Introduction to Supply Chain Management

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What is A Supply Chain?
!  The

system of suppliers, manufacturers,
transportation, distributors, and vendors that exists
to transform raw materials to final products and
supply those products to customers.

!  That

portion of the supply chain which comes after
the manufacturing process is sometimes known as
the distribution network.

Introduction to Supply Chain Management
IEE 534 Supply Chain Modeling & Analysis Lecture Slides
Dr. Esma S. Gel
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A typical supply chain

IEE 534 SCMA, Prof. Esma S. Gel, CIDSE, ASU

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Intro. to Supply Chain Management

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What is Supply Chain Management?
“…a set of approaches utilized to efficiently integrate
suppliers, manufacturers, warehouses, and stores, so
that merchandise is produced and distributed at the
right quantities, to the right locations and at the right
time, in order to minimize system-wide costs while
satisfying service level requirements.”

Suppliers

Manufacturing

Distribution

Channels/retailers

End users

Materials, products, services, information, money

Supply chain activities
Design
Manufacturing
Procurement
Planning and forecasting
Order fulfillment
IEE 534 SCMA, Prof. Esma S. Gel, CIDSE, ASU

Distribution
Intro. to Supply Chain Management

!  Observations:

SCM considers every facility that has an impact on cost and
plays a role in making the product conform to customer
requirements
!  The objective is to be efficient and cost-effective across the entire system
!  SCM encompasses the firm’s activities at many levels – strategic, tactical, operational
! 

IEE 534 SCMA, Prof. Esma S. Gel, CIDSE, ASU

Intro. to Supply Chain Management

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The Goal in Supply Chain Management

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Customer

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Goal in SCM: Profitably match supply
and demand
SUPPLY

MATCH

DEMAND
Product development
Pricing
Promotions

Inventory management
Production planning
Scheduling
!  Buffering

!  Flexibility

on both supply and demand sides leads to a
better match

Source: i2 Technologies

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Deliver the right product to the right place at the right time for the right price, while minimizing system-wide costs and
satisfying service requirements.

IEE 534 SCMA, Prof. Esma S. Gel, CIDSE, ASU

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Intro. to Supply Chain Management

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Supply Chain Decisions
Strategic Level

Long Term

• Corporate objectives
• Capacity/Facilities
• Markets to operate
• Location
• Resources

Examples of flexibility: Flexible capacity, outsourcing
But flexibility usually comes at a cost!

IEE 534 SCMA, Prof. Esma S. Gel, CIDSE, ASU

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What are the Relevant Sources of
Costs?
!  Raw

material and other acquisition costs
transportation costs

Operational

Near Term

• Aggregate planning
• Resource allocation
• Capacity allocation
• Distribution
• Inventory management

!  Facility

• Shop floor scheduling

Tactical

!  Inventory

• Delivery scheduling
•  Truck routing

investment costs

!  Direct

and indirect manufacturing costs

!  Direct

and indirect distribution center costs
holding costs

!  Interfacility
!  Outbound

IEE 534 SCMA, Prof. Esma S. Gel, CIDSE, ASU

Intro. to Supply Chain Management

Intro. to Supply Chain Management

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!  Inbound

Medium Term

variability with inventory, capacity or time

transportation costs

transportation costs

IEE 534 SCMA, Prof. Esma S. Gel, CIDSE, ASU

Intro. to Supply Chain Management

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Performance Metrics for the Supply
Chain
!  Utilization
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(actual input/norm input)

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next frontier…

many manufacturing sectors, various strategies
have provided extensive performance increase
and cost decreases

E.g., ton-miles delivered/costs incurred

!  The

next big improvement and competitive edge
will generally come from efforts in supply chain
management, especially for firms that compete on
cost...
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