facilities
• Manpower
• Management
• Expenditure • Revenue
SCM: The Science of

Activities in a manufacturing company
Manufacturing and other activities
SCM: The Science of

Transformation and flow of materials
Steel Component Product

Mines Retailer Customer
plant manufacturer manufacturer
 All stages- manufacturers, suppliers, transporters, warehouses,

retailers, and customers
 Movement of products, information, funds, and products
 All functions within the company- product development, marketing,

operations, distribution, finance, customer service.
SCM: The Science of

The Supply Chain concept
Physical Mfg Planning Physical Distribution

supply Control
SCM: The Science of

Supply Chain equation
Supply Chain

Supply Chain equation
Supply = Suppliers and sub + + Distributors and +

The Company Customers
chain suppliers Retailers
SCM: The Science of

What Is a Supply Chain?
Supplier Manufacturer Distributor Retailer Customer
Upstream
Downstream
Aims to Match Supply and Demand,
profitably for products and services
SUPPLY SIDE DEMAND SIDE

Achieves
The right
Product
+ + + + +
The right
Price
The right
Store
The right
Quantity
The right
Customer
=
The right
Time
Higher
Profits
SCM: The Science of

• All parties involved, directly or indirectly, in fulfilling a

customer request
• Includes manufacturers, suppliers, transporters, warehouses,
retailers, and customers
• Within each organization, the supply chain includes all
functions involved in receiving and fulfilling a customer
request (new product development, marketing, operations,
distribution, finance, customer service)
• Customer is an integral part of the supply chain

• Contain cash, product, and information flows
• Typical supply chain stages: customers, retailers,
wholesalers, distributors, manufacturers, suppliers
• Supply Chain is a network of various business entities
and processes linking suppliers, operations and
customers.
Figure 1-1 Stages of an Automotive Supply Chain
Supply Chain- Example
SCM: The Science of

Supply Chain- Example
SCM: The Science of

BITS Pilani
Pilani | Dubai | Goa | Hyderabad
Flows in a Supply Chain

Figure 1-2 The Three Flows in a Supply Chain

Product
(Raw material, parts, returns, replacements, packing material, …)
Funds
(Sales revenues, refunds, commission, …)
Information
(Orders, production schedules, inventory status, capacities of production resources, …)
SCM: The Science of

Supply chain stages and flows
Probably more accurate to use the term

“supply network” or “supply web”. SCM: The Science of
Global Supply Chain- Apparel
SCM: The Science of

BITS Pilani
Objective of Supply Chain Management

Managing the company well
Managing the company and, partners and

partners’ partners

SCM: The Science of

Changing nature of competition
Company vs. Competitor
Supply Chains vs. Supply Chains

Mines Retailer
Customer

Mines Retailer
SCM: The Science of

Objective of Supply Chain Management
 Maximize overall value created.

 Supply chain value- Difference between final product worth to the
customer and the effort the supply chain expends in filling the
customer’s request.
 Total profit to be shared across all stages of the supply chain.
 Supply chain management is the management of flows between and

among supply chain stages to maximize total supply chain profitability.
• Value is correlated to supply chain profitability(difference between

revenue generated from the customer and the overall cost across the
supply chain).
SCM: The Science of
The Objective of a Supply Chain
• Example: a customer purchases a wireless router from Best

Buy for $60 (revenue)
• Supply chain incurs costs (convey information, produce
components, storage, transportation, transfer funds, etc.)
• Difference between $60 and the sum of all of these costs is the
supply chain profitability
• Supply chain profitability is total profit to be shared across all
stages of the supply chain
• Success should be measured by total supply chain surplus, not
profits at an individual stage
SCM: The Science of
The Objective of a Supply Chain
• Customer the only source of revenue

• Sources of cost include flows of information, products, or
funds between stages of the supply chain
• Effective supply chain management involves the management
of supply chain assets and product, information, and fund flows
to grow the total supply chain surplus
SCM: The Science of

Importance of Supply Chain Decisions
• Wal-Mart, $1 billion sales in 1980 to $482 billion in 2016

• Seven-Eleven Japan, ¥1 billion sales in 1974 to ¥2.7 trillion in
2016
• Webvan folded in two years
• Borders, $4 billion in 2004, declared bankruptcy in 2010
• Dell, $56 billion in 2006, adopted new supply chain strategies
SCM: The Science of

Importance of Supply Chain Decisions
• Supply chain decisions have a large impact on the success or

failure of each firm because they significantly influence both
the revenue generated and the cost incurred.
• Successful supply chains manage flows of product,
information, and funds to provide a high level of product
availability to the customer while keeping costs low.
SCM: The Science of

Magnitude of Supply Chain costs
Example- Cost
Elements of a
Typical Trade
Book
SCM: The Science of

Magnitude of Supply Chain Costs
Example: The Apparel Industry
Cost per Percent

Shirt Saving
Manufacturer Distributor Retailer Customer

$52.72 0%
Manufacturer Retailer Customer

$41.34 28%
Distributor
$20.45 62%
Manufacturer Distributor Retailer Customer
SCM: The Science of

Evolution of Supply Chain
Management
SCM: The Science of

Evolution of Supply Chain
Management
Further
Refinement of
SCM Capabilities
SCM
Formation/
Extensions
JIT, TQM, BPR,

Alliances
Inventory Management/Cost
Optimization
Traditional Mass Manufacturing
1950s 1960s 1970s 1980s 1990s 2000s Beyond
SCM: The Science of

Summary of Learning Objective 1
• The goal of a supply chain should be to grow overall supply

chain surplus. Supply chain surplus is the difference between
the value generated for the customer and the total cost incurred
across all stages of the supply chain.
• Supply chain decisions have a large impact on the success or
failure of each firm because they significantly influence both
the revenue generated and the cost incurred.
• Successful supply chains manage flows of product,
information, and funds to provide a high level of product
availability to the customer while keeping costs low.
BITS Pilani
Decision phases in a Supply Chain

Decision phases in a Supply Chain
Supply chain strategy or design
Supply chain planning
Supply chain operation

SCM: The Science of
Supply Chain Strategy or Design
 Decisions about the structure of the supply chain over the
next several years and what processes each stage will
perform
 Supply chain design decisions are long-term and expensive

to reverse-must take into account market uncertainty.
 Supply chain design must support strategic objectives .
 Strategic supply chain decisions

 Locations and capacities of facilities
 Products to be made or stored at various locations
 Modes of transportation
 Information systems SCM: The Science of
Strategic decisions-
Location, Capacities, items to be manufactured/stored
SCM: The Science of

BITS Pilani, Pilani Campus

Supply Chain Planning
 Definition of a set of policies that govern short-term
operations.( decision over next quarter or a year)
 Fixed by the supply configuration from previous phase.
 Start with a forecast of demand in the coming year.
 Must consider demand uncertainty, exchange rates, competition
over the time horizon in planning decisions.
 Goal is to maximize supply chain surplus given established
constraints
 Planning decisions:
 Which markets will be supplied from which locations
 Planned buildup of inventories
 Subcontracting, backup locations
 Inventory policies
 Timing and size of market promotions SCM: The Science of
Planning decisions- Which markets
will be supplied from which locations
SCM: The Science of

Supply Chain operation
 Decisions regarding individual customer orders.
 Time horizon is weekly or daily.
 Supply chain configuration is fixed and operating policies are

determined.
 The goal is to implement the operating policies as effectively as possible

and to handle the incoming customer in the best possible manner.
 Allocate orders to inventory or production, set order due dates, generate

pick lists at a warehouse, allocate an order to a particular shipment, set
delivery schedules, place replenishment orders.
 Much less uncertainty (short time horizon).
SCM: The Science of

Operational decisions
SCM: The Science of

• Supply chain decisions may be characterized as strategic (design),

planning, or operational, depending on the time horizon over which
they apply.
• Strategic decisions relate to supply chain configuration. These
decisions have a long-term impact that lasts for several years.
• Planning decisions cover a period of a few months to a year and
include decisions regarding production plans, subcontracting, and
promotions over that period.
• Operational decisions span from minutes to days and include
sequencing production and filling specific orders.
BITS Pilani
Process views of a Supply Chain

Process views of a supply chain
1. Cycle view
 The processes in a supply chain are divided into a series of cycles,
each performed at the interface between two successive stages of
the supply chain.
2 . Push-Pull view
 The processes in a supply chain are divided into two categories,
depending on whether they are executed in response to a customer
order or in anticipation of customer orders. Pull processes are
initiated by a customer order, whereas push processes are initiated
and performed in anticipation of customer orders.
SCM: The Science of
1. Cycle view of a Supply Chain
Customer
Customer Order Cycle
Retailer
Replenishment Cycle
Distributor
Manufacturing Cycle
Manufacturer
Procurement Cycle
Supplier SCM: The Science of
Cycle view of a Supply Chain
 Each cycle occurs at the interface between two successive

stages
 Customer order cycle (customer-retailer)
 Replenishment cycle (retailer-distributor)
 Manufacturing cycle (distributor-manufacturer)
 Procurement cycle (manufacturer-supplier)
 Cycle view defines processes involved and the owners of

each process; specifies the roles and responsibilities of
each member and the desired outcome of each process.
SCM: The Science of

 Customer order cycle (customer-retailer)

– Involves all processes directly involved in receiving and filling the
customer’s order.
• Customer arrival
• Customer order entry
• Customer order fulfillment
• Customer order receiving
 Replenishment cycle (retailer-distributor)

– Involves all processes in replenishing Retailer’s inventories
(retailer is now customer )
• Retail order trigger
• Retail order entry
SCM: The Science of
• Retail order fulfillment Better, Faster, Cheaper
• Retail order receiving
 Manufacturing cycle (distributor-manufacturer)

– Involves all processes in replenishing distributor’s inventories
• Order arrival from distributer or retailer or customer
• Production Scheduling
• Manufacturing and Shipping
• Receiving at distributer , retailer or customer
 • Procurement cycle
All processes necessary (manufacturer
to ensure –supplier
that materials are available for )
manufacturing to occur according to schedule.
• Manufacturer orders components from suppliers to replenish
component inventories.
• However, component orders can be determined precisely from
production schedules (different from retailer/distributor orders
that are based on uncertain customer demand). SCM: The Science of
 Supplier be linked with production schedule .
Cycle View of Supply Chain Processes
Figure 1-4 Subprocesses in Each Supply Chain Process Cycle
2. Push/Pull view of a Supply Chain
 Push/pull view: processes in a supply chain are

divided into two categories depending on whether
they are executed in response to a customer order
(pull) or in anticipation of a customer order (push).
SCM: The Science of

Push/Pull View of Supply Chains
Procurement, Customer
Manufacturing and Order
Replenishment cycles Cycle
PUSH PROCESSES PULL PROCESSES
Customer
Order Arrives
SCM: The Science of

Push/Pull View of Supply Chain
Processes
 Supply chain processes fall into one of two categories depending on the
timing of their execution relative to customer demand
 Pull: execution is initiated in response to a customer order (reactive)
 Push: execution is initiated in anticipation of customer orders
(speculative)
 Push/pull boundary separates push processes from pull processes
 Useful in considering strategic decisions relating to supply chain design

– more global view of how supply chain processes relate to customer
orders
 The relative proportion of push and pull processes can have an impact
on supply chain performance.
SCM: The Science of

Impact of location of push/pull
boundary on Supply Chain performance
SCM: The Science of

Push/Pull View of Supply Chains
Figure 1-5 Push/Pull View of Supply Chain
Push/Pull View – L . L. Bean
Figure 1-6 Push/Pull Processes for the L.L. Bean Supply Chain
Push/Pull View – Ethan Allen
Figure 1-7 Push/Pull Processes for Ethan Allen Supply Chain for
Customized Furniture
Supply Chain Macro Processes
Customer Relationship Management (CRM)

The processes that take place between an enterprise and its customers
downstream in the supply chain.
Internal Supply chain Management (ISRM)
The processes involves in planning and fulfilling customer order.
Supply Chain Macro Processes
Supplier Relationship Management (SRM)

Those processes focused on the interaction between the enterprise
and suppliers that are upstream in the supply chain.
• There must be strong integration between the ISCM

CRM macro processes.
• There is a natural fit between between the ISCM

SRM macro processes.
• The cycle view divides processes into cycles, each

performed at the interface between two successive
stages of a supply chain. Each cycle starts with an order
placed by one stage of the supply chain and ends when
the order is received from the supplier stage.
• A push/pull view of a supply chain characterizes
processes based on their timing relative to that of a
customer order. Pull processes are performed in
response to a customer order, whereas push processes
are performed in anticipation of customer orders.
• All supply chain processes within a firm can be classified into three
macro processes: CRM, ISCM, and SRM.
• The CRM macro process consists of all processes at the interface
between the firm and the customer that work to generate, receive, and
track customer orders.
• The ISCM macro process consists of all supply chain processes that are
internal to the firm and work to plan for and fulfill customer orders.
• The SRM macro process consists of all supply chain processes at the
interface between the firm and its suppliers that work to evaluate and
select suppliers and then source goods and services from them.
• Integration among the three macro processes is crucial for successful
supply chain management.
Examples of Supply Chains
• Gateway and Apple

• Zara
• W.W. Grainger and McMaster-Carr
• Toyota
• Amazon
• Macy's
At a strategic level, a supply chain designer must decide whether

to build a responsive supply chain like Zara or focus on lower
costs. A decision must be made on the location and capacity of
each facility and whether it will be dedicated or flexible in terms
of the products it produces and markets it serves. The designer
must decide whether products will be sold directly to customers,
through distributors.
The planner must then decide on the production levels at each

production site and inventory levels at each DC and retail store.
As customer orders arrive, the operations manager must decide
how each order will be fulfilled given the available inventory and
production schedule. The goal when making all these decisions is
to maximize the supply chain surplus.
BITS Pilani
Next Lecture- Go through the pre-recorded Lecture
Chapter-2 Supply chain performance: Achieving strategic fit and scope
Dated : 19th January , 2020

Supply Chain Management: Arun Arora

Uploaded by

Copyright:

Available Formats

Supply Chain Management: Arun Arora

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Supply Chain Management: Arun Arora

Uploaded by

Copyright:

Available Formats

BA ZG621/ MM ZG621/ MBA ZG621 /POM ZG621/QM ZG 621

Supply Chain Management

Supply Chain Management

You need to buy this textbook.

• Designing and Managing the Supply Chain

• Supply Chain Logistics Management.

No. Name ehaviou Duration

Open Review 03/05/2020 (FN) 9 AM –

CS-1 Understanding the supply chain 1

1.What is a Supply Chain?

SCM: The Science of

SCM: The Science of

 Convert raw materials into products

SCM: The Science of

Manufacturing and other activities

SCM: The Science of

Steel Component Product

 All stages- manufacturers, suppliers, transporters, warehouses,

 Movement of products, information, funds, and products

 All functions within the company- product development, marketing,

SCM: The Science of

Physical Mfg Planning Physical Distribution

SCM: The Science of

Steel Component Product

Supply Chain equation

Supply = Suppliers and sub + + Distributors and +

SCM: The Science of

Supplier Manufacturer Distributor Retailer Customer

SUPPLY SIDE DEMAND SIDE

SCM: The Science of

• All parties involved, directly or indirectly, in fulfilling a

• Customer is an integral part of the supply chain

Figure 1-1 Stages of an Automotive Supply Chain

SCM: The Science of

SCM: The Science of

Flows in a Supply Chain

Figure 1-2 The Three Flows in a Supply Chain

Steel Component Product

SCM: The Science of

Probably more accurate to use the term

SCM: The Science of

Objective of Supply Chain Management

Managing the company well

Managing the company and, partners and

Steel Component Product

SCM: The Science of

Company vs. Competitor

Supply Chains vs. Supply Chains

Steel Component Product

Steel Component Product

SCM: The Science of

 Maximize overall value created.

 Total profit to be shared across all stages of the supply chain.

 Supply chain management is the management of flows between and

• Value is correlated to supply chain profitability(difference between

• Example: a customer purchases a wireless router from Best

• Customer the only source of revenue

SCM: The Science of

• Wal-Mart, $1 billion sales in 1980 to $482 billion in 2016