Basics of Supply Chain Management

Jayanta Kumar Bandyopadhyay

• Publisher: CRC Press
• Year: 2015
• Print ISBN: 9781466588929
• eBook ISBN: 9781498766869
• Topic: Business
• Subtopic: Operations
• Index: Business

The practice of supply chain management has become widespread in most industries. It is now included in the curriculum of many business schools in the United States and in many countries around the world. A number of professional associations, such as the American Production and Inventory Control Society and the Supply Chain Management Society, off

Chapter 1

Introduction

1.1 Introduction

With significant growth in supply chain activities in manufacturing and other industries in the United States, there has been a tremendous need to prepare our university students for a supply chain management (SCM) career path in this new millennium. Currently, manufacturing and other industries in the United States are facing a critical shortage of personnel in SCM areas, and unless efforts are made to launch some viable programs in SCM areas in American universities for preparing university students for this career path, our manufacturing and other industries may be heading toward a crisis.

Over the past decades, many large companies or conglomerates have successfully integrated vertically from their multiple suppliers to their innumerable customers through multitudes of distributers and retailers, and effectively managing the supply chain has become very challenging. Also, managers in nearly every industry have begun to realize that competition in this new millennium is no longer between one company and another company, but between one supply chain and another supply chain. This has generated increasing needs for supply chain management practitioners, and given birth to an entire industry of supply chain consulting companies. National as well as global demand for supply chain management experts has been growing exponentially. Therefore, learning supply chain management can lead to a very successful professional career path.

Supply chain management encompasses all management activities associated with the flow and transformation of goods from the raw material stage through the end user stage, along with the management of flow of the associated information for achieving sustainable competitive advantages for production as well as service-oriented businesses.

Dewitt et al. (2001) define supply chain management as the management of demand, the sourcing of raw materials and parts, the manufacturing and assembly of finished products, warehousing, the tracking of inventories, order entry and order management, physical distribution management across all channels of distribution, and the delivery to the end customers.

Lee and Billingham (1995) define supply chain management as the integration of all activities taking place among a network of facilities that procure raw materials, transform them into intermediate goods and final products, and deliver the final products to customers through a physical distribution system.

1.2 Elements of Supply Chain

Since materials, as well as information, flow both up and down the supply chain, a supply chain thus includes a firm’s internal functions, upstream suppliers, and downstream distribution channels reaching to the end customers. A firm’s internal function includes all transformation processes. For example, in the case of an automotive company, the supply chain includes the manufacturing and fabrication of parts, subassemblies, and the final assembly of the finished products (automobiles).

From suppliers, raw materials flow into manufacturers and fabricators, where they are manufactured and fabricated into components and subassemblies, and then subsequently assembled into finished products by assemblers and distributed to the end customers through a physical distribution system. This chain of suppliers, producers (manufacturers, fabricators, and assemblers), distributors, retailers, and customers comprises the supply chain. Thus, the following may be considered the five most important elements of a supply chain:

1. 1. Suppliers of raw materials, components, and subassemblies
2. 2. Assemblers of the final products
3. 3. Distributors or wholesalers
4. 4. Retailers
5. 5. End customers

Figure 1.1 represents a graphical model of a supply chain.

Figure 1.1

Graphical model of a supply chain.

Suppliers or vendors are those who supply raw materials, components, and subassemblies, or various modules of the final products to the assembler of the final products. A supplier of components, subassemblies, or a module may also be the manufacturer or fabricator of them.

Producers or assemblers are those who assemble the finished products from components and subassemblies or modules supplied by the suppliers.

Distributors are those who receive the finished products from the producers and distribute them among the retailers in the target marketplace.

Retailers are those who receive the finished product from the distributors and sell them directly to customers.

Customers are those who buy the finished product directly from the retailer and ultimately consume the product.

1.3 Operating Environment of Supply Chain

The operating environment of a supply chain includes customers’ demands and expectations related to the product quality and delivery schedule, which must be determined by using customer surveys, forecasting, and demand management. A customer survey is one kind of market survey for determining the needs and expectations of customers related to the product’s quality and the expected demand in terms of quantity and delivery dates.

Customers’ expectation data related to a product’s quality are generally passed to the product design department, who translate this information into technical specifications of the product that will not only meet the needs but also exceed the expectations of the customers. Design of experiment, failure mode analysis, Taguchi’s methods of house of quality, and robust design are some of the methods of analyses generally used for designing quality in product design. Market survey and historical sales data are used in forecasting demand, which in turn is used for production planning and master production scheduling.

Demand management involves relating the forecast, confirming customer orders, backlogging decisions, and using the forecast for production planning and master production scheduling decisions.

A production plan is the overall game plan for a company. It sets the aggregate output levels of the company based on forecast, confirmed customer orders, and available production capacity of the company. The production plan forms the basis for the master production schedule (MPS), which in turn forms the basis...

Table of contents

• Preface
• Author
• Chapter 1 - Introduction
• Chapter 2 - Transformation of Demand into Supply: Designing Products to Meet Customer Expectations
• Chatper 3 - Transformation Process Choices for Making Products Conforming to Product Design Specifications and Tolerances
• Chapter 4 - Demand Forecasting and Demand Management
• Chapter 5 - Master Planning
• Chapter 6 - Master Production Scheduling
• Chapter 7 - Material Requirements Planning
• Chapter 8 - Inventory Management
• Chapter 9 - Purchasing Management
• Chapter 10 - Physical Distribution Management
• Chapter 11 - Distribution Inventory Management
• Chapter 12 - Global and Other Issues in SCM
• Appendix A: Cases in Supply Chain Management
• Appendix B: Self-Study Practice Questions for Basic Supply Chain Management
• Bibliography