Administración de la Cadena

de Suministro

Tecnológico de Monterrey C. Querétaro

Ileana Castillo Arias, Ph.D.

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Outline

1. What is a supply chain?

2. The objective of a supply chain

3. Process view of a supply chain

1. What is a supply chain?

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A supply chain consists of all stages involved, directly or indirectly, in fulfilling a cutomer request

Ballou, 1999

Consider a customer walking into

a Wal-Mart store

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2. The objective of a supply chain

The objective of every supply chain is to maximize the overall value generated.

The value a supply chain generates is the difference between

what the final product is worth to the customer and

the effort the supply chain expends in filling the customer’s request

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2. The objective of a supply

chain

For most commercial supply chains, value will be strongly correlated with supply chain profitability

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3. Process view of a supply

chain

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What is a process?

“We define a business process as a collection of activities that takes one or more kinds of input and creates an output that is of value to the customer.”

E.g. “…the delivery of the ordered goods to the customer’s hands is the value that the process creates.”

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Two points of view

There are two different ways to view the processes performed in a supply chain:

Cycle view

Push/Pull view

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In the cycle view, processes are divided in a series of cycles, where each one is performed at the interface between two successive stages of a supply chain.

In the push/pull view, processes are divided in two categories depending on wether or not they are performed responding to a customer’s order or in anticipation to such an order.

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Supply Chain Process

cycles

Stages

Customer

Retailer

Distributor

Manufacturer

Supplier

Supply Chain Management. Chopra y Meindl

Cycle view

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1.1 Customer arrival 1.4 Customer order

receiving

1.2 Customer order

entry

1.3 Customer order

fulfillment

1. Customer Order Cycle

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1.1 Customer arrival

This process may ocur when:

The client walks into a store to make a purchase

The customer calls a mail order telemarketing service

The customer uses theweb or an electronic link to a mail order firm

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1.1 Customer arrival (cont.)

A key goal is to facilitate the contact

between the customer and

the appropiate

product so that the customer’s arrival

turns into a customer order

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1.1 Customer arrival (cont.)

In a retail store this may mean to handle the flow of clients efficiently and display the products adequately

In telemarketing, this may mean not making the customers wait in line for a long time

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1.1 Customer arrival (cont.)

In the web this may mean to have search engines that facilitate the customer finding the products

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1.2 Customer order entry

In a retail store this means the customer selects the products

In a telemarketing center or the web this means the customer tells the retailer what products he or she has selected, and the quantities requiered.

Then, the retailer assigns the products…

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1.2 Customer order entry (cont.)

…to the order and can give a delivery date to the customer

The objective of this process is to ensure that order entry is fast and accurate, and is communicated to all processes affected in the supply chain

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1.3 Customer order fulfillment

In this process the customer order is filled and sent to the customer

In a retail store the customer performs the process

In an Internet purchase, the process generally includes picking the order from inventory, pack it, and sent it to the customer

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1.3 Customer order fulfillment (cont.)

In the latter case, inventories must be updated, which may trigger the replenishment cycle

In a Built-to-order (BTO) strategy, as in Dell’s case, this process takes place in the production line, and not in the inventory of the retailer

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1.3 Customer order fulfillment (cont.)

The objective of this process is to deliver the correct and complete order to the customer in the promised date, and at the least cost

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1.4 Customer order receiving

In a supermarket this happens when the customer pays for the items

In an Internet purchase, this happens when the customer receives the order at home

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Supply Chain Process

cycles

Stages

Customer

Retailer

Distributor

Manufacturer

Supplier

Supply Chain Management. Chopra y Meindl

Cycle view

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2.1 Retail order

trigger

2.4 Retail order

receiving

2.2 Retail

order entry

2.3 Retail order

fulfillment

2. Replenishment Cycle

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2.1 Retail order trigger

As the retailer fills customer demand, inventory is depleted and must be replenished to meet future demand. This means that the retailer must decide on an ordering policy, either to the distributor or to the manufacturer

This policy must have the objective of maximizing profit,…

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2.1 Retail order trigger(cont.)

…balancing product availability and cost

The result of this process is that a replenishment order is generated

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2.2 Retail order entry

This process is similar to the customer order entry process, only the customer is the retailer, and the order is placed to the distributor or the manufacturer

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2.3 Retail order fulfillment

Similar to the customer process, but the picking, packing and shipping is now performed by the distriutor or the manufacturer

Observation. Orders tend to be larger than customer orders

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2.4 Retail order receiving

Once the replenishment order arrives at the retailer, the retailer must receive it physically, update all inventory records, and settle all payable accounts

This process involves product flow from the distributor to the retailer as well as information and financial flows

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Supply Chain Process

cycles

Stages

Customer

Retailer

Distributor

Manufacturer

Supplier

Supply Chain Management. Chopra y Meindl

Cycle view

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3.1 Order arrival 3.4 Receiving

3.2 Production

Scheduling

3.3 Manufacturing

and shipping

3. Manufacturing Cycle

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3. Manufacturing cycle

This cycle may be initiated by:

A customer order (Dell’s case)

A retailer order or a distributor order (replenishment order). E.g., Sam’s orders water directly to Bonafont

The forecast of customer demand and current product availability in the manufacturer’s finished product warehouse

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3.1 Order arrival

In some cases the customer or the retailer order directly to the manufacturer

In other cases the manufacturer produces to store (MTS, make-to-stock).

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3.2 Production scheduling

During this process, orders are allocated to a production plan or schedule

Given the desired production quantities, the manufacturer must decide on the precise production sequence

If there are multiple lines, the manufcturer must also decide which products to allocate to each line

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A real

example

from the

pharma-

ceutical

industry

Importance

of the setup

times in the

production

sequence

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3.2 Production scheduling (cont.)

The objective of the production scheduling process is to maximize the proportion of orders filled on time while keeping costs down

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3.3 Manufacturing and shipping

Manufacturing is done according to the production plan while meeting quality requirements

The product is shipped to the customer, retailer, distributor or finished-product warehouse

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3.3 Manufacturing and shipping (cont.)

The objective of this process is to ship the product by the promised due date while meeting quality requirements and keeping costs down

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3.4 Receiving

The customer, the retailer, the distributor or the finished-product warehouse receive the product and inventory records are updated

Other processes related to storage and fund transfers also take place

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Supply Chain Process

cycles

Stages

Customer

Retailer

Distributor

Manufacturer

Supplier

Supply Chain Management. Chopra y Meindl

Cycle view

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4.1 Order Based on

Manufacturer’s Production

Schedule or Supplier’s

Stocking Needs

4.4 Receiving at

Manufacturer

4.2 Supplier Production

Scheduling

4.3 Component

Manufacturing

and Shipping

4. Procurement Cycle

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4. Procurement cycle

The order in the procurement cycle is triggered by the production plan, i.e. is demand dependent

If the lead times of a supplier are large, the supplier must produced based on a forecast

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A cycle viewpoint of the supply chain clearly defines the processes and the “owners” of each one of them

This viewpoint is useful when the decision maker has to make decisions at the operational level

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Push/pull view

At the time of execution of a pull process, demand is known with certainty

At the time of execution of a push process, demand is not known and must be forecast

Supply chains have a push/pull boundary

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Example 1(BTO)

Dell

Customer

Manufacturer (Dell)

Supplier

A unique cycle

in Dell´s SC

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Example 2: L.L. Bean

Customer

Manufacturer

Supplier

A unique cycle

in L.L. Bean SC

L.L. Bean

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A push/pull viewpoint of the supply chain categorizes the processes based on whether they are initiated by a customer order (pull) or not (push)

This is useful when making decisions at the strategic level, especially those related to the design of the supply chain

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In-class Activity

Form five teams

Choose one mini-case:

1. Micron Electronics

2. 7-Eleven

3. W.W. Grainger and McMaster-Carr

4. Toyota

5. Amazon.com

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In-class Activity (cont.)

Answer the questions in each case and prepare a presentation for the class