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Supply Chain Management

Module1

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What is a Supply Chain?

A supply chain consists ofall parties involved, directly orindirectly, in fulfilling a customer request Suppliers, manufacturers, transporters, warehouses, retailers, and

customers A supply chain includes all functions involved in receiving

and filling a customer request New product development, marketing, operations, distribution,

finance, and customer service

A supply chain is the entire process of moving a productor service from suppliers to customers

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Stages of a Detergent Supply Chain

CustomerWal-Mart

Store

Wal-Mart

or Third

Party DC

P&G or Other

Manufacturer

Pactiv

Corporation

Paper

Manufacturer

Timber

Company

Plastic

Producer

Chemical

Manufacturer

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Example: Wal-Mart

Customers Request:

Buying detergent,clothes, TV, ...

Wal-Mart

Stores

Wal-Mart

or third-party

distribution

centers

Procter & Gamble

Plastic Producer

Fabric Producer

Da-Fa Clothing, Inc. (China)

SONY Factory (Malaysia)

Electronics Components Producer

Chemical Producer

Zipper Producer

Thread Producer

Plastic Producer

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Example: Dell

Customers order

computers on

Dells website

Dell

Assembly

Plant

Monitors by SONY (Mexico)

Keyboards by Acer (Taiwan)

CPU by Intel (USA)

Other components

Dell is significantly revamping its entire supply

chain strategy and, in large measure, abandoning

its make-to-order model [April, 2008]

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Supply Chain Stages

A typical supply chain involves a variety ofstages

Manufacturer Distributor Retailer Customer Supplier

Most supply chains are actually supply networks

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Supply Chain Flows

Manufacturer Distributor Retailer Customer Supplier

Value-Added Services

Material/Product Flow

Funds/Demand Flow

Information Flow

Returns/Recylcing

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Supply Chain Cycle

Marketing

Product design

Suppliers

Manufacturing

Logistics

Customer

Reverse logistics

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The Objective of a Supply Chain

Supply chain value is the difference betweenwhat the final product is worth to the customerand the costs the supply chain incurs in filling thecustomers request

Supply chain profitability (orsupply chainsurplus) is the difference between the revenuegenerated from the customer and the overall costacross the supply chain

Maximize overall value created

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The Objective of a Supply Chain

Sources ofsupply chain revenue: Customer Best Buy receives $60 from a customer for a wireless router

Sources ofsupply chain cost: Flows of information,products, and funds between any pair of stages in thesupply chain Difference between $60 and the sum of all costs is the supply

chain profit or supply chain surplus

Supply chain profitability is the total profit to be shared

across all supply chain stages and intermediaries

Supply chain success should be measured by total supply

chain profitability, not profits at an individual stage

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The Importance of Supply Chain

Decisions Supply chain design, planning, and operation

play a significant role in the success or failure of afirm