Understanding Supply Chain

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Dr. Ch. V. V. S. N. V. Prasad Assistant Professor in Management BITS-PILANI, K. K. Birla Goa Campus

Learning Objectives
 Supply Chain  Supply Chain Management  Objective of a Supply Chain  Importance of Supply Chain Decisions

 Decision Phases in a Supply Chain
 Process Views of a Supply Chain  Supply Chain Macro Processes in a Firm

 Examples of Supply Chains
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Supply Chain
 Supply Chain is a network of various business entities

and processes linking suppliers, operations and customers.
 Business Entities  Supplier, manufacturer, distributor, transporters, retailers and customers.  Processes  It consists of all activities/processes starting from sourcing of raw material or components till delivery of the finished product to the final customer.

 SC includes all parties involved in fulfilling a customer

request
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Supply Chain
Supplier Manufacturer Distributor Retailer Customer

Upstream

Downstream

SUPPLY SIDE

DEMAND SIDE

The right

Product

+ + + + +
The right The right The right The right

The right

Price

Store

Quantity

Customer

Time

=

Higher

Profits

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MBA C421 Supply Chain Management Ch. V. V. S. N. V. Prasad

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Supply Chain – Business Processes

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MBA C421 Supply Chain Management Ch. V. V. S. N. V. Prasad

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Supply Chain - Flows

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Stages of Detergent Supply Chain
P&G or other manufacturer Jewel or third party DC Jewel Supermarket Customer wants detergent and goes to Jewel

Plastic Producer

Tenneco Packaging

Chemical manufacturer (e.g. Oil Company)

Chemical manufacturer (e.g. Oil Company)
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Paper Manufacturer

Timber Industry
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MBA C421 Supply Chain Management Ch. V. V. S. N. V. Prasad

Stages of Dell Supply Chain
Direct Shipment

Master Board Dell Assembly Plant Website or Phone

Hard disk

Customer wants To buy computer

Customer’s Order

RAM

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Supply Chain
 Supply chains  Stretch from raw materials to consumers  Include various entities and processes  Run in reverse as well as toward end user  Contain cash, product, and information flows  Connect to outside stakeholders.

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MBA C421 Supply Chain Management Ch. V. V. S. N. V. Prasad

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Supply Chain Management
 Supply chain management of any firm can be viewed

as integration of all the activities starting from purchasing, manufacturing, and distribution by the organization plus activities that stretch between company’s suppliers and its customers. It is an integrated approach of managing various business processes that links the supply chain partners.

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MBA C421 Supply Chain Management Ch. V. V. S. N. V. Prasad

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Objectives of a Supply Chain
 Maximize overall value created  Supply chain value: difference between what the final

product is worth to the customer and the effort the supply chain expends in filling the customer’s request  Value is correlated to supply chain profitability (difference between revenue generated from the customer and the overall cost across the supply chain)  Revenue: Dell receives $2000 from a customer for a

computer (revenue)  Cost : Supply chain incurs costs (information, storage, transportation, components, assembly, etc.) 3/9/2013 MBA C421 Supply Chain Management Ch. V. V. S. N. V. Prasad 11

Objectives 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 total supply chain profitability, not profits at an individual stage  Sources of supply chain revenue: the customer  Sources of supply chain cost: flows of...
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