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Scm_mod_12

Apr 14, 2018

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Nayaz Uddin
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    The Objective of a Supply Chain

    Maximize overall value created

    Supply chain value: difference between what the finalproduct is worth to the customer and the effort thesupply chain expends in filling the customers request

    Value is correlated to supply chain profitability(difference between revenue generated from thecustomer and the overall cost across the supplychain)

    Also, known as supply chain surplus.

    Example: Dell receives $2000 from a customer for a

    computer (revenue)Supply chain incurs costs (information, storage,

    transportation, components, assembly, etc.)

    Difference between $2000 and the sum of all of thesecosts is the supply chain profit

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    The Objective of a Supply Chain

    Supply chain profitability is total profit to be shared

    across all stages of the supply chain

    Supply chain success should be measured by totalsupply chain profitability, not profits at an individual stage

    Sources of supply chain revenue: the customer

    Sources of supply chain cost: flows of information,products, or funds between stages of the supply chain

    Supply chain management is the management offlows between and among supply chain stages tomaximize total supply chain profitability

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    Decision Phases of a Supply ChainSupply chain strategy or design

    Supply chain planning

    Supply chain operation

    Supply Chain Strategy or DesignDecisions about the structure of the supply chain and

    what processes each stage will perform

    Strategic supply chain decisions Locations and capacities of facilities

    Products to be made or stored at various locations

    Modes of transportation

    Information systemsSupply chain design must support strategic objectives

    Supply chain design decisions are long-term andexpensive to reverse must take into account market

    uncertainty

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    Supply Chain PlanningDefinition of a set of policies that govern short-term

    operations

    Fixed by the supply configuration from previous phaseStarts with a forecast of demand in the coming year

    Planning decisions:

    Which markets will be supplied from which locations

    Planned buildup of inventories

    Subcontracting, backup locations

    Inventory policies

    Timing and size of market promotionsMust consider in planning decisions demand uncertainty,

    exchange rates, competition over the time horizon

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    Supply Chain Operation

    Time horizon is weekly or daily

    Decisions regarding individual customer orders

    Supply chain configuration is fixed and operating policiesare determined

    Goal is to implement the operating policies as effectively

    as possibleAllocate orders to inventory or production, set order due

    dates, generate pick lists at a warehouse, allocate anorder to a particular shipment, set delivery schedules,

    place replenishment ordersMuch less uncertainty (short time horizon)

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    Process View of a Supply Chain

    Cycle view: processes in a supply chain are divided intoa series of cycles, each performed at the interfacesbetween two successive supply chain stages

    Push/pull view: processes in a supply chain are divided

    into two categories depending on whether they areexecuted in response to a customer order (pull) or inanticipation of a customer order (push)

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    Cycle View of Supply Chains

    Customer Order Cycle

    Replenishment Cycle

    Manufacturing Cycle

    Procurement Cycle

    Customer

    Retailer

    Distributor

    Manufacturer

    Supplier

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    Supplier Stage

    Markets Product

    Buyer ReturnsReverse Flows to

    Supplier or ThirdParty

    Buyer Stage

    Places Order

    Supplier Stage

    Receives OrderSupplier StageSupplies Order

    Buyer Stage

    ReceivesSupply

    Sub-processes in Each Supply Chain Process Cycle

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    Cycle View of a Supply ChainEach cycle occurs at the interface between two

    successive stages

    o Customer order cycle (customer-retailer)o Replenishment cycle (retailer-distributor)

    o Manufacturing cycle (distributor-manufacturer)

    o Procurement cycle (manufacturer-supplier)

    Cycle view clearly defines processes involved and theowners of each process. Specifies the roles andresponsibilities of each member and the desired outcomeof each process.

    The view is useful in case of setting up the informationsystem to support supply chain operations.

    Useful when considering operational decisions.

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    Cycle View of a Supply ChainNot every supply chain will have all four cycles clearly

    separated.

    Each cycle consists of six sub-processes.Within each cycle, the goal of the buyer is to ensure

    product availability and to achieve economies of scale inordering.

    Differences between CyclesDifference 1:

    In the customer order cycle, demand is external to thesupply chain and thus uncertain.

    In all other cycles, order placement is uncertain but canbe projected based on policies followed by the particularsupply chain stage.

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    Differences between Cycles (Contd.)

    Difference 2: (Scale of an order)

    As we move from the customer to supplier, the number ofindividual orders declines and the size of each orderincreases.

    A customer buys a single car whereas, a dealer ordersmultiple cars at a time.

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    Push/Pull View of Supply Chains

    Procurement,Manufacturing andReplenishment cycles

    Customer OrderCycle

    CustomerOrder Arrives

    PUSH PROCESSES PULL PROCESSES

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    Push/Pull View of Supply Chain ProcessesSupply chain processes fall into one of two categories

    depending on the timing of their execution relative to

    customer demandPull: execution is initiated in response to a customer

    order (reactive)

    Push: execution is initiated in anticipation of customerorders (speculative)

    Push/pull boundary separates push processes from pullprocesses

    Useful in considering strategic decisions relating tosupply chain design more global view of how supply

    chain processes relate to customer ordersThis view forces a more global consideration of supply

    chain processes as they relate to a customer order

    This view may induce some of the processes to become

    a pull process.

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    S No. ProcessesPush Pull

    1 They are executed inanticipation ofcustomer orders

    Execution is done in responseto customer orders

    2 Demand is not knownand must be forecast.

    At the time of execution,

    demand is known withcertainty

    3 Referred to asspeculative processes

    because they respondto speculated (orforecast) rather thanactual demand.

    Referred to as reactiveprocesses because they react

    to customer demand

    Push/Pull View

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    Push/Pull Processes for a store SC

    All processes that are part of the customer order cycle

    are pull processes.Order fulfillment takes place from product inventory that

    is built up in anticipation of customer orders.

    The goal of replenishment cycle is to ensure productavailability when a customer arrives.

    All processes in the replenishment cycle are pushprocesses.

    The processes in the manufacturing and procurementcycle are also push processes.

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    CustomerOrder Cycle

    Replenishmentand

    ManufacturingCycle

    ProcurementCycle

    PushProcesses

    Pull

    Processes

    CustomerOrder

    Arrives

    Customer

    Store

    Manufacturer

    Supplier

    Customer

    Order Cycle

    Procurement ,Manufacturing,Replenishment

    Cycle

    Push/Pull Processes for a store SC

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    Push/Pull Processes of Dell Supply ChainThe arrival of a customer order triggers production in final

    assembly.

    The manufacturing cycle is thus part of the customer orderfulfillment process in the customer order cycle.

    Thus there are only two cycles.

    All the processes in the customer order and manufacturing

    cycle at Dell are pull processes initiated by customerarrival.

    Dell does not place component order in response to acustomer order.

    Inventory is replenished in anticipation of customerdemand.

    All processes in the procurement cycle are pushprocesses because they are response to a forecast.

    Dell Supply chain has fewer stages and more pullprocesses.

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    Customer Orderand Manufacturing

    Cycle

    ProcurementCycle

    Push

    Processes

    PullProcesses

    Customer

    Manufacturer

    Supplier

    CustomerOrder Arrives

    Customer

    Order andmanufacturingCycle

    ProcurementCycles

    Push/Pull Processes of Dell Supply Chain

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    Push/Pull View of Supply Chain Processes

    Can combine the push/pull and cycle views

    L.L. Bean

    Dell

    The relative proportion of push and pull processes canhave an impact on supply chain performance

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    Supply Chain Macro Processes in a FirmThe emergence of SCM has broadened the scope

    across which companies make decisions.

    The scope has expanded from trying to optimizeperformance across the division, to the enterprise, and tothe entire supply chain.

    The broadening of scope emphasizes the importance of

    including processes all along the SC.Supply chain processes discussed in the two views can

    be classified into

    Customer Relationship Management (CRM)

    Internal Supply Chain Management (ISCM)

    Supplier Relationship Management (SRM)

    Integration among the above three macro processes iscritical for effective and successful supply chainmanagement

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    Supply Relationship

    Management (SRM)

    Transaction Management Foundation

    (TMF)

    Internal Supply

    Chain Management(ISCM)

    Customer Relationship

    Management (CRM)

    Supplier Firm Customer

    SourceNegotiateBuyDesign Collaboration

    Supply Collaboration

    Strategic PlanningDemand PlanningSupply PlanningFulfilmentField Service

    MarketPriceSell

    Call CentreOrder Management

    Supply Chain Macro Processes

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    Supply Chain Macro Processes

    Customer Relationship Management (CRM):Processes that focus on downstream interactionsbetween the enterprise and its customers.

    Internal Supply Chain Management (ISCM):

    Processes that focus on internal operations within theenterprise.

    Supplier Relationship Management (ISCM):

    Processes that focus on upstream interactions betweenthe enterprise and its suppliers.

    There must be strong integration between the ISCM andCRM macro processes

    There is a natural fit between ISCM and SRM processes

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    Supply Chain Macro Processes

    Customer Relationship Management (CRM):Processes that focus on downstream interactionsbetween the enterprise and its customers.

    Internal Supply Chain Management (ISCM):

    Processes that focus on internal operations within theenterprise.

    Supplier Relationship Management (ISCM):

    Processes that focus on upstream interactions betweenthe enterprise and its suppliers.

    There must be strong integration between the ISCM andCRM macro processes

    There is a natural fit between ISCM and SRM processes

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    The Transaction Management Foundation

    Enterprise software systems (ERP)

    Earlier systems focused on automation of simpletransactions and the creation of an integrated method of

    storing and viewing data across the enterprise

    Real value of the TMF exists only if decision making isimproved

    The extent to which the TMF enables integration acrossthe three macro processes determines its value