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Introduction to

Supply Chain

Management

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What Is a Supply Chain?

Flow of products and services from: Raw materials manufacturers Intermediate products manufacturers End product manufacturers Wholesalers and distributors and Retailers

Connected by transportation and storageactivities

Integrated through information, planning,and integration activities

Cost and service levels

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Two Other Formal Definitions

The design and management of seamless, value-added process across organizational boundariesto meet the real needs of the end customer

Institute for Supply Management

Managing supply and demand, sourcing rawmaterials and parts, manufacturing and assembly,warehousing and inventory tracking, order entryand order management, distribution across allchannels, and delivery to the customer

The Supply Chain Council

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PC Industry Supply ChainTracing back the screen you stare at for the bulk of your

time.

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Source

Supplier

Supplier

Distributor

Distributor

Retailer

End-User

Converter

Converter Consumers

Information Flow

Funds/Demand Flow

Value-Added Services

Material Flow

Reuse/Maintenance/After Sales Service Flow

SCM Definition

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Key Observations

Every facility that impacts costs need to beconsidered

Suppliers suppliers

Customers customers

Efficiency and cost-effectiveness throughout thesystem is required

System level approach

Multiple levels of activities Strategic Tactical Operational

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Other Related Observations

Supply chain strategy linked to theDevelopment Chain

Challenging to minimize system costs andmaximize system service levels

Inherent presence of uncertainty and risk

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1.2 The Development Chain

FIGURE 1-2: The enterprise development and supply chain

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1.3 Global Optimization

Geographically dispersed complexnetwork

Conflicting objectives of different facilities

Dynamic system Variations over time

Matching demand-supply difficult

Different levels of inventory and backorders Recent developments have increased

risks Lean production/Off-shoring/Outsourcing

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Global Apparel Value ChainTracing back the dress you are wearing

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QC & Shipping

[Hong Kong]

Product Design

[Hong Kong]

Zippers+

[Japan+]

Stitching

[Indonesia]

Weaving

[Taiwan]

Yarn Spinning

[Korea]

An Illustration: How Li & Fung Limited Might Make a Dress

Globally Dispersed Manufacturing

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1.4 Uncertainty and Risk FactorsMatching Supply and Demand a Major

Challenge

REASONS EXAMPLES

Raw material shortagesInternal and supplier partsshortagesProductivity inefficiencies

Boeing Aircrafts inventory write-down of $2.6 billion

Sales and earnings shortfallLarger than anticipated inventories

Sales at U.S. Surgical Corporationdeclined 25 percent, resulting in aloss of $22 million

Stiff competition

General slowdown in the PCmarket

Intel reported a 38 percent declinein quarterly profit

Higher than expected orders fornew products over existingproducts

EMC Corp. missed its revenueguidance of $2.66 billion for thesecond quarter of 2006 by around

$100 million